Tariff classification and eligibility for NAFTA tariff preference of upholsteryfabric

HQ H023711 April 22, 2008 CLA-2 OT:RR:CTF:TCM H023711 GC CATEGORY: Classification TARIFF NO.: 5516.23.0090 Lara A. Austrins, Esq. Rodriguez, O’Donnell, Gonzalez & Williams, P.C. 8430 West Bryn Mawr Avenue, Suite 525 Chicago, Illinois 60631 RE: Tariff classification and eligibility for NAFTA tariff preference of upholstery fabric Dear Ms. Austrins: This is in response to your letter, received January 29, 2008, on behalf of your client, Tietex International, Ltd. (Tietex), requesting a binding ruling on certain merchandise. At issue is the tariff classification of upholstery fabric under the Harmonized Tariff Schedule of the United States (HTSUS). Because the upholstery fabric is produced in Mexico from materials originating from the U.S. and Indonesia, its eligibility for tariff preference under the North American Free Trade Agreement (NAFTA) is also at issue. Your original ruling request covered four styles of fabric, three of which were addressed in New York Ruling Letter (NY) N022036, dated February 1, 2008. This ruling pertains only to the “Geraldine” style of upholstery fabric (product number 65403). FACTS: At issue is a jacquard woven fabric composed of 50% staple rayon and 46% filament polyester. It has a textured surface and features stripes of several different colors and widths running the length of the fabric. The fabric contains 59 single yarns per centimeter in the warp and 38 single yarns per centimeter in the filling. It is manufactured using 150 denier filament polyester yarns in the warp and 20/2 c.c. staple rayon yarns in the filling. The fabric weighs 265 g/m2 and will be imported in widths of 137 centimeters. The back of the fabric has been coated with an application of acrylic plastic which is said to represent approximately 4% by weight of the fabric. The polyester yarns within the fabric are produced in the United States and the two ply rayon staple yarns are produced in Indonesia. The yarns are shipped to Mexico, where they are jacquard woven into the upholstery fabric and then coated with the acrylic plastic that has been produced in the United States. The finished fabric is then imported into the United States. Samples of the fabric both with and without the plastic coating as well as the individual yarns used to make the fabric were submitted for our examination. ISSUE: Do the subject entries fall within the scope of heading 5903, HTSUS? If not, what is the proper classification for the imported merchandise? Is the merchandise eligible for preferential tariff treatment under NAFTA? LAW AND ANALYSIS: Classification: Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. The following HTSUS provisions are under consideration: 5516 Woven fabrics of artificial staple fibers: Containing less than 85 percent by weight of artificial staple fibers, mixed mainly or solely with man-made filaments: * * * 5516.23 Of yarns of different colors… * * * 5516.23.0090 Other (629)… * * * 5903 Textile fabrics impregnated, coated, covered or laminated with plastics, other than those of heading 5902: * * * 5903.90 Other: * * * Of man-made fibers: * * * Other: * * * 5903.90.2500 Other (229)… It is not at issue that the yarn from which the subject fabric is woven is classified in heading 5510, HTSUS, which covers “[y]arn (other than sewing thread) of artificial staple fibers, not put up for retail sale”. You suggest that the subject merchandise, as imported into the United States, should be classified in subheading 5903.90.2500, HTSUS, which provides for: “Textile fabrics impregnated, coated, covered or laminated with plastics, other than those of heading 5902: Other: Of man-made fibers: Other: Other.” Note 8 to Section XI, HTSUS, states, in pertinent part: “(b) For the purposes of chapters 50 to 60… [c]hapters 50 to 55 and 60 do not apply to goods of chapters 56 to 59.” Note 8(b) serves to exclude goods from classification in chapters 50 to 55 and 60 that are also classifiable in a heading within chapters 56 to 59. Consequently, if the fabric in this case fits within the scope of heading 5903, HTSUS, then it is excluded from classification in heading 5516, HTSUS. In determining whether or not an article fits within the scope of heading 5903, HTSUS, the analysis first turns to Legal Note 2 of Chapter 59. It states, in pertinent part: Heading 5903 applies to: Textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square meter and whatever the nature of the plastic material (compact or cellular), other than: Fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually chapters 50 to 55, 58 or 60); for the purposes of this provision, no account should be taken of any resulting change of color[.] A visual inspection of the samples reveals that the coloring on the back side of the coated sample appears to be lighter in comparison to the uncoated sample. However, Note 2(a)(1) directs that no account should be taken of any change of color resulting from a textile fabric being coated with plastics. Accordingly, we have consistently found that a determination of whether the plastic coating on a particular textile fabric is visible to the naked eye cannot take into account a change in the fabric’s color. See Headquarters Ruling Letter (HQ) 958261, dated February 14, 1996; HQ 950022, dated September 26, 1991; HQ 952697, dated January 12, 1993. Apart from this direction, neither the Nomenclature nor the Explanatory Notes to Chapter 59 elaborate on the meaning of “cannot be seen with the naked eye.” In HQ 082219, dated November 21, 1988, we stated that the term “visible to the naked eye” found in Note 2(a)(1) to Chapter 59: …is a clear expression by the drafters of the [HTSUS] that a significant, if not substantial, amount of material must be added to the fabric for it to be considered “impregnated, coated over covered.” Therefore, following the strict wording of Note 2(a)(1), for a fabric to be considered “impregnated, coated, or covered” within the requirement, the plastic material added to the fabric must be visibly distinguishable from the fabric without the use of magnification. [CBP] believes that this criterion is satisfied when the application of a plastic material clearly changes the surface character of the fabric. CBP has ruled extensively on the visibility criterion of Note 2(a)(1). Plastics coating found to be visible to the naked eye can be seen within the interstices of the underlying fabric, without the aid of magnification. A coating of plastic is also considered visible to the naked eye if it affects the surface character of the fabric to the point where the image of the underlying weave is obscured. See HQ W968191, dated January 25, 2008 and HQ W968290, dated February 8, 2007. In addition, a plastics coating is visible to the naked eye if it creates a pattern based on the variation in the quantity of coating in different areas of the fabric surface. See HQ 087041, dated May 9, 1990. In this instance, we have found no evidence that the plastic coating on the fabric at issue is visible to the naked eye. Consequently, by application of Note 2(a)(1) to Chapter 59, HTSUS, the subject fabric is excluded from classification in heading 5903, HTSUS. Further, because the fabric is not a good of Chapter 59, it is classified in heading 5516, HTSUS by application of Note 8(b) to Section XI, HTSUS. NAFTA Tariff Preference: General Note 12, HTSUS, provides, in pertinent part: Goods originating in the territory of a party to [NAFTA] are subject to duty as provided herein. For the purposes of this note – * * * Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of Treasury (whether or not the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act. For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if -- they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or they have been transformed in the territory of Canada, Mexico and/or the United States so that – except as provided in subsection (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein[.] We have previously found that the fabric in this case is classified in heading 5516, HTSUS. There is no dispute that the yarn from which the fabric is made is classified in heading 5510. General Note 12(t) 55/2, HTSUS, which is the applicable NAFTA rule of origin for heading 5516, HTSUS, requires “[a] change to heading 5512 through 5516 from any heading outside that group, except from headings 5106 through 5110, 5205 through 5206, 5401 through 5404 or 5509 through 5510.” By application of GN 12(t) 55/2, we find that the finished upholstery fabric is not eligible for treatment as a good of a NAFTA country because it is made in Mexico from non-originating yarn that is classified in heading 5510. HOLDING: By application of GRI 1, Note 2 to Chapter 59 and Note 8 to Section XI, the “Geraldine” style of upholstery fabric (product number 65403) is classified in heading 5516, HTSUS, as a woven fabric. It is specifically provided for in subheading 5516.23.0090, which provides for: “[w]oven fabrics of artificial staple fibers: Containing less than 85 percent by weight of artificial staple fibers, mixed mainly or solely with man-made filaments: Of yarns of different colors… Other.” The column one, general rate of duty is 6.6 percent ad valorem, and the quota category is 629. The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories are the result of international bilateral agreements which are subject to frequent negotiations and changes, the importer is advised to check, close to the time of shipment, the Daily Textile Status Report for Absolute Quotas, which is available on the CBP website (www.cbp.gov). In addition, due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, the importer should contact the local CBP office prior to importing the merchandise to determine the current status of any import restraints or requirements. Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov. By application of General Note 12(t) 55/2, HTSUS, the subject upholstery fabric is not eligible for preferential tariff treatment under NAFTA. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Gail A. Hamill, Chief Tariff Classification and Marking Branch