Origin determination of Tegaderm™ Ag Mesh Dressing for purposes of Government Procurement

HQ H035776 September 22, 2008 VAL-2 OT:RR:CTF:VS H035776 CMR CATEGORY: Marking TARIFF NO.: 3005.90 Mr. Matthew Fuller Trade Compliance Department 3M Company 3M Center Building 225-4S-18 St. Paul, MN 55144-1000 RE: Origin determination of Tegaderm™ Ag Mesh Dressing for purposes of Government Procurement Dear Mr. Fuller: This ruling is in response to your request of August 6, 2008, for a determination as to the country of origin of Tegaderm™ Ag Mesh Dressing which is sold by 3M. You indicate that 3M is the importer of record of the nonwoven cotton fiber fabric used in the production of Tegaderm™ Ag Mesh Dressing and, as such, has standing to request this ruling pursuant to 19 C.F.R. § 177.23(a) and § 177.24. FACTS: 3M imports nonwoven cotton fiber fabric which is produced by and purchased from suppliers outside the United States. At the time of importation, the nonwoven cotton fabric is in large (Jumbo) rolls and has no finishing on it. It is classifiable as a nonwoven fabric of heading 5603 of the Harmonized Tariff Schedule of the United States (HTSUS). After importation, the nonwoven cotton fabric is processed so as to be impregnated with silver sulfate which is manufactured in the United States. The impregnated fabric is then slit to desired widths, cut to size (length), and packaged into pouches which are then sealed. The pouches are labeled, packed into cases, and then sent for sterilization. The finished Tegaderm™ Ag Mesh Dressings are then ready for retail sale in the United States or for export. The silver sulfate with which the nonwoven fabric is impregnated is the “active ingredient” in the product. It is the silver sulfate which causes wounds to heal quicker. On its web site, 3M claims with regard to this product: “Silver sulfate releases as silver ions in the dressing creates an effective antimicrobial barrier for up to 7 days.” It is further claimed that these silver ions reduce the number of bacteria and yeast. You assert that the finished dressings are products of the United States under application of the rules of origin for textile and apparel products set forth in the Customs and Border Protection (CBP) regulations at 19 C.F.R. 102.21 (implementing 19 U.S.C. § 3592). In the alternative, you assert that the finished dressings are products of the United States under the traditional substantial transformation test set forth in 19 U.S.C. § 2518. The CBP regulations implementing 19 U.S.C. § 2515(b)(1), which provides that the Secretary of the Treasury shall issue advisory rulings and final determinations on the origin of an article under the provisions of 19 U.S.C. §§ 2511 through 2518, are found at 19 CFR §§ 177.21 through 177.31. 19 U.S.C. §§ 2511 through 2518 implement Title III of the Trade Agreements Act of 1979, as amended, which effectuated U.S. obligations under the Agreement on Government Procurement. ISSUE: What is the country of origin of the finished Tegaderm™ Ag Mesh Dressings for purposes of U.S. Government procurement? LAW AND ANALYSIS: Pursuant to Subpart B of Part 177, 19 C.F.R. 177.21 et seq., which implements Title III, Trade Agreements Act of 1979, as amended (19 U.S.C. §§ 2511-2518), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purpose of granting waivers of certain "Buy American" restrictions in U.S. law or practice for products offered for sale to the U.S. Government. Initially, we note that 3M is permitted to request this ruling as it is the importer of record and thus meets the requirements of 19 C.F.R. §§ 177.23(a) and 177.24. In addition, 3M meets the definition of a party-at-interest as defined at 19 C.F.R. § 177.22(d) and is entitled to a final determination as to the country of origin of the finished Tegaderm™ Ag Mesh Dressings produced from imported nonwoven cotton fabric. The rule of origin set forth in 19 U.S.C. § 2518(4)(B) states: An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed. See also 19 C.F.R. § 177.22(a) defining “country of origin” in identical terms. In rendering advisory rulings and final determinations for purposes of U.S. Government procurement, CBP applies the provisions of Subpart B of Part 177 consistent with the Federal Procurement Regulations. See 19 C.F.R. § 177.21. In this regard, CBP recognizes that the Federal Procurement Regulations restrict the U.S. Government’s purchase of products to U.S. - made or designated country end products for acquisitions subject to the TAA. See 48 C.F.R. § 25.403(c)(1). The Federal Procurement Regulations define ‘‘U.S.-made end product’’ as: . . . an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed. 48 C.F.R. § 25.003. Therefore, the question presented in this final determination is whether, as a result of the operations performed in the United States, the nonwoven cotton fabric is substantially transformed into a product of the United States. The rules of origin for textile products for purposes of the customs laws and the administration of quantitative restrictions are set forth in 19 U.S.C. § 3592. These provisions are implemented in the CBP Regulations at 19 C.F.R. § 102.21. The rules set forth in § 3592 apply to textile and apparel products, unless otherwise provided for by statute. The rule of origin in § 2518(4)(B) is a rule of origin otherwise provided for by statute, however, it is a general rule, whereas § 3592 is specific to textile products. Section 3592 has been described as Congress’s expression of substantial transformation as it relates to textile products. The rules of origin in 19 U.S.C. § 3592 are implemented in the CBP Regulations in 19 C.F.R. § 102.21. The imported product is a nonwoven textile fabric. The finished product, Tegaderm™ Ag Mesh Dressings, is also a textile product as defined by 19 C.F.R. § 102.21(b)(5). Tegaderm™ Ag Mesh Dressings are classified in subheading 3005.90, HTSUS, which provides for “Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes” other than adhesive dressings and other articles having an adhesive layer. As the finished dressing is produced by processing in more than one country, its origin cannot be determined by application of § 102.21(c)(1), wholly obtained or produced rule, and resort must be made to § 102.21(c)(2). Section 102.21(c)(2) states that the origin of a good is the country “in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of [102.21].” Section 102.21(e) provides in pertinent part: The following rules will apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section: 3005.90 If the good contains pharmaceutical substances, a change to subheading 3005.90 from any other heading; . . . . The material of foreign origin in this case is the nonwoven cotton fabric classifiable in heading 5603, HTSUS. The processing in the United States causes the foreign origin material to make a tariff shift from heading 5603 to subheading 3005.90, HTSUS. Therefore, by application of the rules set forth in 19 C.F.R. § 102.21, the finished Tegaderm™ Ag Mesh Dressings are products of the United States for purposes of government procurement. HOLDING: Based on the facts and analysis set forth above, the finished Tegaderm™ Ag Mesh Dressings are products of the United States for the purpose of government procurement. Notice of this final determination will be given in the Federal Register, as required by 19 C.F.R. § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 C.F.R. § 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 C.F.R. § 177.30, any party-at-interest may, within 30 days after publication of the Federal Register notice referenced above, seek judicial review of this final determination before the Court of International Trade.  Sincerely, Sandra L. Bell Executive Director Regulations and Rulings Office of International Trade