Internal Advice Request; Classification, country of origin, and NAFTA Eligibility of the “Bike Barn”; 19 C.F.R. §177.11

HQ H174865 August 3, 2012 OT:RR:CTF:TCM HQ H174865 AMM CATEGORY: Classification and Marking TARIFF NO.: 6306.22.90 Port Director Service Port of Blaine 9901 Pacific Highway Blaine, WA 98230 Attn: Kimbra Miller, SIS RE: Internal Advice Request; Classification, country of origin, and NAFTA Eligibility of the “Bike Barn”; 19 C.F.R. §177.11 Dear Port Director: This is in regard to your Request for Internal Advice, initiated by PTI Products Inc. (PTI Products). At issue is the classification of PTI Products’ “bike barn” under the Harmonized Tariff Schedule of the United States (HTSUS), and its eligibility under the North American Free Trade Agreement (NAFTA). Samples were provided by PTI Products for our review. In reaching our decision, Customs and Border Protection (CBP) has taken into consideration the original Request for Internal Advice from PTI Products, dated June 20, 2011, a Supplemental Submission dated January 27, 2012, and samples of the fabric used to construct the “bike barn.” FACTS: The instant merchandise is a “bike barn.” It is a tent for motorcycles, designed to protect them from the elements. It is composed of a polyester fabric which is stretched over a galvanized steel tube frame. The tubes extend out from a hub on each side, and rotate up or down to open or close the tent over the motorcycle. The tent comes in various sizes, and can be custom ordered for specific vehicles. The fabric used in the construction of the bike barn is woven from gray 100% polyester fibers. Examination of the samples indicated that the fibers are filament yarns, rather than staple yarns. The fabric is coated on one side with a clear polyurethane coating, which is intended to be water repellant. The fabric is produced in Taiwan, the metal frame components are made in the United States, and other minor components are made in various other countries, such as India, China, and Korea. The bike barn is cut, sewn, and assembled in Canada. PTI Products recently received a ruling from CBP on a similar product. In New York Ruling Letter (NY) N186097, dated October 4, 2011, CBP considered the classification of a “bike barn” that is similar to the instant merchandise. However, CBP notes that the fabric from which the bike barn of NY N186097 was constructed is different from the fabric used to construct the instant bike barn. ISSUES: What is the classification of the “bike barn” under the HTSUS? Whether the fabric used for the “bike barn,” as imported, is classified a coated fabric of heading 5903, HTSUS, or as uncoated fabric of 5407, HTSUS? Whether the “bike barn” is eligible for preferential tariff treatment under NAFTA? LAW AND ANALYSIS: I. Classification of the “Bike Barn” Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification 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 GRI may then be applied. The 2012 HTSUS provisions at issue are as follows: 5407 Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404: --------------------------- 5903 Textile fabrics impregnated, coated, covered or laminated with plastics, other than those of heading 5902: ----------------------- 6306 Tarpaulins, awnings and sunblinds; tents; sails for boats, sailboards or landcraft; camping goods: Tents: 6306.22 Of synthetic fibers: 6306.22.90 Other Note 1 to Chapter 54, HTSUS, states: Throughout the tariff schedule, the term “man-made fibers” means staple fibers and filaments of organic polymers produced by manufacturing processes, either: (a) By polymerization of organic monomers to produce polymers such as … polyesters …; or * * * The term[] “synthetic” … used in relation to fibers, mean[s]: synthetic: fibers as defined at (a); …[.] The terms “man-made”, “synthetic” and “artificial” shall have the same meanings when used in relation to "textile materials". The Harmonized Commodity Description and Coding System Explanatory Notes (EN), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the EN provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to consult, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89–80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). EN 63.06 states, in pertinent part: (4) Tents are shelters made of lightweight to fairly heavy fabrics of man-made fibres, cotton or blended textile materials, whether or not coated, covered or laminated, or of canvas. They usually have a single or double roof and sides or walls (single or double), which permit the formation of an enclosure. The heading covers tents of various sizes and shapes, e.g., marquees and tents for military, camping (including backpack tents), circus, beach use. They are classified in this heading, whether or not they are presented complete with their tent poles, tent pegs, guy ropes or other accessories. * * * In NY N186097, CBP considered the classification of a “bike barn” product imported by PTI Products. This product was a tent for motorcycles, composed of 100% polyester fabric which was coated with a polyurethane compact plastic, visible to the naked eye, on one side. CBP found that this product was classified under heading 6306, HTSUS, specifically under 6306.22.90, HTSUS. The product considered in NY N186097 is nearly identical to that of the instant merchandise, except that a different polyurethane coating is used. The instant merchandise is designed to shelter a motorcycle, and to protect it from the elements. In its condition as imported, it has walls which permit the formation of an enclosure. Thus, the instant merchandise satisfies the definition of “tent” contained in EN(4) to 63.06. Furthermore, the fabric of its structure is made from polyester, which is considered a synthetic fiber. See Note 1 to Chapter 54, HTSUS. Therefore, the instant “bike barn” is properly classified under heading 6306, HTSUS, specifically under heading 6306.22.90, which provides for “[T]ents …: Tents: Of synthetic fibers: Other”, HTSUS. See NY N186097. II. Classification of the Fabric Used for the “Bike Barn” Note 2(a)(1) to Chapter 59, HTSUS, states, in pertinent part: Heading 5903 applies to: (a) 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: (1) 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 purpose of this provision, no account should be taken of any resulting change of color; * * * CBP admits that the polyester material at issue is coated with a clear, polyurethane plastic material on one of its sides. CBP has previously stated: [T]he wording of Note 2(a)(1) [to Chapter 59, HTSUS], ‘visible to the naked eye,’ is a clear expression by the drafters of the Harmonized System that a significant, if not substantial, amount of material must be added to a fabric for it to be considered impregnated, coated or covered. The plastic material added to the fabric must be visibly distinguishable from the fabric without the use of magnification. CBP believes this criterion is satisfied when the application of plastics material visibly affects the surface character of the fabric. In such an instance, the naked eye is seeing the plastics. No account should be taken of any resulting change in only shine, reflectivity, dullness or other property which causes the viewer to see the effect rather than presence of plastic material. * * * Determinations on whether an impregnation, coating or covering can be seen with the naked eye are made on the basis of the characteristics of the specific fabric being ruled upon. The wording of Note 2(a)(1) to Chapter 59, HTSUSA, does not consider the fact that the same amount of plastics application may be more visible on one fabric, or on one color fabric, than on another. See Headquarters Ruling Letter (HQ) W968304, dated December 1, 2006 (emphasis added, citations omitted). Applying the “visible to the naked eye” test on the samples submitted by PTI Products, using normally corrected vision in a well-lighted room, no coating was visibly distinguishable from the fabrics without the use of magnification. The clear polyurethane coating lends a slight shine to the fabric, and a sparkle effect. The weave is still visible on the coated side, and is not obscured by the clear coating. The interstices of the fabric are not filled in. Based on a review of the samples submitted, CBP finds that the coating is not visible to the naked eye, and therefore, the polyester fabric from which the bike barn is constructed is not classifiable in heading 5903, HTSUS, by operation of Note 2(a)(1) to Chapter 59, HTSUS. CBP is aware that the fabric considered in NY N186097 is identical to the fabric considered here, except that a different coating is used. In NY N186097, CBP determined, based on samples submitted, that the fabric was classifiable in heading 5903, HTSUS, because that coating was visible to the naked eye. However, because “[d]eterminations on whether an impregnation, coating or covering can be seen with the naked eye are made on the basis of the characteristics of the specific fabric being ruled upon”, the determination made with respect to the fabric considered in NY N186097 is irrelevant to the determination made with respect to the samples submitted with respect to the instant product. See HQ W968304. Heading 5407, HTSUS, provides for: “Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404”. The instant fabric is woven from polyester filament yarn, and therefore meets the terms of heading 5407, HTSUS. III. NAFTA Eligibility General Note (GN) 12, HTSUS, incorporates Article 401 of the NAFTA into the HTSUS. GN 12(a)(i), HTSUS, provides, in pertinent part, that: 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 Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether 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 "CA" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act. Accordingly, the bike barn will be eligible for the “Special” “CA” rate of duty provided: (1) it is deemed to be NAFTA originating under the provisions of GN 12(b), HTSUS; and, (2) it qualifies to be marked as a product of Canada under the NAFTA Marking Rules that are set forth in Part 102 of the Code of Federal Regulations (19 C.F.R. §102). A. NAFTA In order to determine whether the “bike barn” is NAFTA-originating, we must consult GN 12(b), HTSUS, which provides, in pertinent part, as follows: 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— (i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or (ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that— (A) except as provided in subdivision (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, or (B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or (iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. Because the bike barn is comprised of non-originating polyurethane-coated polyester material from Taiwan, General Notes 12(b)(i) and 12(b)(iii), HTSUS, do not apply. Therefore, we must determine whether the non-originating materials undergo the requisite tariff shift (or other applicable requirement) prescribed under General Note 12(b)(ii), HTSUS. The applicable rule in this case regarding the requisite change of tariff classification is set forth in General Note 12(t)/(63)(4), HTSUS, which requires, in pertinent part: “A change to headings 6304 through 6310 from any other chapter, except from … chapters 54 through 55, … provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA parties.” As explained above, the fabric is classified in heading 5407, HTSUS. Hence, the tariff shift of GN 12(t)/(63)(4), HTSUS, is not met. The instant “bike barn” product is not NAFTA originating under the provisions of General Note 12(b), HTSUS, even though it was assembled in the territory of Canada, a NAFTA party. B. Marking Although the “bike barn” is not eligible for preferential treatment under NAFTA, and the inquirer did not request a country of origin marking determination, we are providing the following information. Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), requires that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit in such manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. §1304 are set forth in Part 134, CBP Regulations (19 C.F.R. Part 134). Section 134.1(b), CBP Regulations (19 C.F.R. §134.1(b)), defines “country of origin” as: The country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. Section 102.21, CBP Regulations (19 C.F.R. §102.21), provides a required hierarchy for determining the country of origin of textiles for marking purposes. Section 102.21 states, in pertinent part: (b) Definitions. The following terms will have the meanings indicated when used in this section: * * * (2) Fabric-making process. A fabric-making process is any manufacturing operation that begins with polymers, fibers, filaments (including strips), yarns, twine, cordage, rope, or fabric strips and results in a textile fabric. (c) General rules … the country of origin of a textile or apparel product will be determined by sequential application of paragraphs (c)(1) through (5) of this section … (1) The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced. (2) Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession 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 this section. * * * (e) Specific rules by tariff classification. (1) 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: HTSUS Tariff shift and/or other requirements * * * 6301-6306 [T]he country of origin of a good classifiable under heading 6301 through 6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process. * * * To determine the country of origin of the instant merchandise, CBP must consider 19 C.F.R. §102.21(c)(1) through (5) in order. The instant bike barn is constructed from fabrics imported to Canada from Taiwan. The bike barn is assembled and finished in Canada for export to the United States. Because the instant merchandise was not wholly obtained or produced in any one country, the country of origin cannot be determined under 19 C.F.R. §102.21(c)(1). Therefore, CBP must look to 19 C.F.R. §102.21(c)(2), which in turn directs us to look at 19 C.F.R. §102.21(e). According to 19 C.F.R. §102.21(e)(1), “the country of origin of a good classifiable under heading … 6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process”. In the case of the instant merchandise, the fabric making process occurred where the polyester fabric was formed. See 19 C.F.R. 102.21(b)(2). Therefore, according to 19 C.F.R. §102.21(c)(2) and (e)(1), the country of origin for the instant bike barn is the same as the origin of the polyester fabric, which is Taiwan. HOLDING: The instant bike barn product, comprised of fabric of heading 5407, is not eligible for preferential treatment under NAFTA, pursuant to General Note 12(b), HTSUS. Moreover, the country of origin of this product under the marking rules of 19 C.F.R. §102.21 will be Taiwan. By application of GRI 1, the instant bike barn is properly classified under heading 6306, HTSUS, specifically under subheading 6306.22.90, HTSUS, which provides for “Tarpaulins, awnings and sunblinds; tents; sails for boats, sailboards or landcraft; camping goods: Tents: Of synthetic fibers: Other”. The 2012 column one, general rate of duty is 8.8% ad valorem. Duty rates are provided for the internal advice applicant’s convenience and are 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. You are directed to mail this decision to the internal advice applicant, no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.CBP.gov, by means of the Freedom of Information Act, and other public methods of distribution. Sincerely, Myles Harmon, Director Commercial Trade Facilitation Division