The tariff classification and status under the North American Free Trade Agreement (NAFTA) and country of origin determination, of certain Velcro® fabric items from Mexico; 19 CFR 102.21(c)(2); tariff shift; Article 509

N105324 May 19, 2010 CLA-2-63:OT:RR:NC:N3:351 CATEGORY: Classification TARIFF NO.: 6307.90.9889 Herbert J. Lynch Sullivan & Lynch, P.C. 56 Roland Street Boston, MA 02129-1223 RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) and country of origin determination, of certain Velcro® fabric items from Mexico; 19 CFR 102.21(c)(2); tariff shift; Article 509 Dear Mr. Lynch: This is in reply to your letter dated May 7, 2010, on behalf of your client Velcro USA, Inc., of Manchester, N.H., requesting classification, status under the North American Free Trade Agreement, and country of origin determination for certain Velcro® fabric items known as DFL that will be imported into the United States. The sample will be retained with the official case file. FACTS: DFL is made from a warp knit fabric of 100% nylon yarns. It is knit at Velcro’s plant in New Hampshire. The yarns can be of United States origin or foreign origin, depending upon availability. The U.S.-manufactured fabric is shipped to a related firm in Mexico in 500-yard rolls of 54” width. In Mexico it is slit into widths ranging from 1-1/2” to 6”, depending on customer requirements. The slit fabrics are then folded onto itself and the edges are sewn, creating a self hem; it is also sewn down the middle, where the folded edges meet. The self hems and the center seam make the fabric “made up” according to the terms of Note 7 to Section XI, Harmonized Tariff Schedule of the United States (HTSUS). The hemmed fabric is cut and rolled in 25-yard lengths for further processing for uses in the medical industry (e.g., orthopedics, wheel chair manufacturing, X-ray machinery, etc.). CLASSIFICATION: The applicable tariff provision for the DFL will be 6307.90.9889, HTSUS, which provides for other made up textile articles, other. The general rate of duty will be 7% ad valorem. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/. NAFTA General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that 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; or (iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the nonoriginating materials falling under provisions for “parts” and used in the production of such goods does not undergo a change in tariff classification because-- (A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or (B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts, provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note. The rule for subheading 6307, HTSUS, in GN 12(t)/63(4) states: A change to headings 6304 through 6310 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, chapters 54 through 55, or headings 5801 through 5802 or 6001 through 6006, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one of more of the NAFTA parties. [Emphasis added.] The warp knit fabric is classified within headings 6001-6005, which are excluded from the tariff shift. Thus, the DFL does not qualify for preferential treatment under the NAFTA because it is made in Mexico from fabric that does not meet the tariff shift requirement. COUNTRY OF ORIGIN - LAW AND ANALYSIS: Section 334 of the Uruguay Round Agreements Act (codified at 19 U.S.C. 3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse for consumption, on and after July 1, 1996. Section 102.21, Customs Regulations (19 C.F.R. 102.21), published September 5, 1995 in the Federal Register, implements Section 334 (60 FR 46188). Section 334 of the URAA was amended by section 405 of the Trade and Development Act of 2000, enacted on May 18, 2000, and accordingly, section 102.21 was amended (68 Fed. Reg. 8711). Thus, the country of origin of a textile or apparel product shall be determined by the sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21. Paragraph (c)(1) states, “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.” As the subject merchandise is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable. Paragraph (c)(2) states, 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 of the foreign materials 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. Paragraph (e) in pertinent part states, The following rules shall 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 The country of origin of a good classifiable under subheading 6307.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process. As the warp knit fabric is formed by a fabric-making process in a single country, that is, the United States, as per the terms of the tariff shift requirement, country of origin is conferred in the U.S. However, Subchapter II, Note 2(a) to Chapter 98, HTSUS, states, in part, that …any product of the United States which is returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means, or any imported article which has been assembled abroad in whole or in part of products of the United States, shall be treated for the purposes of this Act as a foreign article, and, if subject to a duty which is wholly or partly ad valorem, shall be dutiable, except as otherwise prescribed in this part, on its full value determined in accordance with section 402 of the Tariff Act of 1930, as amended. Therefore, in accordance with Subchapter II, Note 2(a) to Chapter 98, HTSUS, and Section 102.21(c)(2), the country of origin of the DFL for marking is the United States, subject to FTC authority (see below), but for duty purposes the DFL is subject to the general rate of duty noted above. If a good is determined to be an article of U.S. origin, it is not subject to the country of origin marking requirements of 19 U.S.C. §1304. Whether an article may be marked with the phrase “Made in the USA” or similar words denoting U.S. origin, is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the FTC Division of Enforcement, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580 on the propriety of proposed markings indicating that an article is made in the U.S. HOLDING: The classification of the DFL is 6307.90.9889, HTSUS. The country of origin is the United States. The item is not eligible for NAFTA. This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). Should it be subsequently determined that the information furnished is not complete and does not comply with 181.100(a)(2), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted. A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Mitchel Bayer at (646) 733-3102. Should you wish to request an administrative review of this ruling, submit a copy of this ruling and all relevant facts and arguments within 30 days of the date of this letter, to the Director, Commercial Rulings Division, Headquarters, U.S. Customs and Border Protection, Regulations & Rulings, 799 9th Street N.W. - 7th floor, Washington, DC 20229-1177. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division