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HQ 084935


August 23, 1989

CLA-2 CO:R:C:G 084935 DC

CATEGORY: CLASSIFICATION MARKING

TARIFF NO.: 9506.91.0030

Ms. Deborah J. Clune
PBB USA Inc.
P.O. Box 950
Buffalo, New York 14213

RE: Tariff classification and marking requirements applicable to the BodyPro "Pocket Gym"

Dear Ms. Clune::

Your letter dated April 24, 1989, addressed to our Buffalo office on behalf of Bodypro Inc. of 2384 Yonge Street, Toronto, Ontario, concerning the tariff classification and marking requirements applicable to a "Pocket Gym" from Canada, has been referred to this office for a direct reply to you. A sample was submitted for examination.

FACTS:

The sample pocket gym includes the following:

2 injection molded plastic handles made in Canada;

2 aluminum extension tubes extruded and machined in Canada;
one 2' by 3' folded instruction poster printed in Canada;
one 8 1/2" by 14" sports specific/product sheet printed in Canada;
one 8 1/2" by 5 1/2" exercise sheet printed in Canada;
one nylon bag 9 1/4" long by 4" wide by 3 1/2 " high made in Korea; and
one 10" twist tie made in Canada.

After importation, an 8' long piece of latex tubing and 4 "O" rings will be added.

ISSUE

Should the nylon bag be considered a container classifiable in the same manner as its contents?

Does the "Pocket Gym" in its condition as imported constitute a set for tariff purposes?

Is the "Pocket Gym" eligible for treatment as "goods originating in the territory of Canada" for the purposes of the U.S.- Canada FTA?

Is the nylon bag manufactured in Korea subject to visa requirements and quota restraints.

Must the nylon bag be marked to indicate Korea as the country of origin?

LAW AND ANALYSIS:

In applying the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), the Customs Service must follow the terms of the statute. Classification of goods under the HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1 provides that "classification shall be determined according to the terms of the headings and any relative section or chapter notes, and, provided such headings or notes do not otherwise require, according to [the remaining GRI's taken in order]." In other words classification is governed first by the terms of the headings of the tariff and any relative section or chapter notes.

GRI 5, HTSUSA, which is relevant in determining whether the nylon bag should be classified in the same manner as its contents reads as follows:

5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred therein:

(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long- term use and entered with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character;

(b) Subject to the provisions of rule 5(a) above, packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.

Rule 5(a) does not apply here because the nylon bag is not specially shaped or fitted to contain the exercise articles. Further, Rule 5(b) is inapplicable because the nylon bag is clearly suitable for repetitive use. Consequently, the bag is not considered a container classifiable with its contents.

GRI 3, HTSUSA, is relevant in determining whether the "Pocket Gym" is a set for tariff purposes. It reads in pertinent part as follows:

3. When by application of Rule 2(b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods . . . those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

GRI 3(b), HTSUSA, is relevant here because GRI 3(a), HTSUSA, cannot be used in determining classification. The Explanatory Notes for GRI 3, HTSUSA, state that the term "goods put up in sets for retail sale" means goods that:

(a) consist of at least two different articles prima facie classifiable in different headings (or, by GRI 6, subheadings);

(b) consist of products or articles put together to meet a particular need or carry out a specific activity; and

(c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards).

It is our opinion that the components comprising the "Pocket Gym" meet the criteria set forth above for being considered a set for tariff purposes.

Since we have concluded that the components of the "Pocket Gym" constitute a set for tariff purposes, it is necessary to determine which component of the set imparts the essential character thereto. The Explanatory Notes for GRI 3(b), HTSUSA, state in pertinent part as follows:

VIII The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.

It is our observation that the exercise equipment in the "Pocket Gym" imparts the essential character to the set. Our rationale for this position is that these components are dedicated to the specific activity for which the set was designed viz., exercise. Consequently, this set is classifiable under subheading 9506.91.0030, HTSUSA, as articles and equipment for gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere in this chapter, other, gymnasium or other exercise articles and equipment, parts and accessories thereof, other.

A determination as to whether the set qualifies as "goods originating in the territory of Canada" is governed by General Note 3(c)(vii) HTSUSA, which reads in pertinent part as follows:

United States-Canada Free Trade Agreement Implementation Act of 1988

(B) For the purposes of subdivision (c)(vii) of this note, goods imported into the customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only if--

(1) they are goods wholly obtained or produced in the territory of Canada and/or the United States, or

(2) they have been transformed in the territory of Canada and/or the United States, so as to be subject--

(1) to a change in tariff classification in Canada as described in the rules of subdivision (c)(vii)(R) of this note, or . . .

The set is eligible for treatment as "goods originating in the territory of Canada" because a substantial transformation has occured here. Specifically, the nylon bag imported into Canada was classified under Chapter 42 while the nylon bag with the exercise equipment is considered a set classifiable under Chapter 95, TSUSA.

Merchandise which is classifiable per se under Chapter 95, HTSUSA, is not subject to visa requirements or quota restraints. However, the nylon bag is not classifiable per se under that chapter. It is only classifiable therein by virtue of its being a component of the set. Thus, the nylon bag is subject to visa requirements and quota restraints.

With respect to marking requirements, it should be noted that Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article.

Section 134.1(b), Customs Regulations (19CFR 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 the meaning of marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940), stands for the principle that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be substantially transformed.

You suggest that the country of origin marking should be consistent with the tariff classification of an article. We do not agree that the classification of an article must control the country of origin marking of the nylon bag. Courts have acknowledged the reality that the application of differing laws
relating to the importation of goods into the U.S. can result in differing origins for the same product. In discussing the differences between the marking laws, drawback laws and the Generalized System of Preferences (GSP), the court in National Juice Products Association v. United States, 10 CIT 48, 628 F. Supp. 978 (1986), concluded, "[t]hus, although the language of the tests applied under the three statutes is similar, the results may differ where differences in statutory language and purpose are pertinent." National Juice, Note 14, at 58-59. We maintain that the differing purposes of the marking laws compared with the classification schedules justify a different result in the present instance; one for country of origin, one for tariff classification.

The pertinent statutory purpose involved in application of the marking laws was explained in United States v. Friedlaender & Co., 27 CCPA 297, C.A.D. 104 (1940) as follows:

Congress intended that the ultimate purchaser should be able to know by an inspection of the marking on imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.

In view of the foregoing, it is our position that since the nylon bag is made in Korea and is not subjected to any processes in Canada that would permit waiver of marking requirements, the bag must be marked "Made in Korea." We suggest a sewn-in label would be acceptable. The handles and tubes may be marked with a sticker "Made in Canada." The printed sheets and poster should state "Printed in Canada."

HOLDING:

The "Pocket Gym" is classifiable under subheading 9506.91.0030, HTSUSA, with duty at the rate of 4.1 percent ad valorem.

The nylon bag is subject to visa requirements and quota restraints under subheading 4202.92.3030, HTSUSA. The textile category is 670.

Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, you should contact your local Customs office prior to importation of this merchandise to determine the current status of any import restraints or requirements.

Sincerely,

John Durant, Director

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