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HQ 955371


April 15, 1994

CLA-2 CO:R:C:T 955371 CC

CATEGORY: CLASSIFICATION

Gary Brunell
A.N. Deringer, Inc.
173 W. Service Road
Champlain, NY 12919

RE: A cap with a net used for protection from mosquitos and other insects; NAFTA

Dear Mr. Brunell:

This letter is in response to your inquiry, on behalf of Produits Horizon Enr., requesting the country of origin marking of and eligibility for preferential treatment for a cap from Canada.

You originally requested a U.S.-Canada Free Trade Act eligibility determination for the merchandise. In your facsimile of February 4, 1994, you changed this request to an eligibility determination under the North American Free Trade Agreement (NAFTA).

FACTS:

The merchandise at issue, designated by you as a "Bug Cap," is a cap which offers protection from mosquitos and other insects. The cap has a pouch with a snap closure at the front panel over the visor. This pouch contains a net, which can be placed over the wearer's face and attached around the shoulders. The back panels of the cap are made of nylon mesh; the front panel, visor, and pouch are made of 100 percent cotton or a combination of 55 percent cotton and 45 percent polyester.
The net is made of 100 percent nylon.

According to your submissions, the cap is made in China. It is shipped to Canada where the pouch and netting are added, along with various minor items such as the label, sewing thread, etc. After completion of the caps, they will be imported into the United States.

ISSUE:

Whether the caps at issue qualify for duty preference under the NAFTA?

LAW AND ANALYSIS:

The NAFTA eliminates tariffs on most goods originating in Canada, Mexico, and the United States over a maximum transition period of fifteen years. Generally, tariffs only will be eliminated on goods that "originate," as defined in Article 401 of the NAFTA. Article 401 defines "originating" in four ways: (a) goods wholly obtained or produced in the NAFTA region; (b) goods produced in the NAFTA region wholly from originating materials; (c) goods meeting the Annex 401 origin rule; and (d) unassembled goods and goods classified with their parts which do not meet the Annex 401 rule of origin but contain 60 percent regional value content using the transaction method (50 percent using the net cost method).

The cap is made in China and is shipped to Canada for further assembly to create the finished merchandise. Obviously, it is not originating through methods (a) or (b), above. Article 401(b) of the NAFTA indicates that goods may "originate" in Canada, Mexico, or the United States, even if they contain non-originating materials, if the materials satisfy the rule of origin specified in Annex 401 of the NAFTA. The Annex 401 rules of origin are based on a change in tariff classification under the Harmonized Tariff Schedule (HTS), a regional value-content requirement, or both.

The finished merchandise is classifiable in Heading 6505 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for hats and other headgear. Annex 401 states that for goods classifiable in headings 6503 to 6507 to be considered originating, they must undergo a change to those headings from any heading outside that group. At the time of importation into Canada, the merchandise is a cap, classifiable in Heading 6505, HTSUSA. This merchandise, therefore, does not undergo the required tariff shift to be considered an originating good. Consequently, duty preference under the NAFTA is denied.

You have also requested a country of origin marking determination. Part 102 of the Customs Regulations (19 CFR Part 102), published in the Federal Register on January 3, 1994 (59 FR 110) establishes marking rules to determine when a good should be marked as a good of a NAFTA country: the United States, Canada, or Mexico.

Section 102.11 of the Customs Regulations sets out general rules of origin. Section 102.11(a) states that the country of origin of a good is the country in which: (1) the good is wholly obtained or produced; (2) the good is produced exclusively from domestic materials; or (3) the good undergoes an applicable change in tariff classification set out in Section 102.20 of the Customs Regulations.

Clearly methods (a)1 and (a)2 are not met in Canada for the subject merchandise. The finished merchandise is classifiable in Heading 6505. Section 102.20 states that for goods classifiable in headings 6503 to 6506 to be considered goods of a NAFTA party for country of origin purposes, they must undergo a change to those headings: from any other heading outside that group, except headings 6501 through 6502; or from heading 6501 by means of a blocking process; or from heading 6502, provided that the change is the result of at least three processing steps (e.g. dyeing, blocking, trimming, or adding a sweatband). At the time of importation into Canada, the merchandise is a cap, classifiable in Heading 6505, HTSUSA. This merchandise, therefore, does not undergo the required tariff shift under Section 102.20 to be considered a good of Canada for country of origin marking purposes.

Section 102.11(b)(1) of the Customs Regulations states that where the country of origin cannot be determined under paragraph (a), the country of origin of the good is the country of origin of the single material that imparts the essential character of the good. Material is defined in Section 102.1(l) of the Customs Regulations as "a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components." The cap as it enters Canada is a component that will be further processed, with a pouch and a net added, to produce the finished article. Therefore, at this stage the cap is considered a material. The cap, which is made in China, is the material that imparts the essential character to this merchandise; the pouch, net, and other minor components clearly would not impart the essential character. Consequently, the country of origin of the subject merchandise for marking purposes is not a NAFTA party in accordance with Part 102 of the Customs Regulations.

Country of origin for marking purposes will therefore be determined in accordance with Section 12.130 of the Customs Regulations (19 CFR 12.130). That determination is the subject of a separate letter, HQ 956008.

HOLDING:

The merchandise at issue is not eligible for duty preference under the NAFTA. The article does not qualify for marking under 19 CFR Part 102 as a good of a NAFTA country.

This ruling letter is being issued pursuant to Section 181, Subpart I, of the Customs Regulations, 19 CFR 181.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is imported. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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