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NY J86748





August 12, 2003

CLA2-RR:NC:TA:N3:356 J86748

CATEGORY: CLASSIFICATION

Ms. Gail Cummins
Sharretts, Paley, Carter & Blauvelt, P.C. Seventy-five Broad Street
New York, NY 10004

RE: Classification and country of origin determination for a men’s knit garment; 19 CFR 102.21(c)(2); tariff shift; Commonwealth of the Northern Mariana Islands; General Note 3 (a)(iv), HTSUSA; 19 CFR 7.3(d).

Dear Ms. Cummins:

This is in reply to your letter dated July 15, 2003, on behalf of TellaS Ltd., requesting a classification and country of origin determination for a men’s knit garment that will be imported into the United States. You have provided a sample of the components in the condition in which they will arrive in either the Philippines or the Commonwealth of the Northern Mariana Islands (Saipan) after processing in China and a sample of the finished garment as it will be imported into the United States. As requested, your samples will be returned.

FACTS:

The submitted sample is a man’s pullover garment constructed from 100% cotton, jersey knit fabric that measures 26 stitches per two centimeters counted in the horizontal direction. The pullover has a rib knit crew neckline; long sleeves with rib knit cuffs; a large heat seal design on the center chest; heat seals and screen printing on the left sleeve; and a straight, hemmed bottom. The garment is identified as Styes PR-PI-JS02 and PR-SPN-JS02. You state that the different style numbers are used for the same garment with the prefix identifying where the garment will be assembled.

The manufacturing operations for the pullover are as follows:

CHINA:

- the tubular fabric is knit
- the fabric is cut into component parts (tubular body, sleeves, neckband, neck tape, cuffs) - the heat seal and screen print designs are applied to the body and sleeve

COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS (SAIPAN) OR THE PHILIPPINES:

- the shoulder seams are sewn closed
- the sleeve seams are sewn closed
- the sleeves are attached to the body
- the rib knit cuffs are attached to the sleeves - the collar is attached
- the neck tape and neck label are attached - the bottom is hemmed
- the garments are washed, ironed, folded and packed for export

ISSUE:

What are the classification and country of origin of the subject garment?

CLASSIFICATION:

The applicable subheading for the submitted garment will be 6110.20.2065, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for men’s or boys’ pullovers, and similar articles, knitted or crocheted: of cotton: other: other: other: men’s or boys’. The general rate of duty is 16.9 percent ad valorem.

The garment falls within textile category designation 338. The designated textile and apparel categories and their quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information, we suggest that you check, close to the time of shipment, the Textile Status Report for Absolute Quotas, which is available at our Web Site at www.cpb.gov. In addition, the designated textile and apparel categories may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected and should also be verified at the time of shipment.

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 that "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 that "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 that "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

6101-6117 If the good is not knit to shape and consists of two or more component parts, a change to an assembled good of heading 6101 through 6117 from unassembled components, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession.

Paragraph (b) (6) defines “wholly assembled” as:

The term “wholly assembled” when used with reference to a good means that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets) will not affect the status of a good as “wholly assembled” in a single country, territory, or insular possession.

The submitted garment is not knit to shape and consists of two or more parts. As all of the assembly operations occur in a single country, that is, either the Philippines or the Commonwealth of the Northern Mariana Islands (Saipan), the garments are considered “wholly assembled” in a single country, that is, either the Philippines or the Commonwealth of the Northern Mariana Islands (Saipan). As per the terms of the tariff shift requirement, country of origin is conferred in the single country of assembly, that is, either the Philippines or the Commonwealth of the Northern Mariana Islands (Saipan).

Regarding the Commonwealth of the Northern Mariana Islands, General Note 3(a)(iv), HTSUSA, permits products of insular possessions of the United States to be imported into the United States free of duty obligations if certain requirements are fulfilled. Duty free status is granted to those goods which

(1) are the growth or product of the possession, or (2) are manufactured or produced in any such possession from materials which are the growth, product or manufacture of any such possession or of the customs territory of the United States, or of both and (3) do not contain foreign materials which represent more than 50% of the goods’ total value (for textile and apparel articles subject to textile agreements), and (4) are shipped directly to the customs territory of the United States from the insular possession.

Since the Commonwealth of the Northern Mariana Islands is an insular possession of the United States, and since the good which is produced in the Commonwealth of the Northern Mariana Islands, namely, the man’s knit pullover, is a textile article that is subject to textile agreements, the “foreign materials” which make up the pullover must not represent more than 50% of the article’s appraised value.

In order to meet the requirements of General Note 3(a)(iv), HTSUSA, we must first determine whether the component parts which are imported into the Commonwealth of the Northern Mariana Islands from China are substantially transformed by processing in the Commonwealth and thereby become a product of that insular possession. A substantial transformation occurs when an item emerges from a process with a new name, character or use that is different from that possessed by the item prior to processing.

In determining whether the cost or the value of the Chinese component parts should be considered part of the cost of the “foreign materials” or part of the cost of the materials produced in the Commonwealth of the Northern Mariana Islands for the purpose of applying the 50% foreign value limitation under General Note 3(a)(iv), we must consider whether the component parts undergo a double substantial transformation during the processing in the insular possession. Treasury Decision (T.D.) 88-17, effective April 13, 1988, determined that the concept of double substantial transformation should be used in deciding whether foreign material that does not originate in the insular possession may nevertheless qualify as part of the value of material produced in the insular possession. To do this, the foreign material must be substantially transformed in the insular possession into a new and different product and then that product must be transformed yet again into another new and different product that is exported directly to the United States. If this happens to the foreign material, then its cost can be considered part of the value of the materials produced in the insular possession.

As an example of the double substantial transformation principle as it was applied to textile wearing apparel, see Headquarters Ruling Letter (HRL) 556214, dated March 20, 1992, in which Customs ruled that foreign rolled fabric that was imported into the Commonwealth of the Northern Mariana Islands where it was cut to shape and then assembled into golf shirts and pullovers did undergo a double substantial transformation. In contrast, the present question involves component parts that are cut in China, not in the Commonwealth of the Northern Mariana Islands. Therefore, the component parts do not undergo a double substantial transformation in the insular possession and their cost may not be included as part of the value of materials produced in the Northern Mariana Islands.

Despite the fact that the Chinese knit and cut component parts of the garment are considered foreign materials when they are shipped to the Commonwealth, and regardless of the determination that these parts do not undergo a double substantial transformation when they are processed in the insular possession, the garment may still qualify for duty free tariff status as long as it does not contain foreign materials which represent more than 50% of the total value of the goods and it is shipped directly to the United States from the insular possession. Section 7.3(d) of the Customs Regulations (C.R.) states that such a determination must be based on a cost comparison between:

The manufacturer’s actual materials cost plus the cost of transporting those materials to the insular possession (excluding duties, taxes and charges after landing) versus the final appraised value of the imported goods under Section 402a Tariff Act of 1930, as amended.

We note that a final determination regarding whether the foreign value limitation is satisfied for the instant merchandise can only be made at the time of entry of the goods into the United States.

HOLDING:

The country of origin of the subject garment is the country where the garment was wholly assembled, that is either the Philippines or the Commonwealth of the Northern Mariana Islands. Based upon international textile trade agreements, products of the Philippines are subject to visa requirements and quota restraints.

With regard to the Commonwealth of the Northern Mariana Islands, the component parts knit and cut in China are considered foreign materials for the purpose of calculating the 50% foreign value limitation under General Note 3(a)(iv), HTSUSA. However, the garment may still be eligible for duty free status provided that it is imported directly from the Commonwealth of the Northern Mariana Islands to the United States, and that the 50% foreign value limitation is satisfied at the time of entry. Since the Commonwealth of the Northern Mariana Islands is not a foreign country and, therefore, the United States has no bilateral quota or visa agreement with it, the garment is not subject to quota or visa requirements.

The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 CFR 177.9(b)(1). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), 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 in accordance with 19 CFR 177.2.

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 Mary Ryan at 646-733-3271.

Sincerely,

Robert B. Swierupski
Director,

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