NY J87691 - Classification, status under the North American Free Trade Agreement (NAFTA) and country of origin determination for bed in a bag sets; General Note 12; Appendix to Part 181, Part II, Section 4(8); Self Produced Materials; 19 CFR 102.21(d); sets; 19 CFR 102.21(c)(1); wholly obtained or produced in a single country; 19 CFR 102.21(c)(2); tariff shift; 19 CFR 102.21(c)(4); most important assembly or manufacturing process; 19 CFR 102.19(a); NAFTA Preference Override; Article 509 - United States International Trade Commision Rulings

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NY J87691

August 20, 2003

CLA-2-RR:NC:TA:349 J87691

CATEGORY: CLASSIFICATION

Mr. Jeff Morse
Keeco, LLC
543 Forbes Blvd.
South San Francisco, CA 94118

RE: Classification, status under the North American Free Trade Agreement (NAFTA) and country of origin determination for bed in a bag sets; General Note 12; Appendix to Part 181, Part II, Section 4(8); Self Produced Materials; 19 CFR 102.21(d); sets; 19 CFR 102.21(c)(1); wholly obtained or produced in a single country; 19 CFR 102.21(c)(2); tariff shift; 19 CFR 102.21(c)(4); most important assembly or manufacturing process; 19 CFR 102.19(a); NAFTA Preference Override; Article 509

Dear Mr. Morse:

This is in reply to your letter dated July 22, 2003, requesting a classification, status under the NAFTA and country of origin determination for bed in a bag sets which will be imported into the United States.

FACTS:

The subject merchandise consists of “Bed in a Bag” sets. The sets contain a comforter, flat sheet, fitted sheet, pillowcases, dust ruffle and pillow shams. Samples were not submitted. The comforter shell is made from a 100 percent cotton woven fabric. It is stuffed with a polyester batting fabric and lightly quilted. You have indicated that the comforter does not contain any embroidery, lace, braid, edging, trimming, piping over 6.35 mm. or applique work. The pillow shams are made from a 100 percent cotton woven fabric and contain embroidery. The dust ruffle or bed skirt is made from a printed 100 percent cotton woven fabric. The flat sheet, fitted sheet and pillowcases will be made from either a bleached or a printed 60 percent cotton and 40 percent polyester woven fabric. The components of the “Bed in a Bag” sets are packed together for retail sale in a zippered vinyl bag. You have described three manufacturing scenarios. The manufacturing operations for the “Bed in a Bag” sets are as follows:

Scenario 1
CHINA OR PAKISTAN:
-cotton fabric for the comforter shell, shams and dust ruffle is woven. -fabric is finished, cut to size and shape and embroidered (sham). -components are sewn creating the comforter shell, shams and dust ruffle. -60/40 cotton and polyester fabric (sheets and pillowcases) is woven. -fabric is bleached and may be printed.
-comforter shell, shams, dust ruffle, vinyl bag and rolls of 60/40 fabric are shipped to Mexico.

MEXICO:
-polyester batting fabric is formed.
-batting is cut to size and stuffed into the comforter shell. -comforter is sewn closed and lightly quilted. -cotton/polyester fabrics are cut to size and shape. -components are sewn forming the sheets and pillowcases. -comforter, shams, dust ruffle, sheets and pillowcases are packed for retail sale in the vinyl bag and shipped.

Scenario 2
CHINA OR PAKISTAN:
-cotton fabric for the comforter shell, shams and dust ruffle is woven. -fabric is finished, cut to size and shape and embroidered (sham). -components are sewn creating the comforter shell, shams and dust ruffle. -comforter shell, shams, dust ruffle and vinyl bag are shipped to Mexico.

THAILAND:
-60/40 cotton and polyester fabric (sheets and pillowcases) is woven. -fabric is bleached and may be printed.
-rolls of 60/40 fabric are shipped to Mexico.

MEXICO:
-polyester batting fabric is formed.
-batting is cut to size and stuffed into the comforter shell. -comforter is sewn closed and lightly quilted. -cotton/polyester fabrics are cut to size and shape. -components are sewn forming the sheets and pillowcases. -comforter, shams, dust ruffle, sheets and pillowcases are packed for retail sale in the vinyl bag and shipped.

Scenario 3
THAILAND:
-60/40 cotton and polyester fabric (sheets and pillowcases) is woven. -fabric is bleached and may be printed.
-rolls of 60/40 fabric are shipped to China.

CHINA:
-cotton fabric for the comforter shell, shams and dust ruffle is woven. -fabric is finished, cut to size and shape and embroidered (sham). -components are sewn creating the comforter shell, shams and dust ruffle. -cotton/polyester fabrics (from Thailand) are cut to size and shape. -components are sewn forming the sheets and pillowcases. -comforter shell, shams, dust ruffle, sheets, pillowcases and vinyl bag are shipped to Mexico.

MEXICO:
-polyester batting fabric is formed.
-batting is cut to size and stuffed into the comforter shell. -comforter is sewn closed and lightly quilted. -comforter, shams, dust ruffle, sheets and pillowcases are packed for retail sale in the vinyl bag and shipped.

ISSUE:

What are the classification, eligibility under NAFTA and country of origin for the subject merchandise?

CLASSIFICATION:

The "bed in a bag" sets meet the qualifications of "goods put up in sets for retail sale". The components of the sets consist of at least two different articles which are, prima facie, classifiable in different headings. They are put together to meet a particular need or carry out a specific activity and they are packed for sale directly to users without repacking. The comforter imparts the essential character of the sets.

The applicable subheading for the “bed in a bag” sets will be 9404.90.8020, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for mattress supports; articles of bedding and similar furnishing (for example, mattresses, quilts, eiderdowns, cushions, pouffes and pillows) fitted with springs or stuffed or internally fitted with any material or of cellular rubber or plastics, whether or not covered: other: other: of cotton, not containing any embroidery, lace, braid, edging, trimming, piping exceeding 6.35 mm or applique work quilts, eiderdowns, comforters and similar articles. The general rate of duty will be 4.5 percent ad valorem.

Although classified as a set the individual components are subject to textile category numbers as if they were classified separately. The comforter falls within textile category designation 362. The pillow shams and dust ruffle fall within textile category designation 369. The fitted and flat sheets fall within textile category designation 361 while the pillowcases fall within textile category designation 360. 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.cbp.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.

NAFTA ELIGIBILITY:

In all three scenarios the comforters undergo processing operations in Mexico and in scenarios 1 and 2 the sheets and pillowcases also undergo processing operations in Mexico. Additionally, the comforter, sheets and pillowcases are packaged with the shams and dust ruffle in Mexico. Mexico is a country provided for under the North American Free Trade Agreement. These products will be eligible for the NAFTA preference if they qualify to be marked as a good of Mexico and if they are wholly obtained or produced in the NAFTA territories or transformed in Mexico so that the non-originating material undergoes a change in tariff classification described in subdivision (t) to General Note 12, HTSUSA. All of the components of the set, not just the item that imparts the essential character to the set, must meet the terms of General Note 12(b). For heading 9404, HTSUSA, the appropriate subdivision (t) rule state that:

A change to subheading 9404.90 from any other chapter, except from headings 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408 or 5512 through 5516.

When the non-originating comforter shells (all three scenarios) from China or Pakistan enter Mexico, they are classified in heading 6307, HTSUSA. As heading 6307, HTSUSA is not excepted by subdivision (t), the merchandise undergoes the requisite change in tariff classification and the comforters qualify for NAFTA preference. When the 60/40 cotton and polyester fabric for the sheets and pillowcases leaves China or Pakistan in scenarios 1 and 2, it is classified in heading 5210, HTSUSA. As fabrics of heading 5210, HTSUSA, are excepted from meeting the tariff change to subheading 9404.90, HTSUSA, it would initially appear that the non-originating materials from China or Pakistan do not undergo the requisite change in tariff classification.

It is noted, however, that the Appendix to Part 181 of the Customs Regulations (19 CFR Part 181), which sets forth the NAFTA rules of origin regulations, specifies rules for determining whether certain non-originating materials undergo an applicable change in tariff classification when used in self-made goods. The Appendix to Part 181, Part II, Section 4 ("Originating Goods")(8), states:

For purposes of determining whether non-originating materials undergo an applicable change in tariff classification, a self-produced material may, at the choice of the producer of the good into which the self-produced material is incorporated, be considered as an originating material or non-originating material, as the case may be, used in the production of that good.

The sheets and pillowcases, which are manufactured in Mexico and packed as part of the “bed in a bag” set, are considered a “self-produced material.” On the basis of the foregoing, the producer of the “bed in a bag” set ("the good") has the option of identifying the sheets and pillowcases ("the self-produced material") as non-originating materials. If this choice is made, the sheets and pillow cases (classifiable under subheadings 6302.21 or 6302.31, HTSUS) fall within a tariff provision that is not excepted by the tariff shift rule set forth in subdivision (t). Accordingly, the sheets and pillowcases in scenarios 1 and 2 would be deemed as undergoing the requisite change in tariff classification.

The dust ruffle and pillow shams in all three scenarios and the sheets and pillowcases in scenario 3 are finished products when they leave China or Pakistan and are imported into Mexico. The dust ruffle is classifiable under heading 6303, HTSUSA, the pillow shams are classifiable under heading 6304, HTSUSA and the sheets and pillowcases fall under heading 6302, HTSUSA. As none of these headings are excepted by subdivision (t), each of these bedding items undergoes the requisite change in tariff classification and they qualify for NAFTA preference.

The fact that the dust ruffle, pillow shams and scenario 3 sheets and pillowcases are merely packaged together with the originating comforter and scenario 1 and 2 sheets and pillowcases in Mexico does not disqualify the “bed in a bag” set from being considered as originating goods. The issue was addressed in Headquarters Ruling letter (HQ) 561326, dated April, 26, 1999. In that ruling, Customs and Border protection explained that there is no language in General Note 12, HTSUSA, which would disqualify a good from obtaining originating status by virtue of merely having undergone simple packaging or combining operations. Thus, non-originating items may undergo the requisite tariff shift under General Note 12 (t), HTSUSA, when packaged in Mexico with originating items.

Pursuant to the analysis set forth above, all of the items in the three “bed in a bag” set scenarios qualify as originating goods. Accordingly, they will be entitled to the special "MX" rate of duty if they qualify to be marked as a good of Mexico and provided that all other NAFTA requirements are met. Note, if the producer in Mexico does not opt to identify the sheets and pillowcases in scenarios 1 and 2 as “self-produced materials,” the “bed in a bag” sets in scenarios 1 and 2 would not be eligible for the NAFTA preference as all items in the set would not make the requisite change in tariff classification.

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.

Section 102.21(d) addresses the treatment of sets for country of origin purposes. Section 102.21(d) provides the following:

Where a good classifiable in the HTSUS as a set includes one or more components that are textile or apparel products and a single country of origin for all of the components of the set cannot be determined under paragraph (c) of this section, the country of origin of each component of the set that is a textile or apparel product shall be determined separately under paragraph (c) of this section.

The classification of the subject “bed in a bag” sets, as per an essential character determination, are based on the comforter, however, per the terms of Section 102.21(d), one must determine whether or not a single country of origin exists for the entire set.

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." The dust ruffle and pillow shams in all three scenarios were wholly obtained or produced in China or Pakistan. Thus the country of origin initially appears to be China when wholly made in China or Pakistan when wholly made in Pakistan. Since the comforter, sheets and pillowcases were not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable for those items.

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

6301-6306 Except for goods of heading 6302 through 6304 provided for in paragraph (e)(2) of this section, the 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.

9404.90 Except for goods of subheading 9404.90 provided for in paragraph (e)(2) of this section, the country of origin of a good classifiable under subheading 9404.90 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric-making process.

Subheadings 6302.21, 6302.31 (sheets and pillowcases, printed or not printed) and 9404.90.80 (comforter) are not included in the paragraph (e)(2) exception to the above tariff shift rules. The sheets and pillowcases are made from a fabric that was formed in a single country. As the fabric comprising the sheets and pillowcase is formed in a single country, that is, China when the fabric is woven in China, Pakistan when the fabric is woven in Pakistan and Thailand when the fabric is woven in Thailland, as per the terms of the tariff shift requirement, country of origin is conferred in China when the fabric is woven in China (scenario 1), Pakistan when the fabric is woven in Pakistan (scenario 1) and Thailand when the fabric is woven in Thailland (scenarios 2 and 3). The comforters are made from a shell fabric and a batting fabric. As the fabrics comprising the comforters in all three scenarios are formed in more than one country, Section 102.21 (c)(2) is inapplicable.

Section 102.21(c)(3) states that, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) of this section":

(i) If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit; or

(ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled.

As the comforters are not knit and subheading 9404.90, HTSUSA, is excepted from provision (ii), Section 102.21 (c)(3) is inapplicable.

Section 102.21 (c)(4) states, "Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1), (2) or (3) of this section, the country of origin of the good is the single country, territory or insular possession in which the most important assembly or manufacturing process occurred". In the case of the subject merchandise, the most important manufacturing process occurs at the time of fabric making. Basing the country of origin determination on the fabric making process as opposed to the assembly process carries out the clear intent of Section 334 as expressed in Section 334 (b)(2) and Part 102.21(c)(3)(ii). In the case of the subject comforters, the fabric making process of the outer shell constitutes the most important manufacturing process. The outer shell of the comforters in all three scenarios is formed by a single fabric. Accordingly, the fabric making process in China or Pakistan, where the fabric for the outer shell is formed, constitutes the most important manufacturing process and the country of origin for the comforter is China when the shell fabric is formed in China or Pakistan when the shell fabric is formed in Pakistan.

However, the “bed in a bag” sets qualify as a NAFTA originating good. As stated in Section 102.19(a):

Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of §181.1(q) of this chapter is not determined under §102.11(a) or (b) or §102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin (see §181.11 of this chapter) has been completed and signed for the good.

Since we have previously determined that the items in the set are "originating" for purposes of the NAFTA preference rule applicable to the set, it is the belief of Customs and Border Protection that Section 102.19(a) operates as an override for all of the items in the set and that all of the items are entitled to be marked as country of origin Mexico. Although packing is considered a non-qualifying operation under Section 102.17, the assembly of the comforter (all scenarios) and the cutting and sewing of the sheets and pillowcases (scenarios 1 and 2) in Mexico meet the requirement that the good underwent production other than minor processing. Customs and Border Protection has previously stated that as long as one item in the set undergoes production other than minor processing, the remaining items in the set will receive the benefit of the NAFTA override. See HQ 559421.dated September 16, 1996; HQ 560577, dated August 4, 1997; HQ 560456, dated September 26, 1997; and HQ 560992, dated July 6, 1998. Thus, each item in the “bed in a bag” sets in all three scenarios qualifies to be marked as country of origin Mexico.

As each item in the “bed in a bag” sets has been found to be originating and qualifies to be marked Mexico, the “bed in a bag” sets in all three scenarios are entitled to the special "MX" duty rate, provided that all other requirements of the NAFTA are met.

Although part of a set for classification purposes, the comforter, pillow shams dust ruffle, sheets and pillowcases are treated for quota and visa purposes as if they are imported separately. Section 204 of the Agricultural Act of 1956, 7 U.S.C. 1854, as amended, authorizes the President to limit importation into the United States of any textile or textile product. The President, in Executive Order 11651, 37 Fed. Reg. 4699 (Mar. 4, 1972), delegated the authority to supervise and implement all textile agreements and arrangements negotiated pursuant to Section 204 to the Committee for the Implementation of Textile Agreements (CITA).

CITA requires, as originally set forth in 53 Fed. Reg. 52765 (Dec. 29, 1988), clarified in 54 Fed. Reg. (Aug. 24, 1989) and reconfirmed in 67 Fed. Reg. 12977 (Mar. 20, 2002) that:
all applicable visa and quota requirements will apply for textiles and their products which are classified as parts of a set. The rule applies to all items which, if imported separately, would require a visa and the reporting of quota.

The comforter, if imported separately, is a NAFTA "originating" good and qualifies to be marked as country of origin Mexico by operation of the NAFTA override of Section 102.19(a). Thus the country of origin for the comforter in all three scenarios is Mexico for duty, marking and quota/visa purposes. However, if the dust ruffle, pillow shams, sheets and pillowcases had been imported separately they would not have qualified as originating goods and would not receive the benefit of the NAFTA override. The country of origin for the dust ruffle, pillow shams, sheets and pillowcases for duty and marking purposes is Mexico. The country of origin of the scenario 1 and 2 pillow shams and dust ruffle for quota/visa purposes is China when wholly obtained in China or Pakistan when wholly obtained in Pakistan. The country of origin for quota/visa purposes for the scenario 3 dust ruffle and pillow shams is China. For quota/visa purposes, the country of origin for the scenario 2 and 3 sheets and pillowcases is Thailand, while the country of origin of the sheets and pillowcases in scenario 1 are China when the fabric is woven in China or Pakistan when the fabric is woven in Pakistan.

HOLDING:

If the producer in Mexico opts to identify the “self-produced material” in scenarios 1 and 2 as a non-originating material, the country of origin of the “bed in a bag” sets in scenarios 1 and 2 for marking and duty purposes is Mexico. For marking and duty purposes the country of origin of the “bed in a bag” set in scenario 3 is Mexico. The “bed in a bag” sets will be entitled to the NAFTA “MX” duty rate of Free upon compliance with all applicable laws, regulations and agreements.

For quota and visa purposes the country of origin of the comforters is, Mexico and the origin of the shams and dust ruffles is China or Pakistan. The comforters, dust ruffles and pillow shams are not subject to quota or visa restrictions. The country of origin for quota and visa purposes of the sheets and pillowcases is China or Thailand. Based upon international textile agreements, sheets and pillowcases that are products of China are subject to quota and the requirement of a visa, while sheets and pillowcases from Thailand are subject to visa requirements.

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 19 CFR 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.

This ruling letter is binding only as to the party to whom it is issued and may be relied on only by that party.

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 John Hansen at 646-733-3043.

Sincerely,

Robert B. Swierupski
Director,

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