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NY L85618





June 23, 2005

CLA2-61-RR:NC:TA:359:L85618

CATEGORY: CLASSIFICATION

Ms. Rhoda Salus
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, Florida 33126-2022

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

Dear Ms. Salus:

This is in reply to your letter dated June 14, 2005, which you submitted on behalf of your client, US-CNMI Development Corporation, in which you requested a classification and country of origin determination for women’s knitwear that will be imported into the United States. Your samples and their component parts are returned as requested.

FACTS:

Representative samples of garments were submitted as certain styles differed only in size, sleeve length, or in the type of decorative beading, embroidery or printing that applied to the front panel of the shirt. Two main styles of garment were presented, those of a pullover and those of a T-shirt. Both styles of garment are made of 97% cotton, 3% spandex finely knitted fabric that weighs 190gm/m².

Styles 05-06457, 05-06458, 05-06459, and 05-06460 are described as knit pullovers. The garments feature scoop necklines with capping, front panels that have beaded designs, hemmed bottoms and hemmed sleeves. Styles 05-06457 and 05-06458 feature long sleeves; styles 05-06459 and 05-06460 feature cap sleeves.

Styles 05-07370, 05-07371, 05-07372, 05-07366, 05-07367, 05-07368, and 05-07369 are described as long sleeved T-shirts. They feature round necklines, long hemmed sleeves and hemmed bottoms. They also feature screen-printing, either as a decorative portion on the front panel or as an all over design. Additionally styles 05-07371 and 05-07372 have a few gold beads sewn onto the front panels of the shirts, and styles 05-07366, 05-07367 and 05-07368 have three rhinestones heat-sealed onto the front portions of the shirts. In your submission, you state that the classification of all of these styles (05-07370371372366 367368 and 369) should be under heading 6109 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA). The presence of beading on styles 05-07371, 05-07372, 05-07366, 05-07367, and 05-07368 precludes classification of these styles in heading 6109.

Further, in your letter, you state that although the garments will be produced in China and in Saipan, (part of the Commonwealth of the Northern Mariana Islands), the countries involved in the production process may change, and you request that the ruling apply to the processes as described, regardless of the countries in which they are performed. Therefore we have identified the countries as Country “A” (China) and Country “B” (CNMI).

The manufacturing operations for the garments are as follows:

The fabric is made
The fabric is cut into component parts
The front panels are printed, beaded and/or embroidered The component parts are packed and shipped to CNMI for assembly

The component parts are wholly assembled in CNMI The shoulder seams are joined
The side seams are joined
The sleeves are attached to the garment body(ies) The neck binding is sewn to the body(ies) The bottoms of the garments are hemmed
The completed garments are trimmed, washed, and inspected The garments are packed for direct export to the U.S.

ISSUE:

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

CLASSIFICATION:

The applicable subheading for styles 05-06457, 05-06458, 05-06459, 05-06460, 05-07371, 05-07372, 05-07366, 05-07367, and 05-07368 will be 6110.20.2075, HTSUSA, which provides for sweaters, pulloversand similar articles, knitted or crocheted: Of cotton: Other: Other: women’s or girls’. The general rate of duty is 16.5% ad valorem.

The applicable subheading for styles 05-07370 and 05-07369 will be 6109.10.0070, HTSUSA, which provides for T-shirtsand similar garments, knitted or crocheted: Of cotton: Women’s or girls’: Other: Other. The general rate of duty is 16.5% ad valorem.

All of the garments fall within textile category designation 339. 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 U.S. Customs Service Textile Status Report, an internal issuance of the U.S. Customs Service, which is available at the Customs Web Site at WWW.CUSTOMS.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:

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. 3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published Section 102.21, Customs Regulations, in the Federal Register, implementing Section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by 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 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":

HTSUSA 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.

Section 102.21(e) states that the good must be assembled in a single country, territory or insular possession. Accordingly, as the garments are assembled totally in Country “B”, (CNMI), they satisfy the conditions of the tariff shift and therefore, Section 102.21(c)(2) is applicable.

Accordingly, the country of origin of the women’s knitted garments is Country “B”, (CNMI).

General Note 3(a)(iv), HTSUSA, permits products of insular possessions of the United States, of which the CNMI is one, to be imported into the United States free of duty obligations if certain requirements are met. Duty free status is granted to those goods that

-are the growth or product of the possession; or -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 -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 -are shipped directly to the customs territory of the United States from the insular possession.

Since the CNMI is an insular possession of the United States, and since the goods, which are produced in the CNMI, namely, the women’s knitted garments, are textile articles that are subject to textile agreements, the “foreign materials” which make up the garments must not represent more than 50% of their respective values.

In order to meet the requirements of General Note 3(a)(iv), HTSUSA, we must determine whether the component panels which are imported into the CNMI from China are substantially transformed by the processing in the CNMI and therefore, become products 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 panels should be considered part of the cost of the “foreign materials” or of the cost of the materials produced in the CNMI for the purpose of applying the 50% foreign value limitation under General Note 3(a)(iv), we must consider whether the component panels 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 the 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 materials produced in the insular possession.

For an example of the double substantial transformation principle as it was applied to textile wearing apparel we look to Headquarters Ruling Letter (HRL) 556214, dated March 20, 1992, in which Customs ruled that the foreign rolled fabric that was imported into the CNMI 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 panels that are cut in China, not in the CNMI. Further, those panels are partially assembled in China. Thus, the component panels 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 CNMI.

Despite the fact that the Chinese knitted and cut component panels of the garments are considered foreign materials when they are shipped to the CNMI, and regardless of the determination that those foreign panels do not undergo a double substantial transformation when they are processed in the insular possession, the garments may still qualify for duty free tariff status as long as they do not contain foreign materials which represent more than 50% of the total value of the garments and that they are shipped directly to the United States from the insular possession. Section 7.3 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 the final determination regarding whether the foreign value limitation is satisfied for the garments can only be made at the time of importation into the United States. Therefore, although we may discuss the criteria which must be met, a ruling cannot issued on this particular aspect of the transaction until after the goods are imported and final appraisement of the goods is made.

HOLDING:

The country of origin of the garments identified by style numbers 05-06457, 05-06458, 05-06459, 05-06460, 05-07370, 05-07371, 05-07372, 05-07366, 05-07367, 05-07368 and 05-07369, is Country “B”, in this instance, the Commonwealth of the Northern Mariana Islands. The component panels that are knitted, cut and decorated in China are considered foreign materials for the purpose of calculating the 50% foreign value limitation under General Note 3(a)(iv), HTSUSA. The garments may still be entitled to duty free status under the same General Note to the tariff schedule provided that they are imported directly from the CNMI to the United States, and that the 50% foreign value limitation is satisfied at the time of entry of the merchandise into the United States. That value determination cannot be made at this time. Since the CNMI is not a foreign country and therefore, the United States has no quota or visa agreement with it, the goods are neither subject to quota restraints nor to the requirement of a visa.

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 Camille R. Ferraro at 646-733-3049.

Sincerely,

Robert B. Swierupski
Director,

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