HQ 954316

August 8, 1994

CLA-2 CO:R:C:F 954316 ALS

CATEGORY: Classification

TARIFF NO.: 9503.70.8000

Mr. William J. LeClair

Trans-Border Customs Services, Inc.

One Trans-Border Drive

P.O. Box 800

Champlain, New York 12919

RE: Doll House Kit; Article 509, NAFTA

Dear Mr. LeClair:

This is reference to your request of May 24, 1993, as amended,

seeking clarification of the eligibility of an unassembled doll

house kit for preferential treatment under the North American Free

Trade Agreement (NAFTA).

FACTS:

The item under consideration consists of 460 pieces that

create and decorate a doll house. Besides the wall, roof and

floors of the doll house, there are various decorative items such

as pictures to hang on the walls, plants, tableware, many pieces

of furniture and an electrified chandelier. These items and 4

dolls are packaged in a box for retail sale. These items, except

for the dolls, are of U.S. or Canadian origin. The doll figurines,

minus their heads, will be manufactured in China. A head, wig and

silk screening will be added to the doll figurines in Canada where

they will be combined with the remaining pieces of the items and

packaged in a box for retail sale. According to the producer, the

value of the head and the processing in Canada to which it is

subjected would exceed the value of the doll as imported into

Canada and would constitute more than 51 percent of the value of

the finished figurine. Information provided by the producer

reveals that the cost to it for the 4 dolls which become part of

the kit represents a very small portion of the transaction value

of such kit, adjusted to a F.O.B. basis, as sold to U.S.

consignees.

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ISSUE:

Is the doll house kit eligible for preferential treatment

under NAFTA?

LAW AND ANALYSIS:

Classification of merchandise under the Harmonized Tariff

Schedule of the United States Annotated (HTSUSA) is governed by

the General Rules of Interpretation (GRI\'s) taken in order.

GRI 1 provides that the classification is determined first in

accordance with the terms of the headings and any relative

section and chapter notes. If GRI 1 fails to classify the goods

and if the heading and legal notes do not otherwise require, the

remaining GRI\'s are applied, taken in order.

We initially considered whether the headless dolls which are

finished in Canada are considered parts of dolls or if they are,

as described in GRI 2(a), an unfinished or incomplete article. In

this regard we note that the headless dolls have the essential

character of a doll when imported into Canada. We, therefore, have

concluded that dolls, as described in subheading 9502.10, HTSUSA,

would cover the instant unfinished dolls.

We next considered the classification of the doll house kit

as imported into the United States. Such kit, which includes 460

pieces manufactured in the United States and/or Canada as well as

the dolls manufactured in China, is formed by the combination of

such pieces and dolls into a single package for retail sale

purposes. This kit permits the purchaser thereof to create and

decorate a doll house when it is assembled. The kit is imported

in a set put up for retail sale and would come under the provision

for \"Other toys, put up in sets\...\" in subheading 9503.70, HTSUSA.

In considering whether the unfinished dolls have undergone a

tariff change which would permit them to be considered \"goods

originating in the territory of a NAFTA party\" as specified in

General Note 12(b), HTSUSA, we referred to General Note 12(t)/95.

This provision specifies that a change to headings 9503 through

9505 must be a change from another chapter in order for the article

to be eligible for preferential treatment under NAFTA. Since the

change relative to the instant article is a change between headings

of chapter 95 the article does not meet the requirements for

preferential treatment under NAFTA based on a tariff change.

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We, however, note that the cost of the dolls\' non-originating

material to the producer represents not more than 7 percent of the

transaction value of the goods as shipped direct to the U.S. We

considered the applicability of Part II, section 5 of the NAFTA

Rules of Origin Regulations contained in the appendix to Part 181,

Customs Regulations (19 CFR 181, Appendix, Part II, section 5), as

published in the Federal Register on December 30, 1993 (58 FR

69497). That section provides that when non-originating materials,

which do not undergo an applicable change in tariff classification,

are used in the production of the good, that fact shall not prevent

the good from being considered to originate in the territory of one

or more NAFTA countries if the value of such non-originating

materials is not more than 7 percent of the transaction value of

the good.

HOLDING:

Headless dolls manufactured in a non-NAFTA country are

considered unfinished dolls classifiable in subheading

9502.10.4000, HTSUSA. These dolls when finished in a NAFTA country

and combined with other articles into a doll house toy set are

classifiable in subheading 9503.70.8000, HTSUSA. Since the

necessary tariff change required by General Note 12(t)/95.4,

HTSUSA, has not taken place the finished doll would still be

considered a Chinese doll and would make the doll house otherwise

composed of all U.S. and Canadian components, ineligible for

preferential treatment under NAFTA pursuant to section

102.11(a)(3), Customs Regulations (19 CFR 102.11(a)(3)), as

published in the Federal Register of January 3, 1994 (50 FR 110).

However, pursuant to Part II, section 5 of the NAFTA Rules of

Origin Regulations, as previously noted, such good is considered

a NAFTA originating good since the value of non-originating

materials used in the production thereof is not more than 7 percent

of the transaction value of the good adjusted to an F.O.B. basis.

Accordingly, the doll house kit is eligible for preferential

treatment under NAFTA.

Sincerely,

John Durant, Director