HQ 086549

March 13, 1990

CLA-2 CO:R:C:G 086549 HP

CATEGORY: Classification

Ms. Grace Howe

President

Tego Limited

5959 Topanga Canyon Blvd.

Suite 380

Woodland Hills, CA 91367

RE: Country of origin of diapers. FTA; cotton; Free-Trade

Agreement; Canada; cut and sewn

Dear Ms. Howe:

This is in reply to your letter of January 30, 1990, concern

ing the country of origin of diapers, for duty purposes under the

Harmonized Tariff Schedule of the United States Annotated (HTSUSA

).

FACTS:

The merchandise at issue consists of 100% cotton babies\'

diapers. The following tables describe the manufacturing proces

ses.

China Production Steps (CAD\$ 2.915/dozen)

1.100% cotton cloth is woven.

2.The cloth is shipped to Canada on large rolls.

Canada Production Steps (CAD\$ 3.2714/Dozen

)

1.Two layers of fabric are placed onto the cutting table.

2.The fabric is cut to size (24\" wide x 16\" long\").

3.The sides of the two layers of fabric are folded over (left:

4\" right: 8\").

4.The center panels are sewn using a straight sewing machine.

5.The sewn fabric is taken to a serging machine, where the top

and bottom edges are trimmed and overedged.

6.The threads from all edges are trimmed, as a trailer thread

of at least \" is required.

7.The diaper is inspected.

8.The completed merchandise is packaged into cartons and

shipped.

ISSUE:

Whether China or Canada is considered the country of origin

for duty purposes under the HTSUSA?

LAW AND ANALYSIS:

General Note 3(c)(vii) to the HTSUSA embodies the Uni

ted States-Canada Free-Trade Agreement of 1988. Subdivision (vi

i)(A) provides that \"\[g\]oods originating in \... Canada\" and im

ported into the United States may be subject to a distinct rate of

duty set forth in the \"Special\" subcolumn of the Tariff Schedule.

For the purposes of this subdivision, General Note 3(c)(vii)(B)

allows consideration of goods as \"goods originating in the

territory of Canada\" if:

\* \* \*

(2)they have been transformed in the ter

ritory of Canada and/or the United

States, so as to be subject\--

(I)to a change in tariff class

ification in Canada as des

cribed in the rules of sub

division (c)(vii)(R) of this

note, or

(II)to such other requirements

subdivision (c)(vii)(R) of this

note may provide when no change

in tariff classification oc

curs, and they meet the other

conditions set out in sub

divisions (c)(vii) \... (G),

(H), (J) and (R) of this note.

Assuming heading 6209, Section XI, HTSUSA, provides for the

instant merchandise in its completed form, and heading 5208 prior

to this, General Note 3(c)(vii)(R)(11) governs the change in

tariff classification. Subdivision (R)(11) states, in pertinent

part, that in order to be considered goods originating in the

territory of Canada, merchandise must undergo

(oo)A change to any heading of chapter 62

from any heading outside that chapter

other than headings \* \* \* 5204 through

5212

\* \* \*

(qq)Notwithstanding rules (nn) and (oo),

apparel goods provided for in chapters 61

and 62 that are both cut and sewn in \* \*

\* Canada \[ (emphasis added) \] \* \* \* from

fabric produced or obtained in a third

country, and that meet other applicable

conditions for preferred tariff treatment

under subdivision (c)(vii) of this note,

shall be subject to the rate of duty

provided in the \"Special\" subcolumn for

goods that originate in Canada, in the

annual quantities set forth below, and

shall, above those quantities for the

remainder of the annual period, be sub

ject to duty at the rates provided for in

the \"General\" subcolumn of column 1:

Non-wool apparel 41,805,000

square meters

Wool apparel 5,016,600

square meters

HOLDING:

Our analysis of the other applicable conditions for pre

ferred tariff treatment under subdivision (c)(vii) of the Free-

Trade Agreement establishes that the instant merchandise, in its

completed form, is considered, for duty purposes under the HTSUSA,

goods originating in Canada.

Sincerely,

John Durant, Director

Commercial Rulings Division