[Federal Register: February 25, 2003 (Volume 68, Number 37)]
[Rules and Regulations]
[Page 8711-8713]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25fe03-8]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Part 102
[T.D. 03-08]
RIN 1515-AC80
Rules of Origin for Textile and Apparel Products
AGENCY: Customs Service, Department of the Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document adopts as a final rule, with a clarification,
the interim rule amending the Customs Regulations to align the existing
country of origin rules for certain textile and apparel products with
the statutory amendments to section 334 of the Uruguay Round Agreements
Act, as set forth in section 405 within title IV of the Trade and
Development Act of 2000. The document also adopts as final the interim
rule making technical corrections to the rules of origin for textile
and apparel products.
EFFECTIVE DATE: February 25, 2003.
FURTHER INFORMATION CONTACT: Cynthia Reese, Textile Branch, Office of
Regulations and Rulings, U.S. Customs Service, Tel. (202) 572-8790.
SUPPLEMENTARY INFORMATION:
Background
Section 334 of the Uruguay Round Agreements Act (URAA), Public Law
103-465, 108 Stat. 4809 (19 U.S.C. 3592), directs the Secretary of the
Treasury to prescribe rules implementing certain principles for
determining the origin of textiles and apparel products. Section 102.21
of the Customs Regulations (19 CFR 102.21) implements section 334 of
the URAA.
Section 405 of title IV of the Trade and Development Act of 2000
(the Act), Public Law 106-200, 114 Stat. 251, amended section 334 of
the URAA. Specifically, section 405(a) amended section 334(b)(2) of the
URAA by redesignating paragraphs (b)(2)(A) and (B) as paragraphs
(b)(2)(A)(i) and (ii), and by adding two special rules at new
paragraphs (b)(2)(B) and (C) that change the rules of origin for
certain fabrics and made-up textile products.
Under section 334, certain fabrics, silk handkerchiefs and scarves
were considered to originate where the base fabric was knit or woven,
notwithstanding any further processing. As a result of the statutory
amendment to section 334 effected by section 405 of the Act, the
processing operations which may confer origin on certain textile
fabrics and made-up articles were changed to include dyeing, printing
and two or more finishing operations. In particular, the amendment to
section 334 affected the processing operations which may confer origin
on fabrics classified under the Harmonized Tariff Schedule of the
United States (HTSUS) as of silk, cotton, man-made fibers or vegetable
fibers.
On May 1, 2001, Customs published in the Federal Register (66 FR
21660), as T.D. 01-36, an interim rule amending
[[Page 8712]]
Sec. 102.21 to implement the rules of origin for the textile products
specified in section 405(a) of the Act. On May 10, 2001, a correction
to T.D. 01-36 was published in the Federal Register (66 FR 23981). On
August 9, 2002, Customs published in the Federal Register (67 FR
51751), as T.D. 02-47, another interim rule which made technical
corrections to Sec. 102.21 to reflect the terms of the 2002 Harmonized
Tariff Schedule of the United States within the country of origin rules
for certain textile and apparel products, as well as a correction
regarding the scope of the definition of the term ``textile or apparel
product''. Because T.D. 02-47 was a technical correction document, no
comments were requested. Comments were requested in T.D. 01-36.
Discussion of Comments
Two commenters responded to the solicitation of public comment
published in T.D. 01-36. A description of the comments received,
together with Customs analyses, is set forth below.
Comment: One commenter suggested that the interim amendments to
Sec. 102.21 of the Customs Regulations be changed in regard to certain
textile fabrics and made-up articles by removing the requirement that
dyeing, printing and finishing of fabric need to occur in order to
confer origin. The commenter proposed that, instead, the rule should
require that either dyeing and finishing of fabric or printing and
finishing of fabric should confer origin. The commenter noted that the
recommended change reflects a more common industry practice.
The commenter also requested that Customs amend the interim Sec.
102.21 to change how origin is determined for embroideries. The
commenter deemed it unfair in the case of embroideries to adhere to the
principle that only the fabric-making process confers origin when the
principle has been abandoned for fabrics. The commenter asserts that as
the origin rules for fabric that existed prior to the implementation of
section 334 have been reintroduced, the same treatment should be
accorded to embroideries.
Customs Response: Section 405(a)(3) of the Act states that dyeing
and printing, when accompanied by two or more of specified finishing
operations, will confer origin to fabric classified under the HTSUS as
of silk, cotton, man-made fiber, or vegetable fiber. The same standard
is used to determine origin for specified made-up textile articles.
Section 405 contains no reference to embroideries, and Customs is
following the language and requirements specified by Congress.
Comments: One commenter requested that Customs clarify the
application of interim rule Sec. 102.21(e) for purposes of determining
the origin of down comforters and featherbeds, with outer shells of
cotton, respectively classifiable under HTSUS subheadings 9404.90.8505
and 9404.90.9505. The commenter interpreted the interim rule as
requiring that origin determinations for these goods be based on where
the fabric comprising the outer shell is formed and seeks confirmation
of that interpretation.
Customs response: Customs agrees with the commenter's
interpretation. Section 102.21(e)(2)(i), Customs Regulations, provides,
in pertinent part, that the country of origin of goods of HTSUS
subheadings 9404.90.85 and 9404.90.95 is the country, territory or
insular possession in which the fabric comprising the good was both
dyed and printed when accompanied by two or more of specified finishing
operations, except for goods classified under those subheadings as of
cotton or of wool or consisting of fiber blends containing 16 percent
or more by weight of cotton.
Down comforters with outer shells of cotton are classifiable in
subheading 9404.90.85, HTSUS, based on a determination that the down
component imparts the essential character to the comforter and is
therefore the component that determines classification at the eight-
digit subheading level. Similarly, down featherbeds with outer shells
of cotton are classified in subheading 9404.90.95, HTSUS. See PillowTex
Corp. v. United States, 983 F. Supp. 188 (CIT 1997), aff'd, 171 F.3d
1370 (CAFC 1999).
Goods classified under HTSUS subheadings 9404.90.85 (quilts,
eiderdowns, comforters and similar articles) and 9404.90.95 (other) are
classified at the ultimate statistical level based on the fiber
composition of the outer shell fabric. It is for this reason that down
comforters and featherbeds with outer shells of cotton are subject to
the exclusion set forth in Sec. 102.21(e)(2). Accordingly, origin for
these goods is determined pursuant to the rule set forth in Sec.
102.21(e)(1); i.e., origin is conferred in the country in which the
fabric comprising the good is formed by a fabric-making process.
It is noted that prior to enactment of section 405, the origin of
all goods of HTSUS subheading 9404.90 was the country in which the
fabric comprising the good was formed by a fabric-making process. As a
result of the statutory amendment to section 334 effected by section
405, the processing operations that confer origin on certain textile
fabrics and made-up articles were changed to include dyeing, printing
and two or more finishing operations. Customs is of the view that the
exclusion of certain goods classified under HTSUS subheadings
9404.90.85 and 9404.90.95, which include down comforters and
featherbeds with outer shells of cotton, of wool, or consisting of
fiber blends containing 16 percent or more by weight of cotton, from
the dyeing, printing and finishing origin rule, is indicative of
Congress' focus on the fiber content of the fabric comprising these
goods. In this regard, the Conference Report to the Act states:
In particular, this dyeing and printing rule would apply to
fabrics classified under the Harmonized Tariff Schedule (HTS) as
silk, cotton, man-made and vegetable fibers. The rule would also
apply to the various products classified in 18 specific subheadings
of the HTS listed in the bill, except for goods made from cotton,
wool, or fiber blends containing 16 percent or more of cotton.
As the fabric comprising the good in a down comforter with an outer
shell of cotton is the cotton fabric of the outer shell, Customs agrees
with the commenter that down comforters and down featherbeds with outer
shells of cotton are precluded from application of Sec. 102.21(e)(2)
and are to have their origin determined based upon the tariff shift
rule set forth in Sec. 102.21(e)(1). The fact that the ultimate
classification of down comforters and featherbeds with outer shells of
cotton is dependent on the fiber content of the fabric of the outer
shell offers support for this conclusion.
Further Customs Analysis
Customs has determined that no changes are necessary to the interim
rules, published as T.D. 01-36 and T.D. 02-47, based on these comments.
However, it has come to Customs attention, upon further review of T.D.
01-36, that clarification is needed regarding the application of Sec.
102.21(e)(2)(i), (ii) and (iii) in determining the origin of goods of
HTSUS subheading 6117.10. The rules set forth in Sec. 102.21(e)(2) are
to be applied hierarchically. The rule set forth in Sec.
102.21(e)(2)(i) clearly applies to goods of HTSUS subheading 6117.10,
and it is only if the origin of the good cannot be ascertained by
application of the rule that the subsequent rules set forth in Sec.
102.21(e)(2)(ii) and (iii) become relevant. The rule set forth in Sec.
102.21(e)(ii) contains an exception for goods of HTSUS subheading
6117.10 that are knit to shape or consist of two or more component
parts, so that the rule does not apply to such goods of that
subheading. Accordingly, the origin of these goods, if not determinable
under
[[Page 8713]]
Sec. 102.21(e)(i), must be determined by application of Sec.
102.21(e)(2)(iii).
For example, if a man-made fiber scarf of HTSUS subheading 6117.10
consisted of two or more component parts and all of the fabric from
which the component parts were formed was dyed and printed and finished
as specified in Sec. 102.21(e)(2)(i), the origin of the scarf would be
ascertained under Sec. 102.21(e)(2)(i); that is, it would be the
country in which the fabric was dyed and printed and finished. However,
if the fabric of the scarf was only dyed and finished, then Sec.
102.21(e)(2)(i) would not apply and origin would be determined pursuant
to Sec. 102.21(e)(2)(iii).
In order to clarify the application of the rules set forth in Sec.
102.21(e)(2), Customs is amending Sec. 102.21(e)(2)(iii) as set forth
in T.D. 01-36 to provide that Sec. 102.21(e)(2)(iii) should be applied
if the country of origin cannot be determined under Sec.
102.21(e)(2)(i).
Non-substantive editorial changes are also made to paragraph
(e)(2)(ii), and the introductory text to paragraph (e)(2)(iii) of the
interim rule, whereby the references to ``(i) above'' in both
paragraphs are replaced by the more specific cite to ``paragraph
(e)(2)(i) of this section.''
It has also come to Customs attention that there may be some
confusion as to whether certain finishing operations qualify under
Sec. 102.21(e)(2)(i) for purposes of determining the country of origin
of certain goods. The finishing operations listed in Sec.
102.21(e)(2)(i) are listed in section 405(a)(3) of the Act and Customs
has no authority to deviate from this list to allow other processes to
effect an origin determination. However, Customs does recognize that
different terms may be used in the textile industry to refer to the
same process. Accordingly, Customs will entertain arguments through the
rulings procedure as to whether finishing processes referred to by
different terms are identical to the named processes.
Conclusion
In accordance with the discussion set forth above, Customs has
determined to adopt as a final rule the interim rule published in the
Federal Register (66 FR 21660) on May 1, 2001, as T.D. 01-36, with the
correction published in the Federal Register (66 FR 23981) on May 10,
2001, and the interim rule published in the Federal Register (67 FR
51751) on August 9, 2002, as T.D. 02-47.
Inapplicability of Delayed Effective Date
These regulations serve to align the Customs Regulations with the
statutory amendments to section 334 of the URAA, as set forth in
section 405 within title IV of the Act, which went into effect May 18,
2000, and with the 2002 Harmonized Tariff Schedule of the United
States. The regulatory amendments inform the public of changes to the
processing operations deemed necessary to confer country of origin
status to certain textile fabrics or made-up articles by way of
amendment to the tariff shift rules applicable to select textile goods.
For these reasons, Customs has determined, pursuant to the provisions
of 5 U.S.C. 553(d)(3), that there is good cause for dispensing with a
delayed effective date.
The Regulatory Flexibility Act and Executive Order 12866
Because these amendments serve to conform the Customs Regulations
to reflect statutory amendments, pursuant to the provisions of the
Regulatory Flexibility Act, 5 U.S.C. 601 et seq., it is certified that
these amendments will not have a significant impact on a substantial
number of small entities. Further, these amendments do not meet the
criteria for a ``significant regulatory action'' as specified in
Executive Order 12866.
Drafting Information
The principal author of this document was Ms. Suzanne Kingsbury,
Regulations Branch, Office of Regulations and Rulings, U.S. Customs
Service. However, personnel from other offices participated in its
development.
List of Subjects in 19 CFR Part 102
Customs duties and inspection, Imports, Rules of Origin, Trade
agreements.
Amendment to the Regulations
For the reasons stated above, the interim rule amending Sec.
102.21 of the Customs Regulations (19 CFR 102.21) which was published
at 66 FR 21660--21664 on May 1, 2001, and corrected at 66 FR 23981 on
May 10, 2001, and the interim rule which was published at 67 FR 51751--
51752 on August 9, 2002, are adopted as a final rule with the changes
set forth below.
PART 102--RULES OF ORIGIN
1. The authority citation for part 102 continues to read as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 23, Harmonized
Tariff Schedule of the United States), 1624, 3314, 3592.
2. In Sec. 102.21, paragraph (e)(2)(ii) and the introductory text
to paragraph (e)(2)(iii) are revised to read as follows:
Sec. 102.21 Textile and apparel products.
* * * * *
(e) Specific rules by tariff classification. * * *
(2) * * *
(ii) If the country of origin cannot be determined under paragraph
(e)(2)(i) of this section, except for goods of HTSUS subheading 6117.10
that are knit to shape or consist of two or more component parts, the
country of origin is the country, territory, or insular possession in
which the fabric comprising the good was formed by a fabric-making
process; or
(iii) For goods of HTSUS subheading 6117.10 that are knit to shape
or consist of two or more component parts, if the country of origin
cannot be determined under paragraph (e)(2)(i) of this section:
* * * * *
Robert C. Bonner,
Commissioner of Customs.
Approved: February 19, 2003.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 03-4317 Filed 2-24-03; 8:45 am]
BILLING CODE 4820-02-P