[Federal Register Volume 68, Number 37 (Tuesday, February 25, 2003)]
[Rules and Regulations]
[Pages 8711-8713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4317]


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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.

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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