HQ 952208: Yarns twisted, plied and dyed in Canada; Applicability of CFTA; Country of Origin; 19 CFR 12.130(b)(d)(e); Headings 5403, 5401, HTSUSA; General Note 3 (c)(vii)(F),(G),(H),(R).

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 952208

                         October 8, 1992

CO:R:C:T 952208 SK

CATEGORY: Classification

TARIFF NO.'s: 5403.31.0020; 5403.41.0000; 5401.20.0000

W.B. Sears, Jr.
Vice President, Sales
Filtex, Inc.
550 Beaumont, ste. 401
Montreal, Quebec H3N 1V3
Canada

RE:  Yarns twisted, plied and dyed in Canada; Applicability of   
     CFTA; Country of Origin; 19 CFR 12.130(b)(d)(e); Headings  
     5403, 5401, HTSUSA; General Note 3 (c)(vii)(F),(G),(H),(R).

Dear Mr. Sears:

     This is in response to your letter of June 4, 1992,
requesting a binding ruling on the country of origin status of
certain yarns and whether these goods qualify for preferential
treatment under the U.S.-Canada Free-Trade Agreement
Implementation Act of 1988 (CFTA).  Samples were submitted for
our examination.

FACTS:

     The subject merchandise is comprised of untwisted viscose
filament yarns sourced from Mexico, Japan, Brazil and Western
Europe and imported into Canada.  Although described as
"untwisted", these yarns probably have a minimal producer's twist
due to the fact that they are wound on non-cylindrical cones. 
Assuming they are not high-tenacity, these raw materials are
classifiable under subheading 5403.31.0020 of the Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), which
provides for, in pertinent part, artificial filament yarn (other
than sewing thread), not put up for retail sale, including
artificial monofilament of less than 67 decitex of viscose rayon.
                 
     The finished products are two-ply multifilament yarns with a
final "Z" twist, and the samples provided weigh less than one
kilogram with their supports.  Three of the submitted samples are
dyed, one is natural. The yarns are dressed.  If the yarns 


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are imported on supports with a total weight exceeding one
kilogram, they are classifiable under subheading 5403.41.0000,
HTSUSA, which provides for, in pertinent part, artificial
filament yarn (other than sewing thread), not put up for retail
sale, including artificial monofilament of less than 67 decitex,
other yarn, multiple (folded) or cabled, of viscose rayon. 
Classified as such, the yarns fall within textile category 606
and are subject to duty at 9.1 percent ad valorem.  If imported
on supports weighing one kilogram or less, they are classifiable
as sewing thread of artificial filaments under subheading
5401.20.0000, HTSUSA.  Yarns classified in that subheading fall
within textile category 200 and are dutiable at 13 percent ad
valorem.

The yarns undergo the following processes in Canada:

1) The imported multifilament is rewound onto spools which fit   
   the spindles of Filtex's twisting machines;

2) The multifilament is twisted 10 turns per inch in the "S"
   direction to form a twisted singles yarn;

3) The singles yarns are plied and twisted 7.5 turns per inch   
   in the "Z" direction to form two-ply yarn;

4) The yarns that are not to be dyed are then rewound onto       
   bobbins, dressed and rewound onto paper spools for use on     
   Schiffli embroidery machines;

5) The yarns that are to be dyed are removed from bobbins and 
   put up on skeins, dyed, dried and the above process is        
   repeated.

     Filtex has supplied cost data for these processes. Values
added as a result of the manufacturing processes in Canada range
from 146 percent to 511 percent. 

ISSUES:

     What is the country of origin for the yarns at issue?

     Is the subject merchandise eligible to receive preferential
treatment under CFTA? 




                               -3-


LAW AND ANALYSIS:

                       -COUNTRY OF ORIGIN-

          Section 12.130(b) of the Customs Regulations (19 CFR
12.130(b)) provides that a textile product that is processed in
more than one country or territory shall be a product of that
country or territory where it last underwent a substantial
transformation.  A textile or textile product will be considered
to have undergone a substantial transformation if it has been 
transformed by means of substantial manufacturing or processing
operations into a new and different article of commerce.  

     Your attention is directed to Section 12.130(d)(1) of the
Customs Regulations which sets forth a non-exhaustive list of
criteria which aid in determining country of origin. 

     (1) A new and different article of commerce will usually
         result from a manufacturing or processing operation if
         there is a change in:

          (i)   Commercial designation or identity;

          (ii)  Fundamental character, or
    
          (iii) Commercial use.

In the form that it enters Canada, the subject merchandise is
commercially referred to as untwisted continuous singles viscose
filament yarn.  After processing, the material is commercially
known as two-ply viscose filament yarn.  Both materials fit under
the general commercial designation of "yarn" and therefore there
has been no change in fundamental character.

     In determining whether merchandise has been subjected to
substantial manufacturing or processing operations, 19 CFR
12.130(d)(2) sets forth the following criteria:

          (i)   The physical change in the material or article as
                a result of the manufacturing or processing      
                operations in each foreign territory or country,
                or insular possession of the U.S.;

          (ii)  The time involved in the manufacturing or 
                processing operations ...;
  
          (iii) The complexity of the manufacturing or processing
                operations ...:



                               -4-


          (iv)  The level or degree of skill and/or technology   
                required ...;

          (v)   The value added ...;

Two points must be addressed here--the value added and the
complexity of the processing.  The value added to these products
in Canada is substantial (between 146 percent and 511 percent),
however this is but one factor to be considered.  Of equal, if
not slightly greater consideration, is the complexity of the
processing in Canada.  We believe the processing is relatively
minor as the yarn is only twisted, plied and in some instances
dyed.  These processing operations are not complex enough to
warrant a finding that they are "substantial" for purposes of
changing the subject merchandise's country of origin status. 

     Section 12.130(e) of the Customs Regulations sets forth
guidelines as to what manufacturing or processing operations
normally result in a change in a product's country of origin
status.  They are:
          
     (i)   Dying of fabric and printing when accompanied by two
           or more of the following finishing operations:
           bleaching, shrinking, fulling, napping, decating,
           permanent stiffening, weighting, permanent 
           embossing, or moireing;

     (ii)  Spinning fibers into yarn;

     (iii) Weaving, knitting or otherwise forming fabric;

     (iv)  Cutting of fabric into parts and the assembly of those
           parts into the completed article; or

     (v)   Substantial assembly by sewing and/or tailoring of all
           cut pieces of apparel articles ... . [emphasis added]

The fibers in the yarns at issue are not "spun" because they are
made of continuous filament and not staple fiber. Therefore,
section (ii) is not applicable because it requires that a fiber
undergo processing so that a product with a new commercial
designation of yarn has been produced.  In the instant case,
yarns were brought into Canada and after processing the material
was still commercially designated as yarn. 

     As mandated by the above regulation, the twisting, plying
and dying operations which take place in Canada do not support a
finding that the articles at issue are products of Canada for 

                               -5-


quota and visa purposes.  The subject merchandise is subject to
the quota and visa restrictions applicable to yarns from the
aforementioned source countries.                       

         -U.S.-CANADA FREE TRADE AGREEMENT APPLICABILITY-

     General Note 3(c)(vii) to the HTSUSA sets forth the terms
and conditions in which the United States-Canada Free-Trade
Agreement Implementation Act of 1988 applies.  General Note
3(c)(vii)(F) provides:

          Whenever the processing or assembly of goods in the    
          territory of Canada and/or the United States results
          in one of the changes in tariff classification in      
          Canada described by the rules set forth in subdivision
          (c)(vii)(R) of this note, such goods shall be 
          considered to have been transformed in the territory 
          of Canada and shall be treated as goods originating
          in the territory of Canada ... .

General Note 3(c)(vii)(R) reads:       
       
          Change in Tariff Classification Rules 
          (11) Section XI: Chapters 50 through 63.
  
          (ff) A change to any heading of Chapter 54 from any
               other chapter.

Any change in classification resulting from the processing
operations in Canada were within Chapter 54 and therefore 
the CFTA is not applicable to the subject merchandise by
operation of this provision.

     General Note 3(c)(vii)(G) of the CFTA refers to "goods
imported into the territory of Canada in an assembled or
disassembled form and ... classified as unassembled or
disassembled goods," and to goods whose tariff provision provides
for the goods themselves and for their parts.  General Note
3(c)(vii)(H) states, in part, notwithstanding subdivision
(c)(vii)(G), goods described in that paragraph will be considered
transformed in Canada and will treated as goods originating in
Canada if the value of the materials originating in Canada that
are used or consumed in the production of the goods plus the
direct cost of assembling the goods constitute at least 50
percent of the value of the goods when exported into the U.S..   
This is not applicable to the yarns at issue and they will not be
accorded preferential treatment under the CFTA.  See Headquarters
Ruling Letter 084553, dated August 31, 1989, which held that
certain yarns similarly processed were not eligible for CFTA
treatment.


                               -6-



HOLDING:

     The countries of origin of the subject merchandise are those
countries where the yarn is sourced.

     The subject merchandise is not eligible for preferential
treatment under the CFTA.

                              Sincerely,


                              John Durant, Director
                              Commercial Rulings Division