HQ 954145: Protest Nos. 0101-93-100038 and 0101-93-100026; ceramic flower pots with saucers; Canadian Free Trade Agreement (CFTA); General Note 3(c)(vii)(B)(2); "originating goods"; NY 860020; detrimental reliance; 19 CFR 177.9(d); North American Free Trade Agreement (NAFTA)

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 954145

                        December 23, 1993

CLA-2 CO:R:C:M 954145  RFA

CATEGORY: Classification

TARIFF NO.: 6913.90.50


District Director of Customs
312 Fore Street
P.O. Box 4688
Portland, Maine  04112-4688

RE:  Protest Nos. 0101-93-100038 and 0101-93-100026; ceramic
     flower pots with saucers; Canadian Free Trade Agreement
     (CFTA); General Note 3(c)(vii)(B)(2); "originating goods";
     NY 860020; detrimental reliance; 19 CFR 177.9(d); North
     American Free Trade Agreement (NAFTA)


Dear District Director:

     The following is our decision regarding the request for
further review of Protest Nos. 0101-93-100038 and 0101-93-100026,
which concerns the rate of duty of various ceramic flower pots
with saucers under the Harmonized Tariff Schedule of the United
States (HTSUS).  The entries subject to Protest No. 0101-93-
100038 were liquidated on January 29, 1993, March 5, 1993, and
April 8, 1993.  The protest was timely filed on April 27, 1993. 
The entries subject to Protest No. 0101-93-100026 were liquidated
on January 15, 1993, and February 5, 19, 26 and 28, 1993.  The
protest was timely filed on March 22, 1993. 

FACTS:

     Plain, unglazed red clay flower pots and saucers were
imported into Canada from Italy.  In Canada, the pots and saucers
were decorated, glazed and fired in a kiln.  After this process,
they were exported to the United States.

     The merchandise was entered under subheading 6913.90.50,
HTSUS, as other ornamental ceramic articles, eligible for CFTA
(Canadian Free Trade Agreement) duty treatment according to NY
860020, dated February 27, 1993.  The CFTA rate of duty is 3.5
percent ad valorem.  The entries were liquidated under subheading
6913.90.50, HTSUS.  However, the goods were determined to be
ineligible for duty reduction benefits under the CFTA.  The
general, column one rate of duty of 7.0 percent ad valorem was
assessed.
ISSUE:

     Whether the ceramic flower pots and saucers are eligible for
duty reduction benefits as "originating goods" under the CFTA?

LAW AND ANALYSIS:

     The CFTA was approved and enacted into United States law, by
the Implementation Act of 1988, Pub. L. 190-449, 101 Stat. 1851,
September 28, 1988 (the Act).  Chapter 3 of the CFTA sets forth
the rules of origin for determining whether goods qualify for the
tariff preferences under the CFTA.  Section 202 of the Act refers
to Chapter 3 of the CFTA, and paragraph (d) of Section 202 refers
specifically to the Annex Rules (Annex 301.2 of the CFTA) and
authorizes the President to proclaim the rules.  The rules of
origin, including the specific rules of the Annex, were
implemented by Presidential Proclamation 5923, December 14, 1988,
as General Note 3(c)(vii), HTSUS.  

     To be eligible for tariff preferences under the CFTA, goods
must be "originating goods" within the rule of origin in General
Note 3(c)(vii)(B), HTSUS.  There are two primary means in General
Note 3(c)(vii)(B), HTSUS, by which articles imported into the
United States may be "goods originating in the territory of
Canada."  The first method is if the goods are "wholly obtained
or produced in the territory of Canada and/or the United States." 
General Note 3(c)(vii)(B)(1), HTSUS.  The second method is if the
goods are transformed in the territory of Canada and/or the
United States. General Note 3(c)(vii)(B)(2), HTSUS.

     The subject merchandise was made from undecorated Italian
clay pots, and, therefore does not meet the criterion of General
Note 3(c)(vii)(B)(1) because it was not wholly obtained or
produced in Canada and/or the United States.  The protestant
states that the Italian clay pots underwent a transformation, as
described in General Note 3(c)(vii)(B)(2), HTSUS, because they
were glazed, colored by hand, and fired in a kiln in Canada.  To
be transformed, the merchandise must be subject to a change in
tariff classification as described in the rules of General Note
3(c)(vii)(R), HTSUS.  General Note 3(c)(vii)(R)(aa), HTSUS,
provides that for articles classified under Chapters 68 through
70, a transformation into "originating goods" occurs if the
operations performed in Canada result in a classification change
of the merchandise from one chapter to another.  

     The undecorated pots and saucers were classified under
Chapter 69 (subheading 6912.00, HTS) when entered into Canada. 
Upon importation to the United States, the same pots and saucers,
which were decorated, remain classified under Chapter 69
(subheading 6913.90, HTS).  Because there is no classification
change from one chapter to another, the ceramic flower pots with
saucers were not transformed in Canada.  Therefore, the subject
merchandise cannot be considered to be "originating goods" from
Canada for CFTA purposes.

     In NY 860020, Customs held that the ceramic pots and saucers
were eligible for CFTA treatment as "originating goods".  Based
upon the above analysis, we find that the holding in NY 860020 as
to CFTA treatment is incorrect and should be modified.  However,
as a result of the North American Free Trade Agreement
Implementation Act [December 8, 1993], the CFTA terminates as of
December 31, 1993.  Therefore, as of December 31, 1993, rulings
such as NY 860020 dealing with CFTA treatment, shall cease to be
valid by operation of law.  This will have no effect on the
marking or classification decisions in NY 860020.

     The protestant contends that they detrimentally relied on NY
860020.  Citing section 177.9(d) of the Customs Regulations [19
CFR 177.9(d)], the protestant states that a revocation of NY
860020 shall not be applied retroactively to them.  Further, if
and when the ruling is properly modified or cancelled, the
effective date can be no earlier than the date of the notice from
Headquarters or, upon written request, up to 90 days after the
notice in those cases where the claimant can prove that they
relied upon the ruling and that they will be injured by the
change.

     Normally, under the provisions of 19 CFR 177.9(d), the
protestant may obtain a delay from the effect of a revocation or
modification up to 90 days, if they can establish by documentary
evidence, that they reasonably relied on NY 860020 to their
detriment.  In view of the unique circumstances of this
particular case and the recent changes in the law, Headquarters
finds that such action need not be taken by the protestant. 
Detrimental reliance of NY 860020 cannot be claimed for any entry
of the subject merchandise after December 31, 1993.  Therefore,
only the protestant's entries, liquidated and unliquidated, up to
December 31, 1993, will receive the benefit of CFTA treatment.  

HOLDING:

     For the foregoing reasons, we find that the ceramic flower
pots with saucers are classifiable under subheading 6913.90.50,
HTSUS, as other ornamental ceramic articles.  The general, column
1 rate of duty is 7.0 percent ad valorem.  However, all of the
protestant's entries, liquidated and unliquidated, that are
imported on or before December 31, 1993, will be eligible for
CFTA treatment upon compliance with all applicable regulations. 
Effective January 1, 1994, preferential treatment for goods under
the CFTA will be discontinued and entries of these goods will be
subject to the requirements of the North American Free Trade
Agreement Implementation Act.

     Because reclassification of the merchandise as indicated
above will result in the same rate of duty as claimed, you should
allow the protest in full.  In accordance with Section 3A(11)(b)
of Customs Directive 099 3550-065, dated August 4, 1993, Subject:
Revised Protest Directive, this decision, together with the
Customs Form 19, should be mailed by your office to the
protestant no later than 60 days from the date of this letter. 
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision.  Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Lexis, Freedom of
Information Act and other public access channels.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division