HQ 954316: Doll House Kit; Article 509, 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 954316                       

                         August 8, 1994

CLA-2 CO:R:C:F  954316  ALS

CATEGORY:  Classification

TARIFF NO.:  9503.70.8000

Mr. William J. LeClair
Trans-Border Customs Services, Inc.
One Trans-Border Drive
P.O. Box 800
Champlain, New York 12919

RE:  Doll House Kit; Article 509, NAFTA 

Dear Mr. LeClair:

     This is reference to your request of May 24, 1993, as amended,
seeking clarification of the eligibility of an unassembled doll
house kit for preferential treatment under the North American Free
Trade Agreement (NAFTA).

FACTS:

     The item under consideration consists of 460 pieces that
create and decorate a doll house.  Besides the wall, roof and
floors of the doll house, there are various decorative items such
as pictures to hang on the walls, plants, tableware, many pieces
of furniture and an electrified chandelier.  These items and 4
dolls are packaged in a box for retail sale.  These items, except
for the dolls, are of U.S. or Canadian origin.  The doll figurines,
minus their heads, will be manufactured in China.  A head, wig and
silk screening will be added to the doll figurines in Canada where
they will be combined with the remaining pieces of the items and
packaged in a box for retail sale.  According to the producer, the
value of the head and the processing in Canada to which it is
subjected would exceed the value of the doll as imported into
Canada and would constitute more than 51 percent of the value of
the finished figurine.  Information provided by the producer
reveals that the cost to it for the 4 dolls which become part of
the kit represents a very small portion of the transaction value
of such kit, adjusted to a F.O.B. basis, as sold to U.S.
consignees.  

                              - 2 -

ISSUE:

     Is the doll house kit eligible for preferential treatment
under NAFTA?

LAW AND ANALYSIS:

     Classification of merchandise under the Harmonized Tariff
Schedule of the United States Annotated (HTSUSA) is governed by
the General Rules of Interpretation (GRI's) taken in order.  
GRI 1 provides that the classification is determined first in
accordance with the terms of the headings and any relative 
section and chapter notes.  If GRI 1 fails to classify the goods
and if the heading and legal notes do not otherwise require, the
remaining GRI's are applied, taken in order.

     We initially considered whether the headless dolls which are
finished in Canada are considered parts of dolls or if they are,
as described in GRI 2(a), an unfinished or incomplete article.  In
this regard we note that the headless dolls have the essential
character of a doll when imported into Canada.  We, therefore, have
concluded that dolls, as described in subheading 9502.10, HTSUSA,
would cover the instant unfinished dolls.

     We next considered the classification of the doll house kit
as imported into the United States.  Such kit, which includes 460
pieces manufactured in the United States and/or Canada as well as
the dolls manufactured in China, is formed by the combination of
such pieces and dolls into a single package for retail sale
purposes.  This kit permits the purchaser thereof to create and
decorate a doll house when it is assembled.  The kit is imported
in a set put up for retail sale and would come under the provision
for "Other toys, put up in sets..." in subheading 9503.70, HTSUSA. 
           

     In considering whether the unfinished dolls have undergone a
tariff change which would permit them to be considered "goods
originating in the territory of a NAFTA party" as specified in
General Note 12(b), HTSUSA, we referred to General Note 12(t)/95.
This provision specifies that a change to headings 9503 through
9505 must be a change from another chapter in order for the article
to be eligible for preferential treatment under NAFTA.  Since the
change relative to the instant article is a change between headings
of chapter 95 the article does not meet the requirements for
preferential treatment under NAFTA based on a tariff change.

                              - 3 -

     We, however, note that the cost of the dolls' non-originating
material to the producer represents not more than 7 percent of the
transaction value of the goods as shipped direct to the U.S.  We
considered the applicability of Part II, section 5 of the NAFTA
Rules of Origin Regulations contained in the appendix to Part 181,
Customs Regulations (19 CFR 181, Appendix, Part II, section 5), as
published in the Federal Register on December 30, 1993 (58 FR
69497).  That section provides that when non-originating materials,
which do not undergo an applicable change in tariff classification,
are used in the production of the good, that fact shall not prevent
the good from being considered to originate in the territory of one
or more NAFTA countries if the value of such non-originating
materials is not more than 7 percent of the transaction value of
the good.

HOLDING:

     Headless dolls manufactured in a non-NAFTA country are
considered unfinished dolls classifiable in subheading
9502.10.4000, HTSUSA. These dolls when finished in a NAFTA country
and combined with other articles into a doll house toy set are
classifiable in subheading 9503.70.8000, HTSUSA.  Since the
necessary tariff change required by General Note 12(t)/95.4,
HTSUSA, has not taken place the finished doll would still be
considered a Chinese doll and would make the doll house otherwise
composed of all U.S. and Canadian components, ineligible for
preferential treatment under NAFTA pursuant to section
102.11(a)(3), Customs Regulations (19 CFR 102.11(a)(3)), as
published in the Federal Register of January 3, 1994 (50 FR 110).

     However, pursuant to Part II, section 5 of the NAFTA Rules of
Origin Regulations, as previously noted, such good is considered
a NAFTA originating good since the value of non-originating
materials used in the production thereof is not more than 7 percent
of the transaction value of the good adjusted to an F.O.B. basis.

     Accordingly, the doll house kit is eligible for preferential
treatment under NAFTA.

                              Sincerely,



                              John Durant, Director