The country of origin and applicability of the United States-Korea Free Trade Agreement (KORUS) for paper shopping bags

N299738 August 31, 2018 MAR-2-48:OT:RR:NC:1:130 CATEGORY: Trade Programs Mr. Joe Nakayama Seishou Customs Brokerage 2032 Bella Lane Lomita, CA 90717 RE: The country of origin and applicability of the United States-Korea Free Trade Agreement (KORUS) for paper shopping bags Dear Mr. Nakayama: In your letter, dated August 4, 2018, you requested a binding country of origin and trade program status ruling on behalf of your client, Direct Source Packaging Co. LLC. The ruling was requested on paper shopping bags. Photos and manufacturing information were submitted for our review. The products under consideration are two styles of paper shopping bags. You do not provide dimensions, but the photographs show standard, folding, paper shopping bags, one with a handle constructed of twisted paper, and a second with a handle constructed of woven acrylic yarn cord or polypropylene (PP) rope. The bags are constructed of printed paper, which is uncoated for the paper-handled bag and coated with PP film for the cord/rope-handled bag. In your letter, you outline a scenario wherein the shopping bags are manufacted in part in both Korea and China. Paper for the bags is manufactured in Korea. The paper is printed, coated, and cut into sheet form in Korea. Likewise, the handle materials are produced and cut to length in Korea. The sheets and handle materials are then sent to China, where they are machine folded, assembled, and glued into bag form. The twisted paper handles are machine-added, and the cords are added by hand labor. The finished bags are then shipped to the United States for importation. You indicate that the Chinese value added represents approximately 7 percent of the total value of the imported bags. You inquire as to whether preferential treatment under the KORUS can be claimed for the entire value of the imported bags. General Note 33, Harmonized Tariff Schedule of the United States (HTSUS) incorporates the KORUS into the HTSUS. General Note 33(c)(iii)(A) provides, in pertinent part: (iii) Transit and transshipment. A good that has undergone production necessary to qualify as an originating good under this note shall not be considered to be an originating good if, subsequent to that production, the good— undergoes further production or any other operation outside the territory of Korea or of the United States, other than unloading, reloading or any other process necessary to preserve the good in good condition or to transport the good to the territory of Korea or of the United States. Even though the paper and handles are manufactured in Korea, because these materials subsequently undergo folding, assembly, and gluing production operations in China, they are limited by this note. The bags therefore cannot be considered to be originating goods under the KORUS. Furthermore, the materials undergo a substantial transformation in China. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Pursuant to 19 CFR Section 134.1(b), the country of origin is the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to a foreign article in another country must effect a substantial transformation in order to render the final product a good of the other country. The manufacturing in China results in a change to heading 4819, HTSUS, from multiple other headings, and therefore constitutes a substantial transformation. This change alone renders China the country of origin of the shopping bags. Due to manufacturing being performed in China subsequent to Korean manufacturing, and due to the substantial transformation that takes place in China, the country of origin of the paper shopping bags is China, and the bags do not qualify for preferential treatment under the KORUS. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Laurel Duvall at [email protected]. Sincerely, Steven A. Mack Director National Commodity Specialist Division