SUMMARY: This document sets forth final amendments to the Customs 
Regulations to implement the provisions of section 334 of the Uruguay 
Round Agreements Act (``the Act'') regarding the country of origin of 
textile and apparel products. Except for the purpose of identifying 
products of Israel, the regulations will govern the determination of 
the country of origin of imported textile and apparel products for 
purposes of laws enforced by the Customs Service. The regulations also 
implement the provisions of section 334 of the Act regarding the 
treatment of components that are cut to shape in the United States from 
foreign fabric, exported for assembly, and returned to the United 
States. This document also sets forth regulations implementing 
previously-enacted provisions regarding the treatment of articles 
assembled or produced in a Caribbean Basin Initiative beneficiary 
country wholly from U.S.-produced components, materials or ingredients.

EFFECTIVE DATE: Final rule effective October 5, 1995.

FOR FURTHER INFORMATION CONTACT: Phil Robins, Office of Regulations and 
Rulings (202-482-7029).

SUPPLEMENTARY INFORMATION:

Background

    On December 8, 1994, President Clinton signed into law the Uruguay 
Round Agreements Act (``the Act''), Public Law 103-465, 108 Stat. 4809. 
Subtitle D of Title III of the Act deals with textiles and includes 
section 334 (codified at 19 U.S.C. 3592) which concerns rules of origin 
for textile and apparel products.
    Paragraph (a) of section 334 provides that the Secretary of the 
Treasury shall prescribe rules implementing the principles contained in 
paragraph (b) for determining the origin of ``textiles and apparel 
products''.
    Paragraph (b) of section 334 incorporates the following provisions: 
(1) for purposes of the customs laws and the administration of 
quantitative restrictions and except as otherwise provided for by 
statute, general rules for determining when a ``textile or apparel 
product'' originates in a country, territory, or insular possession, 
and is the growth, product, or manufacture of that country, territory, 
or insular possession; (2) special origin rules for goods classifiable 
under certain specified tariff headings and subheadings; (3) a 
``multicountry rule'' for determining origin when the origin of a good 
cannot be determined under the preceding provisions of paragraph (b); 
(4) special rules governing the treatment of components that are cut to 
shape in the United States from foreign fabric, exported for assembly, 
and returned to the United States; and (5) an exception to the 
application of section 334 that specifically provides for the continued 
application of the administrative practices that were applied 
immediately before the enactment of the Act to determine the origin of 
textile and apparel products from Israel, unless such practices are 
modified by the mutual consent of the United States and Israel.
    Paragraph (c) of section 334 provides that section 334 shall apply 
to goods entered, or withdrawn from warehouse, for consumption on or 
after July 1, 1996. Paragraph (c) further provides that section 334 
shall not apply to goods entered or withdrawn from warehouse on or 
before January 1, 1998, that are covered by contracts of sale which 
were entered into, with all material terms fixed, before July 20, 1994, 
and which are filed, with an accompanying certification, with the 
Commissioner of Customs within 60 days after the date of the enactment 
of the Act. On January 27, 1995, Customs published in the Federal 
Register (60 FR 5457) a notice setting forth the procedures for filing 
such contracts and certifications.
    On May 23, 1995, Customs published in the Federal Register (60 FR 
27378) a notice of proposed rulemaking setting forth proposed 
amendments to the Customs Regulations to implement the rules of origin 
principles of section 334(b) of the Act. In that document Customs 
proposed to implement those provisions of section 334(b) of the Act 
that have broad application under the terms of the statute by amending 
Part 102 of the Customs Regulations (19 CFR Part 102) and by amending 
other regulatory provisions as necessary to conform to those Part 102 
changes. With regard to the remaining provisions of section 334(b) 
(that is, the special rules governing the treatment of components that 
are cut to shape in the United States from foreign fabric, exported for 
assembly, and returned to the United States), Customs proposed to 
implement those provisions through amendments to Part 10 of the Customs 
Regulations (19 CFR Part 10). In addition, Customs proposed to make a 
number of amendments to existing regulatory provisions to ensure that 
those existing provisions will be consistent with the new regulatory 
proposals implementing section 334(b) of the Act. Finally, Customs 
included in the proposed Part 10 amendments a text to implement U.S. 
Note 2(b), Subchapter II, Chapter 98, Harmonized Tariff Schedule of the 
United States (HTSUS), which had not been previously treated in the 
regulations and which is similar in operation and effect to the cut-to-
shape components provision of section 334(b)(4)(B) of the Act.
    The May 23, 1995, notice of proposed rulemaking invited the public 
to submit comments on the proposed regulatory amendments for 
consideration by Customs before adoption of the proposals as a final 
rule. The public comment period closed on June 22, 1995.
Discussion of Comments

    A total of 43 commenters responded to the solicitation of public 
comments in the May 23, 1995, notice of proposed rulemaking. The 
comments submitted, and the Customs responses thereto, are set forth 
below.

Effective date

    Comment: Five commenters were concerned about the effective date of 
Sec. 334 and the regulations implementing that statute. They stated 
that sometimes it is not possible to know the exact date goods will 
arrive in the United States. As a result, goods will be arriving after 
July 1, 1996, with the wrong visa. In order to avoid this problem, four 
commenters requested that Customs establish a grace period delaying the 
application of Sec. 334 for such goods. One commenter suggested that 
the new regulations should only be applicable to goods shipped after 
July 1, 1996.
    Customs Response: The effective date of Sec. 334 is expressly set 
out in that statute. Section 334(c) provides that the provisions of 
Sec. 334 ``shall apply to goods entered, or withdrawn for warehouse, 
for consumption on or after July 1, 1996.'' Section 334(c) contains an 
exception to that effective date only for goods contracted for prior to 
July 20, 1994, if a copy of the contract containing all material terms 
of sale was filed with Customs within 60 days after enactment of 
Sec. 334 and the goods are entered, or withdrawn from warehouse, for 
consumption on or before January 1, 1998. While Customs recognizes the potential problem faced by importers 
receiving land or sea shipments, the statute is clear as regards the 
effective date of its provisions, and Customs has no authority to 
deviate from the express terms of the statute. As regards the 
suggestion for a grace period to allow the entry of goods imported with 
incorrect visas, that issue falls within the jurisdiction of, and thus 
should be more properly addressed to, the Committee for the 
Implementation of Textile Agreements (CITA).

Scope of ``textile or apparel product''

    Comment: Several commenters stated that the Customs decision to 
utilize the Agreement on Textiles and Clothing of the Agreement 
Establishing the World Trade Organization (the WTO Agreement) to 
determine the scope of section 334 of the Act constitutes an 
unauthorized broadening of that legislation. These commenters believe 
there is nothing to indicate that Congress meant to enlarge the scope 
of textiles and apparel products. The commenters noted the present 
position of Customs that the textile and apparel rules of origin 
contained in Sec. 12.130 of the Customs Regulations (19 CFR 12.130) 
cover all goods classifiable in Section XI (Chapters 50 though 63), 
HTSUS, and any headings or subheadings outside Section XI for which a 
textile and apparel category number has been designated. On the other 
hand, these commenters noted that the Agreement on Textiles and 
Clothing of the WTO Agreement lists several HTSUS headings and 
subheadings outside Section XI which do not have a textile and apparel 
category number designation and which have not traditionally been 
considered within the class of goods known as textiles and apparel.
    Customs response: Customs disagrees with the position advocated by 
these commenters. As noted in our discussion of this point in the May 
23, 1995, notice of proposed rulemaking, the United States is a 
signatory to both the WTO Agreement and the Agreement on Textiles and 
Clothing annexed thereto. The latter agreement specifically defines the 
scope of ``textiles and clothing'' by a listing of headings and 
subheadings in the international Harmonized System. Customs also 
pointed out in the May 23, 1995, notice that three provisions of the 
Act outside section 334 specifically refer to the Agreement on Textiles 
and Clothing of the WTO Agreement. One of those provisions is section 
332 which amended section 204 of the Agricultural Act of 1956 (7 U.S.C. 
1854) to specifically cite the Agreement on Textiles and Clothing of 
the WTO Agreement as a multilateral agreement concluded under the 
authority of section 204. Section 204, as amended, refers to world 
trade in ``the articles with respect to which the agreement [that is, 
any multilateral agreement concluded under the authority of section 
204] was concluded'' and authorizes the President to issue regulations 
governing the entry or withdrawal from warehouse of ``the same 
articles'' which are products of countries not parties to the agreement 
or countries to which the United States does not apply the agreement. 
Thus, the product coverage of section 204 and of the regulations issued 
thereunder is a function of the agreements concluded under section 204, 
including the Agreement on Textiles and Clothing of the WTO Agreement. 
Since section 12.130 of the Customs Regulations was promulgated under 
the authority of section 204, the product coverage of Sec. 12.130 must 
be the same as that of section 204.
    Customs believes that it would be inappropriate to conclude that 
Congress, in drafting section 334 of the Act, was unmindful of the 
adoption of the Agreement on Textiles and Clothing of the WTO Agreement 
and the changes to section 204 made by section 332 of the Act, with the 
result that the regulations mandated by section 334 of the Act could be 
promulgated without regard to the product coverage of the Agreement on 
Textiles and Clothing of the WTO Agreement. In light of the context in 
which section 334 of the Act was enacted, Customs believes it is more 
proper to conclude that Congress intended that the regulations 
implementing section 334 of the Act include the products covered by the 
Agreement on Textiles and Clothing of the WTO Agreement for the 
specific and limited purpose of section 334 of the Act, that is, the 
determination of the country of origin of textile and apparel products, 
while recognizing that such products would also be covered by any 
regulations governing entry or withdrawal from warehouse that may be 
separately issued under the authority of section 204. Therefore, 
Customs does not believe that the scope of the regulations implementing 
section 334 of the Act should be controlled by the traditional scope of 
Sec. 12.130 of the Customs Regulations. On the contrary, it seems clear 
that the product coverage of Sec. 12.130 has been effectively expanded 
by the adoption of the Agreement on Textiles and Clothing of the WTO 
Agreement and by the amendment of section 204 effected by section 332 
of the Act. Accordingly, Customs believes that the May 23, 1995, notice 
of proposed rulemaking reflects the correct position on this issue.

Section 102.21(b)(3)--Definition of ``knit to shape''

    Comment: Section 334(b)(2)(B) of the Act provides that, 
notwithstanding the assembly rule contained in section 334(b)(1)(D), 
``a textile or apparel product which is knit to shape shall be 
considered to originate in, and be the growth, product, or manufacture 
of, the country, territory, or possession in which it is knit.'' A 
number of comments were submitted regarding the proposed definition of 
``knit to shape'' in Sec. 102.21(b)(3). That definition would require a 
good to have its entire exterior surface area, except for trimming 
around the neck and on the front opening, to be comprised of fabrics 
that have been knit or crocheted directly to the shape used in the 
good.
    Two commenters suggested that Customs should maintain its present 
position, that is, that a good is knit to shape if any single major 
part has been knit to shape.
    One commenter suggested that the term ``components'' be substituted 
for the term ``fabrics''.
    Two commenters thought that the proposed definition was too rigid 
in that the incorporation into a garment of added components such as 
trim or pockets would disqualify a good from being considered ``knit to 
shape''. These commenters suggested that the definition be amended by 
adding the words ``or in principal part'' so that the definition would 
read ``. . . with an exterior surface area wholly or in principal part 
comprised of one or more fabrics knitted or crocheted directly to the 
shape used in the good . . .''
    Three commenters noted that socks, pantyhose, tights, and other 
hosiery articles are knit to shape and their country of origin should 
be determined by where they were knit with no account taken of minor 
operations such as closing toes. One commenter specifically referred to 
gussets and top elastics in pantyhose, saying that the addition of 
those components should not change the country of origin from the 
country of knitting. One commenter wanted to ensure that tube-type T-
shirts (T-shirts without side seams) were not considered to be knit to 
shape.
    Customs response: Customs cannot agree to the suggestion to 
maintain the present position, because that position does not 
accurately reflect the language of section 334(b)(2)(B) of the Act. 
Customs does not believe that it was the intent of Congress, in 
providing a special rule for knit to shape products, that a good should qualify as 
being knit to shape where that good contains only one panel knit or 
crocheted to shape.
    Customs agrees that the word ``fabrics'' may be confusing and thus 
should not be used in the definition. However, Customs believes that 
``parts'' would be preferable to ``components''.
    Customs agrees that the proposed definition of ``knit to shape'' is 
too tightly drawn and thus unnecessarily restricts application of 
section 334(b)(2)(B) of the Act. However, Customs believes that the 
suggested additional language is imprecise and overly broad and thus 
would create uncertainty in the application of the definition.
    Customs agrees that socks, pantyhose, tights, and other knitted 
hosiery goods should be covered by the definition of ``knit to shape'' 
without regard to minor finishing operations such as closing toes or 
adding gussets or top elastics. Whether a good such as a T-shirt is 
knit to shape depends on that particular good; however, Customs would 
not normally consider the knitting of a tube with no definitive 
contours to constitute the creation of a knit-to-shape good within the 
meaning of these origin rules.
    In order to address the points made in the above comments on which 
Customs is in substantial agreement, the definition of ``knit to 
shape'' in Sec. 102.21(b)(3) has been modified as set forth below to 
cover a good of which ``50 percent or more'' of the exterior surface 
area is formed by ``major parts'' knitted or crocheted directly to the 
shape as used in the good. The modified definition specifically 
excludes from consideration certain exterior features (that is, patch 
pockets, appliques, or the like) but includes ``sewing'' as one of the 
specified permisible minor operations. In addition, a new paragraph 
(b)(4) has been included in Sec. 102.21 as set forth below to define 
``major parts''; this definition is essentially the same as the 
definition of ``major parts'' set forth in Note (1)b in the Section XI 
rules under Sec. 102.20 of the Customs Regulations (19 CFR 102.20). 
Under these definitions, there should be no uncertainty concerning the 
treatment of hosiery and similar goods that include features such as 
gussets and top elastics or that have been subjected to a toe closing 
operation.

Section 102.21(c)(2)--Goods Consisting of Materials That Meet the 
Sec. 102.21(e) Tariff Shift and Other Requirements

    Comment: Under proposed Sec. 102.21(c)(2), where a good is not 
wholly the product of a single country, territory, or insular 
possession, the country of origin of the good is the single country, 
territory, or insular possession in which ``each foreign material'' in 
the good underwent an applicable change in tariff classification, and/
or met any other requirement, specified in Sec. 102.21(e). One 
commenter noted that this is inconsistent with the Secs. 102.21 (b)(3) 
and (b)(5) definitions of ``knit to shape'' and ``wholly assembled'', 
which do not require that all of the materials in the good be knit to 
shape or wholly assembled in a single country, territory, or insular 
possession. This commenter suggested that only the portion of the good 
which imparts the essential character to that good should be required 
to comply with the applicable Sec. 102.21(e) requirements.
    Customs response: Customs does not agree. This comment appears to 
reflect a misunderstanding of the operation of the general rule in 
paragraph (c)(2) and the tariff shift and other requirements under 
paragraph (e). In this regard Customs notes that the definitions of 
``knit to shape'' (as modified as discussed above) and ``wholly 
assembled'' make allowances (or exceptions) for some materials so that 
the presence of such materials will not affect the status of the good 
as ``knit to shape'' or ``wholly assembled''. Those exceptions are 
solely for the purpose of applying any Sec. 102.21 general rule, tariff 
shift rule or other requirement in which the defined terms are used; 
they do not affect the question of whether a requisite tariff shift 
rule under paragraph (e) has been met. In other words, if a good in 
fact consists of ``knit to shape'' or ``wholly assembled'' components 
and those components meet the requisite tariff shift rule, any foreign 
materials (as defined in Sec. 102.1(e)) incorporated in the good at 
issue that are excepted from the definitions in question would also 
undergo the requisite tariff shift.
Section 102.21(d)--Treatment of Sets

    Comment: One commenter stated that since it is necessary to 
determine the origin of each textile and apparel component in a set, 
there is little point in referring to the origin of the entire set in 
Sec. 102.21(d).
    Customs response: Customs believes the wording of Sec. 102.21(d) is 
correct. Section 102.21(d) covers situations in which two or more of 
the components in the set were produced in different countries. If all 
the components in a set are produced in a single country, there would 
be no need for separate determination of the origin of any textile or 
apparel components of the set.

Assembly

    Comment: With regard to the definition of ``wholly assembled'' in 
Sec. 102.21(b)(5), one commenter argued that Customs should be more 
specific concerning which subassemblies will not preclude a good from 
being ``wholly assembled''. This commenter suggested that this could be 
done by including in the regulation a specific listing of the 
assemblies that will qualify a good to be ``wholly assembled'', in the 
same manner as the Government of Hong Kong has done. In the 
alternative, this commenter suggested that the joining of all 
components of a good in one country would always be at least as 
important as the joining of components into a subassembly and, 
therefore, under the second multicountry rule (Sec. 102.21(c)(5), the 
last place where important processing occurs) the country of origin 
would be the place where the components of the good are assembled.
    Customs response: Customs does not believe that it would be 
appropriate to have a rigid set of rules in the context mentioned by 
this commenter. In the opinion of Customs it would be preferable to 
address these interpretive issues on a case-by-case basis through the 
Customs ruling program whereby prospective importers may obtain 
appropriate advance guidance according to their particular needs. This 
will result in the eventual development of a body of decisions for the 
general guidance of importers based on consideration of a multitude of 
factors that cannot be anticipated at the present time. As regards the 
alternative suggestion of this commenter, Customs agrees with this 
interpretation and notes that the comment does not appear to warrant a 
change to the regulatory texts.

Fabric

    Comment: Six commenters expressed the view that substantial 
finishing of greige fabric (e.g. dyeing and/or printing combined with 
other finishing processes) results in a new article of commerce and, 
therefore, the country of origin of such fabric should be the country 
in which those processes were performed. One commenter made essentially 
the same argument for yarns.
    Customs response: Sections 334(b)(1)(B) and 334(b)(1)(C) of the Act 
set forth specific rules for determining the country of origin of yarns 
and fabric. Section 334(b)(1)(B) states that the country of origin of 
staple yarns is the country where the yarns were spun and that the 
country of origin of filament yarns is the country where the filaments 
were extruded. Section 334(b)(1)(C) states that the country of origin of a fabric is the country in which 
the constituent fibers, filaments, or yarns were transformed (that is, 
into a fabric) by a fabric-making process. The language of 
Secs. 334(b)(1)(B) and 334(b)(1)(C) is clear and unambiguous. 
Accordingly, it would be inappropriate for Customs to prescribe rules 
that would lead to results inconsistent with that statutory language.

Subheadings 5810.91-5810.99--Embroidery

    Comment: Three commenters took issue with the proposed tariff shift 
rule for subheadings 5810.91 through 5810.99. They stated that it is 
unreasonable for the United States to consider the country of origin of 
embroidery in the piece or in strips to be the country where the base 
fabric was formed. These commenters argued that the embroidering of 
fabrics is a highly complex operation that requires a great deal of 
skill and expense. They also pointed out that the HTSUS refers to 
embroidery as ``embroidery'' or as ``Embroidery in the piece, [or] in 
strips,'' not as ``fabric''.
    Customs response: Section 334(b)(1)(C) of the Act provides that the 
country of origin of a fabric is the country where the fabric was 
created by a fabric-making process. It is the view of Customs that 
embroidery, whether in the piece or in strips, is fabric. It is 
commonly known in the United States as embroidered fabric. If Customs 
were to agree that embroidery cannot be considered to be a fabric 
because the relevant tariff provisions do not specifically refer to 
embroidery as fabric, Customs would have to take the same position in 
regard to other fabrics which are not specifically referred to as such, 
i.e. netting, lace, gauze, felt, nonwovens, terry toweling, labels in 
the piece, belting, and hosepiping, all of which are imported as 
fabrics.
    Customs also notes that the industry definition of piece goods 
supports the conclusion that embroidery in the piece is fabric. 
Fairchild's Dictionary of Textiles, 1970, defines ``Piece Goods'' as 
``a general term for fabrics woven in lengths to be sold by the yard in 
retail stores. May also mean all goods which are not cut'' (at page 
435). The Modern Textile and Apparel Dictionary, 4th Edition, 1973, 
defines ``Piece Goods'' as ``Cloth sold by the yard or some definite 
cut length'' (at page 422). Both dictionaries define ``Piece'' as 
standard lengths of woven fabric or cloth.
    Although the commenters would have Customs distinguish embroidery 
in strips from other forms of embroidery, Customs believes that 
embroideries on base fabrics in strips are just as much fabrics as 
those strips without embroidery. Customs perceives no distinction 
between embroidering wide lengths of fabric and embroidering fabric 
strips. In either case, the process starts with fabric and ends with 
embroidered fabric.
    The terms of Sec. 334(b)(1)(C) of the Act are clear and Customs has 
no choice but to adhere to the express wording of that provision--the 
country of origin of embroidered fabric classifiable in subheadings 
5810.91 through 5810.99 is the country in which the base fabric was 
formed by a fabric-making process.
    However, in reviewing this area, Customs has determined that the 
proposed tariff shift rule for subheadings 5810.91 through 5810.99 does 
not accurately effectuate Sec. 334(b)(1)(C) of the Act. In this regard 
Customs notes that under the proposed rule the country of origin of the 
embroidered fabric would not always be the country where the base 
fabric was formed. This is because the proposed rule refers to ``A 
change to subheading 5810.91 through 5810.99 * * *'', and where fabric 
is embroidered in a second country there has been no change to 
embroidered fabric in the country where the fabric was formed. 
Accordingly, the proposed tariff shift rule for subheadings 5810.91 
through 5810.99 has been divided into three rules as set forth below 
with the first rule intended to address this problem (with regard to 
the other two rules, see the discussion below regarding embroidered 
badges, emblems, and similar articles).

Subheading 5810.10--Embroidery Without Visible Ground

    Comment: A commenter complained that the country of origin of 
embroidery without a visible ground, classifiable in subheading 
5810.10, should be the country where the embroidery was applied to the 
base fabric. The tariff shift rule proposed for subheading 5810.10 
provided for a change to that subheading from any other heading.
    Customs response: Customs agrees that the rule for subheading 
5810.10 does not accomplish what was intended. The proposed tariff 
shift rule in question reflected the application of Sec. 334(b)(3)(A) 
of the Act, the first multicountry rule. Customs believes that 
embroidery without a visible ground is a fabric that is not made by a 
fabric-making process because it comes into commercial existence after 
a base fabric is embroidered and the base fabric is removed. In the 
opinion of Customs, the most important manufacturing process in the 
production of embroidery without a visible ground is the application of 
the embroidery and not the removal of the ground. Accordingly, Customs 
intentionally required a shift from another heading so that the 
production prior to the removal of the base fabric would confer origin, 
because a change within the heading would allow the removal of the base 
fabric to confer origin. However, the proposed rule was inadvertently 
drafted to refer to a change ``to subheading 5810.10''. Thus, if fabric 
from country A were embroidered in country B and the ground fabric 
removed in country C, the tariff shift rule would not be satisfied and 
one would be required to go to the next applicable general rule to 
determine origin. In this circumstance, country B would properly be 
determined to be the country of origin by application of 
Sec. 102.21(c)(4). However, Customs believes that for purposes of 
transparency, it is desirable, to the greatest extent possible, for a 
country of origin to be determinable by application of the rules 
referred to in Sec. 102.21(c)(2) and contained in Sec. 102.21(e) rather 
than by application of the multicountry rules of Secs. 102.21(c) (4) 
and (5). Accordingly, the rule specified for subheading 5810.10 has 
been modified as set forth below to reflect these considerations.

Embroidered Badges, Emblems, and Similar Articles

    Comment: One commenter expressed the view that embroidered badges 
or emblems are not fabrics and should not be treated as such.
    Customs response: Customs agrees that badges, emblems, and similar 
embroidered articles are not imported in the form of fabric. However, 
the country of origin of badges, emblems, and similar embroidered 
articles is not necessarily where those goods were embroidered. 
Pursuant to Sec. 334(b)(1)(D) of the Act, the country of origin of 
badges, emblems, and the like, which consist of two or more layers of 
fabric assembled together by gluing, sewing, or other means, is the 
country where the good was wholly assembled. A new second rule has been 
included in the rules for subheadings 5810.91 through 5810.99 as set 
forth below to reflect the application of Sec. 334(b)(1)(D).
    However, badges, emblems, and similar embroidered articles which 
are processed in more than one country and which do not have multiple 
components present certain other problems. Customs believes that there 
is a difference between emblems created by embroidery and printed 
emblems on which embroidery may be present merely to enhance the 
printed design. Where embroidery forms the entire design and, therefore, creates the 
emblem, the determination of the country of origin of the emblem is 
governed by the first multicountry rule (Sec. 334(b)(3) of the Act and 
Sec. 102.21(c)(4) of the regulations). With reference to the 
requirements of Sec. 334(b)(3) and Sec. 102.21(c)(4), the embroidery is 
the most important manufacturing process in the production of the good 
and, as a result, the country of origin of that good is the country, 
territory, or insular possession where the embroidery was created. 
However, where embroidery does not create the motif, but is present 
merely to enhance a printed design on the emblem, Customs does not 
believe that application of the embroidery should confer origin.
    Customs has not been able to draft a tariff shift rule that 
adequately distinguishes between the two types of badges, emblems, and 
similar embroidered articles mentioned above. Accordingly, it was 
decided to make the tariff shift rule applicable to such goods (the 
proposed rule for subheadings 5810.91 through 5810.99, which is set 
forth below in modified form as the third rule for those subheadings) 
difficult to satisfy, that is, by requiring all manufacturing, from the 
forming of the fabric forward, to be done in a single country, 
territory, or insular possession. Thus, if an emblem, badge, etc., is 
produced in country A from fabric formed in country B, the tariff shift 
rule will not be satisfied and, in the hierarchy of rules, the next 
applicable rule is the first multicountry rule, Sec. 102.21(c)(4), 
which provides that the country of origin will be the country, 
territory, or insular possession where the most important manufacturing 
process occurred. While Customs believes it is preferable in principle 
to employ the objective, specific tariff shift or related rules under 
Secs. 102.21(c) (2) and (e), in some instances, as here, Customs has 
been unable to avoid a certain degree of subjectivity in the 
application of the appropriate rule of origin.

Application of Sec. 334(b)(2)(A)--Special Rules for Specified Headings 
and Subheadings

    Comment: Section 334(b)(2)(A) of the Act provides that the origin 
of goods classifiable under certain specified tariff provisions ``shall 
be determined under subparagraph (A), (B), or (C) of paragraph (1), as 
appropriate''. The May 23, 1995, notice of proposed rulemaking stated 
that since all of the headings and subheadings specified in 
Sec. 334(b)(2)(A) cover goods that have been advanced beyond yarn or 
fabric form, the origin of those goods should be determined by the 
yarns (in the case of heading 5609) or the fabrics which comprise the 
good. Three commenters concurred with that position, stating that the 
majority of time, labor, and cost is in the greige fabric. One 
commenter specifically stated that Sec. 334(b)(2)(A) is clear that the 
origin of the goods classifiable under the listed headings and 
subheadings is determined by the origin of the fabric from which the 
goods are constructed. However, six commenters objected to taking a 
restrictive interpretation of the words ``as appropriate'' and one, 
without mentioning the interpretation of those words, stated that the 
origin of goods of subheading 9404.90 should be determined by where 
they are assembled.
    One commenter noted that the proposed tariff shift rule for 
subheading 9404.90, which covers comforters, quilts, etc., would result 
in the goods having their country of origin in the country where those 
goods are assembled. The commenter stated that this would be contrary 
to the terms of Sec. 334(b)(2)(A) under which, notwithstanding the 
general assembly rule in Sec. 334(b)(1)(D), the country of origin of 
goods classifiable under any of the headings or subheadings listed in 
that section will be the country that produced the yarns or fabrics, as 
appropriate, from which those goods are made.
    Customs response: After reviewing all of the comments and the 
commenters' suggestions as to how the words ``as appropriate'' should 
be interpreted, Customs adheres to the position set forth in the May 
23, 1995, notice. No commenter in opposition to the position proposed 
by Customs offered an acceptable legal alternative to that position. 
While several of the commenters cited judicial case law concerning the 
interpretation of statutes, all of their citations and quotations 
involved statutory language that was not the same as, or similar to, 
the language of Sec. 334(b)(2)(A). Moreover, none of the 
interpretations suggested by those commenters adequately addressed the 
fact that all of the headings and subheadings listed in 
Sec. 334(b)(2)(A) provide for goods made from materials and that, 
therefore, the most reasonable interpretation of that section is that 
it is appropriate to determine the origin of those goods according to 
Sec. 334(b)(1)(B), the rule for yarns, or Sec. 334(b)(1)(C), the rule 
for fabrics.
    The comment regarding the tariff shift rule for subheading 9404.90 
prompted Customs to review the proposed tariff shift rules for all of 
the headings and subheadings listed in Sec. 334(b)(2)(A). That review 
disclosed that Customs erred in the proposal for subheading 9404.90 and 
in the proposed rules for the other 15 listed headings or subheadings 
because, in each instance, the proposed rule both referred to a change 
to the named heading or subheading and included a proviso regarding the 
process by which the change must result. For example, if a fabric is 
woven in one country and wholly assembled in a second country into a 
good subject to Sec. 334(b)(2)(A), the required tariff shift change 
does not occur in the country in which the fabric was formed (in other 
words, the change does not result from a fabric-making process as 
prescribed in the applicable proposed rule). As a result and as the 
above commenter noted, the terms of the tariff shift rule would not be 
met and the next relevant general rule, Sec. 102.21(c)(3)(ii), would 
cause the country of origin of that good to be the country of assembly. 
Therefore, each of the rules for the headings and subheadings listed in 
Sec. 334(b)(2)(A) has been modified as set forth below to provide that 
the country of origin of a good classifiable under those headings or 
subheadings is either the country of origin of the yarns (in the case 
of heading 5609) or of the fabric (for the rest of the listed headings 
or subheadings) from which those goods are made.
    In addition, since the clear intent of Sec. 334(b)(2)(A) is to 
eliminate assembly from conferring origin in the case of goods 
classifiable under any of the provisions listed in that section, 
Sec. 102.21(c)(3)(ii) has been modified as set forth below to preclude 
assembly from automatically conferring origin on those goods when the 
Sec. 102.21(c)(2) tariff shift or other requirements are not met (e.g. 
when a good is made from fabrics originating in different countries).
Multicountry rules

    Comment: Eight commenters stated, in one fashion or another, that 
the proposed multicountry rules (Secs. 102.21(c) (4) and (5)) should be 
made clearer, either by adding definitions or by adding examples.
    Customs response: Given the wide variety of textile and apparel 
products and the multiplicity of manufacturing processes involving 
those products, Customs is adverse to defining the terms ``most 
important assembly or manufacturing process'' and ``important assembly 
or manufacturing process'' which form the basis of the multicountry 
rules. Customs recognizes that the concern underlying the submitted 
comments revolves around the meaning of the word ``important'', and, in fact, during the 
development of the proposed regulatory texts Customs decided to eschew 
use of definitions calling for comparisons of such criteria as time 
involved in processing, labor and other costs of processing, 
complexity, and value added. Customs views the word ``important'' as 
referring to the relative significance of the manufacturing or assembly 
processes involved in the production of a good; thus, the word 
``important,'' has the same connotation as the word ``meaningful''. 
Accordingly, in determining relative importance, a manufacturing 
operation in a low wage country is no less important to the production 
of a good than that same manufacturing operation in a high wage 
country, nor is a manufacturing operation done by an expensive machine 
more important than that same manufacturing operation done by hand.
    There is only one example, discussed elsewhere in this document, on 
which Customs has reached a definitive conclusion regarding relative 
importance of manufacturing processes: forming a fabric is a more 
important process than cutting that fabric. Decisions on all other 
comparisons must be made on a case-by-case basis according to the 
specific facts presented. Customs recognizes that this may appear to 
leave importers with a degree of uncertainty. However, Customs believes 
that a large proportion of multicountry processing is unnecessary from 
a manufacturing standpoint and thus is done more for quota-engineering 
purposes, that is, for the primary purpose of avoiding quantitative 
restraints imposed by international agreements. Moreover, if a 
manufacturer or importer has any doubts about which country, territory, 
or insular possession is the country of origin of its goods, that party 
may obtain appropriate advance guidance under the Customs ruling 
program.

Cutting and Products of Insular Possessions

    Comment: The May 23, 1995, notice of proposed rulemaking stated 
that Customs believes cutting was not intended to play any role in 
determining the country of origin of textile and apparel products. That 
statement raised the question, both within Customs and among members of 
the importing public, of whether Customs would continue the current 
tariff treatment of garments that are cut and assembled in insular 
possessions.
    General Note 3(a)(iv), HTSUS, provides that goods of insular 
possessions are excepted from duty if, among other requirements, they 
are ``manufactured or produced in any such possession from materials 
the growth, product, or manufacture'' of that insular possession. 
Customs has ruled that this portion of General Note 3(a)(iv) may be 
satisfied by two significant manufacturing or processing operations. 
Under existing rulings, the cutting of fabric into garment parts and 
the assembly of those parts into garments are normally considered by 
Customs to constitute the required two significant manufacturing or 
processing operations that would qualify the garments for duty-free 
treatment.
    One commenter wanted Customs to retain cutting as a process that 
confers origin. Nine commenters were concerned that the language in the 
May 23, 1995, notice of proposed rulemaking meant that garments cut and 
assembled in insular possessions would no longer be eligible for duty-
free entry. Two commenters argued that cutting is equal to, or more 
important than, forming fabric while three commenters stated that 
cutting fabric is a very small part of producing a garment. One 
commenter referred specifically to the importance, for origin purposes, 
of the high degree of precision and expense involved in cutting 
components for men's tailored clothing. Many of the commenters pointed 
out that there is no evidence to indicate that Congress intended to 
change the tariff status of apparel goods cut and assembled in insular 
possessions. Other commenters noted that General Note 3(a)(iv) was 
intended by Congress to benefit insular possessions and should, 
therefore, be liberally construed. A number of commenters were 
concerned that Customs would never consider cutting when determining 
the origin of textiles and apparel products and expressed their 
disagreement with that position. Several commenters noted that there is 
nothing in Sec. 334 of the Act that requires Customs to ignore entirely 
the role cutting plays in the manufacture of textile and apparel 
articles. Some commenters also pointed out that General Note 3(a)(iv) 
concerns preferential duty status of goods rather than the 
determination of their origin.
    Customs response: Customs concurs with most of the commenters on 
this issue that, since Sec. 334 deals with the country of origin of 
textile and apparel products and not with value requirements for 
purposes of duty preferences, Sec. 334 will not affect either foreign 
material value determinations required under General Note 3(a)(iv) or 
value-added requirements contained in other statutory provisions. 
Accordingly, Customs intends to continue its current tariff treatment 
of garments which are cut and assembled in insular possessions.
    Nevertheless, Customs believes that the position that cutting is 
not an origin-conferring process is correct for country of origin 
determinations. While cutting is a process which may be considered to 
be an important manufacturing process, as between the production of 
fabric and the cutting of that fabric to shape, fabric production is 
considered to be the more important process. The intent of Congress to 
not allow cutting of fabric to confer origin is demonstrated by the 
adoption of Sec. 334(b)(4) of the Act which continues the present 
tariff treatment of components cut to shape in the United States from 
imported fabric and sent abroad for assembly: if Congress had intended 
the cutting of components from fabric to confer origin, there would 
have been no need for Sec. 334(b)(4). Thus, when applying the first 
multicountry rule (Sec. 102.21(c)(4), which provides that the most 
important assembly or manufacturing process will determine the country 
of origin), the country which produced the fabric will be determined to 
be the country of origin of unassembled components merely cut from 
fabric in another country.

Components Cut in the United States

    Comment: Three commenters wrote in support of the continuation of 
the treatment accorded goods by subheading 9802.00.80, HTSUS.
    Customs response: These comments reflect some apparent confusion 
regarding the overall effect of Sec. 334 of the Act in this area.
    Under the present rules of origin, cutting apparel components from 
fabric (regardless of the country of origin of that fabric) will 
usually result in the cut components being considered a product of the 
country where the cutting is performed. Thus, when foreign fabric is 
imported into the United States and cut into apparel components, the 
United States is the country of origin of those components. 
Accordingly, if apparel components cut from foreign fabric in the 
United States are exported for assembly and the assembled goods are 
then imported into the United States, pursuant to subheading 
9802.00.80, HTSUS, duty may be assessed on the full value of the 
imported goods less the cost or value of the components cut in the 
United States.
    As previously noted, Congress adopted Sec. 334(b)(4) because 
Secs. 334(b) (1) and (2) of the Act in effect eliminate cutting as a 
process conferring origin for most purposes. Under Sec. 334(b)(4), 
where goods are assembled abroad from components cut in the United 
States from foreign fabric (even though under the Sec. 334 rules the cut 
components are not products of the United States and the assembling 
country is the country of origin), the assembled goods, when imported 
into the United States, will continue to receive the same duty 
treatment presently accorded to such goods under subheading 9802.00.80, 
HTSUS. Thus, because Sec. 334(b)(4) serves to preserve a tariff 
treatment that otherwise would no longer be available under the 
Sec. 334 origin rules, this statutory provision in effect addresses the 
concern of these commenters.
World Trade Organization and NAFTA Obligations

    Comment: Twelve commenters believed that the proposed rules are in 
violation of the Uruguay Round Agreement and the obligations the United 
States agreed to when it became a member of the World Trade 
Organization (WTO). While some commenters questioned why the United 
States is making significant changes in its textile origin rules at the 
same time that the WTO is embarking on a project involving the 
development of international uniform rules of origin, two other 
commenters expressed the view that the proposed rules will simplify the 
WTO work on harmonized rules of origin. Several commenters stated that 
the new origin rules will change the applicable textile restraint 
categories for many products, creating problems in the administration 
of international textile agreements.
    A number of commenters referred to the obligations the United 
States incurred under the North American Free Trade Agreement (NAFTA). 
Two commenters made the general statement that Sec. 334(b)(2)(A) of the 
Act was contrary to the NAFTA, and a third commenter made the same 
statement but with specific reference to Article 309(1) of the NAFTA. 
Four commenters noted that the proposed rules conflicted with the NAFTA 
marking rules, and one of these commenters argued that Canada has a 
reasonable expectation that established marking rules will continue in 
effect. Another commenter observed that the proposed rules will cause 
some goods now subject to Tariff Preference Levels (TPLs) under the 
NAFTA to no longer be considered products of a NAFTA party, with the 
result that those goods will not be allowed entry into the United 
States under a TPL.
    One commenter stated that if the country in which down comforters 
are assembled is not the country of origin of those goods, in order to 
avoid an unfair advantage for Canadian and Mexican comforter 
manufacturers, Customs should clearly state that the NAFTA preference 
rules do not govern goods processed in a NAFTA country that fall within 
the scope of Sec. 334 of the Act.
    Another commenter thought that the wording of proposed Sec. 102.21 
is ambiguous concerning the application of Sec. 102.19 (the ``NAFTA 
preference override'' provision) to ``originating goods'' under the 
NAFTA.
    Customs response: In discussing Sec. 334, both the President's 
Statement of Administrative Action and the relevant Senate report 
stated that Sec. 334 would more accurately reflect where the most 
significant production activity occurs, would help combat transshipment 
and other circumvention of textile and apparel quotas, would bring the 
U.S. rules of origin in line with rules employed by other major textile 
and apparel importing countries and by U.S. trading partners, and would 
advance the goal of harmonizing international rules of origin set out 
in the WTO Agreement on Rules of Origin. It was also noted that, 
pursuant to Article 4 of the Agreement on Textiles and Clothing which 
provides for consultations in the case of a disruption of trade or an 
adverse affect on market access, the Administration will undertake 
consultations ``where appropriate''.
    It is not the function of Customs to determine whether the 
enactment of Sec. 334 constitutes a breach of either the WTO Agreement 
or the NAFTA. Both agreements have specified procedures for signatory 
parties to follow if it is believed that another signatory has violated 
its commitments. Accordingly, the question of whether there has been a 
violation of a provision of the WTO Agreement on Rules of Origin or of 
the NAFTA is a matter to be decided within the framework of those 
agreements.
    With regard to the comment on down comforters, Customs is unable to 
accede to this commenter's request. Section 334(b)(1) of the Act opens 
with the words ``[e]xcept as otherwise provided for by statute,'' and 
Customs followed this statutory language by including in the first 
sentence of proposed Sec. 102.21(a) the words ``except as otherwise 
provided for by statute''; thus, origin rules contained in other 
statutes will take precedence over the origin rules in Sec. 334 and in 
Sec. 102.21 of the regulations. The NAFTA rules of origin for duty 
preference purposes are set forth in 19 U.S.C. 3332 and in General Note 
12, HTSUS. Accordingly, if, as in the case of down comforters, the 
NAFTA origin rule for duty preference purposes is less restrictive than 
the corresponding rule contained in Sec. 334 of the Act and in 
Sec. 102.21 of the regulations, then the NAFTA origin rule will control 
for NAFTA duty preference purposes.
    As regards the alleged ambiguity between Sec. 102.19 and 
Sec. 102.21, Customs does not believe that any change to the proposed 
regulatory texts is appropriate in this regard. Section 102.19 was 
originally adopted in a strictly NAFTA context in order to clarify the 
relationship between the Part 102 NAFTA marking rules and the separate 
rules of origin that apply under the NAFTA for duty preference 
purposes. Proposed Sec. 102.21(c) included Sec. 102.19 among the 
existing Part 102 provisions that may apply for purposes of the 
Sec. 102.21(c) general rules because a failure to mention Sec. 102.19 
in this context might incorrectly give the impression, contrary to the 
express terms of Sec. 334 as discussed in the preceding comment 
response, that the rules of origin applicable to ``originating goods'' 
under the NAFTA do not take precedence over the Sec. 102.21 provisions.

Miscellaneous Goods

    Comment: One commenter stated that the manufacture of goods 
classifiable in headings 5604-5609, 5808-5809, 5901-5903, 5905-5908 and 
5910 and in subheading 5911.90 requires special equipment and knowledge 
and, therefore, the tariff shift rule for those provisions should 
prescribe a change from any other heading.
    Customs response: The proposed tariff shift rules for each of the 
mentioned headings and subheading were carefully drafted to reflect the 
express requirements of Sec. 334(b) of the Act. Most of those headings 
mentioned by the commenter provide specifically for yarns, cordage, 
braids, or fabrics, and Sec. 334(b) is very specific regarding the 
rules for determining the origin of those goods. In some instances, the 
proposed tariff shift rule was drafted to reflect that assembly (under 
Sec. 334(b)(1)(D) of the Act) confers origin. In a very few instances 
(e.g. fishing nets of heading 5608), the tariff shift rule was drafted 
to reflect the application of the first multicountry rule 
(Sec. 334(b)(3)(A) of the Act and Sec. 102.21(c)(4) of the 
regulations). To do as this commenter suggested would cause the 
application of the tariff shift rules to result, for some goods, in 
determinations of origin not consistent with the requirements of 
Sec. 334(b).

Miscellaneous Issues

    Comment: Five commenters referred to the substantial transformation 
concept, noting variously that there is no definition of ``substantial 
transformation'' in the proposed regulatory texts, that the proposed 
texts do not comply with accepted principles of what constitutes a 
substantial transformation, or that the United States should retain 
substantial transformation as the basis for determining the origin of 
imported goods. One commenter also noted that there is no value-added 
criterion. In addition, while two commenters noted that the rules in 
Sec. 334 of the Act are more similar to the rules followed by the rest 
of the industrialized nations than are the present rules applied by 
Customs, another commenter noted that Sec. 334(b)(2)(A) of the Act (the 
special rule of origin listing 16 provisions which are not subject to 
the assembly rule) is not consistent with rules applied by Canada. One 
commenter pointed out that Sec. 334 conflicts with past practices and 
rulings of Customs. Finally, one commenter expressed concern that the 
rules of origin contained in Sec. 334 are inconsistent with the Federal 
Trade Commission Regulation in 16 CFR 303.33(a)(3) which requires that 
each textile product made in the United States in whole or part of 
imported materials contain a label disclosing those facts.
    Customs response: Section 334 is a Congressionally enacted statute 
and, as such, it prevails over all prior U.S. regulations, rulings, and 
judicial decisions that are inconsistent with its terms, and it applies 
without regard to the laws of other countries. It provides an objective 
set of rules to be applied without reference to the substantial 
transformation concept, which is the present basis applied generally by 
the courts and by Customs for determining the origin of merchandise 
processed in more than one country. While Sec. 334 may represent the 
view of Congress concerning how it believes the substantial 
transformation principle should be applied, when the origin provisions 
of Sec. 334 take effect on July 1, 1996, they will effectively remove 
from consideration the question of whether or not a processing or 
manufacturing operation constitutes a substantial transformation for 
most Customs and related purposes. With regard to the cited Federal 
Trade Commission regulations, Customs would also note that those 
regulations are promulgated under separate statutory authority 
applicable to that agency and, therefore, the issue of the alleged 
inconsistency is not a matter that can be unilaterally addressed by 
Customs in the regulations implementing Sec. 334.

Other Changes to the Regulatory Texts

    In addition to the changes to the proposed regulatory texts 
discussed above in connection with the public comments, Customs has 
determined that a number of other changes should be made to the 
proposed texts based on further internal review. These changes are 
discussed below.

Section 10.26(c)(3)

    In proposed new Sec. 10.26, paragraph (a) implemented the 
provisions of U.S. Note 2(b), Subchapter II, Chapter 98, HTSUS, 
paragraph (b) implemented the provisions of Sec. 334(b)(4)(B) of the 
Act, and paragraph (c) set forth definitions or rules for purposes of 
the section as a whole. In paragraph (c)(3) which set forth a rule 
regarding entry into the commerce of a non-beneficiary country, 
reference was made to a ``component'' (which is the term used in 
Sec. 334(b)(4)(B) of the Act) but references to a ``material'' and an 
``ingredient'' (which are terms used in U.S. Note 2(b), Subchapter II, 
Chapter 98, HTSUS) were inadvertently omitted. The text of 
Sec. 10.26(c)(3) as set forth below has been modified to correct this 
oversight.

Section 102.21(b)(2)--Definition of ``fabric-making process''

    In reviewing proposed Sec. 102.21(b)(2), Customs discovered that 
fabric strips were inadvertently omitted from the list of materials 
which may comprise a fabric. It has been the experience of Customs that 
a fabric may be formed (usually woven) with narrow fabric strips. While 
fabric strips are not a material specifically mentioned in 
Sec. 334(b)(1)(C) of the Act, Customs is of the view that the formation 
of a fabric from fabric strips is a fabric-making process and should be 
treated as such in the regulations, in particular for purposes of 
applying those Sec. 102.21(e) tariff shift or other requirements that 
specifically refer to a ``fabric-making process''. Customs also notes 
that the first multicountry rule (Sec. 334(b)(3)(A) of the Act and 
Sec. 102.21(c)(4) of the regulations) would yield the same result 
because, in the case of a fabric, the most important manufacturing 
process is the actual forming of the fabric. Accordingly, 
Sec. 102.21(b)(2) as set forth below has been modified to reflect that 
a fabric-making process may include a manufacturing operation which 
begins with fabric strips.

Subheading 5808.10

    Customs inadvertently omitted the word ``other'' before the word 
``heading'' in the first proposed tariff shift rule for subheading 
5808.10. In order to eliminate any possible confusion and conform the 
wording to that used in other tariff shift rules, the first tariff 
shift for subheading 5808.10 as set forth below has been modified 
accordingly.

Heading 5904

    Since lamination of preexisting components is considered to be an 
assembly, the proposed tariff shift rule for heading 5904 provided a 
meaningful rule for goods that have been manufactured by a lamination 
process. However, that tariff shift rule did not provide for goods of 
heading 5904 that have been produced by means of a coating process. In 
view of the various manufacturing processes used in the production of 
such coated goods and the differences in materials that may be used, 
Customs does not believe that it is feasible to craft a tariff shift 
rule for those goods. Consequently, the country of origin of goods of 
heading 5904 produced by means of a coating process must be determined 
by application of the multicountry rules in Secs. 102.21(c) (4) and 
(5). Accordingly, the proposed tariff shift rule for heading 5904 has 
been replaced by two rules as set forth below to reflect these 
considerations, the first rule covering goods that are wholly assembled 
by means of a laminating process and the second rule covering all other 
goods.

Subheadings 5911.10-5911.40

    On further review of the proposed tariff shift rule for subheadings 
5911.10 through 5911.40, Customs found that no provision was made for 
application of the assembly rule (Sec. 334(b)(1)(D) of the Act) to 
goods classifiable in subheadings 5911.31 through 5911.32 fitted with 
linking devices. Customs notes in this regard that the combining of 
linking devices with textile fabrics or felts may constitute an 
assembly, in which case Sec. 334(b)(1)(D) would apply to determine the 
country of origin. Accordingly, the proposed tariff shift rule for 
subheadings 5911.10 through 5911.40 has been modified as set forth 
below (1) by setting forth a rule separately both for subheading 
5911.10 through 5911.20 and for subheading 5911.40 and with no change 
in substance and (2) by including two separate rules for subheadings 
5911.31 through 5911.32, the first of which follows the originally 
proposed rule and the second of which is intended to cover goods 
incorporating such linking devices.

Subheading 5911.90

    On further review of the three tariff shift rules proposed for 
subheading 5911.90, Customs has determined that the first and third 
rules overlap in terms of goods covered. The first rule is for ``goods 
of yarn, rope, cord, braid'' and thus includes made up articles which, using normal classification principles, would be considered to be 
``of'' the named materials. The third rule specifically covers goods 
which are made up articles. To eliminate this overlap, the third tariff 
shift rule for subheading 5911.90 has been modified as set forth below 
by the addition of an exception clause for goods subject to the first 
tariff shift rule.
Headings 6501 and 6503

    Headings 6501 and 6503 cover goods of felt. When the proposed 
tariff shift rules for these headings were drafted, Customs 
inadvertently included, in the exception clause in the second tariff 
shift rule for each heading, a reference to heading 5603 which covers 
nonwovens; the reference should have been to heading 5602 which 
provides for felts. Accordingly, the second tariff shift rule for each 
of these headings has been modified as set forth below to correct this 
error.

Issuance of Rulings During the Interim Period

    Although this final rule action is effective 30 days after its 
publication in the Federal Register, Customs notes that the final 
regulatory provisions set forth herein that implement the provisions of 
section 334 of the Act apply to goods entered, or withdrawn from 
warehouse, for consumption on or after July 1, 1996, in keeping with 
the effective date set forth in section 334. Customs recognizes that 
the realities of the textile and apparel trade often require sourcing 
and production decisions long in advance of the ultimate date of 
importation of the goods. In order to ensure that prospective importers 
may have appropriate advance guidance regarding the Customs 
interpretation of the final regulations set forth in this document, 
Customs has determined that the Customs ruling program should 
accommodate ruling requests regarding those regulatory texts during the 
interim period between the effective date of this final rule action and 
the applicability date for the regulatory texts rather than only after 
the section 334(b) provisions take effect. Accordingly, Customs will 
accept requests for rulings on the regulatory texts set forth herein, 
submitted in accordance with the provisions of Part 177 of the Customs 
Regulations (19 CFR Part 177), commencing 30 days after the date of 
publication of this final rule document in the Federal Register.

Conclusion

    Accordingly, based on the comments received and the analysis of 
those comments and based on the additional considerations as discussed 
above, Customs believes that the proposed regulatory amendments should 
be adopted as a final rule with certain changes thereto as discussed 
above and set forth below. As a consequence of the adoption of these 
substantive regulatory amendments, this document also includes an 
appropriate update of the list of information collection approvals 
contained in Sec. 178.2 of the Customs Regulations (19 CFR 178.2).

Executive Order 12866

    This document does not meet the criteria for a ``significant 
regulatory action'' as specified in E.O. 12866.

Regulatory Flexibility Act

    Pursuant to the provisions of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), it is certified that the amendments will not have 
a significant economic impact on a substantial number of small 
entities. Accordingly, the amendments are not subject to the regulatory 
analysis or other requirements of 5 U.S.C. 603 and 604.

Paperwork Reduction Act

    The collection of information requirements contained in these final 
regulations have been reviewed and approved by the Office of Management 
and Budget in accordance with the Paperwork Reduction Act of 1980 (44 
U.S.C. 3507) under control number 1515-0207. The estimated average 
annual burden associated with this collection is 1.5 hours per 
respondent or recordkeeper. Comments concerning the accuracy of this 
burden estimate and suggestions for reducing this burden should be 
directed to the U.S. Customs Service, Paperwork Management Branch, Room 
6316, 1301 Constitution Avenue NW., Washington, D.C. 20