CLA-2 CO:R:C:G 086696 CRS
Mr. Justin Yue
Winner Co. (Garments) Ltd.
East Ocean Centre, 2nd Floor
98, Granville Road
Kowloon, Hong Kong
RE: Country of Origin of Shirts and Trousers
Dear Mr. Yue:
This is in response to your letter dated March 10, 1990, in
which you enquired as to the country of origin of woven shirts
and trousers. Samples were not submitted.
FACTS:
You state that your company has manufacturing operations in
various locations in Southeast Asia and that the piece goods used
in the assembly of the woven shirts and trousers in question will
be sourced in Hong Kong, China, Indonesia or Japan. Pursuant to
this, you posit four scenarios and enquire as to how the
manufacturing operations performed incident thereto will affect
the country of origin of the finished articles. You advise that
you are unable to provide accurate cost breakdowns regarding the
manufacturing processes undertaken in the various countries of
assembly. The first and second scenarios discussed below concern
shirts; the third and fourth involve trousers.
Shirts
In the first scenario, the piece goods will be marked and
cut in country A. In addition, the collars and front panels will
be constructed in country A; however, the remaining cut panels
together with the finished components (collars and front panels)
will be sent to country B and sewn into completed shirts.
In the second case, the marking and cutting will take place
in country A. The components for the collar, front placket,
sleeves and sleeve plackets, front pockets and pocket flaps, and
back yoke will be sent to country B for partial assembly. The
finished components will be returned to country A where, together
with panels cut in country A, the completed shirts will be
assembled. You do not state what type or types of shirts (e.g.,
dress, sport) will be manufactured.
With regard to the above scenarios, you ask whether the
country of origin determination would be affected if:
a) the manufacturing costs incurred and skills required in
country A were to exceed those of country B;
b) the manufacturing costs incurred and skills required in
country B were to exceed those of country A; or
c) the costs incurred and skills required were essentially
the same in both countries.
Trousers
In the third scenario, trousers will be marked and cut in
country A. In addition, zippers will be attached to the two
front panels, welt pockets will be added to the back panels, the
two front panels will be joined as will the two back panels. The
finished panels and components will be sent to country B for
final assembly into completed trousers.
In the fourth case, the trousers will be marked and cut in
country A. All other operations such as the construction of welt
pockets, the attachment of zippers, the sewing together of the
two front panels and the joining of the two back panels will
take place in country B. You state that the finished components
will be sent back to country B where they will be combined with
other components to form completed trousers. However, we
assume, given the context of your fact pattern, that country A
was incorrectly designated as the country of final assembly and
that in actuality, you intend that country B should be the
country of final assembly.
Finally, with regard to trousers, you ask whether the
country of origin would be affected if the manufacturing costs
incurred and skill levels and time required for assembly were
greater in country A than in country B; if the costs, skills and
time involved in country B were to exceed those involved in
country B; or whether costs incurred and skills and time required
were roughly equal.
LAW AND ANALYSIS:
Pursuant to section 12.130, Customs Regulations (19 CFR
12.130), a textile or textile product which consists of materials
produced or derived from, or processed in, more than one foreign
territory or country shall be a product of that foreign territory
or country 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.
Section 12.130(d) establishes criteria for determining
whether an article has been substantially transformed. However,
the criteria set forth in 19 CFR 12.130(d) are not exhaustive;
one or any combination of these criteria may be determinative and
additional factors may be considered.
According to 19 CFR 12.130(d)(2), the following factors are
to be considered in determining whether merchandise has been
subjected to substantial manufacturing or processing operations:
the physical change in the material or article, the time involved
in the manufacturing or processing operations, the complexity of
the operations, the level or degree of skill and/or technology
required, and the value added to the article.
Section 12.130(e), Customs Regulations (19 CFR 12.130(e))
provides further guidance as to what constitutes substantial
manufacturing or processing operations. In particular, 19 CFR
12.130(e)(1)(v) provides that an article will usually be the
product of that country in which it has been sewn and/or tailored
from fabric pieces cut in another country, as for example, with
the complete assembly and tailoring of all cut pieces of suit-
type jackets, suits and shirts.
According to T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714),
the final document rule establishing 19 CFR 12.130:
[T]he assembly of all the cut pieces of a garment usually is
a substantial manufacturing process that results in an
article with a different name, character or use than the cut
pieces. It should be noted that not all assembly operations
of cut garment pieces will amount to a substantial
transformation of those pieces. Where either less than a
complete assembly of all cut pieces of a garment is
performed in one country, or the assembly is a relatively
simple one, then Customs will rule on the particular factual
situations as they arise, utilizing the criteria in
12.130(d).
Based on the information you have provided, the sewing operations
conducted in country B do not appear to require a high degree of
skill. In two of the four scenarios you posit, the country B
manufacturing operations constitute less than a complete assembly
of all cut pieces. Thus in cases 2 and 4, completed components
are returned to country A where final assembly takes place. In
all four cases the work undertaken would seem to be more in the
nature of a simple assembly rather than a tailoring operation.
Since there is nothing to suggest that the assembly of the
cut components is in any degree a complex operation as regards,
for example, the time or level of skill required, or value added,
it is Customs' view that the shirts and trousers processed in
country B have not undergone a substantial manufacturing or
processing operation. Consequently, the shirts and trousers
assembled as described in cases 1-4 above have not been
substantially transformed. Country A, i.e., the location where
the fabric is cut, is therefore the country of origin pursuant to
19 CFR 12.130 for quota and country of origin marking purposes.
HOLDING:
The assembly operations performed in country A do not
constitute a substantial transformation as required by 19 CFR
12.130. The country of origin of the shirts and trousers at
issue is country A.
Sincerely,
Stuart Seidel, Acting Director
Commercial Rulings Division