CLA-2 CO:R:C:G 086779 HP

Ms. Grace Howe
President
Tego Limited
5959 Topanga Canyon Blvd.
Suite 380
Woodland Hills, CA 91367

RE: Clarification of HRL 086549. Country of origin of diapers; cut; sewn

Dear Ms. Howe:

This is in reference to HRL 086549 of March 13, 1990, in which we determined country of origin for duty purposes of diapers under the U.S. - Canada Free Trade Agreement. Our Blaine, Washington, office has re- quested we extend this analysis for textile quota/visa purposes.

FACTS:

The merchandise at issue consists of 100% cotton babies' diapers. The following tables describe the manufacturing processes.

CHINA PRODUCTION STEPS (CAD$ 2.915/DOZEN)

1. 100% cotton cloth is woven. 2. The cloth is shipped to Canada on large rolls.

CANADA PRODUCTION STEPS (CAD$ 3.2714/DOZEN)

1. Two layers of fabric are placed onto the cutting table. 2. The fabric is cut to size (24" wide x 16" long).

3. The sides of the two layers of fabric are folded over (left: 4" right: 8"). 4. The center panels are sewn using a straight sewing machine. 5. The sewn fabric is taken to a serging machine, where the top and bottom edges are trimmed and overedged. 6. The threads from all edges are trimmed, as a trailer thread of at least - " is required. 7. The diaper is inspected. 8. The completed merchandise is packaged into cartons and shipped.

ISSUE:

Whether the processes taking place in Canada are sufficient to change the country of origin for quota/visa purposes from China?

LAW AND ANALYSIS:

Textile commodities produced in more than one foreign country are subject to the country of origin requirements delineated in section 12.130 of the Cus- toms Regulations (19 C.F.R. 12.130). These regu- lations provide that:

... a textile product ... which consists of materials produced or derived from, or pro- cessed in, more than one foreign ... country shall be a product of that foreign ... coun- try where it last underwent a substantial transformation.

12.130(b). A textile product undergoes a substantial transformation when it is ... transformed by means of substantial manufacturing or processing operations into a new and different article of commerce.

Section 12.130 of the regulations outlines the criteria used to determine the country of origin for textiles and textile products. Specifically, this provision of the regulations is considered in determining whether a textile product has undergone substantial manufacturing or processing operations, and what constitutes a new and different article of commerce. The factors considered are not exhaustive. In fact, one or any combination of criteria may be determinative, and additional factors may be considered.

In determining whether merchandise has undergone substantial manufacturing or processing operations, we consider the (1) physical change in the material or the

article; (2) time involved; (3) complexity of the operations; (4) level or degree of skill and/or technology required; and (5) value added to the article in each country.

Section 12.130(e)(2) states that

[a]n article or material usually will not be considered to be a product of a particular for- eign territory or country, ... by virtue of merely having undergone any of the following:

* * *

(ii) Cutting to length or width and hemm- ing or overlocking fab- rics which are readily identifiable as being in- tended for a particular commercial use.... [Em- phasis added.]

It is clear that this provision does not disqualify the diapers from consideration as products of Mozambique or Zimbabwe. Upon exportation from China, the merchandise is mere cotton fabric, suitable for multiple uses. There is no evidence, i.e., lines of demarcation, that would aid the examiner in determining that the fabric is meant to be diapers.

Since there exist no provisions which specifically eliminate the instant manufacturing processes from consideration, it is our opinion that the merchandise has undergone a substantial transformation in Canada. The merchandise changes from cotton fabric to child- ren's diapers as a result of Country 2's complex manufacturing operations. Following the rules of origin stated above, therefore, Country 2 is considered the country of origin for quota/visa purposes. See also HRL 086665 of March 23, 1990.

HOLDING:

As a result of the foregoing, the instant merchandise is considered to be a product of Canada for quota/visa purposes.

This notice to you should be considered a clarification of HRL 086549 of March 13, 1990, as to the merchandise described as diapers, under 19 C.F.R. 177.9(d)(1) (1989).

Sincerely,


JOHN DURANT, DIRECTOR
COMMERCIAL RULINGS DIVISION