CLA-2 CO:R:C:T 089230 PR
Mr. Michael J. DeFrancesco
Franco Manufacturing Co., Inc.
555 Prospect Street
Metuchen, New Jersey 08840-2293
RE: Country of Origin of Bed Sheets
Dear Mr. DeFrancesco:
This is in reply to your letter of April 16, 1991,
concerning the country of origin of certain bed sheets.
FACTS:
The bed sheets in question are either 55 percent cotton and
45 percent polyester, or 100 percent cotton flannel. They are
manufactured as follows:
CHINA--the greige fabric is produced and sent to Hong Kong.
HONG KONG--the fabric is scoured, bleached, printed, napped
(cotton fabric only), and preshrunk. It is then sent to the
Philippines.
PHILIPPINES--the fabric is cut, hemmed, and packaged for
export to the United States.
The following cost percentages for the direct processing
done in each country were submitted:
55/45 Cotton/Poly Cotton Flannel
China 43.85 44.00
Hong Kong 26.30 26.70
Philippines 5.85 5.85
These percentages do not include sales commissions, finance
charges, packaging expenses, or freight charges.
We understand that a shipment of this merchandise was
imported in September, 1990. It was not allowed entry because a
visa issued by the Government of the Philippines was presented
and Customs officials at the port of entry (not indicated in the
incoming correspondence) apparently determined that the
Philippines was not the country of origin for tariff purposes.
As a result, the merchandise has been in bond since the date of
importation pending production of a proper visa.
ISSUE:
At issue here is the determination of the country of origin
of the subject merchandise.
LAW AND ANALYSIS:
Section 12.130, Customs Regulations (19 CFR 12.130)
provides, in pertinent part, as follows:
(b) Country of origin. For the purpose of this section
* * * a textile or textile product, subject to section
204, Agricultural Act of 1956, as amended, imported
into the customs territory of the United States shall
be a product of a particular foreign territory or
country, or insular possession of the U.S., if it is
wholly the growth, product, or manufacture of that
foreign territory or country, or insular possession.
However, * * * a textile or textile product, subject
to section 204, which consists of materials produced or
derived from, or processed in, more than one foreign
territory or country, or insular possession of the
U.S., shall be a product of that foreign territory or
country, or insular possession 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.
* * *
(d) Criteria for determining country of origin. The
criteria in paragraphs (d)(1) and (2) of this section
shall be considered in determining the country of
origin of imported merchandise. These criteria are not
exhaustive. One or any combination of criteria may be
determinative, and additional factors may be
considered.
(1) A new and different article of commerce will
usually result from a manufacturing or processing
operation if there is a change in:
(i) Commercial designation or identity,
(ii) Fundamental character or
(iii) Commercial use.
(2) In determining whether merchandise has been
subjected to substantial manufacturing or processing
operations, the following will be considered:
(i) The physical change in the material or article
as a result of the manufacturing or processing
operations in each foreign territory or country, or
insular possession of the U.S.
(ii) The time involved in the manufacturing or
processing operations in each foreign territory or
country, or insular possession of the U.S.
(iii) The complexity of the manufacturing or
processing operations in each foreign territory or
country, or insular possession of the U.S.
(iv) The level or degree of skill and/or technology
required in the manufacturing or processing operations
in each foreign territory or country, or insular
possession of the U.S.
(v) The value added to the article or material in
each foreign territory or country, or insular
possession of the U.S., compared to its value when
imported into the U.S.
(e) Manufacturing or processing operations.
(1) An article or material usually will be a product of
a particular foreign territory or country, * * * when
it has undergone prior to importation into the U.S. in
that foreign territory or country * * * any of the
following:
(i) Dyeing of fabric and printing when accompanied
by two or more of the following finishing operations:
bleaching, shrinking, fulling, napping, decating,
permanent stiffening, weighting, permanent embossing,
or moireing.
* * *
In accordance with the requirements of 12.130, it does not
appear that any of the processing which the fabric was subjected
to after it was formed in China amounted to a substantial
transformation. The Customs Service has consistently held that
in order to comply with 12.130(2)(e)(i), a fabric must be both
dyed and printed, as well as being subjected to the other
required processing.
This interpretation of 12.130 was upheld by the United
States Court of International Trade in Mast Industries Inc. v.
United States, 652 F. Supp. 1531 (1987); aff'd 822.F. 2d 1069
(CAFC, 1989). That case involved greige cotton fabric produced
in China and sent to Hong Kong for singeing, desizing, scouring,
bleaching, mercerizing, dyeing, softening, and tentering. The
court stated that in determining the meaning of a agency's
regulation, it would defer to that agency's interpretation unless
the interpretation is plainly erroneous or inconsistent with the
regulation. The court found that Customs's interpretation was
reasonable and approved of Customs denying entry to the finished
fabric without a visa from the Government of China.
The cutting and sewing performed in the Philippines is not
considered to be substantial processing within the purview of
12.130(d)(2). It does not require much time; the processing
operations are not complex and do not require a high degree of
skill or technology (particularly when compared to the forming of
the fabric in China); and the value added to the fabric is
relatively small. This is in accord with prior rulings of the
Customs Service on the country of origin of bed sheets. ( e.g.
HRL 086523, dated April 25, 1990).
HOLDING:
On the basis of the above, the processing performed after
the fabric was formed in China failed to constitute a substantial
transformation of that fabric. As a result, in accordance with
12.130(b), China is the country of origin of the bed sheets.
Section 177.9(b)(1), Customs Regulations (19 CFR 177.9
(b)(1), states that a ruling is issued on the assumption that all
of the information furnished in connection with the ruling
request and incorporated in the ruling letter, either directly,
by reference, or by implication, is accurate and complete in
every material respect. Accordingly, the holding set forth above
applies only to the specific factual situation and the
merchandise identified in the ruling request. Should it
subsequently be determined that the information furnished is not
complete and does not comply with 19 CFR 177.9(b)(1), the ruling
will be subject to modification or revocation. If there is a
change in the facts furnished, the holding in this ruling may be
affected. In such an event, it is recommended that a new ruling
request be submitted in accordance with Section 177.2, Customs
Regulations (19 CFR 177.2).
Sincerely,
John Durant, Director
Commercial Rulings Division