CLA-2 CO:R:C:V 555489 DSN
John M. Peterson, Esq.
Neville, Peterson & Williams
39 Broadway
New York, New York 10006
RE: Duty-free treatment for gloves
Dear Mr. Peterson:
This is in response to your letters of August 23, 1989, and
March 22, 1990, on behalf of Aris-Isotoner, Inc., concerning
duty-free treatment under General Note 3(a)(iv), Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), for
certain gloves to be produced in Saipan. Samples were submitted
with your submission.
FACTS:
According to your August 23, 1989, submission, the
merchandise at issue consists of women's dress gloves composed of
textile material and leather. You state that the spandex
material, referred to as "Isotoner" originates in the U.S. The
manufacturing process is described as follows: The "Isotoner"
material will be delivered in roll form to a manufacturing
facility in Saipan where it will be die-cut into glove parts.
The die-cut glove parts will then be delivered to a
manufacturing facility in the Philippines.
Leather of foreign origin will be delivered in skin form to
a manufacturing facility in the Philippines where it will be
die-cut into leather glove strips and perforated. The die-cut
textile glove parts are sewn together to make glove shells. The
leather overlays are then sewn to the textile glove shell on the
back of the hand, inside the thumb and fingers, and running
perpendicular to the wrist. This completes the manufacturing
process in the Philippines. Unhemmed, substantially finished
gloves are shipped back to Saipan, where they are hemmed at the
wrist, folded, ironed, inspected and packed for direct shipment
to the U.S.
In your March 22, 1990, submission, you propose a variant
operation from that described above. Under this althernative
operation, the "Isotoner" textile material would be die-cut into
glove parts in Saipan and then sent to the Philippines where it
is partially assembled into gloves. In the Philippines, the
glove parts would be sewn around four fingers, leaving an open
pinky and side seam, in addition to no cuff or formed wrist.
This would complete the operation in the Philippines, and the
partially sewn gloves would be returned to Saipan where the pinky
and side seam would be sewn closed and the wrist and cuff would
be formed and sewn. In some cases, suface ornamentation would be
attached at this point. The gloves would also be trimmed,
folded, ironed and inspected before being packaged for direct
shipment to the U.S.
The merchandise which is the subject of this request is a
women's glove, and is classified under subheading 6116.93.2010,
HTSUSA, which provides for gloves, mittens and mitts, knitted or
crocheted, other, other, without fourchettes, textile category
631.
ISSUE:
Whether the two proposed manufacturing scenarios will
entitle the dress gloves to duty-free entry under General Note
3(a)(iv), HTSUSA.
LAW AND ANALYSIS:
Under General Note 3(a)(iv), HTSUSA, goods imported from an
insular possession may enter the customs territory of the U.S.
free of duty if they:
(1) Are manufactured or produced in the possession;
(2) Do not contain foreign materials which represent more
than 70 percent of the goods' total value (or more than
50 percent with respect to textile and apparel articles
subject to textile agreements, and other goods
described in section 213(b) of the Caribbean Basin
Economic Recovery Act); and
(3) Come directly to the customs territory of the U.S. from
the possession.
Since textile gloves are subject to textile agreements, they
are not considered eligible articles entitled to duty-free
treatment under the CBERA. Therefore, the foreign materials
making up the merchandise at issue may not represent more than 50
percent of the gloves' appraised value. Assuming, for purposes
of this ruling, that the gloves comply with the above value-
content requirement, then the only issue to be determined is
whether the gloves are a "product of" the U.S. insular
possession.
As noted in your submission, materials imported into an
insular possession become a product of the possession if they are
substantially transformed there. In other words:
"the question...is whether operations performed on products
in the country of exportation are of such a substantial
nature to justify the conclusion that the resulting product
is a manufacture of that country. 'Manufacture implies a
change, but every change is not a manufacture...there must
be a transformation; a new and different article must emerge
having a distinctive name, character of use.' Ferrostal
Metals Corporation v. United States, 664 F.Supp. 535,537
(CIT 1987) (quoting Anheuser-Busch Association v. United
States, 207 U.S. 556, 562 (1908).
Section 12.130(d) and (e), Customs Regulations (19 CFR
12.130(d) and (e)), set forth criteria for determining whether a
textile or textile article has been substantially transformed.
Although 19 CFR 12.130(e)(1)(v) lists "[s]ubstantial assembly by
sewing and/or tailoring of all cut pieces of apparel articles
which have been cut from fabric in another foreign territory,
country or insular possession into a completed garment..." as an
example of a manufacturing or processing operation that may
result in a substantial transformation, the regulations do not
contemplate that all sewing operations will constitute a
substantial transformation. The examples given involve the
substantial and complete assembly and/or tailoring of all cut
pieces of suit-type jackets, suits, and shirts.
You contend that Headquarters Ruling Letter 732623 of
November 6, 1989, subsequently published as C.S.D. 90-20 (24
Cust. B. & Dec. 10 (March 7, 1990)), is applicable to this case.
In that case, cotton industrial work glove pieces were cut in
country A, and the parts sent to country B, where they were sewn
together into gloves, turned, pressed and packaged before being
exported to the U.S. We held that the sewing together of cotton
industrial work gloves was not a complex operation, and
therefore, was not analogous to sewing suit-type jackets, suits
or shirts. Furthermore, we stated that although cutting may not
involve much labor, it often involves a substantial capital
input. For these and other reasons, we concluded that country A
was considered the country of origin of the imported work gloves.
C.S.D. 90-20 was upheld upon reconsideration in HRL 086229
dated April 11, 1990, in which we stated the following:
The sewing together of industrial work gloves is not more
complex in nature than the assembly by sewing of sweatshirts
and polo-style shirts, indeed it is Customs' view that it is
less so. Moreover, the cutting of fabric into glove pieces
is not without complexity. Apparel cutters must also be
skilled since mistakes can be costly in terms of wasted
fabric and can delay or prevent a planned assembly run. See
HRL 081155 of February 3, 1988. In addition, Customs is not
persuaded that sewing cut pieces into finished gloves is
inherently complex. Although the purchase of sewing
machines may require a significant capital investment, the
operation of the machines involves little more than a steady
feeding of cut glove fabric into a machine.
In the instant case, the die-cutting in Saipan of the
continuous lengths of U.S. spandex material into glove parts will
substantially transform the U.S. material into new and different
articles of commerce which will be considered "products of"
Saipan. We have consistently held that the cutting of fabric
imported in continuous lengths into specific or defined shapes
which can serve as components in an assembly operation is
sufficient to substantially transform the fabric into new and
different articles of commerce. See, for example, HRL's 067823
dated June 2, 1982, and 555189 dated June 12, 1989. Moreover,
pursuant to the previously-discussed analysis in HRL 732623
(affirmed by HRL 086229), the subsequent processing in the
Philippines under both proposed scenarios will not change the
country of origin of the die-cut glove parts. Therefore, when
the partially assembled gloves are returned to Saipan for
finishing operations and are then imported into the U.S., the
finished gloves would be considered "products of" Saipan for
purposes of General Note 3(a)(iv), HTSUSA.
You also ask us to address whether the cost or value of the
textile glove parts would be considered "foreign material" for
purposes of calculating the General Note 3(a)(iv), HTSUSA, 50
percent foreign value limitation. As discussed above, the
processing to be performed in the Philippines after the fabric is
cut in Saipan is insufficient to substantially transform the
textile glove parts into "products of" the Philippines.
Therefore, these parts would continue to be considered of Saipan
origin when returned to that insular possession for finishing
operations and, as a result, would not be considered "foreign
material" content for purposes of the foreign value limitation
under this program. However, the cost or value of the leather,
as well as the cost of the processing performed under both
proposed scenarios in the Philippines, would be included in the
"foreign material" content under General Note 3(a)(iv), HTSUSA.
This is consistent with previous rulings involving similar fact
situations. See HRL's 555431 dated April 9, 1990, and 554027
dated January 13, 1987.
HOLDING:
In regard to both manufacturing scenarios, the completed
gloves will be entitled to duty-free treatment under General Note
3(a)(iv), HTSUSA, assuming compliance with the value-content
requirement and the documentation requirements of section 7.8,
Customs Regulations (19 CFR 7.8). The textile glove parts die-
cut in Saipan would not be considered "foreign material" for
purposes of calculating the 50 percent foreign value limitation
under this program.
Sincerely,
Jerry Laderberg
Acting Director
Commercial Rulings Division