CLA-2 CO:R:C:V 555719 SER
Mr. Stanley R. Leacock
Beache Medical Supplies, Ltd.
346 College Avenue, Suite F
Palo Alto, CA. 94306
Re: Country of origin determination and GSP or CBI eligibility
for surgical towels from Barbados.
Dear Mr. Leacock:
This is in reference to your letter of August 9, 1990, and
your fax of October 15, 1990, concerning the country of origin,
and eligibility for duty-free treatment under the Generalized
System of Preferences (GSP)(19 U.S.C. 2461-2466) or the
Caribbean Basin Initiative (CBI)(19 U.S.C. 2701-2706), of
surgical towels to be imported into the U.S. from Barbados.
FACTS:
In your submission of October 15, 1990, you described three
possible textile production operations performed in Barbados to
create the surgical towels.
Process 1 -Import dyed cotton fabric on large bolts of cloth
from sources in China and/or South America. The
fabric would then be cut to length and width, sewn,
trimmed, pre-washed and dried, and then packaged.
Process 2 -Import undyed, unbleached cotton fabric on large bolts
from South America. The fabric would then be dyed and
bleached, cut to length and width, sewn, trimmed, pre-
washed and dried, and then packaged.
Process 3 -Import undyed, unbleached cotton yarn primarily from
South America, and possibly Egypt and Turkey. The
yarn will then be woven into fabric, dyed, cut to
length and width, hemmed, and packaged.
ISSUES:
1. Are the surgical towels eligible for duty-free treatment
under the GSP or CBI?
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2. Do the processing methods described above meet the
textile country of origin requirements, thereby creating articles
from Barbados?
LAW AND ANALYSIS:
1. Applicability of GSP and CBI
It appears from your submissions that you have confused the
purposes of GSP and CBI eligibility. These programs provide
duty-free treatment for eligible articles and are not related to
the administration of quotas for textile articles. For articles
to be eligible for duty-free treatment under GSP and CBI, they
must first be classified under an eligible provision in the
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA). An article classifiable under a GSP or CBI eligible
provision is entitled to duty-free entry if: it is the growth,
product or manufacture of a designated beneficiary country; it is
imported directly into the U.S.; and the sum of the cost or value
of the materials produced in the beneficiary country plus the
direct costs involved in processing the eligible article in the
beneficiary country is at least 35% of the article's appraised
value at the time it is entered into the U.S.
The cotton surgical towels are classifiable under subheading
6307.90.8710, HTSUSA, which provides for other made up articles,
other, other, surgical towels. This provision is neither a GSP
nor CBI eligible provision. Therefore, the articles you wish to
import, surgical towels, are not eligible for GSP or CBI duty-
free treatment, and are dutiable at the rate of 7 % ad valorem.
2. Country of Origin
Textile articles produced in more than one foreign country
are subject to the country of origin criteria set forth in
section 12.130, Customs Regulations (19 CFR 12.130). According
to 19 CFR 12.130(b):
. . . a textile product . . . which consists of materials
produced or derived from or processed in, more than one
foreign . . . country shall be a product of that foreign . .
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.
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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.
According to 19 CFR 12.130(e)(iv), a textile article will
usually be a product of a particular country if the cutting of
the fabric into parts and the assembly of those parts into the
completed article has occurred in that country. However, 19 CFR
12.130(e)(ii) states that a material will usually not be
considered to be a product of a particular foreign country by
virtue of merely having undergone cutting to length or width and
hemming or overlocking fabrics which are readily identifiable as
being intended for a particular commercial use. T.D. 85-38,
which set forth the final rule implementing 19 CFR 12.130,
explains that "where fabric which is readily identifiable as
being intended for a particular commercial use (e.g., toweling or
bed linen material) and is merely cut to length or width, with
the edges then being either hemmed or overlocked, . . . the
foreign territory or country which produced the fabric is the
country of origin and not the country where the fabric was cut."
The Customs Service recently held, in Headquarters Ruling
Letter (HRL) 733601, dated July 26, 1990, that cotton fabric from
China which was imported into Mexico where it was, by machine,
cut to width and length, hemmed on three or four sides, washed
and shrunk, and folded to specifications for use as surgical
towels was not substantially transformed, and, therefore, was
considered a product of China. We also held in HRL 086132 dated
February 22, 1990, that a surgical towel which was cut from
cloth, washed, seamed, folded and packaged in Honduras was not
substantially transformed. Further, in C.S.D. 90-29, we held
that greige terry toweling which was bleached, cut to size,
hemmed, desized, and dyed to create beach towels, was not
substantially transformed.
In this case, processes 1 and 2, where the cotton fabric is
imported into Barbados, cut to shape, sewn, trimmed, and pre-
washed and dried (and dyed in process 2), are similar to the
processes previously ruled on by Customs and discussed above.
These two processes would not result in a substantial
transformation of the fabric imported into Barbados, and,
therefore, the towels would not be considered products of
Barbados. Only process 3, with respect to which we have
previously issued a ruling under the guidelines of 19 CFR
12.130(e)(1(iii) (HRL 555517 dated May 17, 1990), where cotton
yarn is imported into Barbados, woven into fabric and then cut to
shape, sewn, trimmed, pre-washed and dried, will be considered a
product of Barbados.
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HOLDING:
The surgical towels at issue are not eligible for duty-free
treatment under GSP or CBI. Only process 3, where cotton yarn is
imported into Barbados and then substantially transformed into
the final article, surgical towels, will qualify the towels as
products of Barbados. Process 1 and 2, where bolts of cotton
fabric are imported into Barbados to be made into surgical
towels, do not result in products of Barbados. We note that at
the present time, surgical towels from Barbados are not subject
to quota. However, due to the changeable nature of quota
agreements, you are advised to contact your local Customs office
prior to importation to determine the current status of any
textile agreements with Barbados. The rate of duty on surgical
towels from Barbados is 7% ad valorem.
The holding in this ruling applies only to the specific
factual situation and merchandise identified in the ruling
request. This position is clearly set forth in 177.9(b)(1),
Customs Regulations (19 CFR 177.9(b)(1)). This section states
that a ruling letter 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. 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. In the event there is a change in the facts
previously furnished this may affect the determination of country
of origin. In such a case, it is recommended that a new ruling
request be submitted in accordance with 177.2, Customs
Regulations (19 CFR 177.2).
Sincerely,
John Durant, Director
Commercial Rulings Division