CLA-2 CO:R:C:S 556070 KCC
Andrew P. Vance, Esq.
Barnes, Richardson & Colburn
475 Park Avenue South
New York, New York 10016
RE: Women's t-shirts and men's pullovers created by marking,
cutting, sewing, and ironing in the Northern Mariana
Islands.General Note 3(a)(iv), HTSUS; insular possession;
C.S.D. 83-51; substantial transformation; 19 CFR
12.130(e)(iv); 731028; 732485; 731036; marking; 19 CFR
134.31(l); 725787; 729704; 731028; 731041
Dear Mr. Vance:
This is in response to your letter dated April 25, 1991, to
the Regional Commissioner of Customs, New York, on behalf of Luen
Thai, concerning duty-free treatment under General Note 3(a)(iv),
Harmonized Tariff Schedule of the United States (HTSUS), for
women's t-shirts and men's cotton knit pullovers from the
Northern Mariana Islands. In NY 862864, Customs responded to
your request for tariff classification of the t-shirts and
pullovers. Your letter and samples of the t-shirts and pullovers
were forwarded to this office for a reply. As requested, your
samples will be returned under separate cover.
FACTS:
Luen Thai intends to manufacture men's pullovers and women's
t-shirts in the Northern Mariana Islands. Luen Thai will ship
foreign-manufactured cotton knit fabric in bolts to the Northern
Mariana Islands where it will be subjected to the following
operations:
1) unrolling the fabric bolt;
2) marking the fabric;
3) cutting the pattern pieces;
4) sewing together the pattern pieces;
5) ironing; and
6) packing the t-shirts and pullovers.
Upon completion of the foreign operations, the t-shirts and
pullovers will be imported into the U.S.
The women's t-shirts are labeled "American Eagle Outfitters
for Her," and contain a label stating "Made in USA of Imported
Fabric" for the country of origin marking. The men's pullovers
are labeled "Eagle Pass," and contain a label stating "Made in
USA of Imported Fabric" for the country of origin marking.
ISSUE:
I. Whether the t-shirts and pullovers will be entitled to duty-
free treatment under General Note 3(a)(iv), HTSUS, when imported
into the U.S.
II. Whether the proposed labels satisfy the country of origin
marking requirements.
LAW AND ANALYSIS:
I. General Note 3(A)(iv), HTSUS
Under General Note 3(a)(iv), HTSUS, 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.
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 or use.'" Ferrostaal
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)).
Commencing on July 18, 1947, the U.S. became the
administrating authority of the Trust Territory of the Pacific
Islands (TTPI), an area including the Northern Mariana Islands
(Trusteeship Agreement, 61 Stat. 3301, T.I.A.S. No. 1665, 8
U.N.T.S. 89). In accordance with provisions of the trust
agreement to promote self-government for the peoples of the trust
territory, on March 24, 1976, the U.S. signed a Covenant to
Establish a Commonwealth of the Northern Mariana Islands in
Political Union with the U.S., Pub. L. 94-241, 90 Stat. 263.
That covenant became fully effective as of November 4, 1986, and
replaced the trusteeship agreement (See, Presidential
Proclamation 5564 of November 3, 1986 and E.O. 1272 of November
3, 1986).
Article 6 of the Covenant, section 603(c), provides that
"imports from the Norther Marianan Islands into the customs
territory of the United States will be subject to the same
treatment as imports from Guam into the customs territory of the
United States." See also, C.S.D. 83-51, 17 Cust. Bull. 825
(1983). Therefore, products from the Northern Mariana Islands
are eligible for duty-free treatment under General Note 3(a)(iv),
HTSUS.
Because the articles in question are textile products
subject to section 204 of the Agricultural Act of 1956, as
amended (7 U.S.C. 1854), section 12.130, Customs Regulations (19
CFR 12.130) is applicable. 19 CFR 12.130 provides that the
country of origin of a textile product is that foreign territory,
country or insular possession where the article last underwent a
substantial transformation. Section 12.130(e)(iv), Customs
Regulations (19 CFR 12.130(e)(iv)), states that the cutting of
fabric into parts and the assembly of those parts into the
completed article will usually result in the processing country
being the country of origin. Furthermore, we have held that the
cutting of fabric (which contains no indication where that fabric
is to be cut) into garment parts, constitutes a substantial
transformation of the fabric and the parts become a product of
the country where the fabric is cut. See, Headquarters Ruling
Letter (HRL) 731028 dated July 18, 1988; HRL 732485 dated January
18, 1990; and HRL 731036 dated July 18, 1991.
In this case, the foreign cotton knit fabric in bolts is
marked for cutting into pattern pieces, cut into the pattern
pieces, and the pieces are assembled into finished t-shirts and
pullovers in the Northern Mariana Islands. We are of the
opinion that these operations result in a substantial
transformation of the foreign cotton knit fabric into a product
of the Northern Mariana Islands, and, therefore, will be
eligible for duty-free treatment available in General Note
3(a)(iv), HTSUS, assuming that they satisfy the 50% foreign value
limitation and are imported directly from the Northern Mariana
Islands to the U.S.
You state that your client has informed you that the value
added in the Northern Mariana Islands exceeds 50% of the value of
the imported foreign cotton knit fabric in bolts. However, as
previously stated, General Note 3(a)(iv), HTSUS, requires that
the cost of the foreign cotton knit fabric imported into the
Northern Mariana Islands not exceed 50% of the full appraised
value of the women's t-shirts and men's pullovers imported into
the U.S. As no specific cost or appraised value information has
been provided, we are unable to definitely state that the
imported t-shirts and pullovers will meet the value requirement
under this special tariff program.
II. Country of Origin Marking Requirements
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides that, unless excepted, every article of foreign
origin imported into the U.S. shall be marked in a conspicuous
place as legibly, indelibly, and permanently as the nature of the
article (or container) will permit, in such a manner as to
indicate to the ultimate purchaser in the U.S. the English name
of the country of origin of the article. Part 134, Customs
Regulations (19 CFR Part 134), implements the country of origin
marking requirements and exceptions of 19 U.S.C. 1304.
Section 134.1(c) defines "foreign origin" as "a country of
origin other than the U.S., as defined in paragraph (e) of this
section, or its possessions and territories." Section 134.32(l),
Customs Regulations (19 CFR 134.32(l)), states that "products of
possessions of the U.S." are excepted from marking requirements.
Customs has previously ruled that products of Guam are
excepted from country of origin marking requirements under 19 CFR
134.32(l), as products of possessions of the U.S. See, HRL
725787 dated July 25, 1984. In regard to the Northern Mariana
Islands, "Customs treats the Northern Mariana Islands as a
territory or possession of the U.S. and products therefrom would
be excluded from the country of origin marking requirements."
See, HRL 729704 dated September 12, 1986.
The Federal Trade Commission, pursuant to rules and
regulations issued under the authority of the Textile Fiber
Products Identification Act, stated in a staff opinion letter
that garments made in the Northern Mariana Islands of imported
fabric should be labeled "Made in USA of Imported Fabric." See,
HRL 731028 dated July 18, 1988, and HRL 731041 dated July 18,
1988. Therefore, the labels in the women's t-shirts and the
men's pullovers stating "Made in USA of Imported Fabric" are
acceptable.
HOLDING:
The foreign cotton knit fabric imported into the Northern
Mariana Islands is substantially transformed into articles which
are the manufacture or product of the insular possession for
purposes of General Note 3(a)(iv), HTSUS. Accordingly, the
women's t-shirts and men's pullovers will be entitled to duty-
free entry under this special tariff program assuming they
satisfy the 50% foreign value limitation and are imported
directly into the U.S. from the Northern Mariana Islands.
The women's and men's garments have been substantially
transformed into a product of the Northern Mariana Islands, and,
therefore, are exempt from the country of origin marking
requirements of 19 U.S.C. 1304, but must be marked in accord with
the FTC requirements noted above.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Asst Area Dir
NIS, Branch 3
862864