CLA-2 CO:R:C:S 557672 BLS
Ms. Jacqueline M. Sierra
L.S. Quilting, Inc.
P.O. Box 362 385
San Juan, Puerto Rico 00936-2385
RE: Eligibility of sheets and pillowcases for a partial
duty exemption under subheading 9802.00.80, HTSUS;
19 CFR 12.130; substantial transformation
Dear Ms. Sierra:
This is in reference to your letter dated July 23, 1993, to
the District Director, San Juan, Puerto Rico, requesting our
opinion with regard to the eligibility of certain sheets and
pillowcases for the partial duty exemption under subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS). You advise that your company is considering the
importation of such articles from the Dominican Republic.
FACTS:
The printed fabrics to be used in the manufacture of the
articles will be imported from Pakistan, and will consist of a
blend of 50% polyester and 50% cotton. The fabric will be entered
in San Juan, where it will be cut according to size, and then sent
to the Dominican Republic, along with thread, elastic, and
packaging materials of U.S. origin. The items to be produced
consist of pillow cases, flat sheets, and fitted sheets, in
different sizes, which will make up twin, full, and queen size
sets. Each set will contain two pillow cases, one flat sheet, and
one fitted sheet, with the exception of the twin set, which will
also contain the sheets but one pillow case only.
The following operations will take place in San Juan and the
Dominican Republic:
1) Pillow Cases
In San Juan, the fabric will be cut to length and width. In
the Dominican Republic, two identical pieces will be sewn together
on three sides, and hemmed on the other side.
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2) Flat Sheets Twin and Full
In San Juan, fabric will be cut to size on two sides and
another smaller piece of fabric will be cut on four sides. In the
Dominican Republic, the fabric cut on two sides will be hemmed, and
the piece of fabric cut on four sides will be sewn along the top
of this larger piece and finished on the ends.
3) Flat Sheet Queen
In San Juan, fabric will be cut to size on top and bottom, and
another piece of fabric will be cut on four sides. In the
Dominican Republic, the large piece will be hemmed on the bottom
and the smaller piece sewn along the top and bottom of the larger
piece.
4) Fitted Sheets
In San Juan, the fabric will be cut on two sides, and a square
of about 8" x 8" will be cut from the four corners of the piece.
In the Dominican Republic, the corners will be sewn together, the
sides will be closed with a merrow machine and an elastic will be
fitted and sewn along the top and bottom of the piece.
After being assembled, the goods will be packaged in sets
according to their size, arranged in cartons of six sets per
carton, to be exported to San Juan.
ISSUE:
Whether the sheets and pillow cases will be entitled to the
partial duty exemption under subheading 9802.00.80, HTSUS, upon
return to the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, provides a partial duty
exemption for:
Articles assembled abroad in whole or in part of
fabricated components, the product of the United
States, which (a) were exported in condition ready for
assembly without further fabrication, (b) have not lost
their physical identity in such articles by change in
form, shape, or otherwise, and (c) have not been
advanced in value or improved in condition abroad
except by being assembled and except by operations
incidental to the assembly process such as cleaning,
lubricating, and painting.
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All three requirements of subheading 9802.0080, HTSUS, must
be satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty upon
the full appraised value of the assembled article less the cost or
value of the U.S. components assembled therein, upon compliance
with the documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
For a component to receive a duty allowance under subheading
9802.00.80, HTSUS, it must be a "product of the U.S.". According
to section 10.12(e), Customs Regulations (19 CFR 10.12(e)), a
"product of the U.S." is an article manufactured within the Customs
territory of the U.S. and may consist wholly of U.S. components or
materials, of U.S. and foreign components or materials, or wholly
of foreign components or materials. If the component consists
wholly or partially of foreign components or materials, the
manufacturing process must be such that the foreign components or
materials have been substantially transformed into a new and
different article, or have been merged into a new and different
article.
Section 12.130, Customs Regulations (19 CFR 12.130), sets
forth the principles for determining the country of origin of
textiles and textile products subject to section 204 of the
Agricultural Act of 1956, as amended (7 U.S.C. 1854). These
principles are applicable to such merchandise for all purposes
including duty, quota, and marking. The country of origin of
textile products is deemed to be that foreign territory, country
or insular possession where the article last underwent a
substantial transformation.
In determining whether a substantial transformation has
occurred in connection with textile products, 19 CFR 12.130(b)
provides that a new and different article of commerce must emerge
by means of substantial manufacturing or processing operations.
The factors to be considered in determining whether or not a
manufacturing operation is substantial are set forth in 19 CFR
12.130(d) and (e).
Section 12.130(e)(iv) provides that 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)(2)(ii) provides that material usually will not be
considered to be a product of a particular foreign country by
virtue of merely undergone cutting to length or width and hemming
or overlocking fabrics which are readily identifiable as being
intended for a particular commercial use.
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In Headquarters Ruling Letter (HRL) 556015 dated May 20, 1991,
foreign fabric was shipped to the U.S., where it was cut into
simple geometric shapes, including triangles, squares, trapezoids,
parallelograms and rectangles in varying dimensions. The cut
pieces were then shipped to Jamaica for assembly into duvet covers,
by sewing together 50 to 60 component pieces, and adding a zipper.
We stated in that case that cutting geometrical shapes merely
involved cutting straight lines, and did not amount to a
substantial manufacturing operation. Accordingly, we held in HRL
556015 that the cutting operations in the U.S. did not result in
a substantial transformation and, therefore, the cut pieces were
not considered U.S.-origin fabricated components.
In HRL 952577 dated February 1, 1993, modified by HRL 953477
dated May 18, 1993, involving a country of origin determination,
we found that Chinese fabric was not substantially transformed in
Mauritius where the operations consisted in part, of cutting fabric
to length and width, and folding, to form flat sheets, or cutting
to length but not width, and elasticizing, of fitted sheets. See
also HRL 555719 dated November 5, 1990 (cotton fabric for surgical
towels cut to length and width, sewn, trimmed, pre-washed, and
dried is not substantially transformed), and HRL 555648 dated July
16, 1991 (foreign-origin fabric used for surgical towels cut to
length or to length and width in the U.S., remains a product of the
country where the fabric was manufactured).
The operations in the cited cases must be compared to cutting
operations in other cases in which we found that a substantial
transformation had occurred. For example, we have held that
cutting specific pattern pieces for garments, which involves laying
out the pattern according to the weave of the fabric, and following
the shape of the pattern, amounted to substantial manufacturing
operations. See HRL 731028 dated July 18, 1988 (cutting of fabric
into garment parts for wearing apparel constitutes a substantial
transformation; also, HRL 555489 dated May 14, 1990 (cutting of
fabric into glove patterns results in substantial transformation),
and HRL 555693 dated April 15, 1991 (cutting of fabric to create
pattern pieces for infant carrier results in a substantial
transformation,)
We believe that the cutting operations in the instant case are
analagous to the operations in HRLs 952577, 556015, and the other
cited cases in which fabric was cut to length and/or width, or cut
into simple shapes. Accordingly, based on the foregoing, we find
that the operations in San Juan, consisting of cutting the fabric
to length or to length and width, whether to form components for
the flat sheets or pillow cases, do not constitute substantial
manufacturing or processing operations resulting in a substantial
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transformation of the imported Pakistani fabric. We also believe
that the cutting operations in connection with the fitted sheet
components similarly do not amount to a substantial manufacturing
or processing operation. Cutting this fabric lengthwise and
cutting out 8" squares at each of the four corners involves
straight line cuts and does not rise to the complexity of cutting
shaped pattern pieces for wearing apparel. Moreover, even before
the cutting operation, the fabric is readily identifiable as being
intended for sheets and pillow cases.
Accordingly, we find that the Pakistani fabric which has been
cut in San Juan to form components for sheets and pillow cases, has
not been substantially transformed into a product of the U.S.
Therefore, the returned sheets and pillow cases are not eligible
for a duty allowance under subheading 9802.00.80, HTSUS.
HOLDING:
Foreign fabric which is cut in the U.S. to form components for
sheets and pillow cases, is not substantially transformed into
products of the U.S. Therefore, upon return to the U.S. from
abroad, the completed sheets and pillow cases will not be eligible
for the partial duty exemption under subheading 9802.00.80, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division
CC: Chief, Textiles and Plastics
New York Seaport