MAR-2-05 CO:R:C:V 731036 KG
Siegel, Mandell & Davidson, P.C.
655 Fifteenth Street, N.W.
Suite 300
Washington, D.C. 20005
RE: Country of origin marking of polo style shirts
Dear Sirs:
This is in response to your letters of February 8, March 1
and March 31,1988, concerning the country of origin marking of
men's cotton polo style shirts. We regret the delay in
responding.
FACTS:
Your client intends to import men's 100 percent cotton knit
short sleeve polo style shirts. The production of the shirts
will involve processing operations in two countries. In country
A the fabric will be cut into 12 garment components and the
placket will be set in four different operations. In country B
the garment will be assembled by sewing the components together
and performing various finishing operations. Nineteen separate
sewing and related procedures will be involved in the assembly
operation. The total cost of developing the cutting pattern for
the placket-type polo style shirt is $250. This is amortized
over the entire production of the garment parts and represents a
negligible cost on a per dozen garment basis.
You submitted samples of a completed polo style shirt, cut
pieces which make up a completed polo style shirt and detailed
cost and time estimates for the various stages of production.
ISSUE:
What is the country of origin of the polo style shirts for
quota and country of origin marking purposes.
LAW AND ANALYSIS:
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.
Section 12.130, Customs Regulations 919 CFR 12.130), sets
forth the principles of country of origin for textile and
textile products subject to section 204 of the Agricultural Act
of 1956, as amended (7 U.S.C. 1854)("section 204"). According to
T.D. 85-38, the final rule document which established 19 CFR
12.130, the principles of country of origin for textiles and
textile products contained in 19 CFR 12.130 are applicable to
such merchandise for all purposes, including duty and marking.
Pubished in the Federal Register on March 5, 1985, 50 FR 8714.
This regulation, which became effective in 1985, came about as a
result of Executive Order No. 12,475, 49 FR 19955 (1984), which
directed the Secretary of Treasury, in accordance with policy
guidance provided by the Committee for the Implementation of
Textile Agreements, to issue regulations governing the entry or
withdrawal from warehouse for consumption of textile and textile
products subject to section 204. The regulations were to
include clarifications in or revisions to the country of origin
rules for textiles and textile products subject to section 204 in
order to avoid circumvention of multilateral and bilateral
textile agreements.
The United States Court of International Trade upheld the
interim regulations, published as T.D. 84-171 in the Federal
Register on August 3, 1984 (49 FR 31248), written pursuant to
this executive order which included interim regulation section
12.130 in Mast Industries, Inc. v. Regan, 596 F. Supp. 1567 at
1582 (CIT 1984). The court stated that the purpose of the
interim textile regulations is "prevention of the entry of
textile products into the United States on quotas not applied to
the country which manufactured all or a substantial part of the
textile products. Accordingly interim regulation section 12.130
defines country of origin and established criteria for
substantial transformation in order to prevent nearly completed
textile products of one country from being imported into the
United States on the quota of another country."
When T.D. 85-38 was published, the background information
cited an intention to change the result of Cardinal Glove Co. v.
United States, 4 C.I.T. 41 (1982), as one of the motivations of
the drafting of the new textile regulations. Cardinal Glove
involved cotton work gloves. The cotton fabric was produced in
Hong Kong, and cut into front and back panels in Hong Kong.
These front and back panels were assembled by sewing in Haiti.
The gloves were then turned inside out, pressed, inspected,
paired, folded and bundled in Haiti. The court held that the
assembly and processing of the gloves in Haiti transformed the
gloves into an export of Haiti and that therefore, the bilateral
textile agreement between the U.S. and Hong Kong was inapplicable
and a Hong Kong export license or visa was unnecessary for entry
into the U.S. The court noted that "the exportation of
merchandise from a country producing a product to an intermediate
country for the purpose of processing, manipulating or assembling
that product, is a common practice in our present day industrial
and technological economy." Cardinal Glove at 43-44. This very
practice was feared as a method of attempting to circumvent the
textile import program and multilateral and bilateral textile
agreements rather than as a mechanism for effecting a substantial
manufacturing process that Customs desired to halt through
implementation of 19 CFR 12.130.
19 CFR 12.130 requires that the standard of substantial
transformation govern the determination of the country of origin
where textiles and textile products are processed in more than
one country. 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.
Substantial transformation is said to occur when the article has
been transformed into a new and different article of commerce by
means of substantial manufacturing or processing operations.
The factors to be applied in determining whether or not a
manufacturing operation is substantial are set forth in 19 CFR
12.130(d) and (e). Assembly by sewing is considered in 19 CFR
12.130(e)(v) as usually resulting in a article being deemed a
product of the country in which the sewing was done where the
assembly is substantial such as the complete assembly and
tailoring of all cut pieces of suit-type jackets, suits, and
shirts. After considering all the comments received on the
interim regulation regarding assembly by sewing, Customs
concluded that "factors such as time, nature of the sewing
operation, and the skill required to sew together a tailored
garment should be considered in determining whether the
merchandise was substantially transformed.... Where either less
than a complete assembly of all the cut pieces of a garment is
performed in one country, or the assembly is a relatively simple
one, then Customs will rule on the particular factual situations
as they arise, utilizing the criteria in section 12.130(d)." 50
Fed. Reg. 8,715 (March 5, 1985), T.D. 85-38. Customs overtly
rejected the adoption of an arbitrary rule of origin based solely
on the minutes of production in each country.
In your ruling request, you asked us to consider Schedules A
and B in determining the country of origin for quota and marking
purposes. In applying the relevant factors, we find that the
manufacturing process that takes place in Country B is not
substantial. The assembly by sewing of the polo style shirts is
not a complex process such as the examples of types of garments
enumerated in 19 CFR 12.130(e)(v). Although Schedule B lists 19
separate operations, many of the operations take very little time
and involve very little skill. For example, operation #18 is
placing the shirts in poly bags. This is estimated to take .037
of an hour and could not involve any great amount of skill or
training to perform. Operation #19 is packing the shirts in
boxes. This is estimated to take .068 of an hour. There are no
operations listed or described in Schedule B that are
sufficiently complex to warrant a finding of substantial
transformation. There is no evidence that highly skilled or
trained workers are required. The assembly of polo style shirts
does not require tailoring or detail work. Because the
manufacturing process that takes place in Country B is not
considered substantial, Country A is considered the country of
origin for quota and marking purposes.
In your letter of March 1, 1988, you asked us to consider
Schedules C and D in determining the country of origin for quota
and marking purposes. The addition of steps 1 through 3 in
Country B set forth in Schedule D do not change the determination
that the manufacturing process in Country B is not substantial.
There is no evidence of complexity or any operations which
require skillful and highly trained workers. Therefore, the
country of origin for quota and marking purposes would still be
considered Country A.
HOLDING:
The country of origin for quota and country of origin
marking purposes for polo style shirts made as described in
either Schedules A and B or Schedules C and D is Country A. The
manufacturing process that takes place in Country B is not
substantial as required by 19 CFR 12.130.
Sincerely,
John Durant
Director,
Commercial Rulings Division
cc: CITA