MAR-2-05 CO:R:C:V 733180 KG
Ms. Loraine K. Feith
New Zealand Trade Development Board
New Zealand Embassy
37 Observatory Circle
Washington, D.C. 20008
RE: Country of origin marking of imported cotton linens;
substantial transformation; 19 CFR 12.130; bed sheets; pillow
cases; dust ruffles; quilt covers; pillow shams;
Dear Ms. Feith:
This is in response to your letter of February 27, 1990, and
your submission of May 31, 1990, requesting a country of origin
ruling regarding imported cotton linens.
FACTS:
This ruling request involves the country of origin marking
of bed linens; specifically flat and fitted sheets, pillow cases,
quilt covers, pillow shams and dust ruffles. Your client has
commissioned a Turkish textile manufacturer to print design
patterns onto cotton sateen. The design patterns, which are done
in Australia, are reproductions of original ancient Aboriginal
art depicting the art, song and dance of a particular Australian
culture spanning over the past 40,000 years. The processes
involved in the designing make up approximately 6% of the FOB
price. The manufacturer has spent approximately $160,000 and 500
man hours on design interpretation.
The Turkish manufacturer weaves the cotton sateen material
using a standard weaving loom. The approximate length of cloth
necessary to create a standard flat bed sheet, 1.8 meters, was
utilized for the purpose of comparing manufacture time.
Approximately 1.8 meters of fabric are woven every 4-5 minutes.
Printing is done by applying the dye to a revolving drum and
passing the fabric through the drum. Printing 1.8 meters of
material takes approximately 10 seconds. Following the printing
and drying of the design, the fabric is rolled onto cardboard
tubes. These tubes may contain variable amounts of material up
to 500 meters as per the order being filled. The rolls of
material are then packed for export and shipped to Australia.
These rolls of material are not pre-marked with lines of
demarcation or cutting marks.
The cutting, sewing and finishing of the bed linens are
done in Australia. You state that because of the design, the
fabric cannot be straight cut, which is the normal procedure to
minimize waste and maximize production efficiency when making
bed linens. The cutting and hemming must be done on four sides
of a sheet rather than cutting and hemming of only two sides of a
sheet. The entire manufacturing process of an item takes
approximately 10 to 20 minutes depending upon the complexity of
the product. Details of the construction procedure for each
product differs. For the flat sheets, the design must be
positioned for various bed sizes, the material is cut to size on
four sides and the material is hemmed in fine stitching. The
fitted sheets are also hemmed for fitting elastic along the edges
and the elastic is inserted and joined. The hem is then closed.
For the pillow cases, the design must be positioned as directed,
the material must be cut to size on four sides, overlocked on the
cut edges, folded and sewn together on both sides, and sewn in an
envelope fold on the open end.
For the quilt covers, the design must be positioned as
directed, the material must be cut to size on four sides, two
sides of the cover must be matched to establish the design, the
folded ends must be sewn together on three sides, the sides must
be overlocked, the open ends hemmed, and the button closures and
pocket on the open end must be sewn to allow for the insertion of
the quilt.
For the dust ruffles, the material is cut to size on four
sides, all cut edges are overlocked, the flat piece is cut to the
bed size and then joined with fabric pieces that are gathered and
pleated. The bottom edge of the ruffle is hemmed 1/2 inch.
For the pillow shams, the design is centered, cut to size
on four sides, the cut edges are overlocked,the pieces are folded
and sewn together on both sides, allowing for center back closure
and frill is sewn to the edge, allowing for pleating.
The finished products are all then ironed, folded and
packaged. You also submitted information which estimates the
percentage value added for each article at each stage of
production. The Turkish manufacture is estimated to be between
13 and 21 percent of the total value of the various items
produced. The making of the bed linens in Australia accounts for
between 23% to 31% of the price of the finished product, varying
as to the particular item involved.
ISSUE:
What is the country of origin for the imported bed linens
described above?
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 (19 CFR 12.130), sets
forth the principles for making country of origin determinations
for textile and textile products subject to section 204 of the
Agricultural Act of 1956, as amended (7 U.S.C. 1854)"("section
204").
Pursuant to 19 CFR 12.130, the standard of substantial
transformation governs 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.
In T.D. 85-38, published in the Federal Register on March 5,
1985, (50 FR 8716), which is the final rule document which
established 19 CFR 121.30, there is a discussion of how the
examples and the factors enumerated in the regulation are
intended to operate. "Examples set forth in 19 CFR 12.130(e) are
intended to give guidance to Customs officers and other
interested parties. Obviously, the examples represent clear
factual situations where the country of origin of the imported
merchandise is easily ascertainable. The examples are
illustrative of how Customs, given factual situations which fall
within those examples, would rule after applying the criteria
listed in 12.130(d). Any factual situation not squarely within
those examples will be decided by Customs in accordance with the
provisions of 12.130(b) and (d)." The factors to be applied in
determining whether or not a manufacturing operation is
substantial are set forth in 19 CFR 12.130(d).
Section 12.130(e)(iv) states 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) 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
explains that "where fabric which is readily identifiable as
being intended for a particular commercial use (e.g., toweling or
bed linen material) 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. 50 FR 8714.
The phrase "readily identifiable as being intended for a
particular commercial use" was interpreted by Customs in HQ
086779 (April 25, 1990), a ruling letter concerning diapers, to
refer to evidence i.e., lines of demarcation or cutting marks
that would indicate that the fabric was to be made into diapers.
There have been prior cases involving country of origin
determinations for bed linen and toweling which are relevant.
In Belcrest Linens v. U.S., 741 F. 2d 1368 (Fed. Cir. 1984), the
court held that the process of making a bolt of woven fabric
which was pre-marked with lines of demarcation into a pillowcase
with a scalloped edge was a substantial transformation. We note
that Belcrest was decided by the court prior to the
implementation of 19 CFR 12.130.
Customs recently held in HQ 086523 (April 25, 1990), that
bed sheets made out of material woven, dyed and printed in
Pakistan were considered to be from Pakistan even though the
material was cut to length and hemmed in Dubai. The processes
performed in Dubai, i.e., cutting to length and hemming, do not
constitute a substantial transformation. This ruling is
consistent with the example set forth in 19 CFR
12.130(e)(2)(ii). Based on Belcrest, Customs ruled in HQ 086523
that the pillow cases, which were cut and sewn together in Dubai,
were considered to be from Dubai. Further, Customs ruled in HQ
083544 (February 28, 1990), that material cut to both width and
length and hemmed to be made into towels and dishcloths was not
substantially transformed because after examining the factors set
forth in 19 CFR 12.130(d), we concluded that the processing
operations performed in the second country were not substantial.
Customs ruled in HQ 084874 (April 4, 1990), that fabric made into
a bedspread was substantially transformed. Unmarked, uncut
fabric of polyester, fiberfill and backing were imported into
Haiti on separate bolts. There the three types of fabric were
layered and sewn together by a quilting machine and then cut to
length and width to form the body of the bedspread. The sides of
the bedspread were sewn together by overlocking and the top edge
was hemmed. Identical woven fabric to be used for the dust
ruffle was cut to length and width and hemmed with a shirttail
hem. The ruffle was then attached to three sides of the
bedspread by shirred stitching, creating a dust ruffle.
In this case, the bed sheets are first designed in
Australia, the fabric is made in Turkey and then cut to both
width and length and sewn together by overlocking in Australia.
This fact pattern does not fit into any of the examples set forth
in 19 CFR 12.130(e). Therefore, the question presented is
whether the merchandise has been subjected to substantial
manufacturing or processing operations resulting in a new and
different article of commerce to constitute a substantial
transformation. Although there is a considerable amount of
resources invested in the designing of the sheets, country of
origin determinations are based on where the last substantial
transformation took place. Since the design process precedes the
production of the cloth in Turkey, it would not be a relevant
factor.
When fabric is used to make a completed flat sheet, it is
clear that a new and different article of commerce has been
created. However, the second prong of the substantial
transformation test under 19 CFR 12.130 requires a finding that
the textile or textile product has been transformed by means of
substantial manufacturing or processing operations. The
manufacturing operations that are relevant for the flat sheets
are the cutting on all four sides of unmarked fabric and hemming
of the four sides which is done in Australia. As discussed
above, the cutting to length only and hemming of a bed sheet has
already been held in HQ 086523 not to constitute a substantial
manufacturing process. Customs recently ruled in HQ 733746
(November 14, 1990), that cotton surgical cloth cut to both
length and width and hemmed on all four sides in a second country
was not substantially transformed in that second country. In HQ
733250 (August 10, 1990), Customs ruled that cloth cut and hemmed
on all four sides to make a napkin did not constitute a
substantial transformation. Cloth cut and hemmed on all four
sides to make napkins and table cloths was held by Customs not to
constitute a substantial transformation in HQ 733600 (November
16, 1990). Further, Customs ruled in HQ 083544 (February 28,
1990), that cutting to both length and width and hemming on four
sides to make towels was not a substantial manufacturing process.
Although we do note that the difference in type of fabric
involved in the toweling case, the processing operations involved
in making fabric into flat sheets is indistinguishable from the
surgical cloth, and cloth napkins and tablecloths in terms of
complexity of the cutting and hemming operations. The additional
step required to properly position patterned material because
there is a design on it is not enough to constitute a significant
manufacturing operation. Therefore, we find that the
manufacturing operation involved in making fabric into flat
sheets is not a substantial manufacturing or processing
operation. Because the second prong of the substantial
transformation test of 19 CFR 12.130 has not been satisfied, the
fabric is not considered substantially transformed in Australia.
The flat bed sheets would be considered a product of Turkey for
marking, duty and quota purposes.
The fitted sheet, however, must be cut at the corners and
elastic is sewn into the cloth so that the corners will fit over
the mattress. This requires additional cutting and stitching
and is more complex than merely sewing a straight hem.
Therefore, because more processing, which takes more time, skill
and creates a greater physical change is required to make a
fitted sheet, than flat sheets, surgical cloth, cloth napkins and
tablecloths, we conclude that the fabric which is made into a
fitted sheet undergoes a substantial manufacturing or processing
operation. The fabric is made into a fitted sheet, which is a
new and different article of commerce. Therefore, the fabric
made into fitted sheets is substantially transformed in
Australia. The fitted sheets would be considered a product of
Australia for marking, duty and quota purposes.
With regard to the pillow cases, Belcrest, and HQ 086523
both held that fabric made into pillow cases is a substantial
transformation. The manufacturing process involved here in
making pillow cases involves substantially similar cutting and
sewing operations that were involved in Belcrest and HQ 086523.
The material is cut, folded, sewn and hemmed on 3 sides,
including the open side which requires hemming both ends. The
estimated value of the processing involved in making the pillow
cases is 31% as compared to making the fabric which is only 13%
of the estimated value. Because some precision is required to
sew a pillow case properly and more is required than simply
hemming the straight edges of a rectangular size piece of
material which is reflected in the value added to the fabric in
Australia, we conclude that the fabric which is made into pillow
cases does undergo substantial manufacturing into a new and
different article of commerce and therefore is substantially
transformed in Australia.
The sewing involved in making a pillow sham is, if anything,
more complex, time consuming and requires greater skill than the
work required to make a pillow case. This is reflected in the
value added to the fabric in Australia, which is 31% of the total
as compared to the 15% added in Turkey. There is a significant
physical change in making a pillow sham from fabric. Based on
these considerations, we conclude that the fabric is transformed
by means of a substantial manufacturing or processing operation.
The fabric does become a new and different article of commerce.
Therefore, the fabric made into pillow shams is substantially
transformed. Pursuant to 19 CFR 12.130, Australia would be
considered the country of origin of the pillow cases and shams
for marking, duty and quota purposes.
The quilt covers are cut to length and width, the folded
ends are sewn together on three sides, the sides are overlocked,
the open ends hemmed and button closures and pocket on the open
end must be sewn to allow for the insertion of the quilt. The
sewing involved in making the quilt cover is clearly more complex
than a mere hemming on four sides, takes some time and a certain
level of skill. The fabric undergoes a significant physical
change when it is made into a quilt cover. Based on these
considerations, we conclude that the fabric made into quilt
covers is transformed by means of a substantial manufacturing
operation. Further, the fabric which is made into quilt covers
is a new and different article of commerce. Since both prongs of
the substantial transformation test set forth in 19 CFR 12.130
have been satisfied, the quilt covers are substantially
transformed in Australia and are considered to be a product of
Australia for country of origin marking, duty and quota purposes.
The dust ruffles are cut to shape on four sides and each
side is overlocked. In addition, the bottom piece is sewn
together to make pleats and the bottom edge of the pleated
portion is hemmed. This manufacturing process involved with this
product is more like the pillow shams and quilt covers discussed
above. The sewing operation requires some skill in order for the
pleats to fall properly. Further, like the pillow cases, shams
and quilt covers, the fabric is made into a new and different
article of commerce. Because the production of the dust ruffles
both results in a new and different article of commerce and a
substantial manufacturing process is involved, the dust ruffles
are considered substantially transformed in Australia and would
be considered a product of Australia for country of origin
marking, quota, and duty purposes.
HOLDING:
The imported flat bed sheets are considered to be a product
of Turkey for country of origin marking, quota and duty purposes.
The imported fitted bed sheets, pillow cases, pillow shams,
quilt covers and dust ruffles are considered to be a product of
Australia for country of origin marking, quota and duty purposes.
The holding set forth above applies only to the specific
factual situation and merchandise identified in the ruling
request. This position is clearly set forth in section
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. Accordingly, it is
recommended that a new ruling request be submitted in accordance
with section 177.2, Customs Regulations (19 CFR 177.2).
Sincerely,
John Durant
Director,
Commercial Rulings Division