MAR-2-05 CO:R:C:V 733250 KG
Mr. Arnold Edelman
Sabtex Ltd.
120 Van Nostrand Avenue
P.O. Box 1255
Englewood Cliffs, New Jersey 07632
RE: Country of origin marking of imported napkins; substantial
transformation; 19 CFR 12.130;
Dear Mr. Edelman:
This is in response to your letter of March 30, 1990,
requesting a country of origin ruling regarding imported napkins.
FACTS:
Your mill in Dubai, United Arab Emirates ("U.A.E.") intends
to import greige goods from China and perform the following
operations in the U.A.E.: bleaching, cutting into squares, and
hemming on three or four sides to create a cloth napkin.
Included in the submission are samples of the greige goods and a
finished napkin.
ISSUE:
What is the country of origin of the imported cloth napkins
for visa 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 (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").
According to T.D. 85-38, published in the Federal Register
on March 5, 1985, (50 FR 8714), which is 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. 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.
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 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., towelling
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.
Several recent cases have applied the principles of 19 CFR
12.130 to particular fact patterns that are similar to this case.
Customs concluded in C.S.D. 90-29 (November 6, 1989), that greige
terry towelling bleached, cut to size and hemmed, desized, and
dyed to be made into a beach towel in a second country was not
substantially transformed. In HQ 083544 (February 28, 1990),
Customs ruled that material cut to both length and width and
hemmed to be made into kitchen towels and dishcloths in a second
country was not substantially transformed because the processing
operations performed in the second country were not substantial
manufacturing or processing operations.
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., merely cutting to length and hemming,
do not constitute a substantial transformation.
In Belcrest Linens v. U.S., 741 F.2d 1368 (Fed. Cir. 1984),
the court held that the process of making a bolt of pre-cut woven
fabric into a pillowcase was a substantial transformation. The
court reached that conclusion in part because there was evidence
that the fabric was "capable of other commercial uses- woman's
handbags and tops."
This case involves operations in the second country which
are similar to the operations performed in C.S.D. 90-29 and HQ
083544 which were held not to be a substantial transformation.
The cloth is cut to both length and width and hemmed. Although
in this case the cloth is also bleached in the second country,
bleaching is one of the finishing operations listed in 19 CFR
12.130(e)(2)(iv) as usually not constituting a substantial
manufacturing or processing operation. Further, the greige
towelling was bleached as well as cut to size and hemmed in
C.S.D. 90-29. Therefore, bleaching the material, cutting to both
length and width and hemming does not constitute a substantial
manufacturing or processing operation. Because this prong of the
substantial transformation test of 19 CFR 12.130 has not been
satisfied, the fabric is not considered substantially transformed
in the second country. This material would be considered a
product of China for marking, duty and quota purposes.
HOLDING:
This material would be considered a product of China for
marking, duty and quota 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
cc: District Director
Charleston, S.C.