MAR-2-05 CO:R:C:V 733601 KG
Mr. Mike Doud
Sekin Transport International
P.O. Box 655464
Dallas, Texas 75265-5464
RE: Country of origin marking of imported surgical towels;
substantial transformation; 19 CFR 12.130
Dear Mr. Doud:
This is in response to your letter of June 11, 1990,
requesting on behalf of QFC Industries, a country of origin
ruling regarding imported cotton surgical towels.
FACTS:
Bolts of pre-dyed cotton cloth 100 yards long by 35 inches
wide manufactured in China would be imported by a prospective
manufacturer in either Mexico or the Philippines where the
following operations would be performed. The cloth would be
machine cut by both length and width; hemmed on three or four
sides; washed and shrunk; and folded to the specifications of the
medical industry. Enclosed with your submission is a sample of
the finished product.
ISSUE:
What is the country of origin of the imported surgical
towels?
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 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 19 CFR 12.130(d). Any
factual situation not squarely within those examples will be
decided by Customs in accordance with the provisions of 19 CFR
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.
Customs recently held in HQ 086132 (February 22, 1990), that
a surgical towel which was cut from cloth, washed, seamed,
folded and packaged in the Honduras was not substantially
transformed there. That case is indistinguishable from this
case. Further, Customs concluded in C.S.D. 90-29 (November 6,
1989), that greige terry towelling bleached, cut to size and
hemmed as well as desized, and dyed to be made into a beach towel
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 was not
substantially transformed because the processing operations
performed in the second country were not substantial
manufacturing or processing operations. 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. However, 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."
In this case, the toweling is cut, hemmed, washed, shrunk,
and folded with one corner folded down in either Mexico or the
Philippines. This is not significantly different than the
manufacturing processes performed in C.S.D. 90-29 and HQ 083544
and identical to HQ 086132 which were held not to constitute a
substantial transformation. Cutting and hemming fabric and
folding a towel is not complex, requires no great skill and is
not time consuming or costly. No information was submitted as to
the value of this product before and after processing. Because
this imported product does not undergo a substantial
manufacturing process in either Mexico or the Philippines, China
would be considered the country of origin of the imported
surgical towels.
HOLDING:
The surgical towels are not substantially transformed in the
country where the material is cut to length and width, hemmed,
washed and shrunk, and folded. China is the country of origin
for duty, country of origin marking 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: Marty Walsh, CITA