MAR-2-05 CO:R:C:V 733787 KG

Mr. Abdul Yaqub
Eastern Imports Ltd.
1 S. 660 Midwest Road
Suite 150
Oakbrook Terrace, IL 60181

RE: Country of origin marking of imported bed sheets and pillow cases; 19 CFR 12.130; substantial transformation; griege fabric

Dear Mr. Yaqub:

This is in response to the letter of September 14, 1990, from Broker Power Inc., requesting a country of origin ruling on behalf of your company regarding imported bed sheets and pillow cases.

FACTS:

Seventy inch wide greige fabric will be made in Pakistan and shipped to Sri Lanka for further processing. In Sri Lanka, the greige fabric will be: (1) desized; (2) scoured; (3) shrunk; (4) bleached; (5) singed; (6) sized and finished; (7) stentor dried and shrunk; (8) calendered. When these processes are completed, the 70 inch greige fabric will be turned into a 66 inch bleached white fabric. Then the fabric will be cut to length, sewn end- to-end, packaged, baled and shipped to the U.S. as flat and fitted cotton bed sheets and pillow cases.

ISSUE:

What is the country of origin of these bed sheets and pillow cases?

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 8714), which is the final rule document which established 19 CFR 12.130, ("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)(1)(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 into a pillowcase 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 products of 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). 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. Another case, C.S.D. 90-29 (November 6, 1989), involved greige fabric sent to the Philippines where the fabric was desized, bleached, dyed, hydro extracted, dried, printed by hand, cut to size, stitched into towels, mended, graded and packaged to be imported into the U.S. as beach towels. Customs ruled that the beach towels were not substantially transformed in the Philippines despite the conversion of the greige fabric into finished beach towels.

In this case, the greige fabric is made into useable cotton material and then cut to length and sewn together by overlocking in Sri Lanka. 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. This case is distinguishable from C.S.D. 90-29 because of the limited potential uses of toweling material combined with the little degree of processing required to make toweling fabric into a useable towel. In the case of material used to make sheets, it has many uses and the scrap, is in fact, often used to make other textile articles. The combination of making the greige fabric into useable material and cutting the cotton bed sheet material to length and hemming on four sides is a more significant manufacturing operation than just doing the fabric conversion or cutting to length and sewing alone. The physical change in the material is clearly greater, more time is involved in doing all this processing, and the value added to the greige fabric in Sri Lanka is greater than if just some and not all of this processing were to be done there. Based on the above considerations, we conclude that the greige fabric does undergo a substantial manufacturing or processing operation in Sri Lanka. Further, the greige fabric is made into a new and different article of commerce i.e., bed sheets. Because both prongs of the substantial transformation test of 19 CFR 12.130 have been satisfied, the fabric is considered substantially transformed in Sri Lanka. The fitted and flat bed sheets would be considered a product of Sri Lanka 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. Unlike the flat sheets, 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. In addition, prior to the cutting and sewing operations, the greige fabric undergoes the necessary processing operations to make it into useable material. As a result of the combination of making the greige fabric into useable material coupled with the cutting, folding over and sewing operations, the greige fabric is substantially transformed into a new and different article of commerce, namely pillow cases, by means of substantial manufacturing operations in Sri Lanka.

HOLDING:

Sri Lanka would be considered the country of origin of the bed sheets and the pillow cases 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