MAR-2-05 CO:R:C:V 734215 AT
Paul A. Horowitz, Esq.
Siegel, Mandell & Davidson, P.C.
One Whitehall Street
New York, New York 10004
RE: Country of origin marking of imported women's sweaters;
substantial transformation; 19 CFR 12.130; knitting and
cutting of fabric in United Kingdom and assembly in China
Dear Mr. Horowitz:
This is in response to your letter of June 10, 1991, on
behalf of your client Liz Claiborne, Inc. (Liz Claiborne),
requesting a binding and prospective ruling on the country of
origin of imported women's sweaters for tariff, quota and marking
purposes. A sample of a finished sweater as well as the
components as they exist at the conclusion of each major stage in
the production process were also submitted for examination.
FACTS:
You state that Liz Claiborne intends to import women's long
sleeve 100% cotton knitted pullover sweaters from China. You
also state that the production of the sweater will involve
processing operations performed in two countries, the United
Kingdom ("U.K.") and China. The operations to be performed in
the U.K. will consist of the knitting of the fabric (from yarn of
Indian origin) and the cutting of the fabric to shape into the
front, back and two sleeves. The cut-to-shape panels will be cut
to a clean edge in the U.K. and then will be exported to China.
The operations to be performed in China will consist of the
overlocking and stitching of the edges of the panels, the sewing
together of the panels, the sewing of the labels and insertions
of shoulder pads, and the washing, drying, pressing, inspection
and packaging of the sweaters for export to the U.S. Further you
claim that the knitting of the sweater panels and cutting of the
panels to shape in the U.K. constitutes a substantial
transformation, for all country of orign purposes and that the
operations performed in China do not constitute a substantial
transformation of the sweater. Based on this you contend that
the country of origin of the sweaters is U.K. for tariff, quota
and marking purposes.
ISSUE:
What is the country of origin of the imported women's
sweaters for marking, tariff and quota 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 marking 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. 1584) ("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
others words, for textiles governed by 19 CFR 12.130 there is a
two part test for substantial transformation: 1) a new and
different article of commerce and 2) a substantial manufacturing
or processing operation.
In T.D. 85-38, published in the Federal Register on March 5,
1985 (50 CFR 8714), which is the final rule document which
established 19 CFR 12.130, 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) and
(e).
Section 12.130(d)(1) states that a new and different article
of commerce will usually result from a manufacturing or
processing operation if there is a change in: (i) commercial
designation or identity, (ii) fundamental character or (iii)
commercial use.
Section 12.130(d)(2) lists some of the factors considered in
determining whether a manufacturing operation has occurred.
These factors include: (1) the physical change in the material or
article as a result of the manufacturing or processing operations
in each foreign country; (2) the time involved in the
manufacturing or processing operations in each foreign country;
(3) the complexity of the manufacturing or processing operations
in each foreign country; (4) the level or degree or skill and/or
technology required in the manufacturing or processing operations
in each foreign country; and (5) the value added to the article
or material in each foreign country compared to its value when
imported into the U.S.
You state that the fabric for these women's sweaters is made
from Indian yarn and cut in the U.K. One of the examples
enumerated is 19 CFR 12.130(e)(iii), which states that weaving,
knitting or otherwise forming fabric is an example of a
manufacturing or processing operation which would qualify under
19 CFR 12.130 as a substantial transformation. Further, Customs
stated in T.D. 85-38 that "Cutting garment parts from fabric will
result in a substantial transformation of the fabric. Clearly,
making 100% cotton fabric out of yarn results in a new and
different article of commerce. Moreover, the forming of the
fabric and the cutting of the fabric into the front, back and
sleeve panels would qualify as a substantial manufacturing
operation under 19 CFR 12.130. Therefore, the making of the
fabric and the cutting of the fabric to shape into the front,
back and sleeves in the U.K. constitutes a substantial
transformation.
The second question presented is whether the panels undergo
a later substantial transformation in China, where the edges of
the panels are overlocked and stitched and the panels are sewn
together and other minor finishing operations are performed
(sewing of the label, insertion of the pads, washing, drying,
pressing, inspection and packaging).
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.
In Headquarters Ruling Letter (HRL) 085799 dated November
28, 1989, Customs ruled that the sewing together of knit to
shape, or cut sweater panels (front, back, and two sleeves) in
China was not a substantial transformation under 19 CFR 12.130
and the country of origin of the sweater was the country in which
the sweater panels were knit to shape and cut (India). In HRL
733841 dated February 7, 1991, Customs ruled that the sewing of 8
component parts into a men's polo style shirt in a second foreign
country was not a substantial transformation under 19 CFR 12.130.
We stated that the sewing assembly did not require tailoring or
detail work, required very little time and did not require highly
skilled workers. This case presents similar processing performed
in China as the two cases previously mentioned. In this case,
after examining the unfinished panels together with the finished
sweater sample we can assume that the sewing assembly of 4
garment parts (front, back and two sleeves) along with other
minor finishing operations (e.g. sewing of label, insertion of
shoulder pads, washing, drying etc.) is a simple operation
involving only a few skilled workers and not requiring any
tailoring or detail work. Based on these considerations, we
conclude that the front, back and sleeve panels which are sewn
into a finished sweater in China do not undergo substantial
manufacturing in China and therefore, are not substantially
transformed in China. Accordingly, the country of origin of the
women's sweater is U.K.
HOLDING:
Pursuant to 19 CFR 12.130, the country of origin of these
women's long sleeve 100% cotton knitted pullover sweaters for
country of origin marking, tariff and quota purposes is the U.K.
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