MAR-2-05 CO:R:C:V 734275 AT
Ms. Ludene Murphree
The Gap, Inc.
900 Cherry Ave.
San Bruno, California 94066
RE: Country of origin marking of imported women's embroidered
vest; substantial transformation; 19 CFR 12.130; cutting and
assembly of fabric in Hong Kong and embroidering of fabric in
China
Dear Ms. Murphree:
This is in response to your letter of July 23, 1991,
requesting a binding ruling on the country of origin of imported
women's embroidered vests. A sample was submitted for
examination. The country of origin of the fabric is not known.
FACTS:
The submitted sample, style "BWW #24363," is a women's
embroidered vest which is constructed from 100 percent wool.
The sample has gold embroidery around the front portion of the
neckline and button area. On the front two panels of the vest
are various embroidered designs and phrases.
According to your submission, the following operations will
be performed to create the embroidered vest. The fabric is cut
in Hong Kong, panels are embroidered in China, and garment is
assembled in Hong Kong. You state that the value breakdown to
manufacture the embroidered vest are as follows:
Hong Kong Materials $ 9.36
Hong Kong Labor 9.15
Total Hong Kong $18.51
China Materials $ 6.50
China Labor $18.99
Total China $25.49
Total $44.00
ISSUE:
What is the country of origin of the imported women's
embroidered vest?
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 embroidered vests are
first cut in Hong Kong. One of the examples enumerated is 19
CFR 12.130(e)(iv), which states that cutting of fabric into parts
and the assembly of those parts into the completed article is an
example of a manufacturing or processing operation which would
qualify under 19 CFR 12.130 as a substantial transformation
(emphasis added). Further, Customs stated in T.D. 85-38 that
"Cutting garment parts from fabric will result in a substantial
transformation of the fabric." Similarly, in this case, the
cutting of the fabric into vest panels would qualify as a
substantial transformation under 19 CFR 12.130.
The second question presented is whether the embroidery
work performed in China to the cut vest panels constitutes a
substantial transformation.
As shown by the chart above, the cost of the Chinese
materials and labor is approximately one and a half times to
those of Hong Kong. Nonetheless, the embroidery work performed
to the vest panels does not change the identity or fundamental
character of the panels. After the embroidering is completed the
embroidered panels still remain as parts of a vest, although they
are now embroidered vest panels. Customs has previously ruled
that embroidery work performed on garments which does not change
the identity or fundamental character of the article is not a
substantial transformation. See HQ 089068, July 1, 1991
(embroidering a polar bear design to the front panel of an
unfinished sweater was not a substantial transformation); HQ
088565, May 23, 1991 (re-embroidery of lace fabric by sewing
around portions of the design of the lace a narrow braid or cord
of fabric was not a substantial transformation); HQ 733952,
February 15, 1991 (decorating front panels of an unfinished
tracksuit top with plastic ornaments, appliques and embroidery in
China did not constitute a substantial transformation of the
article).
Based on the above considerations, we conclude that the
Chinese processing similarly does not constitute a substantial
transformation. Since the cutting of the panels and the assembly
of the panels is performed in Hong Kong, clearly the country of
origin of the vests is Hong Kong.
HOLDING:
Pursuant to 19 CFR 12.130, the country of origin of these
women's embroidered vests for country of origin marking purposes
is Hong Kong.
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