MAR-2-05 CO:R:C:V 734392 AT
Eleanore Kelly-Kobayashi, Esq.
Rode & Qualey
295 Madison Avenue
New York, New York 10017
RE: Country of origin marking of imported men's trousers;
substantial transformation; 19 CFR 12.130; cutting and
assembly of fabric
Dear Ms. Kelly-Kobayashi:
This is in response to your letters of October 30, 1991, and
March 27, 1992, on behalf of your client, The Glorious Sun
(Holdings), Ltd. (Glorious Sun), requesting a ruling on the
country of origin of imported men's trousers for tariff, quota
and marking purposes. A sample of a finished pair of trousers as
well as the components as they exist at the conclusion of each
major stage in the production process were submitted for
examination.
FACTS:
You state that Glorious Sun intends to import men's trousers
from China. You also state that the production of the trousers
will involve processing operations performed in two countries,
Hong Kong and China under the following situations:
Situation 1- Fabric will be cut in Hong Kong, the front and
back pockets will be sewn onto the pants panels and each
side of the panels will be attached at the top. These
components along with other cut but unconstructed components
will be sent to China where final assembly will be completed
by sewing operations. The sewing operations will consist of
sewing the zipper, closing the back raise, seat seam,
out seam and in seam, constructing the waistband, attaching
the three point tabs onto the waistband, sewing the button
holes onto the center front button closure, creating the
tabs and back pockets, creating the 7 half-inch belt loops,
sewing the 7 buttons onto the trousers and turning the hem.
The trousers will then be washed, ironed and packaged for
shipment to the U.S.
Situation 2- Fabric will be cut in China into all the
components necessary for the assembly of the trousers.
Certain cut components will then be sent to Hong Kong which
will include the front and back panels and the front and
back pockets. In Hong Kong the front pockets will be sewn
to the panels, pleats will be sewn onto the front panels,
the back pockets will be sewn to the back panels, pleats
will be sewn on the back panels and each side of the front
and back panels will be attached at the top. These panels
will then be shipped back to China where the same operations
as described in Situation 1 will be performed.
Situation 3- Fabric will be cut in China and all the cut
components will be sent to Hong Kong where the trousers will
be completely assembled.
You contend that either the sewing operations performed in
China under situation 1 or the cutting of the fabric performed in
China in situations 2 and 3 is where the last substantial
transformation takes place, and therefore the country of origin
of the trousers in all three situations is China.
ISSUE:
What is the country of origin of the imported men's trousers
that are processed under the situations described above?
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. 19 CFR 12.130(b), provides
that a textile product that is processed in more than one
country or territory shall be a product of that country or
territory where it last underwent a substantial transformation.
A textile product will be considered to have undergone a
substantial transformation if it has been transformed by means of
substantial manufacturing or processing operations into a new and
different article of commerce.
19 CFR 12.130(d) sets forth criteria in determining whether
a substantial transformation of a textile product has taken
place. This regulation states that these criteria are not
exhaustive; one or any combination of criteria may be
determinative, and additional factors may be considered.
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) states that in determining whether
merchandise has been subjected to substantial manufacturing or
processing operations, the following will be considered:
(i) The physical change in the material or article as a
result of the manufacturing or processing operations in each
foreign territory or country, or insular possession of the U.S.
(ii) The time involved in the manufacturing or processing
operations in each foreign territory or country, or insular
possession of the U.S.
(iii) The complexity of the manufacturing or processing
operations in each foreign territory or country, or insular
possession of the U.S.
(iv) The level or degree of skill and/or technology required
in the manufacturing or processing operations in each foreign
territory or country, or insular possession of the U.S.
(v) The value added to the article or material in each
foreign territory or country, or insular possession of the U.S.,
compared to its value when imported into the U.S.
You state that either the fabric will be cut in Hong Kong
(Situation 1) or China (Situations 2 and 3) into all the
components necessary for the assembly of the trousers. 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 the
necessary components would qualify as a substantial trans-
formation under 19 CFR 12.130. Therefore, the cutting of fabric
into the necessary garment components in either Hong Kong or
China constitutes a substantial transformation.
The second question presented is whether the garment
components undergo a later substantial transformation as a
result of the sewing operations performed in Hong Kong or China.
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.
With respect to Situation 1 you state that the cut panels
are partially assembled in Hong Kong in that the front and back
pockets are sewn on the front and back panels, pleats are sewn to
the front and back panels and each side of the front and back
panels will be attached at the top. Then these partially
assembled components are sent to China for final assembly into
the finished trousers. You also state that the sewing operations
performed in China represents 74 percent of the total cost and 84
percent of the total time needed to create one dozen pair of
trousers, although no information was submitted with respect to
the skill level involved or the complexity of the sewing
operation.
Based on the information provided, the sewing together of
the trousers in China does not appear to require any tailoring.
Rather, the facts would seem to indicate that the joining of the
cut components is a simple assembly operation which does not
involve a high degree of skill and workmanship, even though 74
percent of the total cost and 84 percent of the total time needed
to create a dozen pair of trousers involves the sewing operation.
The sewing operation is less than a complete operation since some
of the cut panels are already partially assembled prior to being
sent to China for final assembly. Customs has consistently held
that in the absence of a complex sewing operation, the cutting
operation is more complex than the sewing operation because the
apparel cutter is the most highly paid and highly skilled
production worker in the apparel production process. One mistake
can be costly in wasted fabric and can delay a planned production
run. See, HQ 081155 (February 3, 1988). Furthermore, Customs
has previously held that the assembly of cut panels into
completed trousers is not a complex sewing operation resulting in
a substantial manufacturing or processing operation and the
country of origin of the trousers is where the fabric is cut
rather than where the panels are assembled. (See, HQ 083461, May
15, 1990, the country of origin of shorts and trousers is where
the fabric is cut rather than where the cut panels are assembled;
HQ 086696, June 8, 1990, assembly of shirts and trousers is not a
substantial manufacturing operation and the country of origin of
the completed shirts and trousers is where the fabric is cut).
Since there is nothing to suggest that the final assembly of
the cut and partially assembled trouser parts under situation 1
is in any degree a complex operation, or that the assembly
requires anything more than a simple joining of the cut parts, we
find that the garment components have not undergone a substantial
manufacturing or processing operation as a result of the sewing
operation performed in China. Accordingly, the country of origin
of the trousers processed under situation 1 is Hong Kong where
the component parts are cut and partially assembled.
Similarly, we find that the sewing operations performed in
Hong Kong under situations 2 and 3 do not constitute a
substantial manufacturing or processing operation. Like in
situation 1, the sewing operations performed in situations 2 and
3 are not complex and are nothing more than a simple joining of
the cut panels. In situation 2 and 3 either partially assembled
cut panels or unassembled cut panels are completely assembled in
Hong Kong. In both situations only a simple joining of the
partially assembled or unassembled cut panels into a completed
pair of trousers occurs. Accordingly, the country of origin of
the trousers processed under situations 2 and 3 is China, where
the cutting of the fabric into partially assembled in
unassembled cut panels occurs.
HOLDING:
Pursuant to 19 CFR 12.130, the country of origin of these
trousers processed under situation 1, as described above, is Hong
Kong. The country of origin of the trousers processed under
situations 2 and 3, as described above, is China.
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