HQ 556030
August 29,1991
CLA-2 CO:R:C:S 556030 KCC
Mr. Bruce D. Roberts
Miami International Forwarders
P.O. Box 523730
Miami, Florida 33126-1019
RE: Girls' 100% cotton blue denim pants with holes covered in
the inside leg by patches. Alterations; new and commercially
different article; cutting; ripping; sewing; 555021; 555249;
554371; 078245; 555760; substantial transformation; marking
Dear Mr. Roberts:
This is in response to your letter dated April 11, 1991, on
behalf of JMS Trading Corporation, concerning the applicability
of subheading 9802.00.50, Harmonized Tariff Schedule of the
United States (HTSUS), and country of origin marking requirements
to girls' 100% cotton blue denim pants imported from Guatemala.
Samples of the pants before and after the Guatemala processing
operations were submitted for examination.
FACTS:
Girls' 100% cotton blue denim pants are manufactured in
Chile and imported into the U.S. with the appropriate duty paid.
Thereafter, JMS Trading Corporation (JMS) intends to ship the
pants to Guatemala for processing operations. In Guatemala, the
pants will be subjected to the following processes:
1) the legs' inside seams are opened by tearing out the
stitches;
2) the legs are turned inside out;
3) holes are cut into the legs;
4) U.S.-origin patches are placed on the inside of the
pant legs over the cut holes and sewn into place with a
single line of stitches; and
4) the legs' inside seams are sewn closed.
Upon completion of the foreign operations, the girls pants
with the holes covered with patches will be imported into the
U.S.
ISSUE:
I. Whether the girls' pants will be entitled to the partial
duty exemption available under subheading 9802.00.50, HTSUS, when
imported into the U.S.
II. What are the country of origin marking requirements
applicable to the imported processed girls pants?
LAW AND ANALYSIS:
I. Applicability of subheading 9802.00.50, HTSUS
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of this tariff provision is precluded in
circumstances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles. See, A.F. Burstrom v. United States, 44 CCPA 27,
C.A.D. 631 (1956), aff'd, C.D. 1752, 36 Cust.Ct. 46 (1956); and
Guardian Industries Corporation v. United States, 3 CIT 9 (1982),
Slip Op. 82-4 (Jan. 5, 1982). Subheading 9802.00.50, HTSUS,
treatment is also precluded where the exported articles are
incomplete for their intended use and the foreign processing
operation is a necessary step in the preparation or manufacture
of finished articles. See, Dolliff & Company, Inc. v. United
States, 81 Cust.Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd,
66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979).
We have ruled that U.S. articles subjected to a silk
screening or hand-painting operation abroad and then returned to
the U.S., were not eligible for subheading 9802.00.50, HTSUS,
treatment because these operations are more than an alteration.
We stated that the silk screening and hand-painting operations
created a different article of commerce and constituted a
finishing step in the manufacture of the articles. See,
Headquarters Ruling Letter (HRL) 555021 dated July 1, 1988 (silk
screening of socks is not considered an alteration pursuant to
this tariff provision); HRL 555249 dated June 16, 1989 (silk
screening and chenilling designs on sweatshirts abroad exceeds an
alteration); and HRL 554371 dated December 10, 1986 (hand-
painting a design onto sweatshirts abroad exceeds an alteration).
Additionally, we have previously held that embroidery of articles
does not constitute a repair or alteration under subheading
9802.00.50, HTSUS. See, HRL 078245 dated June 17, 1986
(embroidery of cotton sheets does not constitute an alteration)
and HRL 555760 dated November 16, 1990 (embroidery of t-shirts in
Guatemala constitutes an operation that exceeds an alteration).
With regard to the facts of the instant case and based on
our previous rulings, we are of the opinion that the foreign
tearing, cutting and sewing operations exceed an alteration.
Although the girls pants may be worn whether or not the holes are
cut and patches sewn on, the Guatemalan operations, like
embroidery and silk screening, are considered neither a repair
nor an alteration under the provision of subheading 9802.00.50,
HTSUS. The girls' pants, which have a new look and texture as a
result of the Guatemalan operations, are different from the plain
pants, and, as such, the foreign operations have created a
different article with unique, specialized appeal. Furthermore,
the Guatemalan operations constitute a finishing step in the
manufacture of the patched jeans.
II. Country of Origin Marking Requirements
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.
Congressional intent in enacting 19 U.S.C. 1304 was "that the
ultimate purchaser should be able to know by an inspection of the
marking on the imported goods the country of which the goods is
the product. The evident purpose is to mark the goods so that at
the time of purchase the ultimate purchaser may, by knowing where
the goods were produced, be able to buy or refuse to buy them, if
such marking should influence his will." United States v.
Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR
134.1(b)), provides that "country of origin" means the foreign
origin entering the U.S. Further work or material added to an
article in another country must effect a substantial
transformation in order to render such other country the "country
of origin" within the meaning of the marking laws and
regulations.
According to T.D. 90-17, published in the Federal Register
on March 1, 1990 (55 FR 7303), the principles of country of
origin for textiles and textile products contained in section
12.130, Customs Regulations (19 CFR 12.130), are applicable to
such merchandise for all purposes including duty and marking.
19 CFR 12.130 requires that the standard of substantial
transformation govern 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. A
textile or 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) establishes criteria for determining
whether an article has been substantially transformed. However,
the criteria set forth in 19 CFR 12.130(d) are not exhaustive;
one or any combination of these criteria may be determinative and
additional factors may be considered. According to 19 CFR
12.130(d)(2), the following factors are to be considered in
determining whether merchandise has been subjected to substantial
manufacturing or processing operations: the physical change in
the materials or article, the time involved in the manufacturing
or processing operations, the complexity of the operations, the
level or degree of skill and/or technology required, and the
value added to the article.
In this case, we are of the opinion that the girls' pants
have not been substantially transformed in Guatemala. The use
and essential character of the girls' pants remains the same.
The processing operations performed in Guatemala, which involve
cutting holes in the pant legs and adding colorful patches to
cover the holes from the inside of the leg, merely add decorative
features to the legs of the pants. From the information
presented, it appears that little time, skill and technology are
required to perform the foreign operations.
We have also considered your request regarding the
appropriate marking of the girls' pants. It is our opinion that
the original label is acceptable. It clearly indicates that the
country of origin is Chile. The label "Made in Republic of
Chile" is acceptable. Since the pants remain the country of
origin where they were originally manufactured--Chile--they will
be charged against that country's quota and visa when they re-
enter the U.S. from Guatemala.
Due to the changeable nature of the statistical annotation
(the ninth and tenth digits of the classification) and the
restraint (quota/visa) categories applicable to textile
merchandise, you should contact your local Customs office prior
to importation of the merchandise to determine the current status
of any import restraints or requirements.
The designated textile and apparel category may be
subdivided into parts. If so, visa and quota requirements
applicable to the subject merchandise may be affected. Since
part categories are the result of international bilateral
agreements which are subject to frequent renegotiations and
changes, to obtain the most current information available, we
suggest that you check, close to the time of shipment, the Status
Report on Current Import Quotas (Restraint Levels), an internal
issuance of the U.S. Customs Service, which is available for
inspection at your local Customs office.
HOLDING:
On the basis of the information and samples submitted, it is
our opinion that the foreign operations may not be considered an
alteration as they create a commercially different article and
constitute a finishing step in the production of patched jeans.
Therefore, tariff treatment of the returned goods under
subheading 9802.00.50, HTSUS, is precluded.
The processing operations performed in Guatemala to the
girls' pants do not result in a substantial transformation.
Therefore, upon reimportation into the U.S., the pants are
considered a product of the country where they were originally
manufactured. The label, "Made in Republic of Chile," attached
to the girls pants upon initial importation into the U.S. is an
acceptable label pursuant to 19 U.S.C. 1304.
Sincerely,
John Durant, Director
Commercial Rulings Division