MAR-2-05 CO:R:C:V 731036 KG

Siegel, Mandell & Davidson, P.C.
655 Fifteenth Street, N.W.
Suite 300
Washington, D.C. 20005

RE: Country of origin marking of polo style shirts

Dear Sirs:

This is in response to your letters of February 8, March 1 and March 31,1988, concerning the country of origin marking of men's cotton polo style shirts. We regret the delay in responding.

FACTS:

Your client intends to import men's 100 percent cotton knit short sleeve polo style shirts. The production of the shirts will involve processing operations in two countries. In country A the fabric will be cut into 12 garment components and the placket will be set in four different operations. In country B the garment will be assembled by sewing the components together and performing various finishing operations. Nineteen separate sewing and related procedures will be involved in the assembly operation. The total cost of developing the cutting pattern for the placket-type polo style shirt is $250. This is amortized over the entire production of the garment parts and represents a negligible cost on a per dozen garment basis.

You submitted samples of a completed polo style shirt, cut pieces which make up a completed polo style shirt and detailed cost and time estimates for the various stages of production.

ISSUE:

What is the country of origin of the polo style shirts for quota and country of origin marking 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 919 CFR 12.130), sets forth the principles of country of origin for textile and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854)("section 204"). According to T.D. 85-38, the final rule document which established 19 CFR 12.130, the principles of country of origin for textiles and textile products contained in 19 CFR 12.130 are applicable to such merchandise for all purposes, including duty and marking. Pubished in the Federal Register on March 5, 1985, 50 FR 8714. This regulation, which became effective in 1985, came about as a result of Executive Order No. 12,475, 49 FR 19955 (1984), which directed the Secretary of Treasury, in accordance with policy guidance provided by the Committee for the Implementation of Textile Agreements, to issue regulations governing the entry or withdrawal from warehouse for consumption of textile and textile products subject to section 204. The regulations were to include clarifications in or revisions to the country of origin rules for textiles and textile products subject to section 204 in order to avoid circumvention of multilateral and bilateral textile agreements.

The United States Court of International Trade upheld the interim regulations, published as T.D. 84-171 in the Federal Register on August 3, 1984 (49 FR 31248), written pursuant to this executive order which included interim regulation section 12.130 in Mast Industries, Inc. v. Regan, 596 F. Supp. 1567 at 1582 (CIT 1984). The court stated that the purpose of the interim textile regulations is "prevention of the entry of textile products into the United States on quotas not applied to the country which manufactured all or a substantial part of the textile products. Accordingly interim regulation section 12.130 defines country of origin and established criteria for substantial transformation in order to prevent nearly completed textile products of one country from being imported into the United States on the quota of another country."

When T.D. 85-38 was published, the background information cited an intention to change the result of Cardinal Glove Co. v. United States, 4 C.I.T. 41 (1982), as one of the motivations of the drafting of the new textile regulations. Cardinal Glove involved cotton work gloves. The cotton fabric was produced in Hong Kong, and cut into front and back panels in Hong Kong. These front and back panels were assembled by sewing in Haiti. The gloves were then turned inside out, pressed, inspected, paired, folded and bundled in Haiti. The court held that the assembly and processing of the gloves in Haiti transformed the gloves into an export of Haiti and that therefore, the bilateral textile agreement between the U.S. and Hong Kong was inapplicable and a Hong Kong export license or visa was unnecessary for entry into the U.S. The court noted that "the exportation of merchandise from a country producing a product to an intermediate country for the purpose of processing, manipulating or assembling that product, is a common practice in our present day industrial and technological economy." Cardinal Glove at 43-44. This very practice was feared as a method of attempting to circumvent the textile import program and multilateral and bilateral textile agreements rather than as a mechanism for effecting a substantial manufacturing process that Customs desired to halt through implementation of 19 CFR 12.130.

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. 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.

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). 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. Customs overtly rejected the adoption of an arbitrary rule of origin based solely on the minutes of production in each country.

In your ruling request, you asked us to consider Schedules A and B in determining the country of origin for quota and marking purposes. In applying the relevant factors, we find that the manufacturing process that takes place in Country B is not substantial. The assembly by sewing of the polo style shirts is not a complex process such as the examples of types of garments enumerated in 19 CFR 12.130(e)(v). Although Schedule B lists 19 separate operations, many of the operations take very little time and involve very little skill. For example, operation #18 is placing the shirts in poly bags. This is estimated to take .037 of an hour and could not involve any great amount of skill or training to perform. Operation #19 is packing the shirts in boxes. This is estimated to take .068 of an hour. There are no operations listed or described in Schedule B that are sufficiently complex to warrant a finding of substantial transformation. There is no evidence that highly skilled or trained workers are required. The assembly of polo style shirts does not require tailoring or detail work. Because the manufacturing process that takes place in Country B is not considered substantial, Country A is considered the country of origin for quota and marking purposes.

In your letter of March 1, 1988, you asked us to consider Schedules C and D in determining the country of origin for quota and marking purposes. The addition of steps 1 through 3 in Country B set forth in Schedule D do not change the determination that the manufacturing process in Country B is not substantial. There is no evidence of complexity or any operations which require skillful and highly trained workers. Therefore, the country of origin for quota and marking purposes would still be considered Country A.

HOLDING:

The country of origin for quota and country of origin marking purposes for polo style shirts made as described in either Schedules A and B or Schedules C and D is Country A. The manufacturing process that takes place in Country B is not substantial as required by 19 CFR 12.130.

Sincerely,

John Durant
Director,
Commercial Rulings Division

cc: CITA