MAR-2-05 CO:R:C:V 733787 KG
Mr. Abdul Yaqub
Eastern Imports Ltd.
1 S. 660 Midwest Road
Suite 150
Oakbrook Terrace, IL 60181
RE: Country of origin marking of imported bed sheets and pillow
cases; 19 CFR 12.130; substantial transformation; griege fabric
Dear Mr. Yaqub:
This is in response to the letter of September 14, 1990,
from Broker Power Inc., requesting a country of origin ruling on
behalf of your company regarding imported bed sheets and pillow
cases.
FACTS:
Seventy inch wide greige fabric will be made in Pakistan and
shipped to Sri Lanka for further processing. In Sri Lanka, the
greige fabric will be: (1) desized; (2) scoured; (3) shrunk; (4)
bleached; (5) singed; (6) sized and finished; (7) stentor dried
and shrunk; (8) calendered. When these processes are completed,
the 70 inch greige fabric will be turned into a 66 inch bleached
white fabric. Then the fabric will be cut to length, sewn end-
to-end, packaged, baled and shipped to the U.S. as flat and
fitted cotton bed sheets and pillow cases.
ISSUE:
What is the country of origin of these bed sheets and
pillow cases?
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 making 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. 1854)"("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 T.D. 85-38, published in the Federal Register on March
5, 1985, (50 FR 8714), which is the final rule document which
established 19 CFR 12.130, ("T.D. 85-38"), 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 12.130(d). Any factual situation not squarely within
those examples will be decided by Customs in accordance with the
provisions of 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).
Section 12.130(e)(1)(iv) states that a textile article will
usually be a product of a particular country if the cutting of
the fabric into parts and the assembly of those parts into the
completed article has occurred in that country. However, 19 CFR
12.130(e)(2)(ii) states that a material will usually not be
considered to be a product of a particular foreign country by
virtue of merely having undergone cutting to length or width and
hemming or overlocking fabrics which are readily identifiable as
being intended for a particular commercial use. T.D. 85-38
explains that "where fabric which is readily identifiable as
being intended for a particular commercial use (e.g., toweling or
bed linen material) is merely cut to length or width, with the
edges then being either hemmed or overlocked...the foreign
territory or country which produced the fabric is the country of
origin and not the country where the fabric was cut. 50 FR 8714.
The phrase "readily identifiable as being intended for a
particular commercial use" was interpreted by Customs in HQ
086779 (April 25, 1990), a ruling letter concerning diapers, to
refer to evidence i.e., lines of demarcation or cutting marks
that would indicate that the fabric was to be made into diapers.
There have been prior cases involving country of origin
determinations for bed linen and toweling which are relevant.
In Belcrest Linens v. U.S., 741 F.2d 1368 (Fed. Cir. 1984), the
court held that the process of making a bolt of woven fabric
which was pre-marked into a pillowcase was a substantial
transformation. We note that Belcrest was decided by the court
prior to the implementation of 19 CFR 12.130.
Customs recently held in HQ 086523 (April 25, 1990), that
bed sheets made out of material woven, dyed and printed in
Pakistan were considered to be products of Pakistan even though
the material was cut to length and hemmed in Dubai. The
processes performed in Dubai, i.e., cutting to length and
hemming, do not constitute a substantial transformation. This
ruling is consistent with the example set forth in 19 CFR
12.130(e)(2)(ii). Further, Customs ruled in HQ 083544 (February
28, 1990), that material cut to both width and length and hemmed
to be made into towels and dishcloths was not substantially
transformed because after examining the factors set forth in 19
CFR 12.130(d), we concluded that the processing operations
performed in the second country were not substantial. Another
case, C.S.D. 90-29 (November 6, 1989), involved greige fabric
sent to the Philippines where the fabric was desized, bleached,
dyed, hydro extracted, dried, printed by hand, cut to size,
stitched into towels, mended, graded and packaged to be imported
into the U.S. as beach towels. Customs ruled that the beach
towels were not substantially transformed in the Philippines
despite the conversion of the greige fabric into finished beach
towels.
In this case, the greige fabric is made into useable cotton
material and then cut to length and sewn together by overlocking
in Sri Lanka. This fact pattern does not fit into any of the
examples set forth in 19 CFR 12.130(e). Therefore, the question
presented is whether the merchandise has been subjected to
substantial manufacturing or processing operations resulting in a
new and different article of commerce to constitute a substantial
transformation. This case is distinguishable from C.S.D. 90-29
because of the limited potential uses of toweling material
combined with the little degree of processing required to make
toweling fabric into a useable towel. In the case of material
used to make sheets, it has many uses and the scrap, is in fact,
often used to make other textile articles. The combination of
making the greige fabric into useable material and cutting the
cotton bed sheet material to length and hemming on four sides is
a more significant manufacturing operation than just doing the
fabric conversion or cutting to length and sewing alone. The
physical change in the material is clearly greater, more time is
involved in doing all this processing, and the value added to the
greige fabric in Sri Lanka is greater than if just some and not
all of this processing were to be done there. Based on the above
considerations, we conclude that the greige fabric does undergo a
substantial manufacturing or processing operation in Sri Lanka.
Further, the greige fabric is made into a new and different
article of commerce i.e., bed sheets. Because both prongs of the
substantial transformation test of 19 CFR 12.130 have been
satisfied, the fabric is considered substantially transformed in
Sri Lanka. The fitted and flat bed sheets would be considered a
product of Sri Lanka for marking, duty and quota purposes.
With regard to the pillow cases, Belcrest, and HQ 086523
both held that fabric made into pillow cases is a substantial
transformation. The manufacturing process involved here in
making pillow cases involves substantially similar cutting and
sewing operations that were involved in Belcrest and HQ 086523.
The material is cut, folded, sewn and hemmed on 3 sides,
including the open side which requires hemming both ends.
Unlike the flat sheets, some precision is required to sew a
pillow case properly and more is required than simply hemming the
straight edges of a rectangular size piece of material. In
addition, prior to the cutting and sewing operations, the greige
fabric undergoes the necessary processing operations to make it
into useable material. As a result of the combination of making
the greige fabric into useable material coupled with the cutting,
folding over and sewing operations, the greige fabric is
substantially transformed into a new and different article of
commerce, namely pillow cases, by means of substantial
manufacturing operations in Sri Lanka.
HOLDING:
Sri Lanka would be considered the country of origin of the
bed sheets and the pillow cases for country of origin marking,
quota and duty purposes.
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