MAR-2-05 CO:R:C:V 734539 ER
Jeffrey A. Meeks, Esq.
Adduci, Mastriani, Meeks & Schill
330 Madison Avenue
New York, New York 10017
RE: Country of Origin Marking for Lady's Clutches and Men's
Wallets; Substantial Transformation; Assembly; HRL
555189; HRL 554027; HRL 554025; HQ 055588; HQ 083359
and HQ 087349.
Dear Mr. Meeks:
This is in response to your ruling request of March 11,
1992, in which you request a ruling concerning the country of
origin marking requirements for lady's clutches and men's wallets
which are made as a result of a three-stage operation performed
in Hong Kong and China.
FACTS:
Buxton plans to import leather flat goods, including lady's
organizer clutches and men's convertible wallets. The
merchandise will be made in three stages, as is described below.
A. Lady's organizer clutch (model 376-16)
All materials for the clutch will be imported into Hong Kong
from countries other than China. The materials will be shipped
to Hong Kong in bulk. The cutting and first-stage operations
will be performed in Hong Kong. The cut parts will be sent to
China for partial assembly and the assemblies will then be
returned to Hong Kong for final assembly.
1. Hong Kong Operation - Stage I
In Hong Kong, the cover lining, interior pocket, pocket
lining, check book cover, flat pad, and main stay will arrive at
the factory in Hong Kong as rolled stock of polyurethane
material. The materials will be stacked and cut by machine to
product specifications. The taffeta for the check book lining
and purse gusset will arrive in the factory in rolled form and
also will be stacked and cut by machine. The flap reinforcement
will be made of blotter material and will undergo the same
processing as the above items. Leather will be manually cut by
machine press to specification including length, width, notches,
holes and slots for the clutch cover and the purse cover. The
cut components will be sent to the China for partial assembly.
2. China Assembly - Stage II
The leather cover and purse pocket will be shaved or planed
to reduce thickness (splitting) and will be planed on the edges
(edge skiving). A logo will be stamped on the leather cover.
The subassemblies - flap, zipper pocket, pocket stay, purse
gusset, checkbook - will be creased, cemented and folded. Where
necessary, the clear vinyl will be heat sealed within the
subassembly. Some of the subassemblies' edges will be stitched
closed. None of the subassemblies will be permanently affixed to
the clutch cover in China. The cover will be turned over by hand
and the components will be shipped back to Hong Kong for final
stitching, assembly, cementing and inspections.
3. Hong Kong Operation - Stage III
In Hong Kong, all the edges of the subassemblies will be
stitched onto the subassemblies permanently joining them. Loose
threads will be tightened or trimmed. The metal corners will be
placed on the edges of the cover by hand. The clutch, now in one
piece, will be manually prepared for two framings by machine.
The framing machine crimps the metal frame of the purse onto the
leather. The final painting and refinishing will be done by hand
with a brush cloth in order to match the stitching with the color
of the clutch.
B. Men's Convertible Wallet - Model 810
All materials for the men's wallet, including the taffeta,
vinyl, leather and suede vinyl will be imported into Hong Kong
from countries other than China. In general there are three
steps to the processing of men's wallets. First, the material
will be cut to shape with holes punctured and slots for pictures.
The cut pieces will be sent to the China for partial assembly
including folding, gluing and some stitching. No clasps will be
added in China and the panels will not be permanently affixed to
each other. These pieces will be returned to Hong Kong where
they will undergo final assembly and final stitching.
1. Hong Kong Operation - Stage I
In Hong Kong, the pocket lining, suede vinyl, cover lining
and main stay will arrive in rolled stock form and will be
stacked and cut to specifications by machine. The leather will
be from countries other than China and will arrive in Hong Kong
in sides and will be cut to shape manually by machine to create
the wallet cover, right pocket, left pocket and the pass case.
The cut components will be sent to the China for partial
assembly.
2. China Assembly - Stage II
In China the cover, leather stay, right pocket, left window
pocket and the pass case will be planed or shaved to reduce
thickness, edge stained, and edge skived (planing of the edge) by
machine. The logo will be stamped in one place on the leather.
The credit card slots and the right pocket will be hand painted.
The right and left "window pocket" edges will be creased by
machine and the credit card pocket lining will be cemented into
the subassembly. The edges will be folded by machine and the
closed edges will be machine stitched followed by a manual
trimming operation. Similarly, the lining will be cemented by
hand to the pass case pocket, the edges will be creased by
machine and the metal gripper will be attached by machine. The
clear vinyl of the window book of the pass case will be fed
through a heat sealing machine and then slid over the clip. The
right pocket and left window will be manually assembled with the
main stay. These sub-assemblies will then be returned to Hong
Kong for final stitching and assembly operations.
3. Hong Kong Operation - Stage III
The cover will be glued together by hand, the leather will
be glued to the taffeta lining and to the separator. The cover
will be turned over the subassemblies around the edges so as to
become one enclosed unit. Machine stitching will be performed on
the cover so as to permanently attach all the assemblies together
followed by manual trimming. The final stitching will be painted
and refinished and the wallet will be cleaned and trimmed.
Samples of the clutch and wallet at the three stages of
assembly were provided with the ruling request.
ISSUE:
What is the country of origin for marking purposes of lady's
clutches and men's wallets to be assembled in a three-stage
process in Hong Kong and China?
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 (or its container) imported into the United States shall
be marked in a conspicuous place as legibly, indelibly and
permanently as the nature of the article (or its container) will
permit in such a manner as to indicate to the ultimate purchaser
the English name of the country of origin of the article. Part
134, Customs Regulations (19 CFR Part 134) implements the country
of origin marking requirements and exceptions of 19 U.S.C. 1304.
The primary purpose of the country of origin marking statute
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,
302 C.A.D. 104 (1940).
Part 134.1(d) defines the "ultimate purchaser" generally as
the last person in the United States who will receive the article
in the form in which it was imported.
The country of origin for marking purposes is defined at
134.1(b), Customs Regulations (19 CFR 134.1(b)), to mean the
country of manufacture, production, or growth of any article of
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 part 134.
A substantial transformation occurs when articles lose their
identity and become new articles having a new name, character, or
use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270
(1940); Koru North America v. United States, 12 CIT 1120, 701
F.Supp. 229 (1988). The question of when a substantial
transformation occurs for marking purposes is a question of fact
to be determined on a case-by-case basis. Uniroyal Inc. v.
United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed.
Cir. 21, 702 F.2d 1022 (1983).
In determining whether the combining of parts or materials
constitutes a substantial transformation, the issue is the extent
of operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linens
v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2
Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which
are minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation. See,
C.S.D. 85-25 (September 25, 1984).
There is clearly a substantial transformation of the
materials imported into Hong Kong during the first stage of
production to create the clutches and wallets. The question to
be resolved is whether these substantially transformed materials
undergo a substantial transformation by virtue of the second
stage of processing performed in China.
Customs has repeatedly held that the cutting of fabric into
specific patterns and shapes suitable for use in an assembly
operation constitutes a substantial transformation. See HRLs
555189 (June 12, 1989), 554027 (January 13, 1987) and 554025
(December 16, 1986). Therefore, we find with respect to this
case that the leather, vinyl, taffeta and other materials which
will be used to create lady's clutches and men's wallets will
become new and different articles of commerce as a result of the
first stage of operations to be performed in Hong Kong. The
cutting to shape including notches, slits for credit cards and
holes for clasps dedicate the materials for use only as clutches
and wallets. In sum, the parts will take on the essential
character of the finished products as a result of the preliminary
Hong Kong processing. (See, HQ 055588 (September 15, 1978) where
Customs recognized a substantial transformation in the initial
cutting of leather into parts for a belt.)
The assembly operations performed in China do not constitute
a substantial transformation of the pre-cut components. Customs
has long held that the mere assembly of parts will not
necessarily constitute a substantial transformation. C.S.D. 80-
111 (September 24, 1980). In HQ 087439 (October 30, 1990),
Customs found that the simple assembly of components of an
imitation leather portfolio was not sufficient to confer country
of origin. There Customs stated,
These components will be assembled in the
U.S. by means of simple fixing devices such
as sewing and gluing. We find that the
imported components are not substantially
transformed as a result of the assembly
process. At the time of importation,
although the portfolio is unfinished, it
lacks none of its essential characteristics.
The mere assembly of these components by
gluing and sewing into a finished portfolio
does not change the name, character or use of
the product. Accordingly, for purposes of 19
U.S.C. 1304, the country of origin of the
portfolio is the country where the components
are manufactured.
Also instructive for purposes of this decision, are Customs
rulings pertaining to textiles where it has been held that goods
are substantially transformed in the country where the parts were
cut and not where the parts undergo minor or partial assembly
operations. See e.g., HQ 083359 (May 18, 1990) (where Customs,
citing to T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714) noted
that "not all assembly operations of cut garment pieces will
amount to a substantial transformation of those pieces. Where
either less than a complete assembly of all 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)).
Taking the above-referenced rulings into consideration, it
is apparent in the instant case that the operations to be
performed in China constitute intermediate, simple assembly
operations on pre-cut components which do not amount to a
substantial transformation. These operations consist largely of
gluing, folding, creasing, cementing and minor stitching -
processes which do not ordinarily result in a substantial
transformation. Accordingly, the wallets and clutches will be
considered products of Hong Kong, the country where they will
undergo substantial transformation. Since stage two of the
operations does not amount to a substantial transformation, it is
unnecessary to decide if the final assembly operations, stage
three, performed in Hong Kong constitute another substantial
transformation.
HOLDING:
The lady's clutches and men's wallets created in the three-
stage assembly process in Hong Kong and China, described above,
will be considered products of Hong Kong for country of origin
marking purposes. Accordingly, the merchandise should be clearly
and conspicuously marked to indicate the country of origin, "Hong
Kong".
Sincerely,
John Durant, Director
Commercial Rulings Division