CLA-2 CO:R:C:S 555693 SER

Steven S. Weiser, Esq.
Siegel, Mandell & Davidson, P.C.
One Whitehall Street
New York, NY 10004

RE: GSP eligibility of "infant carriers"; substantial transformation; C.S.D. 85-25, HRL 555659, 555532

Dear Mr. Weiser:

This is in reference to your letters of July 12, 1990, and December 13, 1990, on behalf of your client, Cosco, Inc., concerning the eligibility of the "Heart to Heart" infant carrier, imported from Mexico, for duty-free treatment under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2465).


The product at issue is called the "Heart to Heart" infant carrier, which is used for carrying an infant on a person's chest. The article is primarily composed of textile materials, and additionally has foam padding and plastic inserts which are sewn into a section of the fabric to form a back support.

The infant carrier will be manufactured in Mexico from materials primarily of U.S. origin. The article is comprised primarily of U.S.-made fabric which is imported into Mexico in the form of unmarked bolts which measure as follows: 50% polyester/ 50% cotton gray chintz fabric-- 58 inches wide by 300 yards in length; 65% polyester/ 35% cotton white flannel fabric-- 46 inches wide by 200 yards in length; and 50% polyester/ 50% cotton printed mauve fabric-- 58 inches wide by 300 yards in length.

In Mexico, the fabric will be cut to specific lengths, which will then be marked and cut into specific patterns and shapes which will become components of the assembled infant carriers. These components include the front panels and shoulder straps which are cut from the gray chintz fabric, back support panels and seat which are cut from the gray chintz and printed mauve fabrics, and the bib portion which is cut from the white flannel fabric.


After the initial manufacture in Mexico of the components from U.S. fabric, they will be assembled with other materials to complete the infant carrier into its final form. These additional U.S. materials include various pre-cut polyurethane foam pieces for the shoulder straps and back support; a pre-cut plastic back support insert; a nylon draw string; polypropylene webbing straps; various metal snaps, fasteners and eyelets; plastic buckles; and a zipper. All of these components will be incorporated in the production of the finished infant carrier in Mexico through an assembly process consisting primarily of numerous sewing operations.


Whether the U.S. fabric imported into Mexico and used in the manufacture of the infant carriers undergoes a double substantial transformation so that the cost or value of these materials may be counted toward satisfying the 35% value-content requirement under the GSP.


Under the GSP, eligible articles the growth, product, or manufacture of a designated beneficiary developing country (BDC), which are imported directly from a BDC into the U.S., qualify for duty-free treatment if the sum of 1) the cost or value of the constituent materials produced in the BDC, plus 2) the direct cost involved in processing the eligible article in the BDC is at least 35% of the article's appraised value at the time it is entered into the U.S. See 19 U.S.C. 2463.

If an article is produced or assembled from materials which are imported into the BDC, the cost or value of those materials may be counted toward the 35% value-content requirement only if they undergo a double substantial transformation in the BDC. See, section 10.177, Customs Regulations (19 CFR 10.177), and Azteca Milling Co. v. United States, 703 F.Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989). That is, the cost or value of the imported materials used to produce the infant carriers may be included in the GSP 35% value-content computation only if they are first substantially transformed into a new and different article of commerce, which is of itself substantially transformed into the final article.

A substantial transformation occurs "when an article emerges from a manufacturing process with a name, character, or use which differs from those of the original material subjected to the process." Texas Instruments Inc. v. United States, 69 CCPA, 152, 156, 681 F.2d 778, 782 (1982).


As provided in General Note 3(c)(ii)(A), Harmonized Tariff Schedule of the United States Annotated (HTSUSA), Mexico is a BDC. In addition, the article is properly classified under the provision for other made up textile articles, other, other, in subheading 6307.90.9590, HTSUSA, which is a GSP eligible provision.

Customs has consistently held that the cutting of fabric into specific patterns and shapes suitable for use to form the completed article constitutes a substantial transformation. See Headquarters Ruling Letter (HRL) 555659 dated December 3, 1990. Therefore, we find in regard to this case that the cutting to specific patterns and shapes in Mexico of the imported bolts of fabric to create the components for the infant carriers result in a substantial transformation of the imported fabric.

The next issue to be resolved is whether a second substantial transformation of the imported fabric results from the completion of the article. The completion of the infant carrier consists primarily of assembly operations, involving numerous steps of sewing the fabric components together, sewing on the straps, punching on the ties, and snaps, and labelling and packaging the article.

In C.S.D. 85-25, dated September 25, 1984 (HRL 071827), Customs considered the issue of whether the assembly of components can result in a substantial transformation. In that decision, Customs held that an assembly process will not constitute a substantial transformation unless the operation is "complex and meaningful." Whether an operation is "complex and meaningful" depends on the nature of the operation, including the number of components assembled, number of different operations, time, skill level required by the operation, attention to detail and quality control, as well as the benefit accruing to the BDC as a result of the employment opportunities generated by the manufacturing process.

The focus of C.S.D. 85-25 was a printed circuit board assembly (PCBA) produced by assembling in excess of 50 discrete fabricated components onto a Printed Circuit Board (PCB). Customs determined that the assembly of the PCBA involved a very large number of components and a significant number of different operations, required a relatively significant period of time as well as skill, attention to detail, and quality control, and it resulted in significant economic benefits to the BDC from the standpoint of both value added to the PCBA and the overall employment generated thereby.

Although the final assembly operations at issue do not achieve the level of complexity contemplated by C.S.D. 85-25, in view of the overall processing operations in Mexico, we do not believe that this is the minimal, "pass-through" operation that should be disqualified from receiving the benefit of the GSP. -4-

See HRL 555532 dated September 18, 1990, which held that in view of the overall processing done in the BDC, materials are determined to have undergone a double substantial transformation, although the second substantial transformation is a relatively simple assembly process which, if considered alone, would not confer origin. Accordingly, we find that, when the cut to shape fabric pieces are assembled with the other components to create the new and different article-- the infant carriers, this results in a second substantial transformation of the fabrics imported into Mexico.


The U.S. fabric imported into Mexico undergoes a double substantial transformation in the production of the finished infant carriers. Therefore, the cost or value of the fabric may be used in the calculation of the GSP 35% value-content requirement.


John Durant, Director
Commercial Rulings Division