MAR-2-05 CO:R:C:V 733972 KG
David C. Williams, Esq.
Neville, Peterson & Williams
39 Broadway
New York, N.Y. 10006
RE: Country of origin marking of imported denim jeans;
substantial transformation; 19 CFR 12.130
Dear Mr. Williams:
This is in response to your letter of November 27, 1990,
submitted on behalf of RAm Tov Industries, requesting a ruling on
the country of origin of denim jeans for the purposes of duty
rates, applicable quota and proper country of origin marking.
This ruling does not address the question of eligibility for a
duty exemption under the United States- Israel Free Trade Area
Implementation Act of 1985.
FACTS:
Your client plans to import womens' full length cotton denim
jeans. The jeans feature a fly front with zipper closure, a
button closure at the waist band, belt loops, two rear patch
pockets, two scoop front pockets and a coin pocket within the
right scoop pocket. No sample was submitted for examination.
The following operations will be performed in Israel: (1) cotton
denim fabric will be woven and dyed; (2) the fabric will be size
graded, marked and cut into garment parts; and (3) the garment
pieces will be packaged with Israeli-made buttons and thread and
shipped to Egypt.
In Egypt, the garment pieces will be assembled by sewing
into finished jeans. You state that no tailoring will be
required in assembling these jeans and that the joining of the
parts will comprise a simple machine sewing operation not
involving a high degree of skill or workmanship. The jeans will
then be shipped back to Israel for washing, pressing and packing.
The cost of the assembly in Egypt is $0.26 while the cost of the
fabric and operations performed in Israel is $7.11.
ISSUE:
What is the country of origin for the purposes of 19 CFR
12.130 of the imported denim jeans described above?
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 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 a factual situation 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).
The first question presented in this case is whether there
is a substantial transformation of the merchandise in Israel, the
country where the fabric is produced, cut into garment parts and
finished. Clearly, knitting fabric is the creation of a new and
different article of commerce which has undergone a substantial
manufacturing or processing operation. Section 12.130(e)(iii) of
the Customs Regulations provides that processes such as weaving,
knitting, or otherwise forming fabric comprise operations that
substantially transform textile fibers into a new and different
article of commerce. Moreover, cutting garment parts from fabric
is considered a substantial transformation. Customs stated in
T.D. 85-36 that "Cutting garment parts from fabric will result in
a substantial transformation of the fabric. This is not to say,
however, that the cut pieces will not undergo a later substantial
transformation."
Since the standard for determining country of origin is
where the last substantial transformation occurred, the
determinative issue presented here is whether the assembly of the
jeans in Egypt constitutes a substantial transformation of the
cut garment parts. The first prong of the substantial
transformation standard is satisfied; the cut garment parts are
made into denim jeans which differ in fundamental character from
cut garment parts.
The second prong of the substantial transformation standard
set forth in 19 CFR 12.130 requires that the merchandise has been
subjected to substantial manufacturing or processing operations.
This case is not squarely within any of the examples set forth in
19 CFR 12.130(e). Therefore, the factors set forth at 19 CFR
12.130(d)(2) will be considered to determine if the operations
performed in Egypt would be considered to be a substantial
manufacturing or processing operation or not. The factors set
forth at 19 CFR 12.130(d)(2) are: (1) the physical change in the
material or article as a result of the manufacturing or
processing operations in each foreign country; (2) the time
involved in the manufacturing or processing operations in each
foreign country; (3) the complexity of the manufacturing or
processing operations in each foreign country; (4) the level or
degree of skill and/ or technology required in the manufacturing
or processing operations in each foreign country; and (5) the
value added to the article or material in each foreign country
compared to its value when imported into the U.S. Customs ruled
in HQ 082747 (February 23, 1989), that cut garment parts shipped
to Singapore to be completely assembled into denim jeans were not
substantially transformed because the assembly operation did not
constitute a substantial manufacturing or processing operation.
For the purposes of the ruling, Customs assumed that the jeans in
question were the "usual denim type nontailored pants and that
their assembly merely requires a simple joining of their various
parts together by machine stitching." It appears that the jeans
involved in this case will be produced in a manner substantially
similar to that considered in HQ 082747. The joining of the
garment parts is a simple operation which will comprise a simple
machine sewing operation not requiring any tailoring or involving
a high degree of skill or workmanship. Further, a very
significant percentage of the jeans' value will result from work
performed or materials sourced in Israel. Based on these
considerations, we conclude that the assembly operation involved
in this case does not constitute a substantial manufacturing or
processing operation. Because this prong of the substantial
manufacturing standard has not been satisfied, the garment parts
are not considered substantially transformed in Egypt. Since the
last substantial transformation of the jeans occurs in Israel,
Israel is considered the country of origin for the purposes of
country of origin marking, quota and duty purposes.
HOLDING:
The assembly of the denim jeans described above in Egypt
does not constitute a substantial transformation. The country of
origin of the jeans for the purposes of country of origin
marking, quota, and duty purposes is Israel.
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