MAR-2-05 CO:R:C:V 734215 AT

Paul A. Horowitz, Esq.
Siegel, Mandell & Davidson, P.C.
One Whitehall Street
New York, New York 10004

RE: Country of origin marking of imported women's sweaters; substantial transformation; 19 CFR 12.130; knitting and cutting of fabric in United Kingdom and assembly in China

Dear Mr. Horowitz:

This is in response to your letter of June 10, 1991, on behalf of your client Liz Claiborne, Inc. (Liz Claiborne), requesting a binding and prospective ruling on the country of origin of imported women's sweaters for tariff, quota and marking purposes. A sample of a finished sweater as well as the components as they exist at the conclusion of each major stage in the production process were also submitted for examination.

FACTS:

You state that Liz Claiborne intends to import women's long sleeve 100% cotton knitted pullover sweaters from China. You also state that the production of the sweater will involve processing operations performed in two countries, the United Kingdom ("U.K.") and China. The operations to be performed in the U.K. will consist of the knitting of the fabric (from yarn of Indian origin) and the cutting of the fabric to shape into the front, back and two sleeves. The cut-to-shape panels will be cut to a clean edge in the U.K. and then will be exported to China. The operations to be performed in China will consist of the overlocking and stitching of the edges of the panels, the sewing together of the panels, the sewing of the labels and insertions of shoulder pads, and the washing, drying, pressing, inspection and packaging of the sweaters for export to the U.S. Further you claim that the knitting of the sweater panels and cutting of the panels to shape in the U.K. constitutes a substantial transformation, for all country of orign purposes and that the operations performed in China do not constitute a substantial

transformation of the sweater. Based on this you contend that the country of origin of the sweaters is U.K. for tariff, quota and marking purposes.

ISSUE:

What is the country of origin of the imported women's sweaters for marking, tariff and quota 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 (19 CFR 12.130), sets forth the principles for marking 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. 1584) ("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 others words, for textiles governed by 19 CFR 12.130 there is a two part test for substantial transformation: 1) a new and different article of commerce and 2) a substantial manufacturing or processing operation.

In T.D. 85-38, published in the Federal Register on March 5, 1985 (50 CFR 8714), which is the final rule document which established 19 CFR 12.130, 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 19 CFR 12.130(d). Any factual situation not squarely within those examples will be decided by Customs in accordance with the provisions of 19 CFR 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) and (e).

Section 12.130(d)(1) states that a new and different article of commerce will usually result from a manufacturing or processing operation if there is a change in: (i) commercial designation or identity, (ii) fundamental character or (iii) commercial use.

Section 12.130(d)(2) lists some of the factors considered in determining whether a manufacturing operation has occurred. These factors include: (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 or 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.

You state that the fabric for these women's sweaters is made from Indian yarn and cut in the U.K. One of the examples enumerated is 19 CFR 12.130(e)(iii), which states that weaving, knitting or otherwise forming fabric is an example of a manufacturing or processing operation which would qualify under 19 CFR 12.130 as a substantial transformation. Further, Customs stated in T.D. 85-38 that "Cutting garment parts from fabric will result in a substantial transformation of the fabric. Clearly, making 100% cotton fabric out of yarn results in a new and different article of commerce. Moreover, the forming of the fabric and the cutting of the fabric into the front, back and sleeve panels would qualify as a substantial manufacturing operation under 19 CFR 12.130. Therefore, the making of the fabric and the cutting of the fabric to shape into the front, back and sleeves in the U.K. constitutes a substantial transformation.

The second question presented is whether the panels undergo a later substantial transformation in China, where the edges of the panels are overlocked and stitched and the panels are sewn together and other minor finishing operations are performed (sewing of the label, insertion of the pads, washing, drying, pressing, inspection and packaging).

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.

In Headquarters Ruling Letter (HRL) 085799 dated November 28, 1989, Customs ruled that the sewing together of knit to shape, or cut sweater panels (front, back, and two sleeves) in China was not a substantial transformation under 19 CFR 12.130 and the country of origin of the sweater was the country in which the sweater panels were knit to shape and cut (India). In HRL 733841 dated February 7, 1991, Customs ruled that the sewing of 8 component parts into a men's polo style shirt in a second foreign country was not a substantial transformation under 19 CFR 12.130. We stated that the sewing assembly did not require tailoring or detail work, required very little time and did not require highly skilled workers. This case presents similar processing performed in China as the two cases previously mentioned. In this case, after examining the unfinished panels together with the finished sweater sample we can assume that the sewing assembly of 4 garment parts (front, back and two sleeves) along with other minor finishing operations (e.g. sewing of label, insertion of shoulder pads, washing, drying etc.) is a simple operation involving only a few skilled workers and not requiring any tailoring or detail work. Based on these considerations, we conclude that the front, back and sleeve panels which are sewn into a finished sweater in China do not undergo substantial manufacturing in China and therefore, are not substantially transformed in China. Accordingly, the country of origin of the women's sweater is U.K.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of these women's long sleeve 100% cotton knitted pullover sweaters for country of origin marking, tariff and quota purposes is the U.K.

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