MAR-2-05 CO:R:C:V 734405 GRV
Howard M. Paull, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C.
76 Broad Street
New York, NY 10004
RE: Country of origin and quota treatment of girls' denim pants
from Indonesia, assembled in Indonesia from fabric manufac-
tured and cut to shape in Taiwan. Textile products; 19 CFR
12.130; T.D. 85-38; T.D. 90-17; Substantial Transformation;
19 CFR 12.130(e)(2)(i); 19 CFR 12.130(d)(2); 083359; C.S.D.
90-19; C.S.D. 90-20; 086229; 082747; 734215
Dear Mr. Paull:
This is in response to your letter of October 29, 1991, on
behalf of Sanroy Corp., requesting a ruling on the country of
origin of textile products (girls' denim pants) assembled in a
country (Indonesia) other than the country of origin where the
fabric was manufactured and cut to shape (Taiwan). An unmarked
sample pair of assembled pants was submitted for examination,
and, per your request, will be returned under separate cover.
FACTS:
Certain denim fabric, woven and cut into panels (ten) in
Taiwan, will be sent to Indonesia where they will be assembled
into four sizes (4, 5, 6, and 6X) of girls' pants. The pants
will be comprised of a shaped waistband with seamed front, an
elastic waistband with a flat front, 8 belt loops, two pleats on
each side of the front, two scoop pockets and two patch pockets.
All four pockets will be accented with a lace trim--from
Indonesia--and the two front scoop pockets will have one large
and two small rosette accents. The pants will also have an all
lace sash. Regarding the operations performed in each of the two
countries, the unit cost and time data provided show that the
Taiwanese operations (weave and cut fabric) will account for 75%
of the garment's total cost and <40% of the processing time; the
Indonesian operations (sew piece goods, wash and pack garment)
will account for 25% of the garment's total cost and >60% of the
processing time. The finished pants will then be imported into
the U.S.
In a telephone conversation with a member of my staff on
March 19, 1992, a member of your firm stated that the cost of the
lace component from Indonesia was negligible and that it was not
factored into the consolidated figures given above. Further, it
was stated that the imported merchandise will be classified under
HTSUS subheading 6204.63.3510, which has a Textile Category
System (TCS) number of 648.
Based on our findings and determination in Headquarters
Ruling Letter (HRL) 083359 dated May 18, 1990, which dealt with
trousers processed in multiple countries, you believe that Taiwan
is the country of origin of the girls' pants and request that we
so rule in this letter.
ISSUE:
What is the country of origin of the girls' pants, for
marking and textile quota purposes, under 19 U.S.C. 1304 and 19
CFR 12.130(b)?
LAW AND ANALYSIS:
The General Country of Origin Marking Requirement
The marking statute, 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
U.S. 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 manner as to indicate to the ultimate pur-
chaser 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 ulti-
mate purchaser may, by knowing where the goods were produced, be
able to buy or refuse to buy them, if such marking should influ-
ence his will." United States v. Friedlaender & Co., 27 CCPA
297, 302, C.A.D. 104 (1940).
The Country of Origin Requirements Applicable to Textiles and
Textile Products
For textiles and textile products subject to 204 of the
Agricultural Act of 1956, as amended (7 U.S.C. 1854), the
principles for determining the country of origin are provided at
12.130, Customs Regulations (19 CFR 12.130). For purposes of
12.130, where a textile or textile product consists of materials
produced or derived from, or processed in, more than one foreign
territory or country, or insular possession of the U.S., the
country of origin is defined as that foreign territory or coun-
try, or insular possession where it last underwent a substantial
transformation. A textile or textile product will be considered
to have undergone a substantial transformation if it has been
transformed by means of substantial manufacturing or processing
into a new and different article of commerce. 19 CFR 12.130(b).
Thus, the substantial transformation test for textiles embraces
two separate findings: (1) whether there has been a new and
different article of commerce created, and (2) whether the new
article was created by means of a substantial manufacturing or
processing operation. See, Mast Industries, Inc. v. United
States, 11 CIT 30, 652 F.Supp. 1531 (1987), aff'd, 5 Fed.Cir.
105, 822 F.2d 1069 (1987).
Factors indicating whether or not a particular manufactur-
ing/processing operation is substantial are set forth in 19 CFR
12.130(d)-(e). Section 12.130(d)(2) provides that in determining
whether merchandise has been subjected to substantial manufactur-
ing/processing operations, (1) the physical change to the
material/article, (2) the relative time involved in the foreign
operation, (3) the relative value added to the material/article,
(4) the complexity of the foreign operation, and (5) the level/
degree of skill/technology required for the foreign operation
will be considered. Section 12.130(e)(1)(iv) provides that
fabric material usually will be a product of the particular
country where it has been cut and those parts assembled into the
completed article, however, 12.130(e) (2)(i) provides that the
fabric material usually will not be considered a product of the
particular country where simple combining operations occur.
As the merchandise imported is classifiable in HTSUS section
XI and was processed in more than one foreign country, the coun-
try of origin rules of 12.130(b) are applicable, and Customs has
stated that the principles of origin contained in 12.130 are
applicable to such merchandise for all Customs purposes,
including the assessment of duties and marking. T.D. 85-38, 19
Cust.Bull. 58, 68 (1985), and T.D. 90-17, 24 Cust.Bull. ___
(1990). Regarding the substantial transformation criteria and
examples found at 12.130, Customs has stated that "[a]ny factual
situations not squarely within those examples will be decided by
Customs in accordance with the provisions of section 12.130(b)
and (d)." T.D. 85-38, at p. 72. In general, Customs has also
stated that "[c]utting garment parts from fabric will result in a
substantial transformation of the fabric. T.D. 85-38, at p. 67.
See also, HRL 734215 dated November 13, 1991.
In C.S.D. 90-19, we considered whether sweatshirts,
assembled from cut panels in a country other than the country
where the fabric was manufactured and cut, was substantially
transformed by the assembly operations in the second country.
Stating that wherever the fabric is purchased and cut would be
the country of origin pursuant to 19 CFR 12.130, we held that the
sweatshirts were not substantially transformed by the simple
assembly operation in the second country. See also, C.S.D. 90-20
(foreign assembly of cotton work gloves from fabric purchased and
cut into pieces in first country).
In the referenced Headquarters Ruling Letter (HRL 083359
dated May 18, 1990), Customs considered whether the complete
sewing and finishing of trousers--with trim articles--in
Thailand--a country other than the country of origin of the
fabric--of parts cut in Taiwan--where the fabric was also
produced--constituted a substantial transformation of the trouser
parts for purposes of 19 CFR 12.130. Finding the processing
operations in Thailand to be a simple assembly operation, which
did not involve a high degree of skill and workmanship, and that
a significant percentage of the articles' value added occurred in
Taiwan, Customs ruled that Taiwan was the country of origin of
the imported trousers. See also, HRL 733841 dated February 7,
1991 (8 garment components cut in Taiwan and assembled in China
were determined to be Taiwanese for country of origin marking,
quota and duty purposes).
After examining the textile sample submitted and for the
reasons which follow, we find that the pants will be a product of
Taiwan when imported into the U.S. Applying the criteria at
12.130(d), we find that the Indonesian assembly operations do
not substantially transform the Taiwanese fabric components:
they do not involve a high degree of skill and workmanship--no
tailoring of the pants is apparent; the physical change to the
material/article is minor; the relative values added to the pants
by means of the assembly operations is not substantial, account-
ing for only 25% of each unit's cost, and; the complexity of the
foreign operation appears to be simple rather than complex.
These findings are in accordance with the above referenced
rulings. Accordingly, no substantial transformation of the
Taiwanese fabric occurs in Indonesia; the assembly operations are
simple, not complex, combining operations.
HOLDING:
The country of origin of the girls' pants, for marking and
textile quota purposes, is Taiwan, under 19 U.S.C. 1304 and 19
CFR 12.130(b), as the assembly operations performed in Indonesia
do not substantially transform the Taiwanese component parts.
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 177.9(b)(1),
Customs Regulations (19 CFR 177.9(b)(1)), which provides 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 informa-
tion furnished is not complete and does not comply with 19 CFR
177.9(b)(1), the ruling will be subject to modification or revo-
cation. 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 177.2, Customs Regulations (19 CFR
177.2).
Sincerely,
John Durant, Director
Commercial Rulings Division