CLA-2 CO:R:C:T 953191 CAB
Mr. Mustafa Al Wazzan
National Textiles Company
P.O. Box 25186
13112 Safat, Kuwait
RE: Reconsideration of HRL 952450; HRL 950780; Country of origin
of flat bed sheets
Dear Mr. Al Wazzan:
This letter is in response to your inquiry of December 29,
1992, requesting reconsideration of Headquarters Ruling Letter
(HRL) 952450, dated December 15, 1992.
FACTS:
In HRL 952450 Customs reconsidered the country of origin
determination for flat sheets at issue in HRL 950780 dated August
14, 1992. HRL 950780 concerned greige fabric manufactured in
various countries and exported to Kuwait. In Kuwait the greige
fabric was desized and washed, scoured, shrunk, bleached, dyed,
sized and finished, cut on four sides, and hemmed to make
finished flat sheets. Customs ruled that the country of origin
of the flat sheets was the country in which the fabric was woven.
HRL 952450 confirmed the country of origin determination made by
Customs in HRL 950780.
In your submission of December 29, 1992, you request that
Customs now reconsider HRL 952450. You conclude that the woven
greige fabric undergoes a substantial transformation in Kuwait
based on the processing operation that occurs in Kuwait. In
support of your claim you specifically state the following:
The grey fabric contains about 9 percent of the
impurities associated with cotton cellulose fibre and also
about 10 to 15 percent size. After scouring, the resultant
"Clean Fabric" will weigh about 12 percent less than the
grey fabric. The total time taken from the stage Desizing
to Optical Brightening/Dyeing will be about 36 hours by
Conventional Process and about 10 to 12 hours by Modernized
Continuous Process. Optical Brightening/Dyeing operation
alone takes 60 minutes as mentioned in our letter dated
August 17, 1992. When compared to the stages of Spinning &
Weaving, Processing of the Fabric does take an equivalent
time and still more time will be spent Laying, Cutting &
Hemming of Flat Sheets.
ISSUE:
Whether the country of origin determinations regarding the
flat sheets at issue in HRLs 950780 and 952450 were correct?
LAW AND ANALYSIS:
Country of origin determinations for textile products are
subject to Section 12.130, Customs Regulations (19 CFR 12.130).
Section 12.130 provides that a textile product that is processed
in more than one country or territory shall be a product of that
country or territory where it last underwent a substantial
transformation. A textile product will be considered to have
undergone a substantial transformation if it has been transformed
by means of substantial manufacturing or processing operations
into a new and different article of commerce.
Section 12.130(d), Customs Regulations, sets forth criteria
for determining whether a substantial transformation of a textile
product has taken place. This regulation states these criteria
are not exhaustive; one or any combination of criteria may be
determinative, and additional factors may be considered.
Section 12.130(d)(1), Customs Regulations, 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), Customs Regulations, states that for
determining whether merchandise has been subjected to substantial
manufacturing or processing operations, the following will be
considered.
(i) The physical change in the material or article
(ii) The time involved in the manufacturing or processing
(iii) The complexity of the manufacturing or processing
(iv) The level or degree of skill
(v) The value added to the article or material
Section 12.130(e)(1) further provides, in pertinent part:
An article or material usually will be a product of a
particular foreign territory or country,...when it has
undergone prior to the importation into the U.S. in that
foreign territory or country...any of the following:
(i) Dyeing of fabric and printing when accompanied by two
or more of the following finishing operations: bleaching,
shrinking, fulling, napping, decating, permanent stiffening,
weighting, permanent embossing, or moireing.
When applying the above criteria to the merchandise in
question, it appears that the merchandise will not be
substantially transformed in Kuwait. Customs has consistently
ruled that in order to comply with Section 12.130(e)(1)(i), a
fabric must be both dyed and printed, as well as being subjected
to the other required processing. See HRL 089230, dated May 10,
1991, where the subject merchandise was greige fabric that had
been produced in China, scoured, bleached, printed, and pre-
shrunk in Hong Kong, and finally cut, hemmed, and packaged in the
Philippines. Customs determined that none of the processing
which the fabric was subjected to after it was formed in China
amounted to a substantial transformation. Therefore, China was
the country of origin for the goods therein. See also, HRL
952759, dated November 25, 1992, where Customs concluded that
fabric that had been manufactured in Country "A", bleached and
printed in Country "B", and finally brushed, pre-shrunk, cut,
hemmed, labeled, folded and packaged in Country "X" was a product
of Country "A". In the instant case as well as the cited Customs
rulings, the fabric in question is not dyed and printed in
addition to other processing in any single country. Since this
type of processing is a requirement of Section 12.130(e)(1)(i),
the fabric in question underwent its last substantial
transformation in Kuwait.
This interpretation of Section 12.130 was upheld by the
United States Court of International Trade in Mast Industries
Inc. v. United States, 652 F.Supp. 1531 (1987); aff'd 822 F.2d
1069 (CAFC, 1989). That case involved greige cotton fabric
produced in China and sent to Hong Kong for singeing, desizing,
scouring, bleaching, mercerizing, dyeing, softening, and
tentering. The court stated that in determining the meaning of a
agency's regulation, it would defer to that agency's
interpretation unless the interpretation is plainly erroneous or
inconsistent with the regulation. The court found that Customs's
interpretation was reasonable and approved of Customs denying
entry to the finished product without a visa from the Government
of China.
You emphasize that the amount of time spent processing the
fabric in Kuwait is at least equal if not longer than the amount
of time spent manufacturing the fabric. You also assert that
the greige fabric is converted from bales of gray fabric into a
dyed sheet, thereby becoming a different article of commerce.
When fabric is used to make a finished flat sheet, it is clear
that a new and different article of commerce has been created.
However, in order to be deemed to have undergone a substantial
transformation, Section 12.130 requires a finding that the
textile product has been transformed by means of substantial
manufacturing or processing operation.
Although there is a significant amount of time spent and
value added to the fabric as a result of the processing in
Kuwait, Customs has consistently held that the processing
involved in constructing a flat sheet without additional
processing (i.e. attaching piping, ruffles, or capping) is not
considered a complex manufacturing operation and does not require
a high degree of skill or technology. This conclusion conforms
with other Customs rulings regarding the country of origin of
flat bed sheets. (See, e.g., HRL 953378, dated February 19,
1993; HRL 952225, dated December 8, 1992; HRL 089230; HRL 086523,
dated April 25, 1990; and HRL 952579.
The cutting and sewing operation performed in Kuwait is not
considered to be a substantial manufacturing operation within the
purview of Section 12.130(d)(2). As the manufacturing process in
Kuwait does not result in a substantial transformation, the
forming of the fabric in the various countries prior to its
exportation to Kuwait is considered the time at which the last
substantial transformation occurred.
In light of prior rulings, the cited court case, and Section
12.130, Customs does not agree with your claim that the fabric in
question is a product of Kuwait.
HOLDING:
The merchandise in question underwent its last substantial
transformation in the country in which the fabric was woven. The
country of origin determination made in HRL 952450 was correct
and is affirmed.
Sincerely,
John Durant, Director
Commercial Rulings Division