CLA-2 CO:R:C:T 953378 CAB

Mr. Joseph A. Gleicher
Poly-Commodity Corporation
175 Great Neck Road
Great Neck Plaza, NY 11021

RE: Modification of HRL 952070; Country of origin determination of flat sheets that contain piping, capping, and ruffles

Dear Mr. Gleicher:

This letter is in reference to Headquarters Ruling Letter (HRL) 952070 dated September 24, 1992, issued to you from this office, regarding the country of origin of flat sheets with capping, piping, and ruffles. Upon further review Customs has determined that its holding in HRL 952070 with regard to the country of origin of the merchandise is in error.

FACTS:

HRL 952070 concerned the country of origin of flat sheets containing capping, piping, and ruffles. Woven fabric was manufactured, bleached, brushed, and printed in Pakistan. The rolls of fabric were then shipped to Thailand where they were cut to length and width, hemmed, and contrasting fabric sewn onto the sheets' top edge forming a seam. The first sample had capping sewn along the top edge of the seam. The second sample had piping inserted into the seam of the top edge. The third sample had two overlapping ruffles sewn to the edge. In HRL 952070, Customs determined that the processing operations in Thailand were not sufficiently complex to amount to a substantial transformation in compliance with Section 12.130.

ISSUE:

What is the country of origin for the merchandise in question?

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 of material

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.

Headquarters Ruling Letter (HRL) 952579 dated November 25, 1992, confronted the issue of where the last substantial transformation occurred when flat sheets had been processed in three countries. Customs concluded that the last substantial transformation occurred in Country "A" where the fabric had been manufactured; and not in either Country "B" where the fabric was bleached and printed, or Country "X" where the fabric was brushed, shrunk, cut, and hemmed. See also, HRL 086523 dated April 25, 1990, where Customs determined that bed sheets made out of material woven, dyed and printed in Pakistan were considered to be products of Pakistan even though the material was cut to length and hemmed in Dubai. The processes performed in Dubai, (i.e., cutting to length and hemming), did not constitute a substantial transformation.

In this instance the woven fabric was manufactured, bleached, brushed, and printed in Pakistan. This fabric was then sent to Thailand where it was cut to length and width, hemmed, and had either capping, piping, or ruffles added to the finished product. The issue presented is whether the processing in Thailand, was substantial enough to result in a new and different article of commerce. If the processing was sufficiently complex to warrant such a result, then the merchandise in question will have undergone its last substantial transformation in Thailand.

As emphasized in the cited rulings, Customs has consistently held that minor processing (cutting and hemming) of flat bed sheets does not constitute a substantial transformation within the meaning of Section 12.130. However, in the instant case, the fabric in question has been cut to both length and width, hemmed and had capping, piping, or ruffles added to the finished product. The processing required to add capping and piping to a flat sheet involves sewing a band of fabric to finish the sheet's top edge, forming a seam. The side edges of the band are sewn to the sheet's edges. Finally, capping or piping are sewn along the top edge of the seam. The processing necessary to add a ruffle to a flat sheet includes hemming the exposed edge of the ruffle, hemming the side edges of the ruffle, and sewing the bottom edge of the ruffle to the top edge of the sheet. This additional processing done on the instant merchandise is more complex and time-consuming, then merely cutting flat sheets on four sides and hemming them.

HOLDING:

When fabric is cut to length and width and hemmed in order to construct a flat sheet, a new and different article of commerce is created. However, in order for a substantial transformation to result within the purview of Section 12.130, there must be additional processing that is sufficiently complex so as to constitute a substantial manufacturing operation. In this case, cutting the fabric to length and width coupled with the additional processing required to attach the capping, piping, or ruffles to the flat sheets is sufficiently complex so as to constitute a substantial transformation. Therefore, the country of origin of the flat sheets is Thailand.

This notice to you should be considered a modification of HRL 952070 under 19 CFR 177.9(d)(1). It is not to be applied retroactively to HRL 952070 (19 CFR 177.9(d)(2)) and will not, therefore, affect past transactions for the importation of your merchandise under that ruling. However, for the purposes of future transactions of merchandise of this type, HRL 952070 will not be valid precedent. We recognize that pending transactions may be adversely affected by this modification, in that current contracts for importations arriving at a port subsequent to this decision will be affected pursuant to it. If such a situation arises, you may at your discretion, notify this office and apply for such relief from the binding effects as may be warranted by the circumstances. However, please be advised that in some instances involving import restraints, such relief may require separate approvals from other government agencies.

Sincerely,

John Durant, Director
Commercial Rulings Division