CLA-2 CO:R:C:T 954729 SK

Donna B. Van Malder
Koret of California
611 Mission Street
San Francisco, CA 94105

RE: Country of origin; women's knit vest; substantial transformation of garment's component parts occurs in more than one country; assembly into completed article is not sufficient to constitute a substantial transformation within purview of 19 CFR 12.130; country of origin determination based on which component imparts garment's essential character; essential character imparted by the hand knit front panel; significant visual effect.

Dear Ms. Van Malder:

This is in response to your letter of July 23, 1993, requesting a country of origin determination for a women's knitted vest. A sample of the subject merchandise was submitted to this office for examination.

FACTS:

The article at issue, referenced style 655723, is a women's knitted vest made from silk and cotton fibers. The garment features a V-neck with a full front opening secured by faux pearl buttons. The vest's front panel is hand knit and features a decorative design with trios of "holes" interspersed from the waist up and a floral pattern from the bust area down. Hand sewn top embroidery adds decorative accents to the floral portion of the front panel and hand crocheted edging in a contrasting color is affixed to the armholes, neckline and placket. The yarn and accessories are sourced in Korea. In China, the vest's front panel is hand knit and the top embroidery is sewn to the front panel by hand. In Korea, the back solid-colored panel is machine knit, the front and back panels are joined by sewing, the buttons are affixed and hand crocheted edging is added to the garment. The garment is labeled and packed in Korea.

The following cost/labor ratios were submitted to this office from your agent in Korea:

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1) YARN (KOREA) COST (PIECE) TIME $4.08 2) ACCESSORIES (KOREA) $0.42

3) HAND KNITTING AND HAND TOP $1.40 30 hrs. EMBROIDERY OF FRONT PANEL (CHINA)

4) HAND CROCHETING OF FRONT $1.50 3 hrs. PANEL (NECKLINE AND PLACKET (KOREA)

5) MACHINE KNITTING OF BACK $0.15 10 min. (KOREA)

6) HAND CROCHETING OF ARMHOLES $1.43 1.5 hrs. (KOREA)

7) FINISHING AND PACKING (KOREA) $1.30 30 min.

ISSUE:

What is the country of origin for the subject garment?

LAW AND ANALYSIS:

Section 12.130 of the Customs Regulations (19 CFR 12.130) is applicable to the merchandise at issue. Section 12.130(b) 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) sets forth criteria in determining whether a substantial transformation of a textile product has taken place. This regulation states that these criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered.

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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) states that in 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 and/or technology required in the manufacturing or processing operations; (v) The value added to the article or material;

Section 12.130(e)(1) provides that an article or material usually will be a product of a particular foreign territory or country, or insular possession of the United States, when, prior to importation into the United States, it has undergone in that foreign territory or country or insular possession, 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;

(ii) Spinning fibers into yarn;

(iii) Weaving, knitting or otherwise forming fabric;

(iv) Cutting of fabric into parts and the assembly of those parts into the completed article; or

(v) substantial assembly by sewing and/or tailoring of all cut pieces of apparel articles which have been cut from fabric in another foreign country into a completed garment.

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As set forth above, the front panel of the women's vest at issue is hand knit in China and it is also in that country that top embroidery is hand sewn to the article. Section 12.130(e)(1)(iii) states that an article will usually be a product of a country where it has undergone "knitting or otherwise forming fabric." As yarn is knit in China so as to form the front panel of the vest, a substantial transformation is deemed to have occurred in this country. In Korea, the back panel of the vest is machine knit, the front and back panels are sewn together, decorative edging is hand crocheted to the neckline, armholes and placket, buttons are affixed, labels are attached and the vests are packaged for export. As with the knitting operation performed in China, the knitting of the back panel in Korea "forms fabric" and, pursuant to Section 12.130(e)(1)(iii), the back panel of the vest undergoes substantial transformation in Korea.

With regard to the assembly operations performed in Korea, we note that the sewing of the front and back panel into the completed garment is not a substantial transformation for purposes of Section 12.130(e)(1)(v). That Section requires that the assembly process effected by sewing or tailoring be substantial. In T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714), the final document rule establishing 19 CFR 12.130, it was stated that:

[T]he assembly of all the cut pieces of a garment usually is a substantial manufacturing process that results in an article with a different name, character, or use than the cut pieces. It should be noted that not all assembly operations of cut garment pieces will amount to a substantial transformation of those pieces. Where either less than 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). [emphasis added]

This office has consistently held that the mere assembly of goods entailing simple combining operations by sewing, as is the case here, is not enough to substantially transform the components of an article into a new and different article of commerce. See Headquarters Ruling Letters (HRL's) 082747, dated February 23, 1989; 951169, dated April 1, 1992; 951437, dated July 17, 1992; 952647, dated January 27, 1993; 953488, dated May 14, 1993. In the instant case, the assembly operations performed in Korea are mere combining and sewing operations and do not possess the requisite degree of complexity to be deemed substantial manufacturing processes for purposes of conferring country of origin status. No great degree of skill or advanced technology is required, nor is tailoring involved.

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The addition of the hand crocheted edging to the vest in Korea, while relatively labor-intensive (4.5 hours of work per vest) does not serve to create a new and different article of commerce for purposes of conferring country of origin. The edging merely serves to adorn an already existing vest.

If assembly to completion of various components is not sufficient to constitute a substantial transformation within the purview of Section 12.130, and the component parts of an article have been substantially transformed prior to assembly in different countries, a different test must be applied to determine the country of origin of the garment. In Customs Memo 088778, dated March 25, 1991, this office held that in manufacturing situations which are not covered by 19 CFR 12.130, a country of origin determination shall be predicated on the portion of the article which imparts the essential character to that garment. Explanatory Note VIII to GRI 3(b), which sets forth the standards used in an essential character determination, reads:

The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.

In the instant case, there are several persuasive factors which lead this office to the conclusion that it is the front panel of the vest which imparts this garment's essential character. First, the amount of work, and the degree of skill required to make the front panel, is far greater than that required by the rest of the garment. Although the costs incurred in Korea are greater, this is but one factor to consider and is not determinative of the country of origin of this garment. Hand knitting the front panel and top embroidering by hand takes approximately 30 hours, while the remainder of the garment requires just over 5 hours of processing. The floral pattern hand knit into the front panel of the vest, with the top embroidery providing additional adornment, creates a significant visual effect which serves to impart this garment's essential character.

HOLDING:

The country of origin of style 655723, based on the essential character imparted by the hand knitted front panel, is China.

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 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

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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