CLA-2 RR:CR:TC 959771 RH

Area Director of Customs
Attn: Chief, Residual Liquidation
& Protest Branch
6 World Trade Center, Room 761
New York, NY 10048-0945

Re: Protest No. 1001-96-104551; 19 C.F.R. §12.130; finishing operations; shrinkage; country of origin; notice to redeliver; dyeing; bleaching; printing; stentering; substantial transformation; rayon fabric

Dear Sir:

This is in response to your memorandum dated September 13, 1996, regarding the Application for Further Review of Protest (AFR)1001-96-104551 filed by the law firm of Siegel, Mandell & Davidson, P.C., on behalf of Marcus Brothers Textiles, Inc. The protest was timely filed on May 10, 1996, and review is warranted pursuant to 19 C.F.R. §174.24(b).

The protest is against a Notice to Redeliver stating that the fabrics in question are products of China for which a visa is required. The protestant does not dispute the classification of the merchandise under subheading 5516.14.0010 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

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FACTS:

On March 7, 1996, the protestant entered into the United States 2,927 yards of 100 percent spun woven rayon fabric (pattern 2706). However, a Customs laboratory examined samples of the fabric from the entry and found that the fabric and been bleached and printed. There was no indication that the fabric had been dyed or subjected to a shrinking process. Based on that information, Customs issued a Notice to Redeliver on May 10, 1996, informing the protestant that the fabric was not substantially transformed in Korea, that the Korean visa was invalid, and that the country of origin was China, for which a visa was required.

The protestant argues that the fabric underwent “dyeing, screen printing, bleaching and shrinking processes (and possibly other finishing operations) in Korea.”

ISSUE:

Were the greige fabrics in question substantially transformed in Korea pursuant to 19 CFR §12.130?

LAW AND ANALYSIS: At the time the fabrics in question entered the United States, Section 12.130(b) of the Customs Regulations (19 CFR §12.130(b)) governed the country of origin determinations for textiles and textile products subject to Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854). Under that provision, the country of origin of textile products is deemed to be that foreign territory or country 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.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR §12.130(e)(1), which provides in part:

[A]n article or material usually will be a product of a particular foreign territory or country, or insular possession of the U.S., when it has undergone prior to importation into the U.S. 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.

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Section 12.130(e)(2) further provides:

An article or material usually will not be considered to be a product of a particular foreign territory or country, or insular possession of the U.S. by virtue of merely having undergone any of the following:

* * *

(iv) One or more finishing operations on yarns, fabrics, or other textile articles, such as showerproofing, superwashing, bleaching, decating, fulling, shrinking, mercerizing, or similar operations; or

(v) Dyeing and/or printing of fabrics or yarns.

Counsel contends that the fabric has been subjected to a dyeing operation followed by a “screen-over” printing, and that the fabric was preshrunk by a stentering process similar to that decsribed in HQ 953019, dated February 9, 1994, which reads, in pertinent part: “The fabric then undergoes its final finishing, which entails its passage on a stenter frame where fulling agents, a softener and crease resistant chemicals are applied and baked into the fabric at a high temperature to shrink it.”

Customs has been consistent in its determinations that where dyeing and printing are not accompanied by two or more of the operations enumerated in 19 CFR §12.130(e)(1), or where processing involves only one or more finishing operation with no dyeing and printing, or dyeing and printing alone, a substantial transformation does not occur for country of origin purposes. See, Headquarters Ruling Letter (HQ) 734262, dated January 6, 1992, wherein Customs held that greige fabric which was treated by bleaching, dyeing, printing, and resin finishing, including special coating of the fabric, was not substantially transformed; HQ 734435, dated January 10, 1991 (greige fabric produced in Taiwan and processed in Hong Kong by desizing, scouring, bleaching, dyeing, softening, stentering and calendering, was not substantially transformed because the dyeing operation was not in conjunction with a printing operation); HQ 089230, dated May 10, 1991 (Chinese greige fabric exported to Hong Kong where it underwent scouring, bleaching, printing, napping and preshrinking, was not substantially transformed in Hong Kong); HQ 953905, dated July 30, 1993 (fabrics which were dyed and printed and then underwent scouring, singeing, mercerizing and bleaching lacked the two additional operations enumerated in 12.130(e) and were not substantially transformed); HQ 953191, dated May 14, 1993 (a substantial transformation did not occur in Kuwait where greige fabric was desized and washed, scoured, shrunk, bleached dyed, sized and finished and cut on four sides and hemmed); HQ 088901, dated July 5, 1991 (greige fabric shipped to Israel where it was cut and sewn into 3000 foot lengths, singed and desized, washed, dried, subjected to thermofixation (heating the fabric to fix the final elasticity), bleached, printed, placed on a stentor frame, dyed (a light shading), washed, calendered, washed, and pressed, was not substantially transformed because Customs found that the fabric was not printed and dyed).

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Customs interpretation of 19 CFR §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 stentering. The court stated that in determining the meaning of an 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' interpretation was reasonable and approved of Customs denying entry to the finished fabric without a visa from the Government of China. Customs does not contest that the fabric was bleached and printed in Korea. However, a Customs laboratory found no indication that the fabric underwent any of the other finishing operations enumerated in 19 CFR §12.130. The laboratory report reads, in part:

based on our examinations performed on the sample, we are of the opinion that the sample has been bleached and printed.

There are no indications that the fabric was fulled, napped, moired, permanently stiffened, permanently embossed, decated, weighted, or pre-shrunk.

In this case, the protestant has not submitted any evidence to support the claims that the fabric was dyed and preshrunk. Moreover, as stated in 19 CFR §12.130(e)(1) and in the rulings cited above, an article must be both dyed and printed (accompanied by two or more of the enumerated finishing operations) to undergo a substantial transformation. Since the protestant submitted no evidence to rebut Customs laboratory findings, we find that the fabric was not dyed. As a result, the issue regarding shrinkage is moot.

HOLDING:

The fabrics in question did not satisfy the requirement of 19 CFR §12.130(e)(1) for a substantial transformation. Therefore, the protest should be denied in full. Accordingly, the fabrics remain products of the country in which they were woven, i.e., China.

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In accordance with section 3A(11)(b) of Customs Directive Number 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to the Customs Form 19, Notice of Action, and furnished to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision (o n that date) the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Ruling Module in ACS and to the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.

Sincerely,


John Durant, Director
Commercial Rulings Division