MAR-2-05 CO:R:C:S 558722 WAS
Arthur W. Bodek, Esq.
Siegel, Mandell & Davidson, P.C.
One Astor Plaza
1515 Broadway
43rd Floor
New York, N.Y. 10036-8901
RE: Country of origin marking of shirts knitted and cut in Korea
and assembled and finished in China; 19 CFR 134.46; "Knit and
Cut in Korea"; HRL 733323; 19 CFR 12.130
Dear Mr. Bodek:
This is in response to your letter dated August 26, 1994, on
behalf of Miss Erika, Inc., concerning the country of origin
marking of knitted shirts, the fabric of which is knit and cut in
Korea and assembled and finished in China.
FACTS:
You state that Miss Erika is proposing to import various
different knitted shirts and fine gauge pullovers. Based on the
information you have provided, each shirt or pullover will be
made from fine (i.e., in excess of 10 stitches per centimeter)
gauge fabric which is knitted in Korea. You also state that the
fabric will be dyed and then marked and cut to both size and
shape in Korea to form the components of the finished garments.
You submit that the Korean formed and cut components will then be
forwarded, together with Korean origin trim items, including
labels, hangtags, polybags, thread, tissue paper, buttons,
shoulder pads, etc., to China for assembly by means of simple
sewing as well as routine finishing operations (e.g., washing,
packing, etc.). After the assembly and finishing operations have
been completed in China, the finished garments will be packed for
shipment to the U.S.
You state that although Miss Erika is prepared to mark the
subject garments with the words "Made in Korea", certain export
authorities in China have indicated that this is not acceptable
to them and have advised that the marking must include a
description of the processing undertaken in both Korea and China.
Specifically, you state that Miss Erika proposes to mark the
knitted shirts with one of the following country of origin
markings:
(1) Assembled and Finished in China
Knit and Cut in Korea; or
(2) Made in Korea,
Assembled and Finished in China,
Knit and Cut in Korea; or
(3) Made in Korea,
Assembled in China.
It is your position that, inasmuch as the garments described
herein are, under current Customs administrative practice,
properly considered products of Korea, that they may be marked in
any manner which clearly indicates such origin. You maintain
that, in marking the subject garments, references may be made to
the further processing in China, provided that "Korea", the
country of origin, appears, permanently and legibly, in a
proximate location to such statement.
ISSUE:
Whether the legend "Assembled and Finished in China, Knit
and Cut in Korea" is an acceptable country of origin marking for
imported knitted shirts and pullovers as described above, or in
the alternative, whether the legends "Made in Korea, Assembled
and Finished in China, Knit and Cut in Korea," or "Made in Korea,
Assembled in China," are acceptable country of origin markings.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides that, unless excepted, every article of foreign
origin imported into the U.S. shall be marked in a conspicuous
place as legibly, indelibly, and permanently as the nature of the
article (or container) will permit, in such a manner as to
indicate to the ultimate purchaser in the U.S. the English name
of the country of origin of the article. Congressional intent in
enacting 19 U.S.C. 1304 was "that the ultimate purchaser should
be able to know by an inspection of the marking on the imported
goods the country of which the good is the product. The evident
purpose is to mark the good so that at the time of purchase the
ultimate purchaser may, by knowing where the goods were produced,
be able to buy or refuse to buy them, if such marking should
influence his will." United States v. Friedlaender & Co., 27
C.C.P.A. 297 at 302 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. Section 134.41(b), Customs Regulations (19 CFR
134.41(b)), mandates that the ultimate purchaser in the U.S. must
be able to find the marking easily and read it without strain.
Section 12.130, Customs Regulations (19 CFR 12.130), sets
forth the principles for making 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) ("section
204"). According to T.D. 90-17, published in the Federal
Register on March 1, 1990, (55 FR 7303), the rules of origin for
textile and textile products contained in 19 CFR 12.130 are
applicable to such merchandise for all purposes, including duty
and marking. Customs has determined that 19 CFR 12.130 will be
applied to determine the country of origin of all imported
articles which are classified in Section XI, Harmonized Tariff
Schedule of the United States (HTSUS), or to any imported article
classified outside of Section XI, HTSUS, under a subheading which
has a textile category number associated with it. Because the
subject merchandise would be classified under Section XI, HTSUS,
19 CFR 12.130 will be used in making the country of origin
determination.
Pursuant to 19 CFR 12.130, the standard of substantial
transformation governs the determination of the country of origin
where textile and textile products are processed in more than one
country. The country of origin of textile products is deemed to
be that foreign territory, country, or insular possession 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 operations. In
other words, for textiles governed by 19 CFR 12.130, there is a
two part substantial transformation test: (1) a new and different
article of commerce; and (2) a substantial manufacturing or
processing operation.
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.
The factors to be applied in determining whether or not a
manufacturing operation is substantial are set forth in 19 CFR
12.130(d) and (e). Section 12.130(d)(2) lists some of the
factors considered in determining whether a substantial
manufacturing or processing operation has occurred. These
factors include: the physical change in the material or article;
the time involved in the processing; the complexity of the
operation; the level or degree of skill and technology required
in the operation; and the value added to the article or material
in the non-U.S. based operation versus the value added to the
article or material in the U.S.
Section 12.130(e)(1)(iii),(iv) and (v) state that an article
will be a product of a particular foreign country, when it has
undergone prior to importation into the U.S. in that foreign
country: (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 territory or country, or
insular possession, into a completed garment (e.g., the complete
assembly of all cut pieces of suit-type jackets, suits and
shirts).
The first question that we must address is whether the shirt
panels which are knit and cut in Korea are substantially
transformed when they are subsequently assembled together in
China. In Headquarters Ruling Letter (HRL) 733323 dated May 2,
1990, published as C.S.D. 90-69, 24 Cust. Bull. 23, Customs
determined that, for all purposes, including country of origin
marking purposes, sweaters which are assembled in Hong Kong from
panels knit in China are products of China. See also HRL 734736
dated December 17, 1992 (sweater panels knit in China and sewn
together in Guam are considered products of China). Customs has
also consistently held that the country of origin of knitted
shirts which were manufactured from fabric which was knitted and
cut to shape in one country and sent to another country for
assembly is the country in which the components were cut. See
HRL 955943 dated March 16, 1994 (the country of origin of men's
knit shirts which is made of Taiwanese fabric which is cut into
component pieces in Taiwan and then shipped to China for assembly
by sewing, ironing, folding and packing is Taiwan). In the
instant case, the sewing operation performed in China involves
the simple combining of component pieces to form a knitted shirt
or pullover. It does not involve the complex sewing operation
contemplated by section 12.130(e)(1)(v), as for example, that
found in the assembly and tailoring of all cut pieces of suit-type jackets, suits and shirts. Accordingly, as the processing
performed in China does not constitute a substantial
transformation, the shirts and pullovers remain a product of the
country where the fabric is knit and cut to shape.
Customs also indicated in HRL 733323, that reference may be
made to a second country, provided that the country of origin is
clearly stated and the requirements of section 134.46, Customs
Regulations (19 CFR 134.46), are satisfied. This regulation
requires that in any case in which the name of any country other
than the country in which the article was manufactured or
produced appears on an imported article or its container, there
shall appear, legibly and permanently in close proximity to such
name, and in at least a comparable size, the name of the country
of origin preceded by "Made in," "Product of," or words of
similar meaning.
For instance, Customs has consistently held that the country
in which the components of an imported good are assembled and/or
finished may be indicated by use of the phrase "assembled in"
and/or "finished in" in the country of origin marking of the
finished good, provided that the country of origin of the good is
clearly stated and satisfies the requirements of 19 CFR 134.46.
In the case of sweaters, Customs has determined that "Knit
in" are words of similar meaning to the phrase "Made in." For
instance, in HRL 733323, Customs stated that provided that the
marking clearly indicated that the country of origin of the
sweaters was China, we would accept the word "China" standing
alone or any of the following markings: "Made in China", "Product
of China" and "Knit in China". Moreover, Customs further stated
in HRL 733323 that the words "Assembled and Finished in Hong
Kong" may precede or follow "Made in China", "Product of China",
or "Knit in China". Thus, Customs concluded that the legend
"Knit in China. Assembled in Hong Kong" would be an acceptable
country of origin marking. Similarly, Customs has ruled in HRL
733534 dated June 7, 1990, that the phrase "Handknit in China"
clearly indicates that China is the country of origin and would
not cause any confusion as to the origin of any imported product
so marked.
However, Customs has held that the markings "Cut in Taiwan,
Assembled in China" and "Fabric Made & Cut in Taiwan, Assembled
in China" do not satisfy the marking requirements of 19 U.S.C.
1304 and 19 CFR 134.46. See HRL 735568. In HRL 735568,
Taiwanese-origin fabric was cut into garment panels in Taiwan and
shipped to China where they were assembled into finished men's
gold and polo shirts. Customs held that the words "Cut in" and
"Fabric Made & Cut in" are not other words of similar meaning to
"Made in" and "Product of", as required by 19 CFR 134.46. We
stated in HRL 735568 that the words "Cut in" and "Fabric Made &
Cut in" do not clearly indicate that the country of origin of the
article is Taiwan. We further stated that an ultimate purchaser
reading these markings could only determine that the finished
shirt was processed in Taiwan and China, but could not determine
the actual country of origin of the shirt as required by 19 CFR
1304 and 19 CFR 134.46. Therefore, we held that the proposed
markings "Cut in Taiwan, Assembled in China" and "Fabric Made and
Cut in Taiwan, Assembled in China" were not found to be
acceptable country of origin markings for the imported shirts and
pullovers.
Consistent with our holding in HRL 735568, we are of the
opinion that the proposed marking "Knit and Cut in Korea,
Assembled and Finished in China" does not satisfy the marking
requirements of 19 U.S.C. 1304 and 19 CFR 134.46. As in HRL
735568, we are of the opinion that the ultimate purchaser reading
this marking could only determine that the shirt was processed in
both Korea and China, but could not determine the single country
of origin of the shirts and pullovers. Therefore, the proposed
marking "Knit and Cut in Korea, Assembled and Finished in China,"
is not an acceptable country of origin marking for the imported
knitted shirts and pullovers.
However, we find that the alternative proposed markings
"Made in Korea, Assembled and Finished in China, Knit and Cut in
Korea" and "Made in Korea, Assembled in China" satisfy the
marking requirements of 19 U.S.C. 1304 and 19 CFR 134.46. The
words "Made in Korea" in both of these proposed markings clearly
indicates that Korea is the country of origin of the knitted
shirts and pullovers to an ultimate purchaser reading these
markings. Therefore, the proposed markings "Made in Korea,
Assembled and Finished in China, Knit and Cut in Korea" and "Made
in Korea, Assembled in China" are acceptable country of origin
markings for the imported shirts and pullovers.
HOLDING:
The proposed marking "Made in Korea, Assembled and Finished
in China, Knit and Cut in Korea" and "Made in Korea, Assembled in
China" satisfies the marking requirements of 19 U.S.C. 1304 and
19 CFR 134.46, and are acceptable country of origin markings for
the imported knitted shirts and pullovers.
The proposed marking "Assembled and Finished in China, Knit
and Cut in Korea" does not satisfy the country of origin marking
requirements of 19 U.S.C. 1304 and 19 CFR 134.46, and therefore,
is not an acceptable country of origin marking for the imported
knitted shirts and pullovers. A copy of this ruling should be
attached to the entry documents filed at the time this
merchandise is entered. If the documents have been filed without
a copy, this ruling should be brought to the attention of the
Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division