MAR-2 RR:NC:WA:353 A82341
Ms. Irene Chan
T. H. Kelly International, Inc.
1160 Cherry Avenue
San Bruno, CA 94066
RE: THE COUNTRY OF ORIGIN MARKING OF finished leather garments
Dear Ms. Chan:
This is in response to your letter dated January 23, 1996 requesting a ruling on the country of marking of finished leather garments on behalf of your client North Beach Leather.
We regret the delay in responding to your request.
The stated detailed processing of the subject garments fall under two manufacturing scenarios. The first scenario involves a garment being made in Hong Kong.
The second scenario involves foreign leather (from Italy, France, England and Taiwan) that is sent to Hong Kong where the leather is sorted, color matched skin by skin and cut. The cut leather pieces are sent to China for stitching (assembly). The resulting garments are sent to Hong Kong for inspection, trimming or repair if necessary, finished with button holes and buttons and pressed. The garments are then packed for shipment. It is stated that in every case that the cost of the portion of work executed in Hong Kong is much higher than the portion of work performed in China.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit in such a manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
The primary purpose of the country of origin marking statute is to mark the goods 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, 302 C.A.D. 104 (1940).
Part 134.1(d) defines the "ultimate purchaser" generally as the last person in the United States who will receive the article in the form in which it was imported.
The country of origin for marking purposes is defined at 134.1(b), Customs Regulations (19 CFR 134.1(b)), to mean the country of manufacture, production, or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of part 134.
A substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940); Koru North America v. United States, 12 CIT 1120, 701 F.Supp. 229 (1988). The question of when a substantial transformation occurs for marking purposes is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed. Cir. 21, 702 F.2d 1022 (1983).
In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D. 85-25 (September 25, 1984).
In the first scenario where the leather garments are made entirely in Hong Kong, the country of origin is Hong Kong and the goods should be marked "Made in Hong Kong".
There is clearly a substantial transformation in the second scenario where foreign leather material is sent to Hong Kong where it is sorted, color matched skin by skin and cut. The question to be resolved is whether these substantially transformed materials undergo a substantial transformation by virtue of the second stage of processing in China.
Customs has repeatedly held that the cutting of fabric into specific patterns and shapes suitable for use in an assembly operation constitutes a substantial transformation. See HRLs 555189 (June 12, 1989), 554027 (January 13, 1987) and 554025 (December 16, 1986). Therefore, we find with respect to this case that the leather materials which will be used to create finished garments will become new and different articles of commerce as a result of the first stage of operations in Hong Kong provided that the cut components take on the essential character of the finished product as a result of the preliminary Hong Kong processing. (See, HQ 055599 (September 15, 1978) where Customs recognized a substantial transformation in the initial cutting of leather into parts for a belt.)
The assembly operations performed in China do not constitute a substantial transformation of the pre-cut components. Customs has long held that the mere assembly of parts will not necessarily constitute a substantial transformation. C.S.D. 80-111 (September 24, 1980).
Taking the above-referenced rulings into consideration, for non-textile articles, it is apparent in the instant case that the operations to be performed in China constitute intermediate, simple assembly operations on pre-cut components which do not amount to a substantial transformation. Accordingly, the finished leather garments will be considered products of Hong Kong, the country where they will undergo substantial transformation. Since the assembly operations in China does not amount to a substantial transformation, it is unnecessary to decide if the final finishing operations in Hong Kong constitute another substantial transformation.
The finished leather garments created in the three stage assembly process in Hong Kong and China, described above, will be considered products of Hong Kong for country of origin marking purposes. Accordingly, the merchandise should be clearly and conspicuously marked to indicate the country of origin, "Hong Kong".
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Martin Weiss at 212-466-5881.
Sincerely,
Roger J. Silvestri
Director
National Commodity
Specialist Division