HQ 0083461 - The assembly of shorts and trousers sewn in one country from parts cut in a second does not constitute a substantial transformation as required by 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 083461

May 15, 1990

CLA-2 CO:R:C:G 083461 CRS

CATEGORY: COUNTRY OF ORIGIN

Mr. Alpha Chou
Sales Manager
Ho Sing Clothing Co., Ltd.
7-1 FL
695, Tung Hwa South Road
CTCI Tower
Taipei, Taiwan
Republic of China

RE: The assembly of shorts and trousers sewn in one country from parts cut in a second does not constitute a substantial transformation as required by 19 CFR 12.130

Dear Mr. Chou:

This is in reply to your letter dated January 14, 1989, in which you enquired as to the country of origin of shorts and trousers (style 72296) designed and cut in Taiwan and finished in Thailand. Samples of the cut panels and the completed articles were submitted.

FACTS:

You state that the shorts and trousers will be designed, patterned and cut in Taiwan from Taiwanese materials, including fabric and accessories. The cut panels and accessories will then be shipped to Thailand or a third country, where they will be sewn, finished and packaged. The finished articles will be shipped directly from Thailand or the country of finishing to the United States.

Furthermore, you advise that materials represent 50 percent of the value of the finished clothing, while the design work and other operations performed in Taiwan, as well as the sewing and finishing operations undertaken in Thailand each represent 25 percent of the value of the finished shorts and trousers.

Style 72296 consists of a pair of men's 32 inch waist, pleated trousers of 65 percent polyester, 35 percent rayon. The trousers are hemmed, have a zipper fly, and fasten by means of a button and a metal clasp. There are two side and two rear pockets, and eight belt loops.

The shorts (style number not provided) are made from 99 percent cotton. They are pleated and have two back and two rear pockets, five belt loops, a zipper fly, and fasten by means of a button.

ISSUE:

Whether the sewing and finishing in Thailand of parts cut in Taiwan constitutes a substantial manufacturing or processing operation transformation such that the completed shorts and trousers would be considered a manufacture of Thailand for the purposes of 19 CFR 12.130.

LAW AND ANALYSIS:

Pursuant to section 12.130, Customs Regulations (19 CFR 12.130), a textile or textile product which consists of materials produced or derived from, or processed in, more than one foreign territory or country shall be a product of that foreign territory or country where it last underwent a substantial transformation. A textile or 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) establishes criteria for determining whether an article has been substantially transformed. However, the criteria set forth in 19 CFR 12.130(d) are not exhaustive; one or any combination of these criteria may be determinative and additional factors may be considered.

According to 19 CFR 12.130(d)(2), the following factors are to be considered in determining whether merchandise has been subjected to substantial manufacturing or processing operations: the physical change in the material or article, the time involved in the manufacturing or processing operations, the complexity of the operations, the level or degree of skill and/or technology required, and the value added to the article.

Section 12.130(e), Customs Regulations (19 CFR 12.130(e)) provides further guidance as to what constitutes substantial manufacturing or processing operations. In particular, 19 CFR 12.130(e)(1)(v) provides that an article will usually be the product of that country in which it has been sewn or tailored from fabric pieces cut in another country, as for example, with the complete assembly and tailoring of all cut pieces of suit- type jackets, suits and shirts.

According to T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714), the final document rule establishing 19 CFR 12.130:

[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 a complete assembly of all 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 12.130(d).

Based on the information provided, the sewing together of the shorts and trousers in question does not appear to require any tailoring. Rather, the facts would seem to indicate that the joining of the cut parts is a simple assembly operation which does not involve a high degree of skill and workmanship. The shorts and trousers at issue are designed, patterned, sized and cut in Taiwan, which operations, together with the cost of the material sourced in Taiwan, represent 75 percent of the value of the finished articles, while sewing, finishing and packing in Thailand comprise the remaining 25 percent. Thus a significant percentage of the articles' value added occurs as a result of work performed or material sourced in Taiwan.

We also note that the sewing and related operations in Thailand comprise the same percentage of value added as do the cutting and related operations performed in Taiwan. However, absent any additional data concerning the complexity of the sewing operation vis a vis the cutting operation, Customs deems cutting to be the more complex of the two. As we stated in HRL 081155 (February 3, 1988):

It is our understanding that the apparel cutter is the most highly paid and highly skilled production worker in the apparel production process. One mistake can be costly in wasted fabric and can delay a planned production run.

Since there is nothing to suggest that the assembly of the cut parts is in any degree a complex operation as regards, for example the time or level of skill required, or that the assembly requires anything more than a simple joining of the cut parts by machine stitching, it is Customs' view that the shorts and trousers have not undergone a substantial manufacturing or processing operation. See also, HRL 082747 (February 23, 1988), concerning the country of origin of jeans. Consequently, the shorts and trousers have not been substantially transformed in Thailand. Wherever the fabric is cut is therefore the country of origin pursuant to 19 CFR 12.130 for quota and country of origin marking purposes.

HOLDING:

The assembly operations performed in Thailand do not constitute a substantial transformation as required by 19 CFR 12.130. The country of origin of the shorts and trousers at issue is Taiwan.

Sincerely,

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