HQ 0086696 - Country of Origin of Shirts and Trousers - United States International Trade Commision Rulings

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HQ 086696

June 8, 1990

CLA-2 CO:R:C:G 086696 CRS

CATEGORY: COUNTRY OF ORIGIN

Mr. Justin Yue
Winner Co. (Garments) Ltd.
East Ocean Centre, 2nd Floor
98, Granville Road
Kowloon, Hong Kong

RE: Country of Origin of Shirts and Trousers

Dear Mr. Yue:

This is in response to your letter dated March 10, 1990, in which you enquired as to the country of origin of woven shirts and trousers. Samples were not submitted.

FACTS:

You state that your company has manufacturing operations in various locations in Southeast Asia and that the piece goods used in the assembly of the woven shirts and trousers in question will be sourced in Hong Kong, China, Indonesia or Japan. Pursuant to this, you posit four scenarios and enquire as to how the manufacturing operations performed incident thereto will affect the country of origin of the finished articles. You advise that you are unable to provide accurate cost breakdowns regarding the manufacturing processes undertaken in the various countries of assembly. The first and second scenarios discussed below concern shirts; the third and fourth involve trousers.

Shirts

In the first scenario, the piece goods will be marked and cut in country A. In addition, the collars and front panels will be constructed in country A; however, the remaining cut panels together with the finished components (collars and front panels) will be sent to country B and sewn into completed shirts.

In the second case, the marking and cutting will take place in country A. The components for the collar, front placket, sleeves and sleeve plackets, front pockets and pocket flaps, and back yoke will be sent to country B for partial assembly. The finished components will be returned to country A where, together with panels cut in country A, the completed shirts will be assembled. You do not state what type or types of shirts (e.g., dress, sport) will be manufactured.

With regard to the above scenarios, you ask whether the country of origin determination would be affected if:
a) the manufacturing costs incurred and skills required in country A were to exceed those of country B;
b) the manufacturing costs incurred and skills required in country B were to exceed those of country A; or
c) the costs incurred and skills required were essentially the same in both countries.

Trousers

In the third scenario, trousers will be marked and cut in country A. In addition, zippers will be attached to the two front panels, welt pockets will be added to the back panels, the two front panels will be joined as will the two back panels. The finished panels and components will be sent to country B for final assembly into completed trousers.

In the fourth case, the trousers will be marked and cut in country A. All other operations such as the construction of welt pockets, the attachment of zippers, the sewing together of the two front panels and the joining of the two back panels will take place in country B. You state that the finished components will be sent back to country B where they will be combined with other components to form completed trousers. However, we assume, given the context of your fact pattern, that country A was incorrectly designated as the country of final assembly and that in actuality, you intend that country B should be the country of final assembly.

Finally, with regard to trousers, you ask whether the country of origin would be affected if the manufacturing costs incurred and skill levels and time required for assembly were greater in country A than in country B; if the costs, skills and time involved in country B were to exceed those involved in country B; or whether costs incurred and skills and time required were roughly equal.

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 and/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 you have provided, the sewing operations conducted in country B do not appear to require a high degree of skill. In two of the four scenarios you posit, the country B manufacturing operations constitute less than a complete assembly of all cut pieces. Thus in cases 2 and 4, completed components are returned to country A where final assembly takes place. In all four cases the work undertaken would seem to be more in the nature of a simple assembly rather than a tailoring operation.

Since there is nothing to suggest that the assembly of the cut components is in any degree a complex operation as regards, for example, the time or level of skill required, or value added, it is Customs' view that the shirts and trousers processed in country B have not undergone a substantial manufacturing or processing operation. Consequently, the shirts and trousers assembled as described in cases 1-4 above have not been substantially transformed. Country A, i.e., the location where 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 country A do not constitute a substantial transformation as required by 19 CFR 12.130. The country of origin of the shirts and trousers at issue is country A.

Sincerely,

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