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HQ 555489

May 14, 1989

CLA-2 CO:R:C:V 555489 DSN

CATEGORY: CLASSIFICATION

John M. Peterson, Esq.
Neville, Peterson & Williams
39 Broadway
New York, New York 10006

RE: Duty-free treatment for gloves

Dear Mr. Peterson:

This is in response to your letters of August 23, 1989, and March 22, 1990, on behalf of Aris-Isotoner, Inc., concerning duty-free treatment under General Note 3(a)(iv), Harmonized Tariff Schedule of the United States Annotated (HTSUSA), for certain gloves to be produced in Saipan. Samples were submitted with your submission.

FACTS:

According to your August 23, 1989, submission, the merchandise at issue consists of women's dress gloves composed of textile material and leather. You state that the spandex material, referred to as "Isotoner" originates in the U.S. The manufacturing process is described as follows: The "Isotoner" material will be delivered in roll form to a manufacturing facility in Saipan where it will be die-cut into glove parts. The die-cut glove parts will then be delivered to a manufacturing facility in the Philippines.

Leather of foreign origin will be delivered in skin form to a manufacturing facility in the Philippines where it will be die-cut into leather glove strips and perforated. The die-cut textile glove parts are sewn together to make glove shells. The leather overlays are then sewn to the textile glove shell on the back of the hand, inside the thumb and fingers, and running perpendicular to the wrist. This completes the manufacturing process in the Philippines. Unhemmed, substantially finished gloves are shipped back to Saipan, where they are hemmed at the wrist, folded, ironed, inspected and packed for direct shipment to the U.S.

In your March 22, 1990, submission, you propose a variant operation from that described above. Under this althernative operation, the "Isotoner" textile material would be die-cut into glove parts in Saipan and then sent to the Philippines where it is partially assembled into gloves. In the Philippines, the glove parts would be sewn around four fingers, leaving an open pinky and side seam, in addition to no cuff or formed wrist. This would complete the operation in the Philippines, and the partially sewn gloves would be returned to Saipan where the pinky and side seam would be sewn closed and the wrist and cuff would be formed and sewn. In some cases, suface ornamentation would be attached at this point. The gloves would also be trimmed, folded, ironed and inspected before being packaged for direct shipment to the U.S.

The merchandise which is the subject of this request is a women's glove, and is classified under subheading 6116.93.2010, HTSUSA, which provides for gloves, mittens and mitts, knitted or crocheted, other, other, without fourchettes, textile category 631.

ISSUE:

Whether the two proposed manufacturing scenarios will entitle the dress gloves to duty-free entry under General Note 3(a)(iv), HTSUSA.

LAW AND ANALYSIS:

Under General Note 3(a)(iv), HTSUSA, goods imported from an insular possession may enter the customs territory of the U.S. free of duty if they:

(1) Are manufactured or produced in the possession;

(2) Do not contain foreign materials which represent more than 70 percent of the goods' total value (or more than 50 percent with respect to textile and apparel articles subject to textile agreements, and other goods described in section 213(b) of the Caribbean Basin Economic Recovery Act); and

(3) Come directly to the customs territory of the U.S. from the possession.

Since textile gloves are subject to textile agreements, they are not considered eligible articles entitled to duty-free treatment under the CBERA. Therefore, the foreign materials making up the merchandise at issue may not represent more than 50 percent of the gloves' appraised value. Assuming, for purposes of this ruling, that the gloves comply with the above value- content requirement, then the only issue to be determined is whether the gloves are a "product of" the U.S. insular possession.

As noted in your submission, materials imported into an insular possession become a product of the possession if they are substantially transformed there. In other words:

"the question...is whether operations performed on products in the country of exportation are of such a substantial nature to justify the conclusion that the resulting product is a manufacture of that country. 'Manufacture implies a change, but every change is not a manufacture...there must be a transformation; a new and different article must emerge having a distinctive name, character of use.' Ferrostal Metals Corporation v. United States, 664 F.Supp. 535,537 (CIT 1987) (quoting Anheuser-Busch Association v. United States, 207 U.S. 556, 562 (1908).

Section 12.130(d) and (e), Customs Regulations (19 CFR 12.130(d) and (e)), set forth criteria for determining whether a textile or textile article has been substantially transformed. Although 19 CFR 12.130(e)(1)(v) lists "[s]ubstantial assembly by sewing and/or tailoring of all cut pieces of apparel articles which have been cut from fabric in another foreign territory, country or insular possession into a completed garment..." as an example of a manufacturing or processing operation that may result in a substantial transformation, the regulations do not contemplate that all sewing operations will constitute a substantial transformation. The examples given involve the substantial and complete assembly and/or tailoring of all cut pieces of suit-type jackets, suits, and shirts.

You contend that Headquarters Ruling Letter 732623 of November 6, 1989, subsequently published as C.S.D. 90-20 (24 Cust. B. & Dec. 10 (March 7, 1990)), is applicable to this case. In that case, cotton industrial work glove pieces were cut in country A, and the parts sent to country B, where they were sewn together into gloves, turned, pressed and packaged before being exported to the U.S. We held that the sewing together of cotton industrial work gloves was not a complex operation, and therefore, was not analogous to sewing suit-type jackets, suits or shirts. Furthermore, we stated that although cutting may not involve much labor, it often involves a substantial capital input. For these and other reasons, we concluded that country A was considered the country of origin of the imported work gloves.

C.S.D. 90-20 was upheld upon reconsideration in HRL 086229 dated April 11, 1990, in which we stated the following:

The sewing together of industrial work gloves is not more complex in nature than the assembly by sewing of sweatshirts and polo-style shirts, indeed it is Customs' view that it is less so. Moreover, the cutting of fabric into glove pieces is not without complexity. Apparel cutters must also be skilled since mistakes can be costly in terms of wasted fabric and can delay or prevent a planned assembly run. See HRL 081155 of February 3, 1988. In addition, Customs is not persuaded that sewing cut pieces into finished gloves is inherently complex. Although the purchase of sewing machines may require a significant capital investment, the operation of the machines involves little more than a steady feeding of cut glove fabric into a machine.

In the instant case, the die-cutting in Saipan of the continuous lengths of U.S. spandex material into glove parts will substantially transform the U.S. material into new and different articles of commerce which will be considered "products of" Saipan. We have consistently held that the cutting of fabric imported in continuous lengths into specific or defined shapes which can serve as components in an assembly operation is sufficient to substantially transform the fabric into new and different articles of commerce. See, for example, HRL's 067823 dated June 2, 1982, and 555189 dated June 12, 1989. Moreover, pursuant to the previously-discussed analysis in HRL 732623 (affirmed by HRL 086229), the subsequent processing in the Philippines under both proposed scenarios will not change the country of origin of the die-cut glove parts. Therefore, when the partially assembled gloves are returned to Saipan for finishing operations and are then imported into the U.S., the finished gloves would be considered "products of" Saipan for purposes of General Note 3(a)(iv), HTSUSA.

You also ask us to address whether the cost or value of the textile glove parts would be considered "foreign material" for purposes of calculating the General Note 3(a)(iv), HTSUSA, 50 percent foreign value limitation. As discussed above, the processing to be performed in the Philippines after the fabric is cut in Saipan is insufficient to substantially transform the textile glove parts into "products of" the Philippines. Therefore, these parts would continue to be considered of Saipan origin when returned to that insular possession for finishing operations and, as a result, would not be considered "foreign material" content for purposes of the foreign value limitation under this program. However, the cost or value of the leather, as well as the cost of the processing performed under both proposed scenarios in the Philippines, would be included in the "foreign material" content under General Note 3(a)(iv), HTSUSA. This is consistent with previous rulings involving similar fact situations. See HRL's 555431 dated April 9, 1990, and 554027 dated January 13, 1987.

HOLDING:

In regard to both manufacturing scenarios, the completed gloves will be entitled to duty-free treatment under General Note 3(a)(iv), HTSUSA, assuming compliance with the value-content requirement and the documentation requirements of section 7.8, Customs Regulations (19 CFR 7.8). The textile glove parts die- cut in Saipan would not be considered "foreign material" for purposes of calculating the 50 percent foreign value limitation under this program.
Sincerely,

Jerry Laderberg
Acting Director

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