HQ 0555719 - Country of origin determination and GSP or CBI eligibility for surgical towels from Barbados. - United States International Trade Commision Rulings

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HQ 555719

November 5, 1990
CLA-2 CO:R:C:V 555719 SER

CATEGORY: CLASSIFICATION

Mr. Stanley R. Leacock
Beache Medical Supplies, Ltd.
346 College Avenue, Suite F
Palo Alto, CA. 94306

RE: Country of origin determination and GSP or CBI eligibility for surgical towels from Barbados.

Dear Mr. Leacock:

This is in reference to your letter of August 9, 1990, and your fax of October 15, 1990, concerning the country of origin, and eligibility for duty-free treatment under the Generalized System of Preferences (GSP)(19 U.S.C. 2461-2466) or the Caribbean Basin Initiative (CBI)(19 U.S.C. 2701-2706), of surgical towels to be imported into the U.S. from Barbados.

FACTS:

In your submission of October 15, 1990, you described three possible textile production operations performed in Barbados to create the surgical towels.

Process 1 -Import dyed cotton fabric on large bolts of cloth from sources in China and/or South America. The fabric would then be cut to length and width, sewn, trimmed, pre-washed and dried, and then packaged.

Process 2 -Import undyed, unbleached cotton fabric on large bolts from South America. The fabric would then be dyed and bleached, cut to length and width, sewn, trimmed, pre- washed and dried, and then packaged.

Process 3 -Import undyed, unbleached cotton yarn primarily from South America, and possibly Egypt and Turkey. The yarn will then be woven into fabric, dyed, cut to length and width, hemmed, and packaged.

ISSUES:

1. Are the surgical towels eligible for duty-free treatment under the GSP or CBI?

2. Do the processing methods described above meet the textile country of origin requirements, thereby creating articles from Barbados?

LAW AND ANALYSIS:

1. Applicability of GSP and CBI

It appears from your submissions that you have confused the purposes of GSP and CBI eligibility. These programs provide duty-free treatment for eligible articles and are not related to the administration of quotas for textile articles. For articles to be eligible for duty-free treatment under GSP and CBI, they must first be classified under an eligible provision in the Harmonized Tariff Schedule of the United States Annotated (HTSUSA). An article classifiable under a GSP or CBI eligible provision is entitled to duty-free entry if: it is the growth, product or manufacture of a designated beneficiary country; it is imported directly into the U.S.; and the sum of the cost or value of the materials produced in the beneficiary country plus the direct costs involved in processing the eligible article in the beneficiary country is at least 35% of the article's appraised value at the time it is entered into the U.S.

The cotton surgical towels are classifiable under subheading 6307.90.8710, HTSUSA, which provides for other made up articles, other, other, surgical towels. This provision is neither a GSP nor CBI eligible provision. Therefore, the articles you wish to import, surgical towels, are not eligible for GSP or CBI duty- free treatment, and are dutiable at the rate of 7 % ad valorem.

2. Country of Origin

Textile articles produced in more than one foreign country are subject to the country of origin criteria set forth in section 12.130, Customs Regulations (19 CFR 12.130). According to 19 CFR 12.130(b):

. . . a textile product . . . which consists of materials produced or derived from or processed in, more than one foreign . . . country shall be a product of that foreign . . 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.

In determining whether merchandise has undergone substantial manufacturing or processing operations, we consider the (1) physical change in the material or the article; (2) time involved; (3) complexity of the operations; (4) level or degree of skill and/or technology required; and (5) value added to the article in each country.

According to 19 CFR 12.130(e)(iv), a textile article will usually be a product of a particular country if the cutting of the fabric into parts and the assembly of those parts into the completed article has occurred in that country. However, 19 CFR 12.130(e)(ii) states that a material will usually not be considered to be a product of a particular foreign country by virtue of merely having undergone cutting to length or width and hemming or overlocking fabrics which are readily identifiable as being intended for a particular commercial use. T.D. 85-38, which set forth the final rule implementing 19 CFR 12.130, explains that "where fabric which is readily identifiable as being intended for a particular commercial use (e.g., toweling or bed linen material) and is merely cut to length or width, with the edges then being either hemmed or overlocked, . . . the foreign territory or country which produced the fabric is the country of origin and not the country where the fabric was cut."

The Customs Service recently held, in Headquarters Ruling Letter (HRL) 733601, dated July 26, 1990, that cotton fabric from China which was imported into Mexico where it was, by machine, cut to width and length, hemmed on three or four sides, washed and shrunk, and folded to specifications for use as surgical towels was not substantially transformed, and, therefore, was considered a product of China. We also held in HRL 086132 dated February 22, 1990, that a surgical towel which was cut from cloth, washed, seamed, folded and packaged in Honduras was not substantially transformed. Further, in C.S.D. 90-29, we held that greige terry toweling which was bleached, cut to size, hemmed, desized, and dyed to create beach towels, was not substantially transformed.

In this case, processes 1 and 2, where the cotton fabric is imported into Barbados, cut to shape, sewn, trimmed, and pre- washed and dried (and dyed in process 2), are similar to the processes previously ruled on by Customs and discussed above. These two processes would not result in a substantial transformation of the fabric imported into Barbados, and, therefore, the towels would not be considered products of Barbados. Only process 3, with respect to which we have previously issued a ruling under the guidelines of 19 CFR 12.130(e)(1(iii) (HRL 555517 dated May 17, 1990), where cotton yarn is imported into Barbados, woven into fabric and then cut to shape, sewn, trimmed, pre-washed and dried, will be considered a product of Barbados.

HOLDING:

The surgical towels at issue are not eligible for duty-free treatment under GSP or CBI. Only process 3, where cotton yarn is imported into Barbados and then substantially transformed into the final article, surgical towels, will qualify the towels as products of Barbados. Process 1 and 2, where bolts of cotton fabric are imported into Barbados to be made into surgical towels, do not result in products of Barbados. We note that at the present time, surgical towels from Barbados are not subject to quota. However, due to the changeable nature of quota agreements, you are advised to contact your local Customs office prior to importation to determine the current status of any textile agreements with Barbados. The rate of duty on surgical towels from Barbados is 7% ad valorem.

The holding in this ruling applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in 177.9(b)(1), Customs Regulations (19 CFR 177.9(b)(1)). This section states that a ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication is accurate and complete in every material respect. Should it subsequently be determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished this may affect the determination of country of origin. In such a case, it is recommended that a new ruling request be submitted in accordance with 177.2, Customs Regulations (19 CFR 177.2).

Sincerely,

John Durant, Director
Commercial Rulings Division

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