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HQ 732257


May 16, 1990

MAR 2-05 CO:R:C:V 732257 pmh

CATEGORY: MARKING

Mr. Jay K. Gronlund
The Pathfinder Group, Inc.
50 East 42nd Street
New York, N.Y. 10017

RE: Country of origin marking of imported women's pantyhose

Dear Mr. Gronlund:

This is in response to your February 14, 1989, letter to our New York office, on behalf of your client, Hampshire Hosiery, Inc. (the importer). Your letter has been forwarded to us for response. We regret the delay.

FACTS:

According to your letter, the importer manufactures certain women's pantyhose. The manufacturing process consists of knitting "tubes" of lycra and/or nylon in the U.S. and a separate patch for the crotch area. These separate pieces are then shipped to Mexico where the tubes are cut from the top opening to the crotch area, the separate pieces are sewn together and, in most cases, the assembled pantyhose are dyed. Thereafter, the assembled pantyhose are folded around a piece of cardboard, placed in a cellophane bag and shipped back to the U.S. Once in the U.S. the pantyhose, in the cellophane bag, are inserted in a retail "envelope type" package. The retail package will be marked with the words "Knit in the U.S.A., Assembled in Mexico," which will appear on the back panel of the retail package and in close proximity to the name and domestic address of the U.S. distributor.

ISSUES:

Whether the pantyhose will qualify for the duty exemption available under HTSUS subheading 9802.00.80 when returned to the U.S.

Whether the proposed country of origin marking satisfies the country of origin marking requirements.

LAW AND ANALYSIS:

With regard to the first issue, HTSUS subheading 9802.00.80 provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubrication, and painting.

All requirements of HTSUS subheading 9802.00.80 must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to quality for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations inci- dental to the assembly either before, during, or after their assembly with other components.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. However, any significant process, operation or treatment whose primary purpose is the fabrication, completion,physical or chemical improvement of a component precludes the application of the exemption under HTSUS subheading 9802.00.80 to that component. See, section 10.16(c), Customs Regulations (19 CFR 10.16(c)).

In the instant case, the samples and description of the foreign operations show that the pantyhose will not qualify for the duty exemption available under subheading 9802.00.80, HTSUS because the components fail to meet the requirements of clause (a) of the tariff provision, as they are not exported in a condition ready for assembly without further fabrication. Cutting the pantyhose tube is not an acceptable assembly operation or operation incidental to assembly, but is further fabrication of the pantyhose. The cutting operation is not simply cutting a component to length, but is similar to cutting fabric for a specific pattern in order to sew the newly cut components together. See, 19 CFR 10.16(c)(2). Furthermore, the dyeing operation will disqualify the pantyhose from HTSUS subheading 9802.00.80 treatment pursuant to 19 CFR 10.16(c)(4), which states that chemical treatment of components or assembled articles, such as dyeing, to impart new characteristics is not a proper operation incidental to the assembly process. Therefore, the pantyhose will not qualify for the duty exemption available under HTSUS subheading 9802.00.80.

With regard to the second issue, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. 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 in the U.S. 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. Section 134.41(b), Customs Regulations (19 CFR 134.41(b)), provides that the marking of an imported product must be conspicuous enough so that the ultimate purchaser will be able to find the marking easily and read it without strain.

Because the articles in question are textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), section 12.130, Customs Regulations (19 CFR 12.130), is applicable. Section 12.130 provides that generally the country of origin of a textile product is that foreign territory, country or insular possession where the article last underwent a substantial transformation. However,
there is an exception to the general rule set forth in section 12.130(c), Customs Regulations (19 CFR 12.130(c)). Section 12.130(c) provides that U.S. textile articles that are advanced in value or improved in condition, or assembled in a foreign country are considered to be products of that foreign country, for marking purposes.

In this case, the pantyhose are shipped to Mexico in pieces. They are not ready for retail sale until after the processing they undergo in Mexico, in which they are cut and sewn together to form the finished pantyhose. We find, therefore, that the pantyhose are clearly advanced in value and improved in condition by such processing. Accordingly, under 19 CFR 12.130(c) the finished pantyhose are products of Mexico for country of origin marking purposes.

You have indicated that the pantyhose will be imported without individual marking and will be repackaged in individual retail cartons in the U.S. Marking these cartons in lieu of marking the individual products is acceptable. Pursuant to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR 134.32(d)), an exception from individual marking is applicable where the marking of a container of an article will reasonably indicate the origin of such article. This exception is normally applied in cases where the imported article is imported in a properly marked container and Customs officials at the port of entry are satisfied that the ultimate purchaser will receive the article in the original unopened marked container. However, for articles that are to be repacked after release from Customs custody, section 134.34, Customs Regulations (19 CFR 134.34), requires that an exception under 19 CFR 134.32(d), may be authorized in the discretion of the district director at the port of entry, under certain specified conditions. One of these is that the distict director must be satisfied that, if unmarked articles will be repacked in the U.S., the new containers will properly indicate the country of origin of the articles to an ultimate purchaser in the U.S.

With regard to the country of origin marking, itself, we note Customs has previously determined that the words "Assembled in Mexico" constitute sufficient country of origin marking for articles that are assembled in Mexico and eligible for duty exemption under subheading 9802.00.80, HTSUS. (See HQ 731507, issued October 17, 1989.) Since the subject pantyhose are not eligible for duty exemption under subheading 9802.00.80, HTSUS, the words "Assembled in," are not acceptable. Therefore, you must use words such as "Product of," "Made in," or other words of similar meaning to indicate the country of origin in this case.

In addition, Customs has determined that in certain circumstances the words "Knit in" are words similar in meaning to the words "Made in," and "Product of," for country of origin marking purposes. (See Ruling 733323, dated May 2, 1990.) In this case, since Mexico is the country of origin of the pantyhose, the U.S. reference should indicate that the fabric is knit in the U.S. (e.g., "Product of Mexico, Fabric Knit in the U.S.A.").

Lastly, we note that section 134.46, Customs Regulations (19 CFR 134.46), requires that when the name of any city or locality in the U.S., or the name of any foreign country or locality other than the country in which the article was manufactured or produced, appear on an imported article or its container, there shall appear legibly and permanently, in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of," or other words of similar meaning. Assuming the language is changed, we find that the country of origin marking in this case, which is sufficiently conspicuous and appears directly next to the name and domestic address of the U.S. distributor, satisfies the requirements of 19 CFR 134.46.

Based on our examination of the retail carton in this case, we are of the opinion that the country of origin marking (as we suggested above) satisfies the requirements of 19 U.S.C. 1304 and 19 CFR 134.46. Consequently, we suggest you contact the local Customs office to request an exception from marking for repacked articles under 19 CFR 134.34 and submit a sample retail carton for their examination and approval.

HOLDING:

Pantyhose tubes that are cut in Mexico and sewn to a cotton panel to form completed pantyhose, are not eligible for duty exemption under subheading 9802.00.80, HTSUS, because cutting the pantyhose tube is not an acceptable assembly operation or operation incidental to assembly.

For country of origin marking purposes, the pantyhose are considered to be products of Mexico and must be marked accordingly. The words "Assembled in Mexico" are not acceptable because the pantyhose are not eligible for duty exemption under subheading 9802.00.80, HTSUS. The pantyhose may be excepted from individual marking if the individual retail containers in which
they are sold to the ultimate purchaser are marked in the manner described above. However, since the pantyhose are repacked in such cartons after importation, appropriate arrangements must be made with the local district director of Customs, pursuant to 19 CFR 134.34, for an exception from individual marking of the hosiery.

Sincerely,

Marvin M. Amernick

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