HQ 0733826 - Country of origin marking of imported radio-opaque operating towels, surgical towels, substantial transformation, textile, 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 733826
May 16, 1991

MAR-2-05 CO:R:C:V 733826

CATEGORY: MARKING

Lawrence Pilon, Esq.
Hodes & Pilon
431 South Dearborn Street, Suite 405
Chicago, Illinois 60605-1121

RE: Country of origin marking of imported radio-opaque operating towels, surgical towels, substantial transformation, textile, 19 CFR 12.130

Dear Mr. Pilon:

This is in response to your letter of September 26, 1990, submitted on behalf of Medline Industries, Inc., regarding the country of origin marking requirements for radio-opaque operating towels. On December 19, 1990, a meeting with you and Mr. Roger Berndt of Medline Industries was held in our offices. At our request, you submitted additional information in a letter dated January 24, 1991. Samples of the radio-opaque operating room towels were also submitted.

FACTS:

Medline Industries imports radio-opaque operating room towels (surgical towels). Radio-opaque operating towels are made of cotton cloth with a radio-opaque cord sewn into them. The radio-opaque cord is X-ray detectible and is sewn into the towel so that the towels can be observed on an X-ray if they are accidentally left inside a patient after surgery.

The finished towels measure approximately 17 inches in width and 29 inches in length and are hemmed on three sides. The radio-opaque cord, measuring 13 inches in length, is sewn into the hem on one of the short sides of the towel. The towels are made of a 100 percent cotton fabric, which is made in the China. The cord is manufactured in Taiwan and consists of a thin, flexible barium core which has received a protective coating of latex rubber.

The raw fabric is shipped from China to the Philippines in bolts measuring approximately 36 inches in width and between 40 and 100 meters in length. In the Philippines, the raw fabric is cut to an approximate 18 inch width and 30 inch length. The radio-opaque cord is cut into lengths of approximately 13 inches and the sewn onto one of the short sides of the unfinished towel.

The towels are then hemmed on three or four sides, which reduces the size of the towels to their pre-laundered dimension of approximately 17 inches in width and 29 inches in length. The assembled towels are machined laundered and are treated with chemical fabric softeners.

The towels are put through a centrifuge to remove most of the water and the chemical fabric softeners. Next, they are hot-air tumble-dried until completely dry. A vacuum delinting machine is used to remove lint and loose thread pieces. The towels are folded and packaged so that they can be shipped to the U.S. You point out that post drying steps are done in an isolated clean room manufacturing environment to make sure that the towels are not contaminated, which adds to the cost and the difficulty of manufacturing the towels.

The latest cost figures show that the fabric cost about $0.23 and the cost of the cord is $0.16 for each towel. The production costs of making a towel in the Philippines including profit is about $0.15. The final selling price from the Philippines is almost $0.40 a towel. It is also estimated that it takes about 3.5 minutes per towel to complete the processing steps done in the Philippines.

ISSUE:

Whether the processing done in the Philippines described above would constitute a substantial transformation pursuant to 19 CFR 12.130?

LAW AND ANALYSIS:

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 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.

Section 12.130, Customs Regulations (19 CFR 12.130), sets forth the principles for making country of origin determinations for textile and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854) ("section

Pursuant to 19 CFR 12.130, the standard of substantial transformation governs the determination of the country of origin where textiles and textile products are processed in more than one country. The country of origin of textile products is deemed to be that foreign territory, country, or insular possession where the article last underwent a substantial transformation. Substantial transformation is said to occur when the article has been transformed into a new and different article of commerce by means of substantial manufacturing or processing operations. Customs has issued several rulings that deal with the country of origin of surgical towels where we have consistently ruled that the country of origin of surgical towels is the country where the fabric is made. For example, in 733601 (July 26, 1990), Customs ruled that surgical towels are not substantially transformed in the country where the material is cut to length and width, hemmed, washed and shrunk, and folded. In HQ 087477 (August 30, 1990), we concluded that surgical towels cut, sewn, and finished in American Samoa from Chinese cotton fabric was considered to be a product of China. The rationale supporting this conclusion is that the cutting, sewing and finishing operations performed to make a surgical towel are not considered to be substantial manufacturing processes required by 19 CFR 12.130.

Most recently in HQ 733974 (March 15, 1991), we noted that surgical towels are made out of a cloth known as "huckaback" or "huck." A dictionary of textile terms published by Dan River Inc. defines "huckaback" or "huck" as cloth with a honeycomb effect; the filling yarn are slackly twisted to aid absorption. ... very absorbent, durable, serviceable for towels and will withstand rough use. We pointed out that it is the huckaback fabric rather than the subsequent processing which imparts to the surgical towels its identity, commercial use, and fundamental character.

In this case the processing done to the towels in the Philippines is similar to the processing that was done in the cases cited above except that the radio-opaque cord is sewn into the towels. The addition of the radio-opaque, although an enhancement of the towels which does add some value, does not alter the fundamental character of the towels. The article is a surgical towel before the cord is sewn and remains a surgical towel after the cord is sewn into a hem in of the short side of the towel. The name, character or use of the surgical towel does not change. It is a surgical towel with a special feature, but it is still a surgical towel. In accordance with our previous rulings on surgical towels, the processing in the Philippines, the cutting, hemming, laundering, folding, and packaging is deemed not to be a substantial manufacturing process required by 19 CFR 12.130.

Medline claims that two processing operations performed in the Philippines distinguish its case from that of other surgical towels cases in which Customs determined that no substantial transformation had occurred. These include the insertion of the radio opaque cord and the delinting and pre-sterilization folding which it claims are generally done by others in the United States. According to the information submitted, the cutting and insertion of the radio opaque cord accounts for 13% of the total time expended in the Philippines and the delinting process accounts for 31% of time expended. (The data submitted indicates that it takes approximately 3.5 minutes per towel to perform all operations in the Philippines.)

After careful consideration of the information presented, we conclude that neither of the above processes warrants a finding that the processing performed in the Philippines constitutes a substantial transformation. First, neither of these processes results in a new and different article of commerce. Although the addition of the radio-opaque cord is an enhancement of the towels which does add some value, it does not alter the fundamental character of the towels which is determined by the type of fabric which is used. It use as a surgical towel remains the same. The delinting and pre-sterilization folding are minor steps which render the towels ready for use and in no way change their name, character, or use.

Second, neither of these processes, either by themselves or coupled with the cutting and hemming operations, can be considered substantial manufacturing operations. They result in minor physical changes to the articles. They are simple operations and they require only unskilled labor. Although these operations add some time and cost to the overall Philippines operations, none of these operations are particularly time consuming or costly. As indicated above, all the operations performed in the Philippines, including folding and packaging, take only approximately 3.5 minutes per towel and the cost of production including profit and packaging is approximately $0.15 per towel. In contrast, the cost of the fabric is approximately $0.24 cents per towel. Accordingly, we do not consider the additional processes of inserting the radio-opaque cords in the towels and the delinting of the towels to constitute a substantial transformation within the meaning of 19 CFR 12.130.

HOLDING:

The above-described processing of surgical towels in the Philippines which includes the insertion of a radio-opaque cord does not constitute a substantial transformation under 19 CFR 12.130. Accordingly, the country of origin of the operating room towels is the country where the fabric is made, China.

Sincerely,

John Durant, Director

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