HQ 0733952 - Country of origin marking of imported children's two-piece tracksuits; substantial transformation; 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 733952
February 15, 1991

MAR-2-05 CO:R:C:V 733952 KG

CATEGORY: MARKING

Robert B. Silverman, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman 12 East 49th Street
New York, N.Y. 10017

RE: Country of origin marking of imported children's two-piece tracksuits; substantial transformation; 19 CFR 12.130

Dear Mr. Silverman:

This is in response to your letter of November 21, 1990, requesting a country of origin ruling on behalf of Cradle Togs, Inc., regarding imported children's two-piece tracksuits. Samples were submitted for examination.

FACTS:

The following operations will be performed in Hong Kong: (1) the fleece and ribbed-knit fabric will be knit; (2) the fabric will be dyed; (3) the fleece fabric and ribbed-knit fabric will be wound on bolts ready for shipment; (4) a portion of the fleece fabric and all of the ribbed-knit fabric will be shipped to St. Lucia; and (5) a portion of the fleece fabric is cut to form the front panel for tracksuit top of styles 73206 and 73254A, and one of two front panels for the tracksuit top of styles 73200A and 73209A. These front panels are shipped to the People's Republic of China("PRC").

The front panels will be decorated with plastic ornaments, appliques and embroidery in the PRC and then shipped to St. Lucia.

In St. Lucia, the following operations will be performed: (1) the fleece fabric will be cut into component parts; (2) the ribbed-knit fabric will be cut into component parts; (3) the components will be screen printed; (4) the tops and pants will be assembled by machine sewing; and (5) the garments will have labels sewn in, be inspected, folded and packed.

ISSUE:

What is the country of origin for the purposes of 19 CFR 12.130 of the imported tracksuits described above?

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.

In T.D. 85-38 there is a discussion of how the examples and the factors enumerated in the regulation are intended to operate. "Examples set forth in 19 CFR 12.130(e) are intended to give guidance to Customs officers and other interested parties. Obviously, the examples represent clear factual situations where the country of origin of the imported merchandise is easily ascertainable. The examples are illustrative of how Customs, given a factual situation which fall within those examples, would rule after applying the criteria listed in 12.130(d). Any factual situation not squarely within those examples will be decided by Customs in accordance with the provisions of 12.130(b) and (d)." The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d).

Section 12.130(e)(1)(iv) states that 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.

Bolts of fabric and embellished shirt fronts are shipped to St. Lucia to be cut and sewn into finished tracksuits. Making bolts of fabric and embellished shirt fronts into finished tracksuits is a change in fundamental character. Therefore, there is a new and different article of commerce created in St. Lucia.
The second prong of the substantial transformation standard set forth in 19 CFR 12.130 requires that the merchandise has been subjected to substantial manufacturing or processing operations. This case is not squarely within the example set forth in 19 CFR 12.130(e)(1)(iv). Therefore, the factors set forth at 19 CFR 12.130(d)(2) will be considered to determine if the operations performed in St. Lucia would be considered to be a substantial manufacturing or processing operation or not. The factors set forth at 19 CFR 12.130(d)(2) are: (1) the physical change in the material or article as a result of the manufacturing or processing operations in each foreign country; (2) the time involved in the manufacturing or processing operations in each foreign country; (3) the complexity of the manufacturing or processing operations in each foreign country; (4) the level or degree of skill and/ or technology required in the manufacturing or processing operations in each foreign country; and (5) the value added to the article or material in each foreign country compared to its value when imported into the U.S.

As you noted, all of the components except the shirt front panels are cut in St. Lucia and the complete assembly by sewing of both the top and pants of the tracksuit are done in St. Lucia. The cutting operations performed in St. Lucia account for 75% of the total cutting time required to cut the components for the tops and 67% of the total cutting cost. In addition, all of the sewing operations which form the tracksuit pants and the tops are done in St. Lucia. Customs ruled in HQ 087532 (November 7, 1990), that the country of origin of a fleece top in which all the cutting except the shirt front was done in Panama and all of the sewing of the top was done in Panama was considered to be from Panama although the shirt front panel was cut and embellished in Malaysia. The facts presented in HQ 087532 are on point with the facts presented in this case for the top. The pants involved in this case are both cut and assembled by sewing in St. Lucia.

Based on these factors, we conclude that the merchandise has been subjected to substantial manufacturing or processing operations in St. Lucia. Since both prongs of the substantial transformation standard have been satisfied, the fabric and embellished shirt front panels are considered substantially transformed in St. Lucia. Pursuant to 19 CFR 12.130, the country of origin of the tracksuits is St. Lucia.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of the tracksuits is St. Lucia.

The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 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. Accordingly, it is recommended that a new ruling request be submitted in accordance with section 177.2, Customs Regulations (19 CFR 177.2).

Sincerely,

John Durant
Director,

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