HQ 0734019 - Country of origin marking of imported men's swimming shorts; substantial transformation; 19 CFR 12.130; cutting of fabric in Country A and assembly in Country B - United States International Trade Commision Rulings

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HQ 734019

June 18, 1991

MAR-2-05 CO:R:C:V 734275 AT

CATEGORY: MARKING

Ms. Ludene Murphree
Jann Hsin Enterprise Co., Ltd.
No. 43 Ming Chih St.
Pan Chiao City, Taipei
Hsien Taiwan R.O.C.

RE: Country of origin marking of imported men's swimming shorts; substantial transformation; 19 CFR 12.130; cutting of fabric in Country A and assembly in Country B

Dear Mr. Jann-hsin:

This is in response to your letter of January 10, 1991, requesting a ruling on the country of origin of imported men's swimming shorts. A sample was submitted for examination.

FACTS:

The men's swimming shorts are made of 100 percent nylon with a 100 percent polyester liner. The shorts have a elastic waist band with front pockets on each side and a velcro pocket on the back right side. You state that the fabric will be made and cut into 17 components in Country A. The 17 garment components will then be sewn together into finished swimming shorts and packaged in Country B. About 85% of the processing cost of the garment will be attributable to the processing done in Country A and about 15% of the cost will be attributable to the processing in Country B. According to your submission, the processing time expended for making, cutting and packaging one pair of swimming shorts in Country A will be approximately 10.9 minutes and the processing time expended to assemble the swimming shorts in Country B will be 9 minutes. You also state that the processing performed in Country A will require 8 to 10 skill workers and the assembly processing in Country B will require only 2 to 4 skill workers. You further state that the sewing assembly performed in Country B will not require any tailoring or detail work.

ISSUE:

What is the country of origin of the imported men's swimming shorts?

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 marking 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. 1584) ("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 others words, for textiles governed by 19 CFR 12.130 there is a two part test for substantial transformation: 1) a new and different article of commerce and 2) a substantial manufacturing or processing operation.

In T.D. 85-38, published in the Federal Register on March 5, 1985 (50 CFR 8714), which is the final rule document which established 19 CFR 12.130, 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 factual situations which fall within those examples, would rule after applying the criteria listed in 19 CFR 12.130(d). Any factual situation not squarely within those examples will be decided by Customs in accordance with the provisions of 19 CFR 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) and

Section 12.130(d)(1) states that a new and different article of commerce will usually result from a manufacturing or processing operation if there is a change in: (i) commercial designation or identity, (ii) fundamental character or (iii) commercial use.

Section 12.130(d)(2) lists some of the factors considered in determining whether a manufacturing operation has occurred. These factors include: (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 or 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.

You state that the fabric for these swimming shorts is made and cut in Country A. One of the examples enumerated is 19 CFR 12.130(e)(iii), which states that weaving, knitting or otherwise forming fabric is an example of a manufacturing or processing operation which would qualify under 19 CFR 12.130 as a substantial transformation. Further, Customs stated in T.D. 85- 38 that "Cutting garment parts from fabric will result in a substantial transformation of the fabric. Clearly, making nylon/polyester fabric out of yarn or thread results in a new and different article of commerce. Moreover, the forming of the fabric and the cutting of the garment parts would qualify as a substantial manufacturing operation under 19 CFR 12.130. Therefore, the making of the fabric and cutting it into 17 garment components in Country A constitutes a substantial transformation.

The second question presented is whether the fabric undergoes a later substantial transformation in Country B, where the 17 garment components are sewn together into the finished swimming shorts.

Assembly by sewing is considered in 19 CFR 12.130(e)(v) as usually resulting in a article being deemed a product of the country in which the sewing was done where the assembly is substantial such as the complete assembly and tailoring of all
cut pieces of suit-type jackets, suits, and shirts. After considering all the comments received on the interim regulation regarding assembly by sewing, Customs concluded that "factors such as time, nature of the sewing operation, and the skill required to sew together a tailored garment should be considered in determining whether the merchandise was substantially transformed.... Where either less than a complete assembly of all the cut pieces of a garment is performed in one country, or the assembly is a relatively simple one, then Customs will rule on the particular factual situations as they arise, utilizing the criteria in section 12.130(d)." 50 Fed. Reg. 8,715 (March 5, 1985), T.D. 85-38.

In Headquarters Ruling Letter (HRL) 731036 dated July 18, 1989, Customs ruled that the sewing together of 12 component parts into a men's polo style shirt in a second foreign country was not a substantial transformation under 19 CFR 12.130. The factors considered were the simplicity of the operations performed in the second country, and the lack of time and skill required to perform the operations. In HRL 733841 dated February 7, 1991, Customs ruled that the sewing of 8 component parts into a men's polo style shirt in a second foreign country was not a substantial transformation under 19 CFR 12.130. We stated that the sewing assembly did not require tailoring or detail work, required very little time and did not require highly skilled workers. This case presents similar processing performed in Country B as the two cases previously mentioned. In this case, the sewing assembly of the garment is a simple operation involving only a few skilled workers and not requiring any tailoring or detail work. Further, 85% of the value of the finished swimming shorts is attributable to the processing performed in Country A, as compared to 15% being attributable to Country B. Based on these considerations, we conclude that the 17 garment components do not undergo substantial manufacturing in Country B and therefore, are not substantially transformed in Country B. Accordingly, the country of origin of the swimming shorts is Country A.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of these men's swimming shorts for country of origin marking purposes would be Country A.

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
Commercial Rulings Division

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