HQ 0734149 - Country of origin marking of imported nylon taffeta stuffed Santas; substantial transformation; cutting of fabric in Korea or China and assembly in China; Belcrest Linens v. United States; T.D. 67-173; C.S.D. 80-111; HQ 733838; HQ 722997; sewing; assembly; textile dolls - United States International Trade Commision Rulings

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HQ 734149

November 25, 1991

MAR-2-05 CO:R:C:V 734149 AT

CATEGORY: MARKING

Mr. James Shaw
Associated Merchandising Corporation
1440 Broadway
New York, New York 10018

RE: Country of origin marking of imported nylon taffeta stuffed Santas; substantial transformation; cutting of fabric in Korea or China and assembly in China; Belcrest Linens v. United States; T.D. 67-173; C.S.D. 80-111; HQ 733838; HQ 722997; sewing; assembly; textile dolls

Dear Mr. Shaw:

This is in response to your letter of April 25, 1991, requesting a ruling on the country of origin of imported nylon taffeta stuffed Santas. A finished stuffed Santa, as well as the components as they exist at the conclusion of each major stage in the production process were also submitted for examination.

FACTS:

You state that you intend to import nylon taffeta stuffed Santas from Korea and would like to verify the country of origin of the stuffed Santas which are to be processed under the following two conditions:

Condition 1- Korean fabric will be dyed and cut in Korea into approximately 25 shaped pieces and then exported to China to be assembled by sewing and shipped back to Korea to be stuffed and packaged for export to the U.S.

Condition 2- Korean fabric will be dyed in Korea and then exported to China to be cut into approximately 25 shaped pieces and assembled by sewing and shipped back to Korea to be stuffed and packaged for export to the U.S.

ISSUE:

What is the country of origin of the imported stuffed Santas that are processed under the conditions 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 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. Congressional intent in enacting 19 U.S.C. 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b), defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transform- ation in order to render such other country the "country of origin" within the meaning of Part 134. A substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. Koru North America v. United States, 12 CIT 1120, 701 F.Supp. 229 (1988). The question of when a substantial transformation occurs is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022 (1983). (Although the stuffed Santas consist of textile materials, the rules for determining the country of origin for textile products set forth in section 12.130 are not applicable because they are classified outside of section XI, HTSUS and they are not subject to quota).

In determining whether the assembly of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed.Cir. 105, 741 F.2d. 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D.s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.

Clearly in condition 2, where the fabric is both cut into 25 pieces and then sewn together in China to form Santa shells, a substantial transformation takes place. The operations of cutting fabric into 25 pieces and the sewing of those pieces into Santa doll shells would definitely be considerd more than a simple or minimal operation. Further, the rolls of fabric lose their identity after the cutting and sewing operations are performed in that mere fabric becomes Santa doll shells. Condition 1, where the fabric is cut in Korea and sewn in China, presents a closer question. Although it appears that a substantial transformation may take place in China under these conditions, we cannot make a definite determination as to the country of origin without addtional information detailing the operations to be performed in each country (i.e., time involved, type of labor used, cost of each operation).

The second question presented is whether the finished Santa shells shipped from China undergo a later substantial transformation in Korea, where they will be stuffed and packaged for exportation to the U.S. Customs ruled in HQ 733838 (February 7, 1991), that the country of origin of a stuffed doll was the country where the shell was made inasmuch as the stuffing operation was not a substantial transformation. See also HQ 722997, August 30, 1983 (stuffing of toy figures and the process of sewing only the seam on the back of each figure left open did not constitute a substantial transformation). Accordingly, in this case the process of stuffing the finished Santa shells in Korea is not a substantial transformation and the country of origin of the stuffed Santas under Condition 2 is China.

HOLDING:

The country of origin of stuffed nylon taffeta Santas processed under Condition 2, as described above, is China. Insufficient information was presented to determine the country of origin of the Santa dolls in Condition 1.

Sincerely,

John Durant, Director
Commercial Rulings Division

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