HQ 0734193 - Country of origin marking of imported stuffed toys; substantial transformation; cutting of fabric in Korea and sewing assembly in China - United States International Trade Commision Rulings

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HQ 734193

January 6, 1992

MAR-2-05 CO:R:C:V 734193 AT

CATEGORY: MARKING

Patrick D. Gill, Esq.
Rode & Qualey
295 Madison Avenue
New York, New York 10017

RE: Country of origin marking of imported stuffed toys; substantial transformation; cutting of fabric in Korea and sewing assembly in China

Dear Mr. Gill:

This is in response to your letters of May 13 and September 6, 1991, on behalf of Gund, Inc., requesting a ruling on the country of origin of imported stuffed toys. A finished stuffed polar bear, as well as the components as they exist at the conclusion of each major stage in the production process were submitted for examination.

FACTS:

You state that Gund, Inc. intends to import stuffed toys from Korea. You also state that the production of the stuffed toys will involve processing operations performed in two countries, Korea and China. The operations to be performed in Korea will consist of the cutting of Korean fabric into approximately 12 pieces which form the stuffed toy skin. These 12 pieces will then be exported to China where they will be sewn together into the skin for the stuffed toy. The skins will then be sent back to Korea where they will be stuffed with Korean stuffing material, sewn closed, the eyes and nose will be sewn on and packaged for shipment to the U.S. You state that the operations performed in Korea represent approximately 80 percent of the total value of the finished stuffed toys. You state that the cutting of the Korean fabric into the 12 pieces in Korea constitutes a substantial transformation and that the sewingoperation performed in China does not. Based on this you contend that the country of origin of the stuffed toys is Korea.

ISSUE:

What is the country of origin of the imported stuffed toys 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 toys 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.

In HQ 734214 (November 18, 1991), we considered whether the assembly in China of Taiwanese fishing rod components constituted a substantial transformation and found that it did not, stating that the assembly of all the foreign components in China did not result in the manufacture of a new and different article in that the assembly operation was simple, the foreign component parts did not lose their identity (no change to the physical dimensions of the components occurred) and the assembly operation added only 15 percent to the total value of the finished fishing rods. Accordingly, we ruled that the country of origin of the fishing rods was the place where the components were made "Taiwan" and not the place where the simple assembly took place "China".

Similarly, in this case, we find that the sewing in China of the 12 pieces of fabric into the stuffed toy skin does not constitute a substantial transformation of the Korean fabric pieces. Like the fishing rod assembly in HQ 734214, the extent of the operations performed in China is simple in that it requires the sewing of only 12 small pieces of fabric, the 12 pieces of fabric do not lose their identity (no change to the physical dimensions of the fabric pieces occur as a result of sewing them together) and the assembly operation adds only 20 percent of the total value of the finished stuffed toy which we consider to be relatively low. Accordingly, the country of origin of the stuffed toys is Korea.

HOLDING:

The country of origin of the imported stuffed toys processed in the manner described above is Korea.

Sincerely,

John Durant, Director
Commercial Rulings Division

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