HQ 0734197 - Country of origin marking of imported women's sweaters; substantial transformation; 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 734197

January 7, 1992

MAR-2-05 CO:R:C:V 734197 AT

CATEGORY: MARKING

Alan D. Meltzer, Esq.
Coudert Brothers
200 Park Avenue
New York, New York 10166

RE: Country of origin marking of imported women's sweaters; substantial transformation; 19 CFR 12.130

Dear Mr. Meltzer:

This is in response to your letter of May 24, 1991, on behalf of your client, Ralph Lauren Womenswear, Inc. (Ralph Lauren), requesting a ruling on the country of origin of imported women's sweaters. Samples of the finished sweaters (Styles 27109, 37125 and 37126) 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 Ralph Lauren intends to import three styles (style Nos. 27109, 37125 and 37126) of women's long sleeve pullover sweaters from Hong Kong. You also state that the production of the sweaters will involve processing operations performed in two countries, Hong Kong and China. According to your letter the following operations will be performed to create each of the finished sweaters. The major panels (front, back and sleeves) for each sweater style will be machine-knit in Hong Kong in a cable-knit pattern. The cuffs, waistband and collarband, and, in the case of two of the styles (37125 and 37126), an American flag pattern insert which forms a portion of the front panel of each of these two styles, will first be hand-knit in China and then exported to Hong Kong where they will be linked and assembled with the major panels into the finished sweater. You claim that the knitting of the major panels of the sweaters and the complete assembly of the sweater panels in Hong Kong constitutes a substantial transformation for country of origin
purposes and that the operations performed in China do not constitute a substantial transformation of the sweaters. Based on this you contend that the country of origin of the sweaters is Hong Kong.

ISSUE:

What is the country of origin of the imported women's sweaters processed in the manner 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 marking country of origin determinations for textile and textile products. 19 CFR 12.130(b), provides that a textile product that is processed in more than one country or territory shall be a product of that country or territory where it last underwent a substantial transformation. A textile product will be considered to have undergone a substantial transformation if it has been transformed by means of substantial manufacturing or processing operations into a new and different article of commerce.

19 CFR 12.130(d) sets forth criteria in determining whether a substantial transformation of a textile product has taken place. This regulation states that these criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered.

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) states that in determining whether merchandise has been subjected to substantial manufacturing or processing operations, the following will be considered:

(i) The physical change in the material or article as a result of the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S.

(ii) The time involved in the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S.

(iii) The complexity of the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S.

(iv) The level or degree of skill and/or technology required in the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S.

(v) The value added to the article or material in each foreign territory or country, or insular possession of the U.S., compared to its value when imported into the U.S.

Section 12.130(e)(1) provides that an article or material usually will be a product of a particular foreign territory or country, or insular possession of the United States, when, prior to importation into the United States, it has undergone in that foreign territory or country or insular possession, any of the following:

(iii) weaving, knitting or otherwise forming fabric.

In HQ 950287 (October 30, 1991), Customs ruled that women's sweaters which were finished and assembled in Macau from machine- knit component parts from Macau (back panel, sleeves and collar) and a unspecified foreign country (front panel with flower leaf pattern) last underwent a substantial transformation in Macau. Customs stated that the sweater had been subjected to substantial processing in Macau in that this was where the article underwent a significant change into a completed assembled sweater and the time involved in knitting and assembling the back, sleeves and collar was significantly longer than that of processing the front panel. Similarly, in this case, the subject sweaters last undergo a substantial transformation in Hong Kong. This substantial transformation takes the form of extensive manufacturing and processing operations which include all of the subject merchandise's assembly, finishing work and knitting, except for the knitting in China of the cuffs, collarband, waistband and in the case of style Nos. 37125 and 37126, the American flag insert. The sweaters are all subjected to substantial processing in Hong Kong inasmuch as it is here that the major portions of the sweater are knit, and that the sweaters undergo a significant physical change into a completely assembled sweater.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of these women's long sleeve knitted pullover sweaters (Style Nos. 27109, 37125 and 37126) is Hong Kong.

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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