HQ 0734220 - Country of origin marking of imported women's silk scarves; substantial transformation; 19 CFR 12.130; - United States International Trade Commision Rulings

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HQ 734220

December 27, 1991

MAR-2-05 CO:R:C:V 734220 AT

CATEGORY: MARKING

Ms. Jodi Chick
A.N. Deringer, Inc.
1010 Niagara Street
Buffalo, New York 14213

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

Dear Ms. Chick:

This is in response to your letter of May 6, 1991, on behalf of Designer Scarves by Mindy, Inc., requesting a ruling on the country of origin of two styles of imported women's hand- painted 100% silk scarves for marking purposes. A sample of each style of scarf was submitted for examination.

FACTS:

Designer Scarves by Mindy intends to import two different styles (Style A and Style B) of women's hand-painted 100% silk scarves from Canada. Each of the scarf's shorter ends has an overlock stitch to prevent unravelling and each of the two longer sides has a narrow selvage edge. As stated in the NIS (New York Seaport) memorandum dated June 6, 1991 the processing performed to produce each style of scarf is listed below:

Style A: Chinese made woven 100% silk fabric, in the form of 45 meter rolls measuring 90 centimeters across, will be imported into Canada. The cost of the fabric is $3.00 per yard. In Canada, the fabric, which has no lines of demarcation, is cut to length, hand- painted, the edges are sewn, the pleats are added and set by hand. The wholesale price of the finished scarf is $23.00.

Style B: A substantially completed scarf manufactured in China and composed of woven, 100 percent silk fabric is imported into Canada. The cost of the unfinished scarf is $2.00. In Canada, the scarf is dry cleaned, hand-painted, steam fixed (a process of rolling the scarf in a piece of fabric and placing the rolled scarf and fabric in a steam box to permanently set the paint), washed, ironed and packaged for exportation to the U.S. The wholesale price of the finished scarf is $15.00.

ISSUE:

What is the country of origin of the two styles of women scarves (Styles A and B) processed in the manner described above for marking purposes?

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), outlines the criteria used to determine the country of origin for textiles and textile products. 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) substantial manufacturing or processing.

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 substantial manufacturing 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.

Section 12.130(e) sets forth specific examples of processes which would and would not result in a substantial transform- ation. The examples that are most germane are sections 19 CFR 12.130(e)(1)(i), which provides that dyeing and printing accompanied by two or more of a series of finishing processes would result in a substantial transformation and 19 CFR 12.130(e)(2)(ii), which provides that cutting to length or width and hemming or overlocking fabric which are readily identifiable as being intended for a particular use would not result in a substantial transformation. Neither of these examples, nor any combination of the examples completely describes the processes at hand in this case.

In HQ 084272 (August 18, 1989), Customs ruled that the country of origin of scarves consisting of woven rayon Indian fabric which was cut to length and sewn on all four sides, labeled, pre-ticketed and pre-packaged in Canada was India as the Canadian processing did not result in a substantial transformation. In India, the fabric was ripped to the approximate dimensions of the finished scarf. The ruling states that the cutting and hemming operations which take place in Canada are simple operations which do not significantly change the scarves. In C.S.D. 90-29 (November 6, 1989), Customs ruled that the country of origin of towels was the country from where the greige toweling fabric was made and not where the toweling material was processed. In that case, greige fabric was bleached, dyed, dried, painted, cut to size, sewn, mended, and packaged in the Philippines. In HQ 733787 (March 14, 1991) Customs ruled that Pakistani greige fabric sent to Sri Lanka, where it was converted into bleached white fabric which was then cut and sewn into sheets did constitute a substantial transformation. In stating that a substantial transformation had occurred, HQ 733787 distinguished C.S.D. 90-29 by calling attention to the limited uses of the toweling material used in C.S.D. 90-29 as opposed to the sheet material in 733787.

In this case, it is our opinion that in the first scenario (Style A scarf) the imported roles of fabric are substantially transformed into hand-painted, pleated scarves in Canada. The rolls of imported fabric have no specific use upon their importation into Canada. Without lines of demarcation, the fabric could be used to make a variety of items from scarves or handkerchiefs to apparel to textile furnishing items. Thus, the Canadian processing results in a new and different article of commerce. In addition, while merely cutting and sewing the two edges would not constitute a substantial manufacturing process, as was the case in HQ 084272, when the hand-painting and pleating are considered in conjunction with the cutting and sewing operations, as well as the value added in Canada, we find that substantial manufacturing does occur in Canada. Therefore, we find that the country of origin of the Style A scarf for marking purposes is Canada.

On the other hand, with respect to the Style B scarf we find that no substantial transformation occurs in Canada. While the value added in Canada is considerable, and the hand-painting provides a significant decoration to the scarf, the items imported and exported from Canada are essentially 100 percent silk scarves. Upon exportation from China the merchandise is a substantially completed scarf in that it has the shape, length and identity of the completed scarf. Changes to the fundamental character, commercial use and commercial designation mentioned in 19 CFR 12.130(d)(1) have not been accomplished. Therefore, no substantial transformation takes place in Canada and the country of origin of the Style B scarves for marking purposes is China.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of the two hand-painted scarves for marking purposes is Canada for the Style A scarves and China for the Style B scarves.

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), 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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