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HQ 734405


April 3, 1992

MAR-2-05 CO:R:C:V 734405 GRV

CATEGORY: MARKING

Howard M. Paull, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C. 76 Broad Street
New York, NY 10004

RE: Country of origin and quota treatment of girls' denim pants from Indonesia, assembled in Indonesia from fabric manufac- tured and cut to shape in Taiwan. Textile products; 19 CFR 12.130; T.D. 85-38; T.D. 90-17; Substantial Transformation; 19 CFR 12.130(e)(2)(i); 19 CFR 12.130(d)(2); 083359; C.S.D. 90-19; C.S.D. 90-20; 086229; 082747; 734215

Dear Mr. Paull:

This is in response to your letter of October 29, 1991, on behalf of Sanroy Corp., requesting a ruling on the country of origin of textile products (girls' denim pants) assembled in a country (Indonesia) other than the country of origin where the fabric was manufactured and cut to shape (Taiwan). An unmarked sample pair of assembled pants was submitted for examination, and, per your request, will be returned under separate cover.

FACTS:

Certain denim fabric, woven and cut into panels (ten) in Taiwan, will be sent to Indonesia where they will be assembled into four sizes (4, 5, 6, and 6X) of girls' pants. The pants will be comprised of a shaped waistband with seamed front, an elastic waistband with a flat front, 8 belt loops, two pleats on each side of the front, two scoop pockets and two patch pockets. All four pockets will be accented with a lace trim--from Indonesia--and the two front scoop pockets will have one large and two small rosette accents. The pants will also have an all lace sash. Regarding the operations performed in each of the two countries, the unit cost and time data provided show that the Taiwanese operations (weave and cut fabric) will account for 75% of the garment's total cost and <40% of the processing time; the Indonesian operations (sew piece goods, wash and pack garment) will account for 25% of the garment's total cost and >60% of the processing time. The finished pants will then be imported into the U.S.
In a telephone conversation with a member of my staff on March 19, 1992, a member of your firm stated that the cost of the lace component from Indonesia was negligible and that it was not factored into the consolidated figures given above. Further, it was stated that the imported merchandise will be classified under HTSUS subheading 6204.63.3510, which has a Textile Category System (TCS) number of 648.

Based on our findings and determination in Headquarters Ruling Letter (HRL) 083359 dated May 18, 1990, which dealt with trousers processed in multiple countries, you believe that Taiwan is the country of origin of the girls' pants and request that we so rule in this letter.

ISSUE:

What is the country of origin of the girls' pants, for marking and textile quota purposes, under 19 U.S.C. 1304 and 19 CFR 12.130(b)?

LAW AND ANALYSIS:

The General Country of Origin Marking Requirement

The marking statute, 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) 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 manner as to indicate to the ultimate pur- chaser the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The primary purpose of the country of origin marking statute is to "mark the goods so that at the time of purchase the ulti- mate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influ- ence his will." United States v. Friedlaender & Co., 27 CCPA 297, 302, C.A.D. 104 (1940).

The Country of Origin Requirements Applicable to Textiles and Textile Products

For textiles and textile products subject to 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), the principles for determining the country of origin are provided at 12.130, Customs Regulations (19 CFR 12.130). For purposes of 12.130, where a textile or textile product consists of materials produced or derived from, or processed in, more than one foreign territory or country, or insular possession of the U.S., the country of origin is defined as that foreign territory or coun- try, or insular possession where it last underwent a substantial transformation. A textile or textile product will be considered to have undergone a substantial transformation if it has been transformed by means of substantial manufacturing or processing into a new and different article of commerce. 19 CFR 12.130(b). Thus, the substantial transformation test for textiles embraces two separate findings: (1) whether there has been a new and different article of commerce created, and (2) whether the new article was created by means of a substantial manufacturing or processing operation. See, Mast Industries, Inc. v. United States, 11 CIT 30, 652 F.Supp. 1531 (1987), aff'd, 5 Fed.Cir. 105, 822 F.2d 1069 (1987).

Factors indicating whether or not a particular manufactur- ing/processing operation is substantial are set forth in 19 CFR 12.130(d)-(e). Section 12.130(d)(2) provides that in determining whether merchandise has been subjected to substantial manufactur- ing/processing operations, (1) the physical change to the material/article, (2) the relative time involved in the foreign operation, (3) the relative value added to the material/article, (4) the complexity of the foreign operation, and (5) the level/ degree of skill/technology required for the foreign operation will be considered. Section 12.130(e)(1)(iv) provides that fabric material usually will be a product of the particular country where it has been cut and those parts assembled into the completed article, however, 12.130(e) (2)(i) provides that the fabric material usually will not be considered a product of the particular country where simple combining operations occur.

As the merchandise imported is classifiable in HTSUS section XI and was processed in more than one foreign country, the coun- try of origin rules of 12.130(b) are applicable, and Customs has stated that the principles of origin contained in 12.130 are applicable to such merchandise for all Customs purposes, including the assessment of duties and marking. T.D. 85-38, 19 Cust.Bull. 58, 68 (1985), and T.D. 90-17, 24 Cust.Bull. ___ (1990). Regarding the substantial transformation criteria and examples found at 12.130, Customs has stated that "[a]ny factual situations not squarely within those examples will be decided by Customs in accordance with the provisions of section 12.130(b) and (d)." T.D. 85-38, at p. 72. In general, Customs has also stated that "[c]utting garment parts from fabric will result in a substantial transformation of the fabric. T.D. 85-38, at p. 67. See also, HRL 734215 dated November 13, 1991.

In C.S.D. 90-19, we considered whether sweatshirts, assembled from cut panels in a country other than the country where the fabric was manufactured and cut, was substantially transformed by the assembly operations in the second country. Stating that wherever the fabric is purchased and cut would be the country of origin pursuant to 19 CFR 12.130, we held that the sweatshirts were not substantially transformed by the simple assembly operation in the second country. See also, C.S.D. 90-20 (foreign assembly of cotton work gloves from fabric purchased and cut into pieces in first country).

In the referenced Headquarters Ruling Letter (HRL 083359 dated May 18, 1990), Customs considered whether the complete sewing and finishing of trousers--with trim articles--in Thailand--a country other than the country of origin of the fabric--of parts cut in Taiwan--where the fabric was also produced--constituted a substantial transformation of the trouser parts for purposes of 19 CFR 12.130. Finding the processing operations in Thailand to be a simple assembly operation, which did not involve a high degree of skill and workmanship, and that a significant percentage of the articles' value added occurred in Taiwan, Customs ruled that Taiwan was the country of origin of the imported trousers. See also, HRL 733841 dated February 7, 1991 (8 garment components cut in Taiwan and assembled in China were determined to be Taiwanese for country of origin marking, quota and duty purposes).

After examining the textile sample submitted and for the reasons which follow, we find that the pants will be a product of Taiwan when imported into the U.S. Applying the criteria at 12.130(d), we find that the Indonesian assembly operations do not substantially transform the Taiwanese fabric components: they do not involve a high degree of skill and workmanship--no tailoring of the pants is apparent; the physical change to the material/article is minor; the relative values added to the pants by means of the assembly operations is not substantial, account- ing for only 25% of each unit's cost, and; the complexity of the foreign operation appears to be simple rather than complex. These findings are in accordance with the above referenced rulings. Accordingly, no substantial transformation of the Taiwanese fabric occurs in Indonesia; the assembly operations are simple, not complex, combining operations.

HOLDING:

The country of origin of the girls' pants, for marking and textile quota purposes, is Taiwan, under 19 U.S.C. 1304 and 19 CFR 12.130(b), as the assembly operations performed in Indonesia do not substantially transform the Taiwanese component parts.

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 177.9(b)(1), Customs Regulations (19 CFR 177.9(b)(1)), which provides 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 informa- tion furnished is not complete and does not comply with 19 CFR 177.9(b)(1), the ruling will be subject to modification or revo- cation. 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 177.2, Customs Regulations (19 CFR 177.2).

Sincerely,


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