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HQ 556793


October 1, 1992

CLA-2-CO:R:C:S 556793 RAH

CATEGORY: CLASSIFICATION

Mr. Alan Robson
General Manager
Central America and Caribbean
A & E de Costa Rica S.A.
Apartado 20-3006
Zona Franca Metropolitana del Barreal de Heredia Costa Rica

RE: Country of Origin; Thread;Yarn; Textile Products; Dyeing; Finishing; Substantial Transformation; 19 CFR 12.130

Dear Mr. Robson:

This is in response to your letter of June 12, 1992, in which you ask whether yarn or thread which is imported into Costa Rica where it is dyed and finished would be considered "made" in that country.

FACTS:

In response to a previous request for a ruling from you, we issued Headquarters Ruling Letter (HRL) 556523, dated May 29, 1992, which held that U.S.-origin thread exported to Costa Rica for dyeing and and the application of a lubricant is ineligible for a duty allowance under subheading 9802.00.80, HTSUS, upon importation into the United States as part of assembled garments. We stated that the thread was not exported from the U.S. in condition ready for assembly, and that the dyeing and lubricating operations are not incidental to the assembly of the thread with fabric, as required by the statute.

Since the thread is subject to duty under the above circumstances, you ask whether it is considered to be "made" in Costa Rica. You also ask whether yarn sourced from a third country and imported into Costa Rica where it is dyed and finished would be considered "made" in that country.

For purposes of this ruling, we assume the facts relating to the processing of the thread in Costa Rica is the same as those in HRL 556523. The thread is exported to Costa Rica in disposable plastic centres where it is dyed to match fabric. After dyeing, the yarn is wound onto a plastic cone to a length of 6000 yards and, as it is winding, it passes over a surface which contains a silicon/wax mixture which gives the thread "sewability." This lubricant keeps the needle cool as the thread passes through it in sewing operations. You state that the undyed and unlubricated thread would not be of use as sewing thread without these operations. The character of the thread is not changed by these operations; the porosity, surface and texture remain the same.

ISSUE:

Whether thread of U.S. origin and yarn from a third country which are shipped to Costa Rica for dyeing and finishing operations are considered "products of" that country.

LAW AND ANALYSIS:

Section 12.130, Customs Regulations (19 CFR 12.130), sets forth the principles for country of origin determinations for textile and textile products. According to 19 CFR 12.130(b), 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. However, an exception to this rule for U.S. textile articles sent abroad for processing is set forth in 19 CFR 12.130(c), which provides as follows:

Chapter 98, Subchapter II, Note 2, Harmonized Tariff Schedule of the United States, provides that any product of the U.S. which is returned after having been advanced in value or improved in condition abroad, or assembled abroad, shall be a foreign article for the purposes of the Tariff Act of 1930, as amended. In order to have a single definition of the term "product of" and, therefore, a single country of origin for textile or textile product, notwithstanding paragraph (b), merchandise which falls within the purview of Chapter 98, Subchapter II, Note 2, Harmonized Tariff Schedule of the United States, may not, upon its return to the U.S., be considered a product of the U.S.

Therefore, U.S.-made thread which is exported to Costa Rica for dyeing and finishing operations will be considered a "product of" Costa Rica, as the thread is advanced in value and/or improved in condition in that country (as discussed in HRL 556523, supra) within the meaning of 19 CFR 12.130(c).

You also ask whether foreign-origin yarn shipped to Costa Rica for dyeing and finishing is considered a "product of" that country. As stated above, 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. Factors indicating whether or not a particular manufacturing processing operation is substantial are set forth in 19 CFR 12.130(d)-(e). While section 12.130(e)(1)(i) provides that an article or material usually will be a product of the particular country where it has been both dyed and printed when accompanied by two or more of the finishing operations enumerated, section 12.130(e)(2) provides that the article or material usually will not be considered to be a product of the particular country by virtue of merely having undergone one or more finishing operations or having been dyed and/or printed. In HRL 734392 dated February 10, 1992, we held that sweaters exported to Hong Kong for dyeing, washing, ironing and packing for export to the U.S. are not substantially transformed into products of Hong Kong as the processes performed are only finishing operations.

Under the facts presented, we find that the dyeing and finishing of yarn in Costa Rica constitute mere finishing operations that fall short of a substantial transformation under 19 CFR 12.130(e)(1)(i). Accordingly, the foreign-sourced yarn shipped to Costa Rica for dying and finishing will be considered a product of the country where the yarn was formed. However, if the yarn imported into Costa Rica is woven into fabric after it is dyed and finished, the resulting fabric would be considered a product of Costa Rica. See 19 CFR 12.130(e)(1)(iii).

For your information, we have enclosed a copy of 19 CFR 12.130.

HOLDING:

Pursuant to 19 CFR 12.130(c), the country of origin of the U.S.-origin thread exported to Costa Rica for dyeing and lubricating is Costa Rica. The yarn sourced from another country and exported to Costa Rica for dyeing and finishing operations is not substantially transformed into a product of Costa Rica, but remains a product of the country where the yarn was formed.

Sincerely,

John Durant, Director
Commercial Rulings Division

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