HQ 0733972 - Country of origin marking of imported denim jeans; substantial transformation; 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 733972
April 8, 1991

MAR-2-05 CO:R:C:V 733972 KG

CATEGORY: MARKING

David C. Williams, Esq.
Neville, Peterson & Williams
39 Broadway
New York, N.Y. 10006

RE: Country of origin marking of imported denim jeans; substantial transformation; 19 CFR 12.130

Dear Mr. Williams:

This is in response to your letter of November 27, 1990, submitted on behalf of RAm Tov Industries, requesting a ruling on the country of origin of denim jeans for the purposes of duty rates, applicable quota and proper country of origin marking. This ruling does not address the question of eligibility for a duty exemption under the United States- Israel Free Trade Area Implementation Act of 1985.

FACTS:

Your client plans to import womens' full length cotton denim jeans. The jeans feature a fly front with zipper closure, a button closure at the waist band, belt loops, two rear patch pockets, two scoop front pockets and a coin pocket within the right scoop pocket. No sample was submitted for examination. The following operations will be performed in Israel: (1) cotton denim fabric will be woven and dyed; (2) the fabric will be size graded, marked and cut into garment parts; and (3) the garment pieces will be packaged with Israeli-made buttons and thread and shipped to Egypt.

In Egypt, the garment pieces will be assembled by sewing into finished jeans. You state that no tailoring will be required in assembling these jeans and that the joining of the parts will comprise a simple machine sewing operation not involving a high degree of skill or workmanship. The jeans will then be shipped back to Israel for washing, pressing and packing. The cost of the assembly in Egypt is $0.26 while the cost of the fabric and operations performed in Israel is $7.11. ISSUE:

What is the country of origin for the purposes of 19 CFR 12.130 of the imported denim jeans 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 making country of origin determinations for textile and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854)"("section

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 T.D. 85-38 there is a discussion of how the examples and the factors enumerated in the regulation are intended to operate. "Examples set forth in 19 CFR 12.130(e) are intended to give guidance to Customs officers and other interested parties. Obviously, the examples represent clear factual situations where the country of origin of the imported merchandise is easily ascertainable. The examples are illustrative of how Customs, given a factual situation which fall within those examples, would rule after applying the criteria listed in 12.130(d). Any factual situation not squarely within those examples will be decided by Customs in accordance with the provisions of 12.130(b) and (d)." The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d).

The first question presented in this case is whether there is a substantial transformation of the merchandise in Israel, the country where the fabric is produced, cut into garment parts and finished. Clearly, knitting fabric is the creation of a new and different article of commerce which has undergone a substantial manufacturing or processing operation. Section 12.130(e)(iii) of the Customs Regulations provides that processes such as weaving, knitting, or otherwise forming fabric comprise operations that substantially transform textile fibers into a new and different article of commerce. Moreover, cutting garment parts from fabric is considered a substantial transformation. Customs stated in T.D. 85-36 that "Cutting garment parts from fabric will result in a substantial transformation of the fabric. This is not to say, however, that the cut pieces will not undergo a later substantial transformation."

Since the standard for determining country of origin is where the last substantial transformation occurred, the determinative issue presented here is whether the assembly of the jeans in Egypt constitutes a substantial transformation of the cut garment parts. The first prong of the substantial transformation standard is satisfied; the cut garment parts are made into denim jeans which differ in fundamental character from cut garment parts.

The second prong of the substantial transformation standard set forth in 19 CFR 12.130 requires that the merchandise has been subjected to substantial manufacturing or processing operations. This case is not squarely within any of the examples set forth in 19 CFR 12.130(e). Therefore, the factors set forth at 19 CFR 12.130(d)(2) will be considered to determine if the operations performed in Egypt would be considered to be a substantial manufacturing or processing operation or not. The factors set forth at 19 CFR 12.130(d)(2) are: (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 of 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. Customs ruled in HQ 082747 (February 23, 1989), that cut garment parts shipped to Singapore to be completely assembled into denim jeans were not substantially transformed because the assembly operation did not constitute a substantial manufacturing or processing operation. For the purposes of the ruling, Customs assumed that the jeans in question were the "usual denim type nontailored pants and that their assembly merely requires a simple joining of their various parts together by machine stitching." It appears that the jeans involved in this case will be produced in a manner substantially similar to that considered in HQ 082747. The joining of the garment parts is a simple operation which will comprise a simple machine sewing operation not requiring any tailoring or involving a high degree of skill or workmanship. Further, a very significant percentage of the jeans' value will result from work performed or materials sourced in Israel. Based on these considerations, we conclude that the assembly operation involved in this case does not constitute a substantial manufacturing or processing operation. Because this prong of the substantial manufacturing standard has not been satisfied, the garment parts are not considered substantially transformed in Egypt. Since the last substantial transformation of the jeans occurs in Israel, Israel is considered the country of origin for the purposes of country of origin marking, quota and duty purposes.

HOLDING:

The assembly of the denim jeans described above in Egypt does not constitute a substantial transformation. The country of origin of the jeans for the purposes of country of origin marking, quota, and duty purposes is Israel.

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,

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