HQ 0734425 - Country of origin marking of imported yarns further processed in the U.S.; dyeing, shrinking, weighting and bleaching of imported yarns; substantial transformation; textiles; 19 CFR 12.130(b)(d)(e); HQ 952208 - United States International Trade Commision Rulings

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HQ 734425

January 7, 1992

MAR-2-05 CO:R:C:V 734425 AT

CATEGORY: MARKING

District Director of Customs
One Virginia Avenue
Wilmington, North Carolina 28401

RE: Country of origin marking of imported yarns further processed in the U.S.; dyeing, shrinking, weighting and bleaching of imported yarns; substantial transformation; textiles; 19 CFR 12.130(b)(d)(e); HQ 952208

Dear Sir:

This is in response to your memorandum dated December 19, 1991, requesting internal advice on the country of origin of yarn imported from Mexico and Peru by Belmont Dyers Co. (Belmont) to be further processed in the U.S. Additional submissions and samples were submitted, by counsel, on behalf of Belmont and received by this office on May 26, 1992.

FACTS:

According to counsel's submission, Belmont imports yarns from Mexico and Peru to be further processed in the U.S. The processing performed by Belmont consists of a combination of dyeing, shrinking, weighting and in most cases bleaching the yarn. The U.S. processing is summarized as follows:

1. The imported yarn is first wound off the standard cones and onto specially designed dye tubes.

2. Yarns that are intended to be dyed lighter colors then undergo a bleaching process to lighten the raw yarn and make the color uniform.

3. The yarn then undergoes a preshrinking process using a variety of chemicals. The preshrinking is designed to reduce the size of the yarn by 7%-8%.
4. The preshrunk yarn then undergoes the actual dyeing process where it is treated with dyes as well as salt and other chemicals.

5. Following the dyeing, the yarn undergoes a specified drying process.

6. Once dry, the yarn then undergoes a winding process. Winding transfers the dyed yarn from a dye tube to a cone. During the winding process, two additional processes are occurring. The first is weighting. Weighting is designed to add 7% to 9% additional weight to the yarn in order to ensure proper handling in subsequent manufacturing operations. The second is lubricating. Lubricating is a process where by specially designed lubricants are applied to the yarn to enhance lubricity during further manufacturing processes.

Counsel claims that the U.S. processing requires 15 hours and adds approximately 100% of the cost of the imported yarn. Counsel also claims that the U.S. processing performed by Belmont constitutes a substantial transformation within the meaning of Section 12.130, Customs Regulations (19 CFR 12.130) thus rendering the yarn a product of the United States not subject to country of origin marking requirements.

ISSUE:

What is the country of origin for imported yarn which is processed in the manner described above for marking, tariff and quota 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), sets forth the principles for determining country of origin for marking and other purposes 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. (Emphasis added).

19 CFR 12.130(d) sets forth the criteria to be applied 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.

In HQ 952208 (October 8, 1992), Customs considered whether foreign sourced untwisted continuous singles viscose filament yarn imported into Canada was substantially transformed when processed into two-ply viscose filament yarn. In holding that the imported yarn was not substantially transformed in Canada, Customs stated that both the foreign sourced untwisted viscose filament yarn and finished two-ply viscose filament yarn qualified under the general commercial designation of "yarn" and therefore there had been no change in the fundamental character of the imported yarn after being further processed in Canada.

Similarly, in this case, in the form it enters the U.S., the subject merchandise is commercially referred to as cotton yarn. After being further processed in the U.S. the finished product is still commercially known as cotton yarn, although it is now colored cotton yarn. Both the imported yarn and finished colored yarn fit under the general commercial designation of "yarn" and therefore there has been no change in fundamental character.

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.

Counsel contends that the processes of dyeing, shrinking, weighting, and in most cases bleaching, the imported yarn performed in the U.S. constitutes a substantial manufacturing operation under Section 12.130(e)(1), Customs Regulations (19 CFR

Section 12.130(e)(1)(i) states that the dyeing of fabric and printing when accompanied by two or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing is considered to be a substantial manufacturing or processing operation normally resulting in a change in a product's country of origin status. (Emphasis added).

In this case, imported yarn, not fabric, is dyed, weighted, shrunk, and in most cases bleached in the U.S. Therefore, section 12.130(e)(1)(i) is not applicable because it requires both the dyeing and printing of fabric, not yarn, when accompanied by two or more finishing operation such as weighting, shrinking and bleaching.

Furthermore, section 12.130(e)(2)(iv) states that one or more finishing operations on yarns, fabrics or other textile articles, such as showerproofing, superwashing, bleaching, decating, fulling, shrinking, mercerizing or similar operations: or (v) dyeing and/or printing of fabrics or yarns; does not constitute a substantial manufacturing or processing operation resulting in a change of origin. Therefore, in this case, we find that the U.S. processing consisting of dyeing, shrinking, weighting, and bleaching does not constitute a substantial manufacturing or processing operation and the imported yarn is not substantially transformed in the U.S. Accordingly. the country of origin of the imported yarn is "Mexico" or "Peru". HOLDING:

Pursuant to 19 CFR 12.130, for marking, tariff, and quota purposes, the country of origin of the imported yarn which is processed in the manner described above is Mexico or Peru.

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. In such circumstances, 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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