HQ 0734456 - Country of origin marking of imported women's sweaters; substantial transformation; 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 734456
March 12, 1992

MAR-2-05 CO:R:C:V 734456 KR

CATEGORY: MARKING

Alan R. Klestadt, Esq.
Richard M. Wortman, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman 12 East 49th Street
New York, NY 10017

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

Dear Mr. Klestadt and Mr. Wortman:

This is in response to your letter dated December 27, 1991, on behalf of Jeri-Jo Knitwear, Inc., requesting a ruling on the country of origin of imported women's sweaters. A sample of a finished sweater (body model number RA 5000) as well as the components as they exist at the conclusion of each major stage in the production process were submitted for examination. The sample contained a white knit collar, sleeves , and rear panel; and a front panel composed of white background with the top third of the panel containing a basically horizontal striped pattern in four colors (olive, pink, navy blue and grey), and the bottom two thirds decorated with pink v-shaped designs spaced in rows two inches apart with a grey stripe along the bottom. Another sample was submitted in pieces which were similar to the first sample except that the pink designs were substituted with tan yarn. This ruling will apply only to sweaters matching the samples submitted with this request for ruling.

FACTS:

You stated that Jeri-Jo intends to import two styles of ladies' knit ramie/cotton sweaters with a designated country of origin of Korea. Both of the sweater styles are made from the same body model, RA 5000. One style of sweater will be produced in single dyed version and the second style in double dyed version. You stated that production of the sweaters will involve processing operations performed in two countries, Korea and China. According to your letter dated December 27, 1991, the following operations will be performed to create the finished sweaters. The sweaters will be made from yarn of Korean origin. The rear panel, sleeves and collar will be knit-to-shape in Korea. The front panel will be knit-to-shape in China and then sent to Korea, where the individual components will be assembled by looping and/or sewing. You stated that trims, including labels, hangtags and polybags, of Korean origin will be added to the sweaters. The sweaters will be washed, pressed and packaged in Korea prior to shipment to the United States.

You claim that the knitting of two sleeves, the rear panel, the collar, and the assembly of the sweaters in Korea constitutes a substantial transformation for country of origin purposes and that the operations performed in China are not sufficient to constitute a substantial transformation. Based on this, you contend that the country of origin of the sweaters is Korea.

You claim that the total material and manufacturing cost of the single dyed sweater is $95.30 per dozen, with 75% of the cost attributable to Korean materials and operations. The double dyed sweater has a total cost of $114.94 per dozen, with 80% of the cost attributable to Korean materials and operations.

ISSUE:

What is the country of origin of the imported women's sweaters processed in the aforementioned manner?

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 marking country of origin determinations 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.

19 CFR 12.130(d) sets forth criteria 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.

Section 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.

Section 12.130(e)(1) provides that an article or material usually will be a product of a particular foreign territory or country, or insular possession of the United States, when, prior to importation into the United States, it has undergone in that foreign territory or country or insular possession, any of the following:

(i) Dyeing of fabric and printing when accompanied by two or more of the following operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing;

(ii) Spinning fibers into yarn;

(iii) Weaving, knitting or otherwise forming fabric.

In deciding a case involving the assembly of a sweater, T.D. 87-29, defined substantial transformation as "meaning a fundamental change in the form, nature, appearance, or character of an article which adds to the value of the article an amount or percentage which is significant in comparison with the value which the article had when exported from the country in which it was first manufactured, produced, or grown." 21 Cust. Bull. 37, 45 (June 24, 1986) (citing United States v. Murray, 621 F.2d 1163 (1st Cir. 1980)).

In HQ 950287 (October 30, 1991), Customs ruled that women's sweaters which were finished and assembled in Macau from machine- knit component parts from Macau (back panel, sleeves and collar) and a unspecified foreign country (front panel with flower leaf pattern) last underwent a substantial transformation in Macau. Customs stated that the sweater had been subjected to substantial processing in Macau in that this was where the article underwent a significant change into a completed assembled sweater and the time involved in knitting and assembling the back, sleeves and panel. See also, HQ 734197 (January 7, 1992). Similarly, in this case, the subject sweaters last undergo a substantial transformation in Korea. This substantial transformation takes the form of extensive manufacturing and processing operations which include all of the subject merchandise's assembly; the knitting of the rear panel, sleeves and collar; the addition of trim; and the washing, pressing and packaging of the merchandise. The knitting-to-shape in China of the front panel, is the only work done outside of Korea. Therefore, the sweaters are all subjected to substantial processing in Korea and undergo a significant physical change into a completely assembled sweater.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of these women's long sleeve knit ramie/cotton pullover sweaters, body model RA 5000, is Korea.

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)). 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 177.2, Customs Regulations (19 CFR 177.2).

Sincerely,

John Durant, Director
Commercial Rulings Division

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