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HQ 734465

May 28, 1992

MAR-2-05 CO:R:C:V 734465 KR

CATEGORY: MARKING

Mr. Steven P. Sonnenberg
Sonnenberg, Anderson, O'Donnell & Rodriguez 200 West Adams Street Suite 2625
Chicago, IL 60606

RE: Country of origin marking of athletic shoe inserts; substantial transformation; 19 CFR 12.130

Dear Mr. Sonnenberg:

This is in response to your letter dated August 29, 1991, on behalf of Rochester Shoe Tree Co. requesting a ruling on the country of origin of a product known as "Stuffits"TM. Two samples were submitted. Exhibit A contains separate parts which are sent to Mexico where they are partially assembled. Exhibit B contains the partially assembled product which is then shipped back to the U.S. for final assembly.

FACTS:

You stated that Rochester Shoe Tree Inc. intends to market a product called "Stuffits"TM. This product is intended to be an accessory used in maintaining athletic footwear. The product is manufactured as follows: four pieces of fabric to make two shells, two five inch straps made from the same fabric, one thirty one inch nylon strap, two foam pads in the shape of the toe portion of the foot, and thread, is exported from the U.S. to Mexico. All materials used to make the StuffitsTM are of U.S. origin. In Mexico the product is partially assembled by stitching two of the fabric pieces together around the foam pad to form the shape of a foot with the heel portion left open. The same is done with the other two fabric pieces and foam pad. The five inch strap is sewn across the top of the foot. The thirty one inch strap connects the two foot portions by being sewn onto the five inch straps on each foot portion. The partially assembled item is then imported to the U.S. where it is filled with cedar shavings and sewn closed. The StuffitsTM are used in athletic footwear to absorb moisture and to provide an aromatic scent.

The cost of the materials prior to shipping to Mexico is 22% of the total cost. The costs of the added workmanship performed in Mexico is 22% of the total cost. The costs of the final parts and workmanship performed after the importation back to the U.S. is 56% of the total cost of the product.

You have received two prior rulings concerning classification matters in this case. The first ruling, HQ 950372 (November 13, 1991), held that the product is considered "made up" under Section XI of the HTSUS and that the merchandise is classified; under subheading 6307.90.9490, HTSUS. The second ruling HQ 556395 (January 7, 1992), held that the product will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S. This ruling concerns only the country of origin marking required for this product, and does not alter the prior rulings.

You claim that the addition of cedar shavings and sewing together of the heel in the U.S. constitutes a substantial transformation for country of origin marking purposes. You state that Rochester Shoe Tree Co. is the ultimate purchaser of the partly assembled StuffitsTM and it becomes substantially transformed after adding the cedar shavings, which you believe is the main component supplying the moisture absorption and the aromatic scent. Based on this, you contend that the article is exempt from marking.

ISSUE:

Whether the imported articles are substantially transformed in the U.S. when cedar shavings of U.S. origin are added and the articles are sewn closed, so that the domestic manufacturer is the ultimate purchaser of the imported articles?

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. 19 CFR 12.130(c) concerns U.S. articles which are sent abroad for processing then returned to the U.S. According to this regulation, if a U.S. product has "been advanced in value or improved in condition abroad, or assembled abroad", the article is deemed to be from the foreign country or locality where the advancement, improvement or assembly has taken place. In this case the StuffitsTM is partially assembled in Mexico. This partial assembly also increases its value. Therefore, the StuffitsTM becomes a product of Mexico. See HQ 732257 (May 16, 1990) (holding that panty hose which are sewn together in Mexico are advanced in value and improved in condition by such processing). See also HQ 733713 (November 14, 1990).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.35, Customs Regulations (19 CFR 134.35), states that the manufacturer or processor in the U.S. who converts or combines the imported article into a different article having a new name, character or use will be considered the ultimate purchaser of the imported article within the contemplation of 19 U.S.C. 1304 and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked. The question presented here is whether the partially assembled Mexican StuffitsTM are substantially transformed in the U.S. by the insertion of cedar shavings and sewing so that Rochester Shoe Tree Inc. is the ultimate purchaser.

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940); National Juice Products Association v. United States, 628 F. Supp. 978, 10 CIT 48 (CIT 1986); Koru North America v. United States, 701 F. Supp. 229, 12 CIT 1120, (CIT 1988). Two court cases have considered the issue of whether imported parts combined in the U.S. with domestic parts were substantially transformed for country of origin marking purposes. In the first case, Gibson-Thomsen, the court held that imported wood brush block and toothbrush handles which had bristles inserted into them in the U.S. lost their identity as such and became new articles having a new name, character and use. The second case involved imported shoe uppers which were combined with domestic soles in the U.S. The imported uppers were held in Uniroyal, Inc. v. United States, 542 F. Supp. 1026, 3 CIT 220 (CIT 1982), to be the "essence of the completed shoe" and therefore, not substantially transformed.

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. 19 CFR 12.130(d) states that these criteria are not exhaustive; one or any combination of criteria may be determinative, and additional factors may be considered. This regulation will apply to the finished StuffitsTM because it remains under the same classification in Section XI upon its final assembly, 6307.90.9490, HTSUS, other made up articles.

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 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.

We find that the extent of the processing upon the return to the United States is only a simple assembly and finishing operation rather than substantial manufacturing. The insertion of cedar shavings and the simple closing of the end of the StuffitsTM does not create a substantial transformation. The complex sewing of the parts in Mexico establishes the character and forms the unique design and style of the product. Thus, according to the standards of the regulations, the fundamental character, commercial identity, and commercial use of the product are already determined prior to the importation, by the extent of the manufacturing completed in Mexico. 19 CFR 12.130(d)(1). The product when returned to the U.S. already is the "essence of the completed" product and therefore not substantially transformed. See Uniroyal, Inc. v. United States, 542 F. Supp. 1026, 3 CIT 220 (CIT 1982). The product once returned to the U.S. "[a]lthough ... is not salable in its imported condition, it is recognizable ... and it is very unlikely that it could be used for any other purpose than to make the finished" product. HQ 734295 (March 30, 1992).

The standards of 19 CFR 12.130(d)(2) also show that the StuffitsTM are not substantially transformed. The physical shape of the StuffitsTM is predetermined and already existent upon its importation into the U.S. ( 12.130(d)(2)(i)). The insertion of cedar shavings in the presewn 'sock' only makes the sock fill out. This is not an appreciable change in shape. The time involved in the insertion of the cedar shavings and sewing closed the one panel is minimal ( 12.130(d)(2)(ii)), as is the complexity of the manufacturing ( 12.130(d)(2)(iii)), and the level of skill and technology required by this completion

According to the information in the ruling request, the cost of the U.S. parts shipped to Mexico for assembly is 22% of the total cost of the item. The cost of the processing in Mexico is also 22% of the cost of the item. The cost of the cedar shavings and sewing closed the remaining side in the U.S. is 55% of the total cost. However we find that this one factor does not outweigh all the others. Therefore, we hold that the StuffitsTM are not substantially transformed.

Section 10.22, Customs Regulations (19 CFR 10.22), states that assembled articles entitled to the partial duty exemption under subheading 9802.00.80, HTSUS, are considered products of the country of assembly for the purposes of country of origin marking. If an imported assembled article is made entirely of American-made materials, the United States origin of the material may be disclosed by using a legend such as "Assembled in ___, from material of U.S. origin", or a similar phrase. See, HQ 088449 (May 10, 1991). Pursuant to 19 CFR 10.22, the StuffitsTM may be marked with the legend "Assembled in Mexico from material of U.S. origin" or a similar phrase.

HOLDING:

The imported articles are not substantially transformed in the U.S. when cedar shavings of U.S. origin are added and the articles are sewn closed. Therefore, Rochester Shoe Tree Inc. is not the ultimate purchaser and the imported articles must be marked with their country of origin. Pursuant to 19 CFR 12.130, the country of origin of the StuffitsTM is Mexico. However, 19 CFR 10.22 will allow the StuffitsTM to be marked "Assembled in Mexico from material of U.S. origin" or another similar phrase.

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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