HQ 0734539 - Country of Origin Marking for Lady's Clutches and Men's Wallets; Substantial Transformation; Assembly; HRL 555189; HRL 554027; HRL 554025; HQ 055588; HQ 083359 and HQ 087349. - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0734312 - HQ 0734544 > HQ 0734539

HQ 734539
June 8, 1992

MAR-2-05 CO:R:C:V 734539 ER

CATEGORY: MARKING

Jeffrey A. Meeks, Esq.
Adduci, Mastriani, Meeks & Schill
330 Madison Avenue
New York, New York 10017

RE: Country of Origin Marking for Lady's Clutches and Men's Wallets; Substantial Transformation; Assembly; HRL 555189; HRL 554027; HRL 554025; HQ 055588; HQ 083359 and HQ 087349.

Dear Mr. Meeks:

This is in response to your ruling request of March 11, 1992, in which you request a ruling concerning the country of origin marking requirements for lady's clutches and men's wallets which are made as a result of a three-stage operation performed in Hong Kong and China.

FACTS:

Buxton plans to import leather flat goods, including lady's organizer clutches and men's convertible wallets. The merchandise will be made in three stages, as is described below.

A. Lady's organizer clutch (model 376-16)

All materials for the clutch will be imported into Hong Kong from countries other than China. The materials will be shipped to Hong Kong in bulk. The cutting and first-stage operations will be performed in Hong Kong. The cut parts will be sent to China for partial assembly and the assemblies will then be returned to Hong Kong for final assembly.

1. Hong Kong Operation - Stage I

In Hong Kong, the cover lining, interior pocket, pocket lining, check book cover, flat pad, and main stay will arrive at the factory in Hong Kong as rolled stock of polyurethane material. The materials will be stacked and cut by machine to product specifications. The taffeta for the check book lining and purse gusset will arrive in the factory in rolled form and also will be stacked and cut by machine. The flap reinforcement will be made of blotter material and will undergo the same processing as the above items. Leather will be manually cut by machine press to specification including length, width, notches, holes and slots for the clutch cover and the purse cover. The cut components will be sent to the China for partial assembly.

2. China Assembly - Stage II

The leather cover and purse pocket will be shaved or planed to reduce thickness (splitting) and will be planed on the edges (edge skiving). A logo will be stamped on the leather cover. The subassemblies - flap, zipper pocket, pocket stay, purse gusset, checkbook - will be creased, cemented and folded. Where necessary, the clear vinyl will be heat sealed within the subassembly. Some of the subassemblies' edges will be stitched closed. None of the subassemblies will be permanently affixed to the clutch cover in China. The cover will be turned over by hand and the components will be shipped back to Hong Kong for final stitching, assembly, cementing and inspections.

3. Hong Kong Operation - Stage III

In Hong Kong, all the edges of the subassemblies will be stitched onto the subassemblies permanently joining them. Loose threads will be tightened or trimmed. The metal corners will be placed on the edges of the cover by hand. The clutch, now in one piece, will be manually prepared for two framings by machine. The framing machine crimps the metal frame of the purse onto the leather. The final painting and refinishing will be done by hand with a brush cloth in order to match the stitching with the color of the clutch.

B. Men's Convertible Wallet - Model 810

All materials for the men's wallet, including the taffeta, vinyl, leather and suede vinyl will be imported into Hong Kong from countries other than China. In general there are three steps to the processing of men's wallets. First, the material will be cut to shape with holes punctured and slots for pictures. The cut pieces will be sent to the China for partial assembly including folding, gluing and some stitching. No clasps will be added in China and the panels will not be permanently affixed to each other. These pieces will be returned to Hong Kong where they will undergo final assembly and final stitching.

1. Hong Kong Operation - Stage I

In Hong Kong, the pocket lining, suede vinyl, cover lining and main stay will arrive in rolled stock form and will be stacked and cut to specifications by machine. The leather will be from countries other than China and will arrive in Hong Kong in sides and will be cut to shape manually by machine to create the wallet cover, right pocket, left pocket and the pass case. The cut components will be sent to the China for partial assembly.

2. China Assembly - Stage II

In China the cover, leather stay, right pocket, left window pocket and the pass case will be planed or shaved to reduce thickness, edge stained, and edge skived (planing of the edge) by machine. The logo will be stamped in one place on the leather. The credit card slots and the right pocket will be hand painted. The right and left "window pocket" edges will be creased by machine and the credit card pocket lining will be cemented into the subassembly. The edges will be folded by machine and the closed edges will be machine stitched followed by a manual trimming operation. Similarly, the lining will be cemented by hand to the pass case pocket, the edges will be creased by machine and the metal gripper will be attached by machine. The clear vinyl of the window book of the pass case will be fed through a heat sealing machine and then slid over the clip. The right pocket and left window will be manually assembled with the main stay. These sub-assemblies will then be returned to Hong Kong for final stitching and assembly operations.

3. Hong Kong Operation - Stage III

The cover will be glued together by hand, the leather will be glued to the taffeta lining and to the separator. The cover will be turned over the subassemblies around the edges so as to become one enclosed unit. Machine stitching will be performed on the cover so as to permanently attach all the assemblies together followed by manual trimming. The final stitching will be painted and refinished and the wallet will be cleaned and trimmed.

Samples of the clutch and wallet at the three stages of assembly were provided with the ruling request.

ISSUE:

What is the country of origin for marking purposes of lady's clutches and men's wallets to be assembled in a three-stage process in Hong Kong and China?

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 (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit in such a manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The primary purpose of the country of origin marking statute is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will. United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).

Part 134.1(d) defines the "ultimate purchaser" generally as the last person in the United States who will receive the article in the form in which it was imported.

The country of origin for marking purposes is defined at 134.1(b), Customs Regulations (19 CFR 134.1(b)), to mean the country of manufacture, production, or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of part 134.

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); Koru North America v. United States, 12 CIT 1120, 701 F.Supp. 229 (1988). The question of when a substantial transformation occurs for marking purposes is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed. Cir. 21, 702 F.2d 1022 (1983).

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D. 85-25 (September 25, 1984).

There is clearly a substantial transformation of the materials imported into Hong Kong during the first stage of production to create the clutches and wallets. The question to be resolved is whether these substantially transformed materials undergo a substantial transformation by virtue of the second stage of processing performed in China.

Customs has repeatedly held that the cutting of fabric into specific patterns and shapes suitable for use in an assembly operation constitutes a substantial transformation. See HRLs 555189 (June 12, 1989), 554027 (January 13, 1987) and 554025 (December 16, 1986). Therefore, we find with respect to this case that the leather, vinyl, taffeta and other materials which will be used to create lady's clutches and men's wallets will become new and different articles of commerce as a result of the first stage of operations to be performed in Hong Kong. The cutting to shape including notches, slits for credit cards and holes for clasps dedicate the materials for use only as clutches and wallets. In sum, the parts will take on the essential character of the finished products as a result of the preliminary Hong Kong processing. (See, HQ 055588 (September 15, 1978) where Customs recognized a substantial transformation in the initial cutting of leather into parts for a belt.)

The assembly operations performed in China do not constitute a substantial transformation of the pre-cut components. Customs has long held that the mere assembly of parts will not necessarily constitute a substantial transformation. C.S.D. 80- 111 (September 24, 1980). In HQ 087439 (October 30, 1990), Customs found that the simple assembly of components of an imitation leather portfolio was not sufficient to confer country of origin. There Customs stated,

These components will be assembled in the U.S. by means of simple fixing devices such as sewing and gluing. We find that the imported components are not substantially transformed as a result of the assembly process. At the time of importation, although the portfolio is unfinished, it lacks none of its essential characteristics. The mere assembly of these components by gluing and sewing into a finished portfolio does not change the name, character or use of the product. Accordingly, for purposes of 19

U.S.C. 1304, the country of origin of the portfolio is the country where the components are manufactured.

Also instructive for purposes of this decision, are Customs rulings pertaining to textiles where it has been held that goods are substantially transformed in the country where the parts were cut and not where the parts undergo minor or partial assembly operations. See e.g., HQ 083359 (May 18, 1990) (where Customs, citing to T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714) noted that "not all assembly operations of cut garment pieces will amount to a substantial transformation of those pieces. Where either less than a complete assembly of all cut pieces of a garment is performed in one country, or the assembly is a relatively simple one, then Customs will rule on the particular factual situations as they arise, utilizing the criteria in section 12.130(d)).

Taking the above-referenced rulings into consideration, it is apparent in the instant case that the operations to be performed in China constitute intermediate, simple assembly operations on pre-cut components which do not amount to a substantial transformation. These operations consist largely of gluing, folding, creasing, cementing and minor stitching - processes which do not ordinarily result in a substantial transformation. Accordingly, the wallets and clutches will be considered products of Hong Kong, the country where they will undergo substantial transformation. Since stage two of the operations does not amount to a substantial transformation, it is unnecessary to decide if the final assembly operations, stage three, performed in Hong Kong constitute another substantial transformation.

HOLDING:

The lady's clutches and men's wallets created in the three- stage assembly process in Hong Kong and China, described above, will be considered products of Hong Kong for country of origin marking purposes. Accordingly, the merchandise should be clearly and conspicuously marked to indicate the country of origin, "Hong Kong".

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling