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HQ 734854


June 7, 1993

MAR-2-05 CO:R:C:V 734854 AT

CATEGORY: MARKING

Mr. Luis Terner
Terner's of Miami Corporation
2337 N.W. 5th Avenue
Miami, Florida 33127

RE: Country of origin marking of imported partially assembled tote bags; textiles; substantial transformation; cutting components; sewing; 9802.00.80; 19 CFR 12.130(c); 19 CFR 10.22

Dear Mr. Terner:

This is in response to your letter dated October 8, 1992, requesting a country of origin marking exception for large tote bags which your company, Terner's of Miami Corporation ("Terner's"), intends to manufacture from operations performed in the U.S. and Costa Rica. You have submitted photographs of the finished large tote bag as well as the stages of production of the finished article. We regret the delay in responding.

FACTS:

Terner's plans to manufacture large tote bags (Style No. 209) in the U.S. and Costa Rica. In the U.S. all the components (9 nylon pieces, 3 zippers, elastic, 12 small leather pieces for trimming and a piece of plastic piping) are die cut by Terner's from material components purchased in the U.S. (For purposes of this ruling, it is assumed that all the material is of U.S. origin). These components are then shipped to Costa Rica for further processing. In Costa Rica, the back part is stitched to the lining, leather ornaments and piping; the front part material is stitched to the lining, leather ornaments, and piping, and the zipper pocket is sewn along with the elastic restrainer; and the main center partition material is sewn to the lining along with the zipper and the leather trimming. After these operations are completed in Costa Rica, the partially assembled components of the bag are shipped back to the U.S. for final assembly. This consists of sewing the back partition to the back of the tote, binding the edges and turning the bag inside out, sewing one side of the center partition, attaching the front side of the tote to the rest of the bag, binding the two remaining edges of the tote and turning it right side out, attaching four snaps to the handle holder on the short strap and incorporating the hook leashes and attaching the shoulder strap (the shoulder strap is completely manufactured in the U.S.), trimming all excess from the large tote and cleaning the bag, stuffing the bag with paper, final inspection and packaging for distribution. Based on the fact that a majority of the operations performed in manufacturing the large tote bag occur in the U.S., you have requested a marking exception for the finished large tote bag.

ISSUE:

1. What is the country of origin of the partially assembled components of the large tote bag imported from Costa Rica?

2. Are the imported partially assembled components substantially transformed as a result of the assembly operations performed in the U.S.?

3. Is the finished large tote bag excepted from country of origin marking?

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 country of origin marking determinations for textiles and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1584) ("section 204"). According to T.D. 90-17, published in the Federal Register on March 1, 1990 (55 FR 7303), the principles of country of origin for textiles and textile products contained in 19 CFR 12.130 are applicable to such merchandise for all purposes, including duty and marking. Customs has determined that 19 CFR 12.130 will be applied to determine the country of origin of all imported articles which are classified in Section XI, Harmonized Tariff Schedule of the United States (HTSUS), or to any imported article classified outside of Section XI, HTSUS, under a subheading which has a textile category number associated with it. Because the subject merchandise is classified under a subheading which has a textile category number associated with it, 19 CFR 12.130 will be used in making the country of origin determination.

The first question that must be addressed is what is the country of origin of the imported partially assembled components from Costa Rica. 19 CFR 12.130(c), specifically addresses the determination of country of origin, for among other things, U.S. articles sent abroad for assembly. Section 12.130(c) provides that merchandise which falls within the purview of Chapter 98, Subchapter II, Note 2, HTSUS, may not upon its return to the U.S., be considered a product of the U.S. Note 2(a) provides, in pertinent part:

(a) Except as provided in paragraph (b) [which does not apply to textile articles or apparel articles], any product of the United States which is returned after having been advanced in value . . ., or any imported article which has been assembled abroad in whole or in part of products of the United States, shall be treated for purposes of this Act as a foreign article, . . .

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners. (Emphasis added).

Since in this case the U.S. cut components of the tote bag are shipped to Costa Rica in a condition ready for assembly by sewing which is specified as an acceptable assembly operation in 19 CFR 10.16(a), pursuant to 19 CFR 12.130(c) the country of origin of the partially assembled components is Costa Rica.

The marking requirements hinge on whether the partially assembled components are substantially transformed by the processing done in the U.S. Pursuant to 19 CFR 134.35, a manufacturer in the U.S. who substantially transforms an imported article is considered the ultimate purchaser and the imported article is excepted from individual marking. Absent a substantial transformation, the imported article must be marked in a manner which is sufficient to advise the ultimate purchaser of the country of origin. It is Customs policy that the principles set forth in 19 CFR 12.130 will be applied in determining whether an imported article is substantially transformed in the U.S. as a result of the processing performed there if the completed article would be classified in Section XI, HTSUS, or outside Section XI which has a textile category number associated with it.

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 other words, for textiles governed by 19 CFR 12.130 there is a two part test for substantial transformation: 1) a new different article of commerce and 2) a substantial manufacturing or processing operation.

In this case, the completed tote bag is classified under 4202.92.3030 HTSUS, textile category #670. Therefore 12.130 will be used to determine the substantial transformation question. The partially assembled components are further processed in the U.S. by sewing the components together into the finished tote bag and adding a strap to the finished bag. Other minor operations such as inspecting, cleaning and packaging the tote bag are also performed in the U.S. Assembly by sewing is considered in 19 CFR 12.130(e)(v) as usually resulting in a article being deemed a product of the country in which the sewing was done where the assembly is substantial such as the complete assembly and tailoring of all cut pieces of suit-type jackets, suits, and shirts. Where either less than a complete assembly of all the 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). 50 Fed. Reg. 8,715 (March 5, 1985), T.D. 85-38.

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) lists some of the factors considered in determining whether a substantial manufacturing operation has occurred. These factors include: (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 or 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.

In HQ 951899 (October 31, 1992), Customs ruled that unassembled luggage panels cut in Taiwan and shipped to China where they were sewn together with zippers, piping and related accessories into completed luggage and tote bags were not substantially transformed as a result of the sewing operations performed in China, and therefore the country of origin of the merchandise was Taiwan. Customs stated that the assembly process in China involving the sewing together of components cut from fabric in Taiwan did not involve sufficient skill or complexity to constitute a substantial transformation as defined in 19 CFR 12.130. Similarly in this case, from viewing the submitted photographs it appears that the assembly of these partially assembled imported pieces into a finished tote bag does not involve sufficient skill or complexity to constitute a substantial transformation. All that is performed in the U.S. is a simple joining of the assembled component pieces (back center, main center, back and front panels) by sewing and stitching the lining to these pieces and attaching a shoulder strap to the finished bag. Based on these considerations, we conclude that the final sewing of the tote bags performed in the United States does not constitute a substantial manufacturing operation. Therefore, under 19 CFR 12.130, the partially assembled bags are not substantially transformed in the U.S.

Accordingly, for marking purposes, the retail purchaser, rather than Terner's is the ultimate purchaser. The partially assembled bags must be conspicuously marked in a manner which is sufficient to advise the retail purchaser of the country of origin (Costa Rica). They should be marked in a location which will remain visible even after the U.S. processing. If the processing necessarily obscures the marking, the finished bag should be marked. If the partially assembled tote bags are eligible for importation under subheading 9802.00.80, Harmonized Tariff Schedule of the United States ("HTSUS"), they may be marked "Assembled in Costa Rica" or "Assembled in Costa Rica from U.S. Components". See 19 CFR 10.22.
HOLDING:

Pursuant to 19 CFR 12.130(c), the country of origin of the partially assembled tote bag is Costa Rica. The partially assembled components are not substantially transformed by the final sewing operations performed in the U.S. Therefore, the retail purchaser and not Terner's is the ultimate purchaser and the tote bag must be marked with the country of origin "Costa Rica" in a manner which is sufficient to advise the retail purchaser of the country of origin.

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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