HQ 0950841 - Country of origin of baseball-style caps; modification of HRL 084624 - United States International Trade Commision Rulings

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HQ 950841

January 4, 1993

CLA-2 CO:R:C:T 950841 CC

CATEGORY: CLASSIFICATION

Nancy Fuller-Jacobs, Esq.
Jennings, Engstrand & Henrikson
501 West Broadway
Suite 1400
San Diego, CA 92101-3541

RE: Country of origin of baseball-style caps; modification of HRL 084624

Dear Ms. Fuller-Jacobs:

This letter is in response to your inquiries, on behalf of R & R Accessories (R&R), concerning the country of origin of baseball-style caps.

In Headquarters Ruling Letter (HRL) 084624, dated August 8, 1989, we ruled on the country of origin of baseball-style caps imported by R&R. In HRL 084624 the entire facts presented concerning processing of the subject hats were in the following statement: "The material for the hat is cut in Taiwan but is assembled in either the Philippines, Thailand, or China." We ruled in HRL 084624 that the country of origin was the country of assembly.

In response to concerns raised by Customs relating to the country of origin of the subject merchandise and the completeness of the factual information furnished for HRL 084624, you submitted additional information concerning the manufacturing and processing operations employed by R&R to make the subject caps. This information shows, among other things, that the caps are made in three countries instead of two, with final assembly taking place in Mexico. In our letter of May 4, 1992, we informed you that since the manufacturing and processing operations of R&R's merchandise are substantially different from the information provided to us for making the country of origin determination in HRL 084624, we would be modifying HRL 084624 based on the additional information and in accordance with 19 CFR 177.9. The modification of HRL 084624 follows based on all the information you have provided to us concerning the merchandise at issue.

FACTS:

According to your submissions, the following processes are performed in Taiwan:

1. The raw materials for the caps are purchased in Taiwan at a cost of $4.030 per dozen.

2. The materials are then shipped via Hong Kong to China at a cost of $.392 per dozen.

You state that the following processes are performed in China:

1. The cap materials are cut using automatic machines.

2. The sweatband material is cut in straight lines. The material has been sewn together by sewing long, straight strips of material together using a regular needle machine. There is no turning or positioning of the material required.

3. The mesh back and front panel components are created by using a regular, single needle machine. The four pieces of mesh back are sewn together using three straight line stitches. This sewing involves a straight line sewing technique where the worker pulls the material through the machine; the worker is not required to guide the material in any special way, and can rest his or her arms on the machine while sewing.

4. The visor is sewn together by using a double needle four stitch machine. This sewing combines a piece of foam, a hard cardboard material, and a top cloth material. There is a guide on the Four Stitch Machine which helps the worker turn and sew the visor. Depending on the client's specifications, a total of between 2 to 8 lines of stitches are placed in the visor.

5. After the above-referenced process which involves labor costs of $.335 per dozen, the components of the caps are shipped to Mexico, via Hong Kong, at a cost of $.608 per dozen.

You state that the following processes are performed in Mexico:

1. The materials are transported and unloaded and then the inventory is checked.

2. The crown is assembled by performing the following operations: sewing lining #1 on the mesh back, covering the mesh back edge with lining, sewing the front panel by a single stitch which creates the shape of the front panel on the crown, combining the front panel and mesh back, which are then sewn together using a regular single needle machine, sewing linings #2 and #3 on the mesh back, and sewing 2 size bands on the crown.

3. The fabric label is sewn or glued on the cap.

4. The visor, parts of the crown, braid, and sweatband are combined. The assembly of these parts requires the use of a high head single needle sewing machine, which requires the worker to position his hands to turn the materials while sewing. The machine does not have a table so that the operator can rest his or her arms while sewing. You believe that this step requires the greatest degree of skill on the part of the operator. Holding all four pieces together, the operator of a high head machine sews together the crown parts and sweatband. This process is accomplished by the operator performing the following tasks: sewing together the crown parts and sweatband; sewing the visor onto the cap, and at the same time, sewing the braid onto the cap, and cutting the excess braid; and inspecting the caps.

5. The adjustable band is sewn onto the crown.

6. A quality control supervisor spot checks the quality of the cap.

7. The button is attached to the cap.

8. The caps are packed and shipped.

The total cost of all packaging materials is $.436 per dozen. Direct labor costs in Mexico equal $.570 per dozen caps, and the total labor costs in Mexico equal $1.145 per dozen caps.

ISSUE:

What is the country of origin of the merchandise at issue?

LAW AND ANALYSIS:

Country of origin determinations for textile products are subject to Section 12.130 of the Customs Regulations (19 CFR 12.130). Section 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.

Section 12.130(d) of the Customs Regulations 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 12.130(d)(2) of the Customs Regulations 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.

The raw material for the caps at issue is Taiwanese. In China the cap materials are cut, the front and back panels are produced by sewing, and the visor is sewn together. The materials created by this processing clearly identify the merchandise at issue as caps; thus, a new and different article of commerce has been created in China. In addition, we believe that the operations performed in China constitute substantial manufacturing and processing operations. Consequently a substantial transformation has taken place in China. In Mexico only a partial assembly takes place, consisting mainly of assembly of the crown and attachment of the visor, braid, sweatband, adjustable band and button, and the packing and shipment of the merchandise. More importantly, when the merchandise leaves China it is clearly identifiable as a cap, and thus a new and different article of commerce has not been created in Mexico. Consequently a substantial transformation does not take place in Mexico; the last substantial transformation for the merchandise at issue takes place in China.

HOLDING:

The country of origin for the merchandise at issue is China.

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).

Based on the additional facts presented and Section 177.9(b)(1) of the Customs Regulations, and in order to insure uniformity in Customs country of origin determination of this merchandise and eliminate uncertainty, we are modifying HRL 084624 to reflect the above country of origin determination effective with the date of this letter.

This notice to you should be considered a modification of HRL 084624 under 19 CFR 177.9(d)(1). It is not to be applied retroactively to HRL 084624 (19 CFR 177.9(d)(2)) and will not, therefore, affect past transactions for the importation of your client's merchandise under that ruling.

Sincerely,

John Durant, Director

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