HQ 0953698 - Country of origin of ladies' shorts, pants and skirt; weaving of fabric, cutting and manufacture of trim performed in Taiwan; simple assembly in second country; 19 CFR 12.130(b)(d)(e); cutting constitutes substantial transformation. - United States International Trade Commision Rulings

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HQ 953698

July 19, 1993

CLA-2 CO:R:C:T 953698 SK

CATEGORY: CLASSIFICATION

James H.C. Kuo
Tuntex Incorporation
No. 99, Sec. 2, Tunhwa South Road, 34th Fl. Taipei, Taiwan 106 R.O.C.

RE: Country of origin of ladies' shorts, pants and skirt; weaving of fabric, cutting and manufacture of trim performed in Taiwan; simple assembly in second country; 19 CFR 12.130(b)(d)(e); cutting constitutes substantial transformation.

Dear Mr. Kuo:

This is in response to your letter of March 16, 1993, requesting a country of origin determination for ladies' shorts, pants and skirt. Samples of the garments, plus bundles consisting of the garments' constituent parts, were submitted to this office for examination.

FACTS:

You have requested a country of origin determination for three ladies' garments: shorts, pants and skirts. All the garments are affixed with two sets of hangtags. One hangtag references each of the garments as style number P323A. The other hangtag references each garment as style number P502 and bears the legend "Petites by Fundamental Things."

The shorts are constructed from a woven 100 percent cotton khaki fabric. The shorts have an internal drawstring which, when pulled tight, creates a wrinkled waistline effect. The shorts feature seven belt loops, two front pockets with one smaller change pocket, and two rear pockets. The pockets have steel rivets and the shorts have a one button front closure with a zipper. The shorts extend to the upper thigh area.

The ladies' pants are made of woven 100 percent cotton khaki fabric. They feature cuffed leg bottoms, a pleated front, seven belt loops, two front pockets with one smaller change pocket and two rear pockets which close with button flaps. The front of the pants has a single button closure and zipper.

The skirt is also constructed from woven 100 percent cotton khaki fabric. It extends to approximately mid-calf and has a full front opening with placket which closes by means of nine buttons. The skirt features a partially elasticized waist with seven belt loops and two rear pockets with have button flaps. The skirt is cut full and is made up of four panels.

The shorts, pants and skirt are all constructed in similar fashion to the extent that the fabric for these garments is spun and woven in Taiwan, and this is also where the garments' patterns are designed and where the fabric is cut. It is also in Taiwan that various articles of trim for these garments (i.e., labels, hangtags, zippers, buttons and interlining) are made.

You did not provide Customs with the name of the second country in which these articles will undergo assembly. For purposes of this ruling, we shall hereafter refer to the second country as "country B." In country B, all the component parts of the garments, except for the trim, are assembled. Specifically, assembly of the front and back panels, pockets, back yokes, front rise/fly, back rise, waistband and belt loops (and sweep and placket in the case of the skirt) takes place. It is in country B where the inseam, outseam and hems are sewn and where the garments are pressed and packed for exportation.

In your submission you provide a cost/labor ratio which breaks down the percentage of the total value of the garment that is imparted in each country and how much labor is involved in each respective country. This data follows:

TOTAL COST OF GARMENT VALUE ADDED: "A" "B"

SHORTS: $6.84 $4.74(69.3%) $2.10(30.7%)

PANTS: $8.48 $6.38(75.2%) $2.10(24.8%)

SKIRT: $8.75 $6.35(72.6%) $2.40(27.4%)

TOTAL PROCESSING TIME (minutes): "A" "B"

SHORTS: 58.28 33.28(57.1%) 25(42.9%)

PANTS: 66.02 40.02(60.6%) 26(39.4%)

SKIRT: 68.9 39.90(57.9%) 29(42.1%)

ISSUE:

What is the country of origin for the subject merchandise?

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;
(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;

(ii) The time involved in the manufacturing or processing;

(iii) The complexity of the manufacturing or processing;

(iv) The level or degree of skill and/or technology required in the manufacturing or processing operations;

(v) The value added to the article or material;

Section 12.130(e)(1)(v) of the Customs Regulations describes manufacturing or processing operations by which an article will usually be considered a product of the country in which these operations occur:

(v) substantial assembly by sewing and/or tailoring of all cut pieces of apparel articles which have been cut from fabric in another foreign territory or country, or insular possession, into a completed garment (e.g. the complete assembly and tailoring of all cut pieces of suit-type jackets, suits, and shirts). [emphasis added]

According to T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714), the final document rule establishing 19 CFR 12.130:

[T]he assembly of all the cut pieces of a garment usually is a substantial manufacturing process that results in an article with a different name, character, or use than the cut pieces. It should be noted that not all assembly operations of cut garment pieces will amount to a substantial transformation of those pieces. Where either less than 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). [emphasis added]

This office has consistently held that the mere assembly of goods entailing simple combining operations, trimming or joining together by sewing is not enough to substantially transform the components of an article into a new and different article of commerce. See Headquarters Ruling Letters (HRL's) 082747, dated February 23, 1989; 086665, dated March 23, 1990; 951169, dated April 1, 1992; 951437, dated July 17, 1992; 952647, dated January 27, 1993.

In the instant case, the assembly operations to be performed in country B are mere combining and sewing operations and do not possess the requisite degree of complexity to be deemed substantial manufacturing processes for purposes of conferring country of origin status. No great degree of skill or advanced technology is required, nor is tailoring involved. The cutting in Taiwan for the shorts, pants and skirt materially alters the fabric into designated garment pieces. This constitutes a substantial transformation of that fabric. The cost/labor ratios set forth above also serve to support this position. The value added to these garments in Taiwan is, in all cases, at least twice as much as that added in country B. The processing these
garments undergo in Taiwan is of a longer duration and the work involved is of greater complexity requiring 15 laborers as opposed to the five laborers who process these garments in country B.

HOLDING:

The country of origin of the shorts, pants and skirt is Taiwan. It is during the cutting process in Taiwan that these textile products undergo a substantial transformation and are transformed into new and different articles of commerce by means of substantial manufacturing operations.

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 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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