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HQ 557672


April 29, 1994

CLA-2 CO:R:C:S 557672 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Ms. Jacqueline M. Sierra
L.S. Quilting, Inc.
P.O. Box 362 385
San Juan, Puerto Rico 00936-2385

RE: Eligibility of sheets and pillowcases for a partial duty exemption under subheading 9802.00.80, HTSUS; 19 CFR 12.130; substantial transformation

Dear Ms. Sierra:

This is in reference to your letter dated July 23, 1993, to the District Director, San Juan, Puerto Rico, requesting our opinion with regard to the eligibility of certain sheets and pillowcases for the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS). You advise that your company is considering the importation of such articles from the Dominican Republic.

FACTS:

The printed fabrics to be used in the manufacture of the articles will be imported from Pakistan, and will consist of a blend of 50% polyester and 50% cotton. The fabric will be entered in San Juan, where it will be cut according to size, and then sent to the Dominican Republic, along with thread, elastic, and packaging materials of U.S. origin. The items to be produced consist of pillow cases, flat sheets, and fitted sheets, in different sizes, which will make up twin, full, and queen size sets. Each set will contain two pillow cases, one flat sheet, and one fitted sheet, with the exception of the twin set, which will also contain the sheets but one pillow case only.

The following operations will take place in San Juan and the Dominican Republic:

1) Pillow Cases

In San Juan, the fabric will be cut to length and width. In the Dominican Republic, two identical pieces will be sewn together on three sides, and hemmed on the other side.

2) Flat Sheets Twin and Full

In San Juan, fabric will be cut to size on two sides and another smaller piece of fabric will be cut on four sides. In the Dominican Republic, the fabric cut on two sides will be hemmed, and the piece of fabric cut on four sides will be sewn along the top of this larger piece and finished on the ends.

3) Flat Sheet Queen

In San Juan, fabric will be cut to size on top and bottom, and another piece of fabric will be cut on four sides. In the Dominican Republic, the large piece will be hemmed on the bottom and the smaller piece sewn along the top and bottom of the larger piece.

4) Fitted Sheets

In San Juan, the fabric will be cut on two sides, and a square of about 8" x 8" will be cut from the four corners of the piece. In the Dominican Republic, the corners will be sewn together, the sides will be closed with a merrow machine and an elastic will be fitted and sewn along the top and bottom of the piece.

After being assembled, the goods will be packaged in sets according to their size, arranged in cartons of six sets per carton, to be exported to San Juan.

ISSUE:

Whether the sheets and pillow cases will be entitled to the partial duty exemption under subheading 9802.00.80, HTSUS, upon return to the U.S.

LAW AND ANALYSIS:

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

Articles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating, and painting.

All three requirements of subheading 9802.0080, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full appraised value of the assembled article less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

For a component to receive a duty allowance under subheading 9802.00.80, HTSUS, it must be a "product of the U.S.". According to section 10.12(e), Customs Regulations (19 CFR 10.12(e)), a "product of the U.S." is an article manufactured within the Customs territory of the U.S. and may consist wholly of U.S. components or materials, of U.S. and foreign components or materials, or wholly of foreign components or materials. If the component consists wholly or partially of foreign components or materials, the manufacturing process must be such that the foreign components or materials have been substantially transformed into a new and different article, or have been merged into a new and different article.

Section 12.130, Customs Regulations (19 CFR 12.130), sets forth the principles for determining the country of origin of textiles and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854). These principles are applicable to such merchandise for all purposes including duty, quota, and marking. 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.

In determining whether a substantial transformation has occurred in connection with textile products, 19 CFR 12.130(b) provides that a new and different article of commerce must emerge by means of substantial manufacturing or processing operations. The factors to be considered in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d) and (e).

Section 12.130(e)(iv) provides that a textile article will usually be a product of a particular country if the cutting of the fabric into parts and the assembly of those parts into the completed article has occurred in that country. However, 19 CFR 12.130(e)(2)(ii) provides that material usually will not be considered to be a product of a particular foreign country by virtue of merely undergone cutting to length or width and hemming or overlocking fabrics which are readily identifiable as being intended for a particular commercial use.

In Headquarters Ruling Letter (HRL) 556015 dated May 20, 1991, foreign fabric was shipped to the U.S., where it was cut into simple geometric shapes, including triangles, squares, trapezoids, parallelograms and rectangles in varying dimensions. The cut pieces were then shipped to Jamaica for assembly into duvet covers, by sewing together 50 to 60 component pieces, and adding a zipper. We stated in that case that cutting geometrical shapes merely involved cutting straight lines, and did not amount to a substantial manufacturing operation. Accordingly, we held in HRL 556015 that the cutting operations in the U.S. did not result in a substantial transformation and, therefore, the cut pieces were not considered U.S.-origin fabricated components.

In HRL 952577 dated February 1, 1993, modified by HRL 953477 dated May 18, 1993, involving a country of origin determination, we found that Chinese fabric was not substantially transformed in Mauritius where the operations consisted in part, of cutting fabric to length and width, and folding, to form flat sheets, or cutting to length but not width, and elasticizing, of fitted sheets. See also HRL 555719 dated November 5, 1990 (cotton fabric for surgical towels cut to length and width, sewn, trimmed, pre-washed, and dried is not substantially transformed), and HRL 555648 dated July 16, 1991 (foreign-origin fabric used for surgical towels cut to length or to length and width in the U.S., remains a product of the country where the fabric was manufactured).

The operations in the cited cases must be compared to cutting operations in other cases in which we found that a substantial transformation had occurred. For example, we have held that cutting specific pattern pieces for garments, which involves laying out the pattern according to the weave of the fabric, and following the shape of the pattern, amounted to substantial manufacturing operations. See HRL 731028 dated July 18, 1988 (cutting of fabric into garment parts for wearing apparel constitutes a substantial transformation; also, HRL 555489 dated May 14, 1990 (cutting of fabric into glove patterns results in substantial transformation), and HRL 555693 dated April 15, 1991 (cutting of fabric to create pattern pieces for infant carrier results in a substantial transformation,)

We believe that the cutting operations in the instant case are analagous to the operations in HRLs 952577, 556015, and the other cited cases in which fabric was cut to length and/or width, or cut into simple shapes. Accordingly, based on the foregoing, we find that the operations in San Juan, consisting of cutting the fabric to length or to length and width, whether to form components for the flat sheets or pillow cases, do not constitute substantial manufacturing or processing operations resulting in a substantial
transformation of the imported Pakistani fabric. We also believe that the cutting operations in connection with the fitted sheet components similarly do not amount to a substantial manufacturing or processing operation. Cutting this fabric lengthwise and cutting out 8" squares at each of the four corners involves straight line cuts and does not rise to the complexity of cutting shaped pattern pieces for wearing apparel. Moreover, even before the cutting operation, the fabric is readily identifiable as being intended for sheets and pillow cases.

Accordingly, we find that the Pakistani fabric which has been cut in San Juan to form components for sheets and pillow cases, has not been substantially transformed into a product of the U.S. Therefore, the returned sheets and pillow cases are not eligible for a duty allowance under subheading 9802.00.80, HTSUS.

HOLDING:

Foreign fabric which is cut in the U.S. to form components for sheets and pillow cases, is not substantially transformed into products of the U.S. Therefore, upon return to the U.S. from abroad, the completed sheets and pillow cases will not be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.

Sincerely,

John Durant, Director
Commercial Rulings Division

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