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 > 1994 HQ Rulings > HQ 0953634 - HQ 0953851 > HQ 0953703

Previous Ruling Next Ruling



HQ 953703


October 18, 1993

CLA-2 CO:R:C:T 953703 NLP

CATEGORY: CLASSIFICATION

TARIFF NO.: 9902.61.00

Mr. David S.H. Chu, Marketing Director
D.C. Fascho, Inc.
Golden World Trade Center
P.O. Box 8128
Tamuning, Guam 96931

RE: Country of origin of sweaters comprised of cotton, cotton blends or wool blends; fabric is made into knit-to-shape components in foreign countries and is assembled into sweaters in Guam; 19 CFR 12.130; substantial transformation; HRLs 732502 and 087271; Customs Regulations Amendments Relating to Textiles and Textile Products, 50 Fed. Reg. 8710, 8715 (1985)

Dear Mr. Chu:

This is in response to your letters, dated March 19, July 6, and September 28, 1993, concerning the eligibility of sweaters assembled in Guam for quota-free entry into the U.S. In addition, you inquired as to whether the sweaters would be eligible for duty free treatment under the Harmonized Tariff Schedule of the United States (HTSUS).

Your letter of September 28, 1993, which was forwarded to us by Congressman Robert A. Underwood, inquired concerning our letter to you dated September 24, 1993, Headquarters Ruling Letter (HRL) 557409, relating to the eligibility of certain ladies, men's and children's clothing assembled in Guam for duty-free treatment under General Note 3(a)(iv), HTSUS. You advised that you were puzzled by HRL 557409 as it did not address the issues presented in your letters dated March 19 and July 6, 1993. The confusion appears to have been caused by the fact that we received multiple ruling requests from you dated March 19, 1993, as well as a separate request dated July 31, 1993. Please treat HRL 557409 as responsive solely to the factual scenario set forth in your July 31, 1993, letter relating to the eligibility for duty-free treatment under General Note 3(a)(iv), HTSUS, of ladies', men's and children's clothing (other than sweaters) assembled in Guam from foreign component parts.

FACTS:

The garments at issue are sweaters which will be composed of either 100% cotton, cotton blends or wool blends. The component parts of the sweaters will be sent from various countries, including Malaysia, Indonesia, China, Hong Kong and Korea, into Guam, where they will be assembled into sweaters. According to your letter, the following operations will take place in Guam:

Joining the shoulders and setting the seams; linking; closing the side seams; closing the neck; tacking; attaching the labels; steam pressing the sweaters; inspecting the sweaters and packing them for shipment into the U.S.

Furthermore, in response to our request for more information, you stated in your letter of July 6, 1993, that all the processes required for making the knit-to-shape component parts of the sweaters will be done in a foreign country. In addition, a minimum of five component parts will be used to form each sweater.

ISSUE:

Are sweaters which are assembled in Guam from knit-to-shape component parts of foreign origin exempt from duty and country of origin quota when imported into the U.S.?

LAW AND ANALYSIS:

Quota

Under the terms of section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854), and in accordance with the provisions of Executive Order 11651 of March 3, 1972, as amended, effective on November 2, 1992, Customs is directed to permit entry or withdrawal from warehouse for consumption in the U.S. of 225,015 dozen cotton, wool and man-made fiber textile products in categories 345, 445, 446, 645 and 646, the product of any foreign country or foreign territory, as determined under section 12.130, Customs Regulations (19 CFR 12.130), and which have been certified as assembled in Guam and exported to the U.S. during the twelve- month period beginning on November 1, 1992, and extending through October 31, 1993.

The sweaters at issue, if they are knitted and contain 36% or more by weight of flax fibers, are classifiable in subheading 6110.20.1020, HTSUS, and the textile category is 345. If the sweaters at issue are knitted and are of cotton but contain less than the above described amount of flax, they are classifiable in subheading 6110.20.2020, HTSUS, and the textile category code is also 345. If the sweaters are made of a wool blend, where the wool predominates by weight over the other materials, the sweaters would be classified in subheading 6110.10.2030, HTSUS, and the textile category code is 446. Therefore, the sweaters are made out of the materials specified in the agreeement and are also subject to the textile category codes covered by the above agreement.

The next issue concerns whether the sweaters are considered to be products of a foreign country pursuant to 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 or 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 for 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) of the Customs Regulations 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.

Section 12.130(e) of the Customs Regulations sets forth criteria which aid us in determining whether an article has been subjected to certain manufacturing or processing operations which serve to substantially transform an article into a new and different article of commerce. Specifically, Section 12.130(e)(iii), (iv) and (v) are relevant in the instant case. This Section provides that:

An article or material usually will be a product of a particular foreign territory or country, or insular possession of the U.S., when it has undergone prior to importation into the U.S. in that foreign territory or country, or insular possession any of the following:

(iii) Weaving, knitting or otherwise forming fabric;

(iv) Cutting of fabric into parts and the assembly of those parts into the completed articles; or

(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).

Moreover, 19 CFR 12.130(e)(2)(iii) states that:

An article or material usually will not be considered to be a product of a particular foreign territory or country, or insular possession of the U.S. by virtue of merely having undergone any of the following:

(iii) Trimming and/or joining together by sewing, looping, linking, or other means of attaching otherwise completed knit-to-shape component parts produced in a
single country, even when accompanied by other processes (e.g. washing, drying, mending, etc.) normally incident to the assembly process;

Customs has 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. For example, in HRL 732502, dated November 28, 1989, Customs held that sweatshirts assembled in Jamaica from fabric that was knit and cut- to-shape in an Asian country were not considered substantially transformed in Jamaica. Therefore, the assembly of knit-to-shape garment parts into the finished garments does not by itself constitute a substantial transformation for the purposes of 19 CFR 12.130.

In the instant case, when the fabric is exported to Guam it is identifiable for use as sweaters. The fabric consists of knit- to-shape component parts of sweater panels. All that remains to be done in Guam is to assemble the component parts into sweaters. The sewing does not involve sufficient skill or the complex sewing operations required when manufacturing a suit, suit jacket or tailored shirt. It is Customs' position that the intent of 19 CFR 12.130 was to exclude the assembly of knit-to-shape components by a simple sewing operation that does not require a significant amount of time or skill. Customs Regulations Amendments Relating to Textile and Textile Products, 50 Fed. Reg. 8710, 8715 (1985) (final document rule establishing 19 CFR 12.130). See also, HRL 087271, dated January 17, 1991 which held that the assembly of knit-to shape components by a simple linking method did not result in a substantial transformation of the fabric into a product of Hong Kong. Therefore, the sewing of the knit-to-shape components by linking, sewing and tacking does not constitute a substantial transformation of the fabric into a product of Guam and the sweaters are considered to be of foreign origin pursuant to 19 CFR 12.130.

It appears that the sweaters at issue fall within the textile category codes covered by the above described agreement. Moreover, they are of foreign origin and are assembled in Guam. Thus, provided the imported sweaters are certified as assembled in Guam from parts originating in a foreign country and are not in excess of 225,015 dozen, no export visa or license will be required from the country of origin of this merchandise, and imports entered under this procedure will not be charged to limits established for exports from the country of origin.

We note, however, that imports in categories 345, 445, 446, 645 and 646 assembled in Guam, but not of Guam origin, which are not accompanied by a certification of assembly, and those in excess of 225,015 dozen exported during the 12-month period November 1,

1992 through October 31, 1993, will require the appropriate visa or export license from the country of origin and will be subject to any other applicable restriction.

Duty

Subheading 9902.61.00, HTSUS, provides for the duty-free entry (on or before October 31, 1996) of:

Sweaters that--
(i) do not contain foreign materials in excess of the percentage of total value limitation contained in general note 3(a)(iv), and
(ii) are assembled in Guam, exclusively by United States citizens, nationals, or resident aliens, by joining together (by completely sewing, looping, linking, or other means of attaching) at least 5 otherwise completed major knit-to-shape component parts of foreign origin; and if entered before the aggregate quantity of such sweaters that is entered during any 12-month period after October 31, 1985, exceeds the duty-free quantity for that period.

For purposes of this subheading, the "duty-free quantity" for the 12-month periods ending October 31, 1993, and October 31, 1994, is 173,257 dozen and 174,990 dozen, respectively. See U.S. Note 7, subchapter II, Chapter 99, HTSUS.

The foreign material value limitation set forth in General Note 3(a)(iv), HTSUS, is 50% with respect to textile and apparel articles subject to textile agreements, and other goods described in section 213(b) of the Caribbean Basin Economic Recovery Act (CBERA). Therefore, the sweaters which are the subject of this case would be entitled to duty-free treatment under subheading 9902.61.00, HTSUS, only if they do not contain foreign materials which represent more than 50% of the goods' total value.

Thus, assuming compliance with the 50% foreign materials value limitation, the sweaters assembled in Guam from a minimum of 5 component parts of foreign origin would be entitled to duty-free treatment under subheading 9902.61.00, HTSUS, provided the assembly is performed by U.S. citizens, nationals, or resident aliens, and the quantity of qualifying sweaters from Guam imported during the 12-month periods ending October 31, 1993, and October 31, 1994, does not exceed the "duty-free quantities" for those periods set forth above.

HOLDING:

The subject sweaters are entitled to quota-free entry to the U.S. if they are certified as being assembled in Guam from parts
originating in foreign countries and the imports are not in excess of 225,015 dozen.

The described sweaters also are entitled to duty-free entry under subheading 9902.61.00, HTSUS, provided they: (1) do not contain foreign materials to the value of more than 50% of their total value; (2) are assembled, as described in this letter, in Guam from at least 5 major knit-to-shape foreign components; and (3) they do not exceed the "duty-free quantities" set forth above.

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
Commercial Rulings Division

Previous Ruling Next Ruling

See also: