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HQ 955551


March 21, 1994

CLA-2 CO:R:C:T 955551 CMR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Hugh Black
Director of Purchasing
Western Textile Products
3400 Tree Court Industrial Blvd.
St. Louis, MO. 63177-1139

RE: Substantial transformation of fabric and various garment components; country of origin, 19 CFR 12.130; 9802.00.80

Dear Mr. Black:

This is in response to your request of November 22, 1993, regarding the country of origin of certain fabrics and various garment components produced therefrom. Specifically, you have inquired as to whether the processing performed in the United States substantially transforms the goods so as to convey origin in the United States. Your request, along with various exhibits and samples, has been forwarded to this office for a reply.

FACTS:

In your letter, you state that your company is a converter and manufacturer of textile products. You have requested a ruling as to whether dyeing and finishing foreign greige fabric in the United States constitutes a substantial transformation. In addition, you have inquired as to whether waistbands, pre-made hip pockets, die cut pockets and parts, and GERBERcut parts for apparel produced from the dyed and finished fabrics in the United States will qualify as substantially transformed goods and thus, as United States origin goods.

You state that these goods will be promoted to customers who assemble garments outside the United States for importation into the United States and wish to benefit from the duty exemption available under subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

Samples of the greige fabric, finished dyed fabric and waistbands were received as part of your submission, along with advertising literature, a flow diagram of the imported fabric to -2-
the sale of your products, and discussions of the production process.

You have indicated that fabrics of various fabric constructions, blends, widths and weights are purchased in the greige state by your company from importers. You provided six different fabric descriptions, indicating these are some of your larger volume items. The specific fabric descriptions need not be repeated herein, as it is the processing of the greige fabrics in the United States which is of importance here, not the specific fabrics used. The woven greige goods listed in your letter will be sourced and made in the following countries: China, Pakistan, India, Taiwan, South Korea, Indonesia, Malaysia, Philippines and Thailand.

The greige fabrics undergo the following processes after importation into the United States.

1. Preparation for dyeing and finishing: batch the imported bales or rolls together; desize or bleach to remove greige impurities.

2. Dyeing: process of coloring fabric with natural and/or synthetic dyes.

3. Finishing: the processes through which the fabric is passed after bleaching and dyeing. All fabrics are heat set which confers dimensional stability and other desired properties. Chemicals are often applied during the heat setting step to change the character of the fabric (deter shrinkage and to achieve the specified hand or feel). Other finishing steps such as napping, embossing, pressing, or calendering, might be done if required by customers.

4. Inspection and Packing: a final inspection of fabric and packaging in a putup specified by customers. Lab tests of fabric are performed to verify that the fabric meets the minimum physical characteristics.

After the greige fabric is processed, the finished fabric is used to manufacture various components according to the following steps.

WAISTBANDS FOR APPAREL

1. Design waistband to customer's specifications.

2. Sew the finished fabric edges together.

3. Process the finished fabric on a bias machine to change the direction of the warp and filling yarns throughout the length of the fabric.

4. Slit the biased finished fabric to the specified width.

5. Slit the components.

6. Combine the biased finished fabric with other components (the biased fabric from the imported greige fabric usually represents 50 to 70 percent by weight of the finished waistband, the other components would be either a woven or nonwoven buckram, possibly some decorative fabric as a piping and thread).

7. Sew and fold the components together.

8. Print customer's logo or trademark information on waistband if customer so specifies.

9. Pack the waistbands to customer's specifications.

PRE-MADE HIP POCKETS

1. Design pocket to customer's specifications.

2. Hot slit the fabric to required width with edges being fused to deter unravelling.

3. Prefold and press the edges.

4. Cut the hot slit and prefolded and pressed fabric to specified length.

5. Pack the premade pockets to customer's specifications.

DIE CUT POCKETS AND PARTS

1. Design the pocket to customer's specifications.

2. Prepare dies for equipment to provide maximum utilization of the fabric.

3. Spread finished fabric on a cutting table, examining and cutting out defects, and preparing fabric for cutting.

4. Cut the pockets or parts.

5. Pack the die cut pockets or parts to customer's specifications. -4-

GERBER (TM) CUT PARTS FOR APPAREL

1. Design the parts to customer's specifications.

2. Plot or draw parts on a full-size pattern marker.

3. Generate a numerical control cut file on a micro processor to program the GERBER (TM) cutter.

4. Calculate how to spread the finished fabric for maximum fabric utilization.

5. Spread finished fabric on a cutting table, examining and cutting out defects, and preparing the fabric for cutting.

6. Cut the finished fabric into garment parts.

7. Stack groups of like parts into bundles.

8. Shade match the critical garment parts and label with a Soabar ticketing machine.

9. Pack bundles into shipping containers to customer's specifications.

ISSUE:

Are the products at issue substantially transformed in the United States?

Would the products at issue qualify for a duty exemption under subheading 9802.00.80, HTSUSA, as U.S. goods returned?

LAW AND ANALYSIS:

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

[a]rticles 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 9802.00.80, HTSUSA, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty -5-
upon the full cost or value of the imported 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 be eligible for subheading 9802.00.80, HTSUSA, treatment it must first be a "product of" the U.S. According to section 10.12(e), Customs Regulations (19 CFR 10.12(e)), a "product of the United States" 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 and materials. If the article consists wholly or partially of foreign components or materials, as in the instant case, 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. A substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character or use, which is different from that originally possessed by the article or material before being subjected to the manufacturing process. See Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

Determinations of the country of origin of textiles and textile products are governed by the terms of section 12.130 of the Customs Regulations (19 CFR 12.130). Section 12.130(b) provides that a textile or textile product which is processed in more than one country will be considered a product of that country where it last underwent a substantial transformation. A substantial transformation is defined therein as a transformation by means of substantial manufacturing or processing operations into a new and different article of commerce.

Section 12.130(d)(1) provides 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) sets out factors which will be considered in determining if merchandise has been subjected to substantial manufacturing or processing operations. These factors are:

(i) The physical change in the material or article as a result of the manufacturing or processing operations (ii) The time involved in the manufacturing or processing -6-

(iii) The complexity of the manufacturing or processing (iv) The level or degree of skill and/or technology required in the manufacturing or processing (v) The value added to the article or material in each foreign territory or country compared to its value when imported into the U.S.

Section 12.130(e)(1)and (e)(2) set out processes which will normally be considered to be substantial and those which will not be considered substantial. Section 12.130(e)(1) states, in pertinent part, that an article will usually be a product of a particular country when it has undergone in that particular country:

(i) Dyeing of fabric and printing when accompanied by two or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing;

(iii) Weaving, knitting or otherwise forming fabric;

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

Section 12.130(e)(2) states, in pertinent part, that an article will usually not be a product of a particular country by merely having undergone:

(i) Simple combining operations, labeling, pressing, cleaning or dry cleaning, or packaging operations, or any combination thereof;

(iv) One or more finishing operations on yarns, fabrics, or other textile articles, such as showerproofing, superwashing, bleaching, decating, fulling, shrinking, mercerizing, or similar operations; or

(v) Dyeing and/or printing of fabrics or yarns.

In regard to the greige fabric which is imported into the United States where it is dyed and finished, following the language of section 12.130 and numerous rulings issued by this office, Customs does not view the fabric as undergoing a substantial transformation. Section 12.130(e)(1)(i) specifically states dyeing and printing plus two other substantial finishing -7-
operations are required for a substantial transformation to occur. Additionally, when reading section 12.130(e)(2)(iv)and (v), it reinforces the understanding that dyeing and printing are both required along with the two or more finishing operations in order for a fabric to be substantially transformed. See, HRL 955430 of January 10, 1994. As the greige fabric is not substantially transformed in the United States, it is considered to be a product of the country in which it was woven.

As to the waistbands, pre-made hip pockets, die cut pockets and parts and GERBERcut garment parts, Customs has repeatedly ruled that the cutting of fabric into designated garment parts is a substantial transformation. The garment parts are thus considered to be goods of the country in which they are cut. See, HRL 082924 of March 26, 1990; and, T.D. 85-38 at 67. In addition to cutting, the components of the waistbands are assembled. The result of the processing in the United States is completed waistbands that are ready for assembly. This processing would appear to fall directly within the terms of section 12.130(e)(1)(iv) [cited earlier] with the completed article being the finished waistbands.

The country of origin of the waistbands, pre-made hip pockets, die cut pockets and parts and GERBERcut garment parts is the United States as that is where the fabric is cut into the designated garment parts and thus, substantially transformed.

HOLDING:

Based upon the information provided, as the dyeing and finishing of the greige fabric in the U.S. does not result in a substantial transformation of the fabric into a "product of" the U.S., the fabric will not be eligible for an allowance in duty under subheading 9802.00.80, HTSUSA, when returned to the U.S. However, cutting fabric into the designated garment parts in the production of the waistbands, pre-made hip pockets, die cut pockets and parts and GERBERcut garment parts substantially transforms the imported fabric into a "product of" the U.S. Therefore, these components may be eligible for allowances in duty under subheading 9802.00.80, HTSUSA, provided that all of the other requirements under this provision are satisfied.

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 -8-
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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