HQ 0955799 - Country of origin determination of knapsacks, pouches and carry-alls; fabric and components are manufactured and cut in Taiwan and sewn together in China; 19 CFR 12.130; HRLs 952642, 951899 and 951481 - United States International Trade Commision Rulings

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HQ 955799

April 28, 1994

CLA-2 CO:R:C:T 955799 NLP

CATEGORY: CLASSIFICATION

Ms. Denise Kelly
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, FL 33126-2022

RE: Country of origin determination of knapsacks, pouches and carry-alls; fabric and components are manufactured and cut in Taiwan and sewn together in China; 19 CFR 12.130; HRLs 952642, 951899 and 951481

Dear Ms. Kelly:

This is in response to your letter of January 14, 1994, in which you requested a country of origin determination for knapsacks, pouches and carry-alls. Samples of the articles were submitted for our examination and they will be returned to you with this ruling.

FACTS:

The articles at issue are described as knapsacks, pouches and carry-alls. The first article at issue is a knapsack, style J177. It is constructed of cotton denim fabric and it is secured by a drawstring closure. This closure is located at the top of the sack and may be concealed by a foldover flap. Attached to the flap is a metal snap swivel closure. The knapsack has a front zippered pocket decorated with a sewn-on flower design and two adjustable back-straps with adjustable metal buckles that allow the knapsack to be worn on the back or over one shoulder.

The cotton fabric from which this article is made is woven, dyed, printed, cut and finished in Taiwan. The other components are also manufactured in Taiwan. The cut fabric and the other components are sent to China where they are assembled by sewing into the completed knapsacks and packed in polybags and cartons for shipment to the U.S. The denim fabric is also stonewashed in China. The costs incurred in Taiwan per dozen items amount to 68.51% of the total costs of the knapsack. The costs incurred in China represent 31.49% of the total costs of the knapsack.

The second article, style L1655, is a rectangular shaped pouch that is made of nylon and measures approximately 6 inches in length by 9 inches in width. It has a zipper closure and a 3/4 inch nylon band is sewn on to the front of the pouch directly underneath the zipper. The name "Estee Lauder" is stitched on the nylon band.

The components and fabric of this pouch are manufactured and cut in Taiwan and are sent to China for assembly by sewing into completed pouches. The pouches are packed in polybags and cartons and shipped to the U.S. The costs incurred in Taiwan per dozen items represent 64.02% of the total costs of the pouches. The costs incurred in China represent 35.98% of the total costs of the pouch.

The third article is identical in design and construction to the above described pouch. The only difference between the pouches in that the name "Drakkar Noir" is printed on the front of this pouch. The costs incurred in Taiwan per dozen pouches represent 63.15% of the total costs of the pouches. The costs incurred in China represent 36.85% of the total costs of the pouches.

The fourth article, style P420T4, is an over-sized duffle- like travel or sports carry-all. It is constructed of nylon with PVC-backing. The bag has two carrying straps that are attached to the front and back panels. It has an adjustable shoulder strap that is secured to the side panels and a nylon zipper closure which covers the length of the top panel. Nylon mesh fabric covers one side panel and forms a pocket. The edges of the side panels and bottom front panel are trimmed with plastic piping.

The fabric is manufactured and die-cut in Taiwan and all of the other components, including the polybags, are also manufactured in Taiwan. The fabric and components are sent to China for assembly by sewing. The finished articles are then packed in cartons for shipment to the U.S. The costs incurred in Taiwan per dozen bags repesent 76.46% of the total costs of the bags. The costs incurred in China represent 23.54% of the total costs of the bags.

ISSUE:

What is the country of origin of the knapsacks, pouches and travel bags?

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 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 onto 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)(1)(iii) and (iv) 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; . . .

We have previously held that cutting of fabric into pattern pieces constitutes a substantial transformation of the fabric, resulting in the apparel pieces becoming a product of the country where the fabric is cut. See, Headquarters Rulings Letter (HRL) 951437, dated July 17, 1992. Customs has also 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 952642, dated May 10, 1993, Customs held that the assembly process of sports bags, knapsacks and insulated lunch bags, which involved the sewing together of material that was manufactured and cut in Taiwan and components that were manufactured in Taiwan, did not result in a substantial transformation. The operations performed in Taiwan were more extensive than the simple sewing operation performed in China. Furthermore, a significant part of the cost of the bags accrued from operations performed in Taiwan. Moreover, in HRL 951889, dated October 31, 1992, we held that the assembly of luggage panels, zippers, grommets, piping webbing, labels and packaging materials into luggage and tote bags did not involve sufficient skill or complexity to constitute a substantial transformation. Finally, in HRL 951481, dated July 31, 1992, nylon fabric, thread, binding, zippers, webbing, trim and hang tags were die-cut in Taiwan and these materials were shipped to China for assembly. We held that the manufacture of the raw materials and the designing and cutting operations were the factors which contributed most to the creation of the knapsacks and the country of origin was determined to be Taiwan.

In the instant case, the fabric used to construct the knapsacks, pouches and travel bags is cut in Taiwan and this materially alters the fabric into designated component pieces. The assembly operations to be performed in China 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. In assembling the component pieces, no great degree of skill or advanced technology is required, nor is tailoring involved. In addition, the greatest cost in producing these articles is incurred in Taiwan. We note that the stonewashing of the knapsack in China does not substantially transform the article as, in the instant situation, it is akin to a finishing operation. See, 19 CFR 12.130(e))(2)(iv). Thus, the country of origin of these articles is Taiwan as that is where the fabric was manufactured and cut into specific parts and where the articles last underwent a substantial transformation.

HOLDING:

The country of origin for the knapsack, pouches and travel bag is Taiwan.

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

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