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HQ 956436


July 28, 1994

CLA CO:R:C:T 956436 jb

CATEGORY: CLASSIFICATION

Michael Riley
May Department Stores International Inc.
615 Olive Street
St. Louis, Missouri 63101

RE: Country of Origin determination for women's knit wearing apparel

Dear Mr. Riley:

This letter is in response to your inquiry of April 22, 1994, requesting a country of origin determination for women's knit wearing apparel. Three sample garments in the unassembled condition were submitted to this office for examination.

FACTS:

The three submitted samples consist of women's knit sweaters, referred to as style numbers 3907, 3908 and 3909, the fabric of which measures less than nine stitches per two centimeters in the horizontal direction. All the sweaters are constructed of 55 percent ramie and 45 percent acrylic fibers. The garments are worn on the upper part of the body and serve to cover other apparel.

It appears that style number 3907, upon assembly will become a cardigan, while the other styles are intended to be pullovers. Each style number contains the following components:

Style number 3907
left front panel, right front panel, back, two sleeves, rib knit cuffs, waistband and placket. The two front panels feature decorative intarsia (mosaic) patterns.

Style numbers 3908 and 3909
front panel, back panel, two sleeve panels, rib knit neck and front waistband panels. The front panel of each style features a decorative intarsia (mosaic) panel.

You state that in each of the three styles, the front panel is to be knit in China from yarn of Korean origin and that except for the work performed in China on the front panel, the entire article is to be manufactured in Korea.

Though you did not indicate in your letter the complexity of each of the operations or the time spent in each country to complete any of the operations, you did provide a cost breakdown for the manufacture of the three styles allocating more than eighty percent of the cost of the materials, labor and shipping and overhead/handling to Korea and the remainder to China.

ISSUE:

What is the country of origin of the merchandise at issue?

LAW AND ANALYSIS:

Section 12.130 of the Customs Regulations (19 CFR 12.130) sets forth the principles of country of origin for textiles and textile products subject to Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854).

Pursuant to 19 CFR 12.130(b), the standard of substantial transformation governs the country of origin determination where textiles and textile products are processed in more than one country. The country of origin of textile products is deemed to be that foreign territory or country where the article last underwent a substantial transformation. Substantial transformation is said to occur when the article has been transformed into a new and different article of commerce by means of substantial manufacturing or processing.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d). Section 12.130(e)(1) describes manufacturing or processing operations from which an article will usually be considered a product of the country in which those operations occurred.

Section 12.130(e)(1)(v) states that an article will be a product of a particular foreign country, when it has undergone prior to importation into the U.S. in that foreign country:

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 of all cut pieces of suit-type jackets, suits and shirts).

The front panel(s) of the subject garments is knit in China. Section 12.130(e)(1)(iii) states that an article will usually be a product of a country where it has undergone "knitting or otherwise forming fabric". As yarn is knit in China to form the front panel(s) of the sweaters, a substantial transformation is deemed to have occurred in this country. In Korea, the remainder of the sweater is knit (back, two sleeves, rib knit neck, cuffs, and waistband, and placket) and the component parts are assembled to form the completed sweaters. As with the knitting operation performed in China, the knitting of the remainder of the sweater components in Korea constitutes the "forming of fabric" and, pursuant to 12.130(e)(1)(iii), the components undergo a substantial transformation in Korea.

With regard to the assembly operations performed in Korea, we note that the sewing of the components into the completed garments, is not a substantial transformation for purposes of section 12.130(e)(2)(iii). As was stated by Customs in Treasury Decision (T.D.) 85-38 (19 Cust. Bull. 58, 69; 50 FR 8714), the final document rule establishing 19 CFR 12.130, in pertinent part:

[T]he joining together by looping, linking, sewing, or other means, of knit-to-shape components produced in a single country, even when accompanied by other processing (i.e. washing, drying, mending, etc.) normally incident to the assembly process will not usually cause a substantial transformation...

[B]ased on time, value added by processing at each stage, complexity, etc. such an assembly process does not cause the knit-to-shape components to be substantially transformed. The assembly of knit-to-shape component parts is a relatively simple processing operation that does not require a great deal of time.

Accordingly, Customs has held that the mere assembly of goods by linking and looping, or simple sewing, is not enough to substantially transform the components of an article into a new and different article of commerce, even in situations where the components are produced in more than one country. See HRL 953703, dated October 18, 1993; HRL 087271, dated January 17, 1991.

If assembly to completion of various components is not sufficient to constitute a substantial transformation within the purview of section 12.130, and the component parts of an article have been substantially transformed prior to assembly in different countries, a different test must be applied to determine the country of origin status of the garments. In Customs Memo dated 088778, dated March 25, 1991, this office held that in manufacturing situations which are not covered by 19 CFR 12.130, a country of origin determination shall be predicated on the portion of the article which imparts the essential character to the garment. Explanatory Note VIII to GRI 3(b), sets forth the standards used in an essential character determination:
the factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of the constituent material in relation to the use of the goods.

In the instant case, neither the front panel(s) nor the back panel imparts the essential character to the sweaters. Both components are made from the same fabric and perform similar functions. Customs Memo 088778 further provides that in situations where no one component can be said to impart the essential character, country of origin will be determined according to the component which governs the classification of the garment. This is determined using GRI 3(c) which states that the heading occurring last in numerical order among those equally meriting consideration will govern classification. The country of origin of the component which governs classification using GRI 3(c) will also determine the country of origin for the entire article. In the instant case however, as both components are made from the same fabric, there are no competing headings and as such we are unable to use GRI 3(c).

As was determined in HQ 954961, dated November 2, 1993, in situations where components are manufactured in different countries, where the manufacturing process does not constitute a substantial transformation for the purposes of 19 CFR 12.130, and where no one component determines the classification of the merchandise, Customs will determine the country of origin on the basis of where the merchandise last underwent a significant processing operation.

In this situation, the sweaters last undergo a significant processing operation in Korea as this is the country where all of the components of the garments, with the exception of the front panels, were knit to shape and assembly of all of the components into the completed garments occurs.

Accordingly, applying this standard, it is out belief that Korea is the country of origin of the subject sweaters. (See also, HQ 954729, dated November 23, 1993; HQ 734791, dated February 16, 1993; HQ 952503, dated January 15, 1993; HQ 734456, dated March 12, 1992 and HQ 950287, dated October 30, 1991).

HOLDING:

The country of origin of the submitted merchandise is Korea.

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 the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

Should it be subsequently 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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