HQ 0956464 - Country of Origin determination for certain knit wearing apparel - United States International Trade Commision Rulings

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HQ 956464

August 4, 1994

CLA CO:R:C:T 956464 jb

CATEGORY: CLASSIFICATION

Ms. Josefa M. Dizon
Embassy of the Philippines
1600 Massachusetts Avenue, N.W.
Washington, D.C. 20036

RE: Country of Origin determination for certain knit wearing apparel

Dear Ms. Dizon:

This letter is in response to your inquiry of May 18, 1994, requesting a country of origin determination for certain knit wearing apparel. No sample garments were submitted to this office for examination.

FACTS:

The garments in question are stated to be a sweater composed of 100 percent cotton fabric featuring some embroidery work on the front panel, and a button front knitted jacket composed of 100 percent acrylic fabric. You state that there are two possible processing operations for these garments and that in both instances the yarn will be sourced in "Country A":

1. PROJECT A
knitting garment components, linking and finishing garments, completely in the Philippines

2. PROJECT B
knitting garment components in the Philippines linking and finishing garments in China

Though you did not indicate in your letter the complexity of each of the operations, a cost comparison was submitted which reflected a slightly higher "total cost" for operations performed in Project A, i.e, complete manufacture in the Philippines.

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).

In both Project A and B the knitting occurs in the Philippines. 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 the Philippines in both Project A and B to form the panel(s) of the garments, a substantial transformation is deemed to have occurred in this country. In Project B, the panels are later sent to China where they are linked and finished, that is, the component parts are assembled to form the completed garments.

With regard to the assembly operations performed in China in the case of Project B, we note that the linking 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.

As such, in the case of both Project A and B, the garments last undergo a substantial transformation in the Philippines as this is the country where all of the components of the garments were knit-to-shape. It is thus our belief that the Philippines is the country of origin of the subject sweaters.

HOLDING:

The country of origin of the submitted merchandise, for both Project A and Project B, is the Philippines.

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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