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HQ 956625


July 27, 1994

CLA-2 CO:R:C:T 956625 GG

CATEGORY: CLASSIFICATION

TARIFF NO.: 6110.30.3015

Alan G. Lebowitz, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman 245 Park Avenue
New York, New York 10167-0002

RE: Classification and country of origin of boys' knit acrylic sweaters; panels knitted in different countries; substantial transformation occurs in two different countries; assembly into the completed article is not sufficient to constitute a substantial transformation within purview of 19 CFR 12.130; essential character; country of origin will be predicated on where garment last underwent significant processing.

Dear Mr. Lebowitz:

This is in response to your letter of May 25, 1994, concerning the country of origin of boys' knit sweaters produced from Thai yarn in the People's Republic of China ("China") and Hong Kong. Please reference your client Crystal Knitters Ltd.

FACTS:

The merchandise at issue is boys' 100% acrylic sweaters, with long sleeves, rib knit collars, waistbands and cuffs. There are fewer than 9 stitches per two centimeters when measured in a horizontal direction. The sweaters are assembled from four knit- to-shape panels (two sleeves, front, and back) and a neckline piece. The front panel features a machine-knit deer design, and there is cabling in each of its four major panels. The sweaters, which are known as Style TS90858, will be imported in boys' sizes 4-7.

To produce Style TS90858, Thai yarn will be exported to China, where it will be knitted into the sweaters' front panels. The back and sleeve panels and the neckline pieces will be knitted from Thai yarn in Hong Kong. The front panels will then be exported to Hong Kong, where they will be attached to the rest of the panels by linking and looping operations. Thai packing accessories will be added to the sweaters in Hong Kong. The garments will also be washed, pressed, and packaged in Hong Kong. ISSUE:

What are the tariff classification and the country of origin of the knitted sweaters?

LAW AND ANALYSIS:

Classification of goods under the Harmonized Tariff Schedules of the United States (HTSUSA) is governed by the General Rules of Interpretation (GRI's). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. Merchandise that cannot be classified in accordance with GRI 1 is to be determined in accordance with subsequent GRI's, taken in order.

Subheading 6110.30.3015, HTSUSA provides for boys' sweaters, knitted or crocheted, of man-made fibers. Statistical Note 3 to Chapter 61, HTS, defines "sweaters" for purposes of that chapter as "garments, whether or not known as pullovers, vests or cardigans, the outer surfaces of which are constructed essentially with 9 or fewer stitches per 2 centimeters measured in the horizontal direction, and garments known as sweaters where, due to construction, the stitches on the outer surface cannot be counted in the horizontal direction". The submitted sample, a pullover with fewer than 9 stitches per 2 centimeters measured in the horizontal direction, is properly classifiable in this provision.

Country of origin determinations for textile products are made pursuant 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 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)(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; (ii) The time involved in the manufacturing or processing; (iii) The complexity of the manufacturing or processing; (iv) The level or degree of skill and/or technology required in the manufacturing or processing operations; and
(v) The value added to the article or material.

Section 12.130(e)(1) provides that an article or material usually will be a product of a particular foreign territory or country, or insular possession of the United States, when, prior to importation into the United States, it has undergone in that foreign territory or country or insular possession, any of the following:

(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;
(ii) Spinning fibers into yarn;
(iii) Weaving, knitting or otherwise forming fabric; (iv) Cutting of fabric into parts and the assembly of those parts into the completed article; 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).

As set forth above, the front panels of the boys' sweaters are knit in China. Section 12.130(e)(1)(iii) states that an article usually will be a product of a country where it has undergone "knitting or otherwise forming fabric". As yarn is knit into front panels in China a substantial transformation is deemed to have occurred in that country. In Hong Kong, the back and sleeve panels and the neckline pieces are knit and attached to the front panels to form the completed sweater. This knitting process similarly serves to "form fabric", and the back and sleeve panels and the neckline pieces undergo substantial transformation in Hong Kong.

With regard to the assembly operations performed in Hong Kong, 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, stated in pertinent part that

[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, as is the case here, 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 of the garment. In Customs Memo 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 that garment. See also HRL 954729, dated November 23, 1993; HRL 954961, dated November 2, 1993. Explanatory Note VIII to GRI 3(b), which sets forth the standards used in an essential character determination, reads:

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 a constituent material in relation to the use of the goods.

Here, neither the front panels nor the back, sleeve and neck panels impart the essential character to the boys' sweaters. All components are made from the same fabric and perform similar functions. Moreover, the presence of the deer design is not significant enough to warrant a finding that the front panel imparts the essential character to this garment. See HRL 954961, infra.

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 determination is accomplished using a GRI 3(c) analysis, 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 a GRI 3(c) analysis will also determine the country of origin for the entire article. See HRL 952801, dated July 13, 1993. In this particular case, however, all of the components are made from the same fabric and we are unable to use a GRI 3(c) analysis because there are no competing headings.

In situations where components are manufactured in different countries, where the assembly process does not constitute a substantial transformation for purposes of 19 CFR 12.130, and where no one component determines the classification of the article, Customs will determine the country of origin on the basis of where the article last undergoes a significant processing operation. Here, the boys' sweaters last undergo a significant processing operation in Hong Kong, as this is the country where the last knitting occurs and where all of the knitted parts are linked and looped together into completed articles. While this manufacturing scenario does not constitute a substantial transformation for purposes of 19 CFR 12.130, it nevertheless is deemed complex enough to confer country of origin to an article in situations that fall outside of the scope of Section 12.130. It is using this standard that we determine Hong Kong to be the country of origin of the boys' sweaters.

HOLDING:

The subject merchandise is classifiable under subheading 6110.30.3015, HTSUSA, which provides for boys' sweaters, knitted or crocheted, of man-made fibers. The textile quota category is 645 and the duty rate is 34.2% ad valorem.

The country of origin of the sweaters is Hong Kong. This ruling is issued pursuant to the provisions of Part 177 of the Customs Regulations (19 CFR Part 177). The holding in this ruling only applies to the specific factual situation presented and the merchandise identified in the ruling request. If the information furnished is not accurate or complete, or there is a change in the factual situation, this ruling will no longer be valid. In such an event, a new ruling request should be submitted.

The designated textile and apparel category may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected. Since part categories ar the result of international bilateral agreements which are the subject of frequent negotiations and changes, to obtain the most current information available, we suggest that you check, close to the time of shipment, the Status Report on Current Import Quotas (Restraint Levels), an issuance of the U.S. Customs Service, which is updated weekly and is available at the local Customs office.

Due to the changeable nature of the statistical annotation (the ninth and tenth digits of the classification) and the restraint (quota/visa) categories, you should contact the local Customs office prior to importing the merchandise to determine the current status of any import restraints or requirements.

Sincerely,

John Durant
Director, Commercial

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