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HQ 558786




January 20, 1995

CLA-2-CO:R:C:S 558786 DEC

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.80

Ms. Lanette Hodges
Tower Group International, Incorporated
One Clay Place
P.O. Box 20729
Atlanta, Georgia 30320-0729

RE: Pillow tick; HRL 733601; C.S.D. 90-29; 19 CFR 10.14(b); HRL 086132;
T.D. 90-17; 19 CFR 12.130; HRL 731028; HRL 555489; HRL 555693

Dear Ms. Hodges:

Your letter dated August 29, 1994, to the Customs Service office at Savannah, Georgia with respect to your inquiry on behalf of Dowling Textile Manufacturing Company (Dowling) concerning the eligibility of certain pillow ticks processed in Jamaica for the partial duty exemption under the Harmonized Tariff Schedule of the United States (HTSUS) subheading 9802.00.80 has been referred to this office for reply.

FACTS:

The pillow tick is constructed from a woven fabric of eighty percent (80%) polyester and twenty percent (20%) cotton. It measures approximately twenty-seven inches in length and nineteen inches in width. The pillow tick is made from fabric imported from China. Dowling will cut the fabric to length and width in the United States. The cut parts will be exported to Jamaica where it will be sewn on three sides. The top will be left open. The article will be imported into the United States unstuffed.

ISSUE:

Whether the cutting to length and width of the Chinese-origin fabric will substantially transform the fabric into a product of the United States that will be eligible
for a partial duty exemption pursuant to subheading 9802.00.80, HTSUS.

LAW AND ANALYSIS:

Subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) provides for 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, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the United States components assembled abroad provided the section 10.24, Customs Regulations (19 CFR 10.24), documentary requirements are satisfied.

The first issue to be considered concerns whether the cut pieces of fabric to be sent to Jamaica qualify as products of the United States. In this case, the fabric will be imported from China and it will be cut to size in the United States. According to section 10.14(b), Customs Regulations (19 CFR 10.14(b)), foreign-made articles or materials may become products of the U.S. for purposes of subheading 9802.00.80, HTSUS, if they undergo a process of manufacture in the U.S. that results in their substantial transformation. This provision further states that a substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use that is different from that originally possessed by the article or material.

According to T.D. 90-17, published in the Federal Register on March 1, 1990 (55 FR 7303), the principles of country of origin for textiles and textile products contained in section 12.130, Customs Regulations (19 CFR 12.130), are applicable to such merchandise for all purposes including duty and marking. Section 12.130 requires that the standard of substantial transformation govern the determination of the country of origin where textiles and textile products are processed in more than one country. The country of origin of textile products is deemed to be that territory, country, or insular possession where the article last underwent a substantial transformation.

Section 12.130(d) establishes criteria for determining whether an article has been substantially transformed. However, the criteria set forth in section 12.130(d) are not exhaustive; one or any combination of these criteria may be determinative and additional factors may be considered.

According to 19 CFR 12.130(d)(2), the following factors are to be considered in determining whether merchandise has been subjected to substantial manufacturing or processing operations: the physical change in the materials or article, the time involved in the manufacturing or processing operations, the complexity of the other operations, the level or degree of skill and/or technology required, and the value added to the article.

The question presented here is whether cutting foreign-origin fabric in the U.S. to length and width to create the pillow tick fabric pieces constitutes a substantial transformation. Customs has held under certain circumstances that the cutting of fabric into specific patterns and shapes suitable for use to form the completed article constitutes a substantial transformation. See, Headquarters Ruling Letter (HRL) 731028 of July 18, 1988 (cutting of fabric into garment parts for wearing apparel constitutes a substantial transformation), HRL 555489 of May 14, 1990 (cutting of fabric into glove pattern pieces results in a substantial transformation), and HRL 555693 of April 15, 1991 (cutting of fabric to create pattern pieces for infant carrier results in a substantial transformation).

However, Customs has held that cotton fabric from China that was imported into Mexico where it was machine-cut to width and length, hemmed on three or four sides, washed and shrunk, and folded to specifications for use as surgical towels was not substantially transformed, and, therefore, was considered a product of China. Headquarters Ruling Letter (HRL) 733601, dated July 26, 1990. We also held in HRL 086132 dated February 22, 1990, that a surgical towel which was cut from cloth, washed, seamed, folded and packaged in Honduras was not substantially transformed. Further, in C.S.D. 90-29, we held that greige terry toweling which was bleached, cut to size, hemmed, desized, and dyed to create beach towels was not substantially transformed.

In the present case, the cutting of the fabric in the United States involves simply cutting straight lines similar to cutting toweling fabric to length and/or width. HRL 556015, dated May 20, 1991. This operation does not substantially transform the Chinese-origin materials. Therefore, the fabric exported to Jamaica to be sewn does not become a product of the United States.

HOLDING:

Since the cut fabric pieces that are exported for processing to Jamaica do not become products of the United States, the pillow ticks are ineligible for allowances in duty under HTSUS subheading 9802.00.80 when returned to the United States.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant
Director, Commercial Rulings Division

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