HQ 558796 - Country of Origin Marking for Leather Jackets; substantial transformation; assembly; Part 134, Customs Regulations (19 CFR 134) - United States International Trade Commision Rulings

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HQ 558796

December 8, 1994

MAR-2-05 CO:R:C:S 558796 WAS

CATEGORY: MARKING

Ms. May Chan
1574 - 38th Avenue
San Francisco, CA 94122

RE: Country of Origin Marking for Leather Jackets; substantial transformation; assembly; Part 134, Customs Regulations (19 CFR 134)

Dear Ms. Chan:

This is in response to your letter dated August 1, 1994, requesting a ruling on the country of origin marking requirements for imported leather components which are assembled in the U.S.

FACTS:

You state that leather will be purchased either in Italy, Japan, China or another country, depending upon the availability and quality demand from customers. The leather will be cut into components for use in the assembly of a leather jacket in China. The cut pieces will then be shipped to the U.S., where they will be assembled and combined with a textile lining of U.S.-origin. You have also asked whether the finished jacket may be marked "Made in U.S.A."

ISSUE:

What are the country of origin marking requirements applicable to leather jackets which are assembled in the U.S. from components which are cut to shape in China?

LAW AND ANALYSIS:

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit in such a manner as to indicate to the ultimate purchaser the English name of the country of origin of the article.

The primary purpose of the country of origin marking statute is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will. United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.42(b), Customs Regulations (19 CFR 134.42(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. Section 134.1(d) defines the "ultimate purchaser" generally as the last person in the United States who will receive the article in the form in which it was imported. 19 CFR 134.1(d)(1) states that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See 19 CFR 134.35.

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linen v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D.'s 80-111, 89-110, 89-129, and 90-51.

C.S.D. 85-25 dated September 25, 1984 (HRL 071827) sets forth criteria for determining whether an assembly operation will constitute a substantial transformation. In C.S.D. 85-25, Customs considered the issue of whether the assembly of components onto a circuit board results in a substantially transformed constituent material for purposes of the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2465). In that decision, Customs held that an assembly process will not constitute a substantial transformation unless the operation is "complex and meaningful." Whether an operation is considered "complex and meaningful" depends upon the nature of the operation, including the number of components assembled, number of different operations, time, skill level required by the operation, attention to detail and quality control, and the benefit to the country of assembly from the standpoint of both the value added to each PCBA and the overall employment generated thereby. In C.S.D. 85-25, it was stated that the factors which determined whether a substantial transformation occurred should be applied on a case-by-case basis.

We are of the opinion that Customs rulings pertaining to textiles and textile products are also instructive for purposes of this decision. Section 12.130, Customs Regulations (19 CFR 12.130), sets forth the principles for country of origin determinations for textile and textile products. 19 CFR 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.

19 CFR 12.130(d) sets forth criteria in determining whether a substantial transformation of textile products 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) 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.

Assembly by sewing is considered in 19 CFR 12.130(e)(v) as usually resulting in an article being deemed a product of the country in which the sewing was performed where the assembly is substantial, such as the complete assembly and tailoring of all cut pieces of suit-type jackets, suits, and shirts. According to T.D. 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714), the final document rule establishing 19 CFR 12.130:

The assembly of all the cut pieces of a garment usually is a substantial manufacturing process that results in an article with a different name, character or use than the cut pieces. It should be noted that not all assembly operations of cut garment pieces will amount to a substantial transformation of those pieces. Where either less than a complete assembly of all cut pieces of a garment is performed in one country, or the assembly is a relatively simple one, then Customs will rule on the particular factual situations as they arise, utilizing the criteria in 12.130(d).

For instance, in HRL 086696 dated June 8, 1990, Customs ruled that the sewing together of cut panels and finished components (collars and front panels) into finished woven shirts in a second foreign country was not a substantial transformation under 19 CFR 12.130 and the country of origin of the shirt was the first country where the fabric was cut. See also HRL 083359 dated May 18, 1990, (sewing and finishing in a second country of trouser parts cut in a first country where the fabric originated does not substantially transform the finished trousers, which remain a product of the first country; HRL 734215 dated November 13, 1991 (assembly in a second country of sweater parts cut in a first country where fabric originated does not substantially transform the finished sweaters, which remain a product of the first country); HRL 734467 dated April 17, 1992 (garment components cut in Singapore and sent to Indonesia to be assembled into poloshirts were not substantially transformed and the country of origin of the shirts was Singapore).

In HRL 087439 dated October 30, 1990, Customs found that the simple assembly of components of an imitation leather portfolio was not sufficient to confer country of origin. Customs stated in HRL 087439 as follows:

These components will be assembled in the U.S. by means of simple fixing devices such as sewing and gluing. We find that the imported components are not substantially transformed as a result of the assembly process. At the time of importation, although the portfolio is unfinished, it lacks none of its essential characteristics. The mere assembly of these components by gluing and sewing into a finished portfolio does not change the name, character or use of the product. Accordingly, for purposes of 19 U.S.C. 1304, the country of origin of the portfolio is the country where the components are manufactured.

Based on the limited information you have provided and consistent with the standard set forth in C.S.D. 85-25 and the above-cited cases, we are of the opinion that the sewing operation conducted in the U.S. to assemble the cut leather jacket components into a finished jacket does not appear to require a high degree of skill or expertise. Rather, the sewing operation appears to be more closely analogous to a simple assembly, instead of a more complex tailoring operation. Since there is nothing to suggest from your submission that the assembly of the cut leather jacket components is in any degree a complex operation in regards to, for example, the time or level of skill required, or value added, it is Customs' view that the leather jackets which are assembled in the U.S. from leather which has been cut to shape in China have not undergone a substantial transformation in the U.S. Consequently, the country in which the leather components are cut to shape -- China -- is the country of origin for country of origin marking purposes.

Finally, as the country of origin of the leather jackets is China, your proposed marking "Made in U.S.A." is unacceptable.

Customs has long held the position, articulated in T.D. 54640(6) dated July 2, 1958, that in regard to wearing apparel, such as coats, shirts, blouses, etc, that on and after October 1, 1958, these articles of clothing must be legibly and conspicuously marked with the name of the country of origin by means of a fabric label or label made from natural or synthetic film which is sewn or otherwise permanently affixed on the inside center of the neck midway between the shoulder seams or in that immediate area or otherwise permanently marked in that area in some other manner. The Customs Service is reconsidering its policy concerning the required location and type of label allowed for the marking of these products. Nevertheless, in the meantime, the leather jackets must be properly marked to indicate, China, as the country of origin, in a conspicuous place as legibly, indelibly, and permanently as the nature of the article will permit. If you wish to receive a binding ruling on the acceptability of the marking, you may submit a sample of the article along with such a request.

HOLDING:

The country of origin of the leather jacket is China. The leather jacket is not excepted from marking, because the U.S. assembly operations do not result in a substantial transformation. Therefore, the jacket must be conspicuously marked with a label sewn in the nape area indicating China as the country of origin, and the label must remain visible after the addition of the lining. 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

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