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HQ 955975

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June 21, 1994

CLA-2:CO:R:C:G 955975 PR

CATEGORY: CLASSIFICATION

Diane Weinberg, Esquire
Sandler, Travis & Rosenberg, P.A.
505 Park Avenue
New York, New York 10022-1106

RE: Country of Origin of Quilts

Dear Ms. Weinberg:

This is in reply to your letter concerning the country of origin of certain quilts manufactured in both China and Indonesia. Our ruling on the matter follows.

FACTS:

The merchandise consists of hand-stitched three layer quilts. The face fabric is made from multiple pieces of cotton (or cotton blend) fabric sewn together to form a design. The middle layer is either man-made fiber fiberfill or cotton batting. The back is stated to be made from three pieces of woven cotton (or cotton blend). The quilts are produced as follows:

1. Piece goods produced in China, Indonesia, and/or Korea are cut into pieces in China.

2. The pieces of fabric are machine stitched together to form the face (top) of a quilt. A sample of this stage of production was submitted.

3. The three back panels are cut on all four sides from piece goods from China, Indonesia and/or Korea.

4. The three back panels are stitched together to form the back of a quilt.

5. The face is trimmed.

6. The back is trimmed.

7. The face and back are joined by sewing them together on three sides. A sample of this stage of production was submitted.
8. The middle layer is inserted into the shell.

9. The middle layer is basted to the sides.

10. The open side seam is stitched closed. A sample of this stage of production was submitted.

11. Using a template, a design is marked on the filled shell.

12. Four workers hand-quilt the design on each quilt. A sample of this stage of production was submitted.

Three factual situations were presented. We have been assured by counsel that the fact situations are not hypothetical. In fact situation A, steps 1 through 10 will be accomplished in China. The stuffed shell will then be exported to Indonesia for steps 11 and 12. In fact situation B, steps 1 through 7 will be performed in China. The shell will then be sent to Indonesia for completion of steps 8 through 12. In fact situation C, only steps 1 and 2 will occur in China. The face fabric will be sent to Indonesia where the remaining steps, 3 through 12, will be performed.

ISSUE:

The question presented by each factual situation is whether China or Indonesia is the country of origin of the quilts.

LAW AND ANALYSIS:

Section 12.130, Customs Regulations (19 CFR 12.130) provides, in pertinent part, that a textile or textile product which consists of materials processed in more than one foreign country shall be a product of the country where it last underwent a substantial transformation. A textile or 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.

In FACT SITUATION A, a virtually complete quilt is formed in China, needing only the stitching to hold the middle batting layer in place. It is readily recognizable as an unfinished  -3-
quilt or comforter. Clearly, the processing done in Indonesia does not change the character or identity of the Chinese product. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982).
General Rule of Interpretation (GRI) 2(a), HTSUSA, provides that an incomplete or unfinished article will be classified as though complete or finished if it has the essential character of the complete or finished article. We have no hesitancy in holding that, pursuant to GRI 2(a), the goods, in their condition as imported into Indonesia, have the essential character of finished quilts and would be classified as though they were finished articles. The processing in Indonesia does not cause the goods to have a different name, character, and use. Accordingly, the country of origin of the quilts in fact situation A is China.

FACT SITUATION B involves the filling of a quilt shell and adding stitching to hold the filling in place. Counsel has advanced a number of reasons why Indonesia should be considered the country of origin of the quilts.

First, it is contended that 84 percent of the value of the quilts is attributable to inserting the filling and the subsequent stitching. In this regard, ?12.130(d)(2), Customs Regulations (19 CFR 12.130(d)(2)) provides as follows:

(d) Criteria for determining country of origin. The criteria in paragraphs (d)(1) and (2) of this section shall be considered in determining the country of origin of imported merchandise. These criteria are not exhaustive. One or any combination of criteria may be determinative, and additional factors may be considered.

(2) 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 as a result of the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S.
(ii) The time involved in the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S. -4-

(iii) The complexity of the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S. (iv) The level or degree of skill and/or technology required in the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S.
(v) The value added to the article or material in each foreign territory or country, or insular possession of the U.S., compared to its value when imported into the U.S.

As stated in ?12.130(d)(2), the listed factors are not the only factors which may be considered, and one or more may be controlling. Each fact situation must be ruled on independently. While it is reasonable for counsel to advance an argument on the amount of "value added" in this instance, we are not persuaded that "value added", in addition to other factors advanced for consideration in Fact Situation A (i.e. complexity, time, and skill), is sufficient to justify the finding of a substantial transformation in Indonesia.

The filling of the quilt shell is, in our view, a simple combining operation. The closing of the quilt shell is nothing more than a simple stitching procedure. The quilting stitching, which serves to hold the filling in place and provides a decorative appearance, may be both time consuming and requiring of a certain degree of skill when done by hand. However, (1) the quilting stitching is not sufficiently complex to rise to the status of a "substantial manufacturing or processing operations", and (2) the same quilting stitching is a relatively quick and simple procedure when done by machine.

In our view, it is not logical have different countries of origin for identical articles, solely because one was made by hand and the other by machine. Accordingly, in the absence of evidence that processing done by hand results in a different article of commerce than the same article processed by machine, we will consider hand work on a par with that same work done by machine. Therefore, in fact situation B, the processing done in Indonesia does not change the country of origin of the quilts.

When looking at the totality of what is done in Indonesia, we are unable to conclude that the filling of the quilt shell and subsequent stitching constitutes "substantial manufacturing or processing operations."

Under Customs proposed country of origin rules published on January 3, 1994, in the Federal Register (59 FR 110), Indonesia would be determined to be the country of origin of the quilts. Customs has stated that the proposed rules are a codification of the existing rules of origin. While that statement is generally true, there are certain exceptions. One of those exceptions is that in some areas inadvertent errors were made. As we become aware of those errors we will attempt to rectify them. The proposed tariff change rule for subheading 9404.90, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), the tariff provision under which finished quilts are classifiable, represents an inadvertent departure from Customs position on the country of origin of articles classifiable under that subheading. It is an area in the proposed rules which Customs intends to revisit.

Our determination here differs from a Customs Headquarters Ruling, cited by counsel, which ruled on the country of origin of vinyl shells used in the manufacture of waterbed mattresses. Customs held in HQ 731433, dated December 15, 1989, that a partially seamed vinyl shell imported into the United States was substantially transformed into a product of the United States. In the U.S., four layers of polyester fiber and one layer of foam (all U.S. products) were attached together and riveted to a flotation sheet (also U.S. origin). The polyester fiber layers, the foam layer, and the flotation sheet were then inserted into the partially seamed shell and the shell seamed closed.

The factual situation presented in HQ 731433 differs from that presented here. The cutting and partial seaming of vinyl is not comparable to the creation of a fabric quilt shell. In addition, substantially more was involved in the United States in creating the insert for the waterbed mattress than is being done in Indonesia in this factual situation. Further, 19 CFR ?12.130, which governs country of origin determinations for textiles and textile products, was not utilized in HQ 731433.

In FACT SITUATION C, the materials imported into Indonesia are a patchwork face fabric, fabric from which the back panels will be made, and a middle padding. The processing done in Indonesia changes those materials into a completed quilt. The processing done in Indonesia obviously results in a new and different article of commerce. In addition, when looking at the change in the physical condition of the goods as a consequence of the processing in Indonesia, that processing is considered to be substantial. Accordingly, under this factual situation, the completed quilt is a product of Indonesia.

HOLDING:

Under the first two factual situations, the country of origin of the finished quilts is China. Under FACT SITUATION C, the country of origin of the finished quilts is Indonesia.

This ruling is issued pursuant to the provisions of Part 177 Customs Regulations (19 CFR Part 177). If the specific factual situation is not as described above, this ruling may not be valid. In such an event, it is recommended that a new ruling request be submitted.

Sincerely,

John Durant, Director

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