HQ 958700 - Country of Origin determination for knit scarves and headbands; fabric knit in Taiwan; 19 CFR 12.130(b),(d),(e); knitting constitutes a substantial transformation - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 958636 - HQ 958741 > HQ 958700

Previous Ruling Next Ruling
HQ 958700

March 25, 1996

CLA-2 RR:TC:TE 958700 jb

CATEGORY: CLASSIFICATION

Dick Lin
Canonda Enterprise Co., Ltd.
6/F. No. 119, Chien Kuo N. Road
Sec. 2, Taipei
Taiwan, R.O.C.

RE: Country of Origin determination for knit scarves and headbands; fabric knit in Taiwan; 19 CFR 12.130(b),(d),(e); knitting constitutes a substantial transformation

Dear Mr. Lin:

This letter is in response to your inquiry of November 20, 1995, requesting a country of origin determination for certain knit scarves and headbands. Samples were submitted to this office for examination.

FACTS:

The merchandise at issue consists of knit scarves and headbands made out of acrylic or wool yarn. The manufacturing process is as follows:

Taiwan
knitting of goods in jacquard circular machines setting lines of demarcation

Vietnam
inspection separation of scarves or headbands by cutting along lines of demarcation ironing (steaming) size fitting making up fringe/or knot attaching fringe or knot to scarf or headband attaching J-hook and hang tag packing in polybag quality control packing

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)(2). The following are 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;

(v) The value added to the article or material.

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:

(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 of all cut pieces of suit-type jackets, suits and shirts).

As was stated by Customs in Treasury Decision (T.D.) 85-38 (19 Cust. Bull. 58, 70; 50 FR 8714), the final document rule establishing 19 CFR 12.130, in pertinent part:

[T]he assembly of all 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 complete assembly of all the 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 section 12.130(d).

Customs has consistently 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 (See HRL 082747, dated February 23, 1989; HRL 086665, dated March 23, 1990; HRL 951169, dated April 1, 1992; HRL 951437, dated July 17, 1992; and HRL 952647, dated January 27, 1993).

In the case of the subject scarves and headbands, the knitting process identifies the merchandise and is considered a substantial transformation as envisioned by 12.130(e)(1)(iii). The operations performed in Vietnam, that is, cutting along the lines of demarcation and combining and sewing are minor operations which do not possess the requisite degree of complexity to be deemed substantial manufacturing processes for purposes of conferring country of origin status. No great degree of skill or technology is required, nor is tailoring involved.

Additional operations such as ironing, inspecting and packaging are considered minor finishing operations and are not sufficient to affect country of origin. As is stated in section 12.130(e)(2)(i), an article usually will not be considered to be a product of a particular country by virtue of merely having undergone:

Simple combining operations, labeling, pressing, cleaning or drycleaning, or packaging operations, or any combination thereof;

The knitting operation in Taiwan materially alters the fabric. This constitutes a substantial transformation of the fabric and confers country of origin.

HOLDING:

The country of origin of the submitted garments, i.e., the scarves and headbands, is Taiwan. It is at the knitting process in Taiwan that the fabric last undergoes a substantial transformation and is transformed into new and different articles of commerce. As this constitutes a substantial transformation of that fabric, Taiwan is the country of origin for the subject scarves and headbands.

However, you should be aware that on December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act provides new rules of origin for textiles and apparel entered or withdrawn from warehouse, for consumption, on and after July 1, 1996. On September 5, 1995, Customs published Section 102.21, Customs Regulations, in the Federal Register, implementing ?334 (60 FR 46188). Section 334 generally provides, with certain exceptions, that the origin of textile goods will be the country in which they are assembled. The subject scarves and headbands are within the products excepted from the assembly rule. 19 CFR ?102.21(c)(3)(i) states "If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit". Accordingly, as per ?334 of the Uruguay Round Agreements Act, the country of origin of the subject merchandise is also Taiwan.

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,

Previous Ruling Next Ruling