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HQ 959137

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June 20, 1996
CLA-2 RR:TC:TE 959137 SK

CATEGORY: CLASSIFICATION

TARIFF NO.: 5810.99.9000

Spencer Hutchins
AKA International, Inc.
2601 Elliott Ave., Suite 3167
Seattle, Washington 98121

RE: Classification, country of origin and marking determinations; embroidered upholstery fabric; Section 12.130; Section 102.21(c); Section 134.1(b), Customs Regulations.

Dear Mr. Hutchins:

This is in response to your inquiry of November 29, 1995, on behalf of Robbins Textile Designs, requesting a classification, country of origin and marking determination for embroidered upholstery fabric pursuant to Section 12.130, Section 102.21 and Section 134.1(b), Customs Regulations. You also inquire as to whether the subject merchandise is entitled to a duty allowance. Samples swatches were submitted to this office for examination.

FACTS:

The subject merchandise consists of two styles of embroidered upholstery fabric, identified as "Siam" and "Newport." The woven base fabric of each swatch is made of 100 percent silk.

The subject fabrics are imported from India into the United States. A knit polyester backing is applied in the United States to facilitate the embroidery process. The fabric is exported to China for embroidery with rayon thread. The fabric is then returned to the United States where it will be used as upholstery.

You submit that the cost of the polyester-backed silk is $15.30 per yard with the cost breakdown set forth as $13.30 for the silk and $2.00 for the backing. You state that the preponderance of the weight is imparted by the silk, rather than the polyester backing, and that the cost of embroidering fabric in China is $15.00 per yard.

Specification sheets were provided for the subject fabrics. The fabric style identified as "Siam" is a plain weave 100 percent silk fabric with a width per unit area of 140 centimeters. The fabric weighs 157 grams per square meter. The warp is 44 denier and the weft 380 denier. The yarn has been dyed. The fabric style identified as "Newport" is a plain solid weave made of 100 percent silk. The fabric has a width per unit area of 137 centimeters. The fabric weighs 100-150 grams per linear yard. The yarn has been dyed.

The Office of Laboratories and Scientific Services at Customs Headquarters analyzed the subject fabrics and submitted a lab report to this office. The lab report states that the "Newport" style fabric consists of 56 percent by weight woven fabric and 44 percent by weight knit fabric. The "Siam" style consists of 42 percent by weight woven fabric, 12 percent by weight knit fabric, and the remainder of the total fabric weight is comprised of a nonwoven backing material and embroidery thread.

ISSUES:

1) What is the proper classification of the embroidered fabric?

2) Is the subject merchandise entitled to a duty allowance?

3) What is the country of origin of the subject merchandise?

4) How is the subject merchandise to be marked?

LAW AND ANALYSIS:

- CLASSIFICATION AND ASSESSABLE DUTY -

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (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 classified in accordance with subsequent GRI's, applied in sequential order.

Heading 5810, HTSUSA, provides for, inter alia, embroidery in the piece. The Explanatory Notes (EN) to heading 5810, at page 808, define embroidery as that which is "obtained by working with embroidery threads on a pre-existing ground of ... woven fabric ... ." The subject merchandise consists of a pre-existing woven fabric background of 100 percent silk onto which rayon thread has been embroidered to create an ornamental effect. Accordingly, classification is proper within heading 5810, HTSUSA. Specifically, the subject fabric is classifiable within subheading 5810.99.9000, HTSUSA, which provides for, "Embroidery in the piece, in strips or in motifs: other embroidery: of other textile materials: other... ." The rate of duty applicable to subheading 5810.99.9000, HTSUSA, is set forth in Additional U.S. Note 5 which states: "The rates of duty applicable to subheading 5810.99.90 are ... 7.6 percent, but in the case of embroidery in the piece not less than the rate which would apply to such product if not embroidered." If the subject merchandise were not embroidered, both the Newport and the Siam styles would be classifiable under subheading 5007.20, HTSUSA, which has an attendant rate of duty of 3 percent ad valorem. The subject merchandise, therefore, is dutiable at a rate of 7.6 percent ad valorem. There are no quota/visa restraints applicable to the subject merchandise at this time. The imported embroidered fabric is dutiable on its full appraised value. See U.S. Note 2(a), subchapter II, Chapter 98, HTSUSA. Based on the information presented, no duty allowance may be made for the polyester backing.

- COUNTRY OF ORIGIN: SECTION 12.130, CUSTOMS REGULATIONS -

Country of origin determinations for textile or apparel products entered, or withdrawn from warehouse for consumption, before July 1, 1996, are subject 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) of the Customs Regulations sets forth criteria to be used in determining whether a substantial transformation of a textile product 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.

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;

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

Section 12.130(e)(1) of the Customs Regulations describes manufacturing or processing operations by which an article will usually be considered a product of the country in which the following operations occur:

(i) Dying 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 articles; 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).

In the instant case, the formation of the woven fabric in India constitutes a substantial transformation as per Section 12.130 (e)(1)(iii) cited above. The formation of the knit polyester backing also constitutes a substantial transformation for the same reason, however the country in which this manufacturing operation takes place is not specified in your submission to this office. The combining of the polyester backing to the silk fabric in the United States does not substantially transform the subject merchandise; this operation is deemed a simple assembly process and does not require the requisite degree of complexity to be considered a significant manufacturing or processing operation. Similarly, the embroidery work performed in China does not constitute a substantial transformation inasmuch as the embroidery does not serve to change the identity or fundamental character of the fabric: the subject merchandise enters China as upholstery fabric and is exported as upholstery fabric, albeit enhanced in decorative value. See Headquarters Ruling Letter (HRL) 089068, dated July 1, 1991, in which Customs determined that embroidering a polar bear design to the front panel of an unfinished sweater was not a substantial transformation; HRL 088565, dated May 23, 1991, in which Customs held that re-embroidery of lace fabric was not a substantial transformation, and; HRL 733952, dated February 15, 1991, in which Customs determined that decorating front panels of an unfinished tracksuit top with appliques and embroidery did not constitute a substantial transformation. HRL 082527, dated March 9, 1989, is distinguished in that this ruling dealt with inexpensive fabric which underwent complex eyelet embroidery performed by Schiffli machines and virtually all of the value was imparted by the embroidery.

As the simple assembly and embroidery operations, respectively performed in the United States and China, do not serve to substantially transform the subject merchandise within the purview of Section 12.130, and the woven silk fabric component and the knit polyester backing have been substantially transformed prior to assembly in different countries, a different test must be applied to determine the country of origin of the fabric. 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. Explanatory Note VIII
to GRI 3(b), which sets forth the standards used in an essential character determination, reads:

"[T]he 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."

In the instant case, it is the woven silk fabric which imparts the essential character to the subject merchandise. This component provides the most significant visual impact, it is significantly heavier than the polyester backing and, at $13.30 per yard to produce the silk fabric versus $2.00 per yard to produce the knit backing, it is substantially more valuable. Accordingly, if the subject upholstery fabric is entered, or withdrawn from warehouse for consumption, before July 1, 1996, the country of origin of the fabric is India.

-COUNTRY OF ORIGIN: SECTION 102.21 -

Pursuant to the Uruguay Round Agreements Act, new rules of origin will be effective for textile or apparel products entered, or withdrawn from warehouse for consumption, on or after July 1, 1996. These rules were published in the Federal Register, 60 Fed. Reg. 46188 (September 5, 1995). Section 102.21, Customs Regulations (19 CFR Section 102.21), sets forth the general rules which determine country of origin. The country of origin of a textile or apparel product will be determined by a hierarchy of rules set forth in paragraphs (c)(1) through (c)(5) of Section 102.21.

Section 102.21(c)(1) sets forth the general rule for determining the country of origin of a textile or apparel product in which the good is wholly obtained or produced in a single country, territory, or insular possession.

Section 102.21(c)(2) provides for instances where the country of origin of a textile or apparel product cannot be determined under Section 102.21(c)(1). Section 102.21 (c)(2) provides:

"[W]here the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory,
or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section."

Section 102.21(c)(3) governs instances where country of origin of a textile or apparel product cannot be determined pursuant to paragraphs

(i) "[I]f 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; or

(ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10,
6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled."

Section 102.21(b), paragraph (6), defines "wholly assembled" as follows:

"[T]he term wholly assembled' when used with reference to a good means that all components, of which there must be at least two, preexisted in essentially the same condition as found in the finished good and were combined to form the finished good in a single country, territory, or insular possession. Minor attachments and minor embellishments (for example, appliques, beads, spangles, embroidery, buttons) not appreciably affecting the identity of the good, and minor subassemblies (for example, collars, cuffs, plackets, pockets), will not affect the status of a good as wholly assembled' in a single country, territory, or insular possession."

For the manufacturing scenario described above, Section 102.21(c)(1) does not provide the relevant country of origin analysis because the subject embroidered upholstery fabric is not wholly obtained or produced in a single country.

Section 102.21(c)(2) is also inapplicable inasmuch as there is no single country where each foreign material incorporated in the subject merchandise undergoes an applicable change in tariff classification. The embroidered fabric is classifiable under
subheading 5810.99.9000, HTSUSA. Accordingly, we are directed to paragraph (e) of this section which states, in pertinent part, that origin is conferred in the following manner:

5810.91 - 5810.99 (1)"[F]or embroidered fabric, the country of origin is the country, territory, or insular possession in which the fabric was produced by a fabric-making process."

As the woven silk fabric and the polyester backing fabric comprising the subject merchandise were produced in two different countries, Section 102.21(c)(2) is inapplicable and our hierarchical application of Section 102.21(c) continues.

Section 102.21(c)(3)(i) does not provide the relevant country of origin analysis in the instant case inasmuch as the subject fabric is not a knit to shape good. Section 102.21(c)(3)(ii), however, states that except for goods of certain enumerated headings and subheadings, of which heading 5810, HTSUSA, is not included, and for non- knit to shape goods, the country of origin will be the country, territory, or insular possession in which the good was wholly assembled. In this case, the subject article is wholly assembled in the United States as this is where the woven silk fabric is combined with the polyester knit backing. The embroidery operations in China are not taken into consideration in this instance, pursuant to Section 102.21(b)(6) cited supra. Accordingly, based on Section 102.21(c)(3)(ii), the country of origin of the subject upholstery fabric is the United States.

Be advised, however, that there is an exception for products from the United States that are sent abroad for processing. Section 12.130(c), Customs Regulations, provides that any product of the United States which is returned after having been advanced in value or improved in condition abroad, or assembled abroad, shall be a foreign article. Section 12.130, which remains in effect, was originally intended to be used to determine the country of origin of textiles and textile products for quota/visa requirements. In Treasury Decision ("T.D.") 90-17, issued February 23, 1990, Customs announced a change in practice and position. This change resulted in Customs using Section 12.130 for quota, duty and marking purposes when making country of origin determinations for textile goods. Therefore, in accordance with T.D. 90-17 and Section 12.130(c), the country of origin of the embroidered fabric is China for quota, duty and marking purposes, as it is in China that the U.S.-origin fabric is advanced in value by means of embroidering.

- COUNTRY OF ORIGIN MARKING REQUIREMENTS-

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires 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 manner as to indicate to an ultimate purchaser in the U.S. the English name of the country of origin of the article. The regulations implementing the requirements and exceptions of 19 U.S.C. 1304 are set forth in Part 134, Customs Regulations (19 CFR Part 134).

"Country of origin" is defined in section 134.1(b), Customs Regulations (19 CFR 134.1(b)as:

"...the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the country of origin' within the meaning of this part... ."

The ultimate purchaser is defined in 19 CFR 134.1(d)) as generally the last person in the U.S. who will receive the article in the form in which it was imported. If the 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. In such case, the article itself is excepted from marking pursuant to section 134.35(a), Customs Regulations (19 CFR 134.35(a)), and only the outermost container of the imported article must be marked.

In regard to the facts of this case, we have previously determined that, by application of the current rules of origin for textile and apparel products found in 19 CFR 12.130, joining the polyester backing to the imported silk fabric in the U.S. will not result in a substantial transformation of the Indian-origin silk into a good of the U.S. Therefore, the U.S. firm which joins the backing to the silk fabric is not the ultimate purchaser, and the initially-imported silk (or its container) must be marked to indicate its Indian origin. We have also determined that the subsequent embroidery process in China will not result in a substantial transformation of the fabric into a product of China. Therefore, when the embroidered silk fabric is reimported, the fabric or the container in which it reaches the ultimate purchaser must again be marked to indicate the Indian origin of the fabric.

Applying the rules of origin for textile and apparel products set forth in 19 CFR 102.21, which will become effective on July 1, 1996, we have determined that the process of joining the backing to the silk in the U.S. will render the U.S. the country of origin of the fabric. Thus, pursuant to 19 CFR 134.35, the fabric will be excepted from country of origin marking and only the outermost container of the initially-imported silk must be marked to indicate the Indian origin of the fabric. With respect to the subsequent embroidery process performed in China, we have determined that, by applying the rules of origin provided for in 19 CFR 102.21, the silk fabric remains a good of the U.S. However, 19 CFR 12.130(c) provides that a textile product of U.S. origin which is advanced in value or improved in condition abroad, or assembled abroad, may not, upon its return to the U.S., be considered a product of the U.S.

As stated above, the embroidery process performed in China advances the value and improves the condition of the fabric therefore, pursuant to 19 CFR 12.130(c), the resulting embroidered fabric is not considered a product of the United States but a product of China. Therefore, the reimported fabric or the container in which it reaches the ultimate purchaser must be marked to indicate the Chinese origin of the fabric.

HOLDING:

The subject merchandise is classifiable under subheading 5810.99.9000, HTSUSA, which provides for "Embroidery in the piece, in strips or in motifs: other embroidery: of other textile materials: other... ." The rate of duty is 7.6 percent ad valorem. There is no quota/visa restraints applicable to the subject merchandise at this time. The imported embroidered fabric is dutiable on its full appraised value. See U.S. Note 2(a), subchapter II, Chapter 98, HTSUSA. Based on the information presented, no duty allowance may be made for the polyester backing.

If the subject merchandise is entered, or withdrawn from warehouse for consumption, before July 1, 1996, the country of origin of the fabric is India.

If the subject merchandise is entered, or withdrawn from warehouse for consumption, on or after July 1, 1996, pursuant to Section 102.21 of the Customs Regulations, the country of origin of the fabric is the United States. Inasmuch as the embroidery process performed in China clearly advances the value and improves the condition of the fabric, pursuant to 19 CFR 12.130(c), the resulting embroidered fabric may not be considered a product of the United States, but rather will be
considered a product of China. Therefore, the reimported fabric or the container in which it reaches the ultimate purchaser must be marked to indicate the Chinese origin of the fabric.

The holding set forth above applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 CFR 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect.

Should it be subsequently determined that the information furnished is not complete and does not comply with 19 CFR 177.9(b)(1), the ruling will be subject to modification or revocation. In the event there is a change in the facts previously furnished, this may affect the determination of country of origin. Accordingly, if there is any change in the facts submitted to Customs, it is recommended that a new ruling request be submitted in accordance with 19 CFR 177.2.

Sincerely,

John Durant, Director
Tariff Classification Appeals
Division

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See also:

• Tariff No.: 5810.99.90 - Embroidery in piece/strips/motifs,of textile material except cotton, man-made fiber, wool or fine animal hair, other than w/o visible ground
• Tariff No.: 6209.20.50 - Babies' garments & clothing acc. nesoi, of cotton, incl. sunsuits & sim app, sets & parts of sets, & diapers, not knitted or crocheted