HQ 734394 - Country of origin marking of imported women's sweaters, blouses and T-shirts; substantial transformation; 19 CFR 12.130; knitting and assembly in Sri Lanka, dyeing and packaging in Hong Kong - United States International Trade Commision Rulings

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HQ 734394

February 10, 1992

MAR-2-05 CO:R:C:V 734394 AT

CATEGORY: MARKING

Patrick D. Gill, Esq.
Rode & Qualey
295 Madison Avenue
New York, New York 10017

RE: Country of origin marking of imported women's sweaters, blouses and T-shirts; substantial transformation; 19 CFR 12.130; knitting and assembly in Sri Lanka, dyeing and packaging in Hong Kong

Dear Mr. Gill:

This is in response to your letter of October 23, 1991, on behalf of your client Laws Garment and Knitting Factory Ltd. (Laws Garment), requesting a ruling on the country of origin of imported women's sweaters, blouses and T-shirts for tariff, quota and marking purposes.

FACTS:

You state that Laws Garment intends to import women's sweaters, blouses and T-shirts from Hong Kong. You also state that the production of the sweaters, blouses and T-shirts will involve processing operations performed in two countries, Sri Lanka and Hong Kong.

The sweaters will be subject to the following manufacturing and finishing operations. In Sri Lanka, the sweater parts will be knit and assembled into completed sweaters. The completed sweaters will then be sent to Hong Kong where they will be dyed, washed, ironed and packaged for export to the U.S.

With respect to the blouses and T-shirts, the operations to be performed in Sri Lanka will consist of cutting all the necessary parts for each garment and the sewing of those parts into the completed blouses and T-shirts. Thereafter, the
completed blouses and T-shirts will be sent to Hong Kong where they will be dyed, washed, ironed and packaged for export to the U.S.

You claim that the operations performed in Sri Lanka, the knitting and assembly of the completed sweaters and the cutting and assembly of the completed blouses and T-shirts constitutes a substantial transformation for all country of origin purposes and that the finishing operations dying, washing, ironing and packaging, performed in Hong Kong do not constitute a substantial transformation of either the sweaters, blouses or T-shirts. Based on this you contend that the country of origin for the sweaters, blouses and T-shirts is Sri Lanka for tariff, quota and marking purposes.

ISSUE:

What is the country of origin of the imported women's sweaters, blouses and T-shirts for marking, tariff and quota purposes?

LAW AND ANALYSIS:

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

Section 12.130, Customs Regulations (19 CFR 12.130), sets forth the principles for marking 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.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d) and (e).

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) 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 as a result of the manufacturing or processing operations in each foreign country.

(ii) The time involved in the manufacturing or processing operations in each foreign country.

(iii) The complexity of the manufacturing or processing operations in each foreign country.

(iv) The level or degree or skill and/or technology required in the manufacturing or processing operations in each foreign country.

(v) The value added to the article or material in each foreign country compared to its value when imported into the U.S.

Section 12.130(e)(1) provides that an article or material usually will be a product of a particular foreign territory or country, or insular possession of the United States, when, prior to importation into the United States, it has undergone in that foreign territory or country or insular possession, any of the following:

(iii) weaving, knitting or otherwise forming fabric.

(iv) cutting of fabric into parts and the assembly of those parts into the completed article.

With respect to the sweaters, the processes to be performed in Sri Lanka will consist of knitting the sweater panels and the assembly of those panels into the completed sweater. In HQ 950287 (October 30, 1991), Customs ruled that women's sweaters which were finished and assembled in Macau from machine-knit component parts from Macau (back panel, sleeves and collar) and an unspecified foreign country (front panel with flower leaf pattern) last underwent a substantial transformation in Macau. Customs stated that the sweater had been subjected to substantial processing in Macau in that this was where the article underwent a significant change into a completed assembled sweater and the time involved in knitting and assembling the back sleeves and collar was significantly longer than that of processing the front panel. In the present case, all the components are knit and assembled into the completed sweater in

Sri Lanka. Based on HQ 950287 and the factors enumerated in 19 CFR 12.130, it is clear that Sri Lanka is the country of origin. Although the completed sweaters are then exported to Hong Kong for dyeing, washing, ironing and packaging for export to the U.S. these are only finishing operations which do not substantially transform the completed sweaters. 19 CFR 12.130(e)(2) states in part that an article will usually not be considered to be a product of a particular territory or country by virtue of merely having undergone simple combining operations, labeling, pressing, cleaning or packaging operations, or any combination thereof or dyeing and/or printing of fabrics or yarns. Since the only operations to be performed in Hong Kong consist of dyeing, washing, ironing and packaging these are considered to be finishing operations which do not substantially transform the completed sweaters. Accordingly, the sweaters last undergo a substantial transformation in Sri Lanka where the sweater panels are knit and then assembled into the completed sweaters.

The imported blouses and T-shirts also undergo a substantial transformation in Sri Lanka. In Sri Lanka, the fabric is cut into the necessary parts and then assembled into the completed article. 19 CFR 12.130 (e)(1)(iv) states that the cutting of fabric into parts and the assembly of those parts into the completed article constitutes a substantial transformation. Clearly, in this case, making a completed blouse or T-shirt out of fabric results in a new and different article of commerce. Although the completed blouses and T-shirts are shipped to Hong Kong for dyeing, washing, ironing and packaging for export to the U.S., like the sweaters, these processes are only considered to be finishing operations which do not substantially transform the completed articles. Accordingly, the country of origin of the blouses and T-shirts is Sri Lanka.

HOLDING:

Pursuant to 19 CFR 12.130, the country of origin of these imported sweaters, blouses and T-shirts for country of origin marking, tariff and quota purposes is Sri Lanka.

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 177.9(b)(1), Customs Regulations (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 connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication is accurate and complete in every material respect. Should it subsequently be
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, it is recommended that a new ruling request be submitted in accordance with section 177.2, Customs Regulations (19 CFR 177.2).

Sincerely,

John Durant, Director
Commercial Rulings Division

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