HQ 960089 - Country of Origin; United States-Israel Free Trade Agreement; 19 CFR 12.130; substantial transformation; cutting; assembly; sewing; Section 102.21; simple assembly operations - United States International Trade Commision Rulings

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HQ 960089

February 7, 1997

CLA-2 RR:TC:TE 960089 RH

CATEGORY: CLASSIFICATION

Ms. Anita Mahaffey
Managing Director
Funika U.S. Inc.
12272 Rue Cheaumont
San Diego, CA 92131

RE: Country of Origin; United States-Israel Free Trade Agreement; 19 CFR 12.130; substantial transformation; cutting; assembly; sewing; Section 102.21; simple assembly operations

Dear Ms. Mahaffey:

This is in reply to your letter of November 26, 1996, requesting a ruling on the country of origin of bathrobes and "loungers."

You provided us with photographs of three styles of the garments.

FACTS:

Funika U.S. Inc., is the U.S. sales office for Funika LTD., a Turkish company that manufactures bathrobes and loungers. These articles are constructed of Turkish-made fabrics that are exported to Israel to be cut into garment components. The components are then returned to Turkey where they are sewn together to form bathrobes and loungers. The finished bathrobes and loungers are imported into the United States from Turkey.

You ask us to confirm that the country of origin of the bathrobes and loungers is Israel.

ISSUE:

What is the country of origin of the subject garments?

LAW AND ANALYSIS:

On December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act (codified at 19 U.S.C. ?3592) provides new rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996.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 Section 334 (60 FR 46188). Thus, effective July 1, 1996, the country of origin of a textile or apparel product shall be determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21.

Section 334(b)(5) provides that:

This section shall not affect, for purposes of the customs laws and administration of quantitative restrictions, the status of goods that, under rulings and administrative practices in effect immediately before the enactment of this Act, would have originated in, or been the growth, product, or manufacture of, a country that is a party to an agreement with the United States establishing a free trade area, which entered into force before January 1, 1987. For such purposes, such rulings and administrative practices that were applied, immediately before the enactment of this Act, to determine the origin of textile and apparel products covered by such agreement shall continue to apply after the enactment of this Act, and on and after the effective date described in subsection (c), unless such rulings and practices are modified by the mutual consent of the parties to the agreement.

Israel is the only country which qualifies under the terms of Section 334(b)(5). As the Section 334 rules of origin for textiles and apparel products do not apply to Israel, we refer to the
19 CFR 12.130 rules of origin, the rules of origin applicable to textiles and textile products before the enactment of Section 334. Section 334(b)(5) makes clear that if origin was conferred in Israel under Section 12.130 prior to the enactment of the Uruguay Round Agreements Act, Israel will continue to be accorded the same treatment. This interpretation of Section 334(b)(5) was confirmed in a Notice of a general statement of policy, Treasury Decision 96-58, appearing in the Federal Register, Vol. 61, No. 148, dated July 31, 1996.

Accordingly, applying Section 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.

Section 12.130(d) sets forth criteria for determining whether a substantial transformation of a textile product has taken place. 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) states that for 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 operation,
(iii) The complexity of the manufacturing or processing operation,
(iv) The level or degree of skill and/or technology in the manufacturing or processing operation, and (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. Section 12.130(e)(1)(iv) specifically provides that the cutting of fabric into parts and the assembly of those parts into the completed article will be a manufacturing operation that will usually result in an article being considered a product of the country in which those operations occurred. Additionally, Section 12.130(e)(1)(v) states that an article will usually be considered a product of the country where a substantial assembly by sewing and /or tailoring of all cut pieces (cut from fabric in another country) occurred.

According to T.D. 85-38, 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 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 situation as they arise, utilizing the criteria in Section 12.130(d).

Customs has consistently determined that cutting fabric into garment pieces, like the operation performed in Israel in this instance, constitutes a substantial transformation of the fabric, and the clothing pieces become products of the country where the fabric is cut. The cutting process materially alters the fabric into designated garment pieces, which constitute new and different articles of commerce. See, Headquarters Ruling Letter (HQ) 952531, dated November 25, 1992, and HQ 089539, dated April 22, 1992.

On the other hand, Customs has also long held that the mere assembly of goods entailing simple combining operations, trimming or joining together by sewing is not enough to substantially transform the components of an article into a new and different article of commerce. See,
HQ 082787, dated March 9, 1989; HQ 082747, dated February 23, 1989; HQ 958383, dated February 14, 1996; HQ 958737, dated February 22, 1996.

In this case, the sewing operations performed in Turkey involve the simple assembly of various garment pieces and do not amount to complex sewing operations required in Section 12.130(e)(1)(v). Thus, the bathrobes and loungers are products of Israel, where the fabric was cut into garment pieces.

HOLDING:

The country of origin of the bathrobes and loungers is Israel.

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

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