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April 1, 1999

CLA?2-RR:NC:TA:349 D88786

CATEGORY: CLASSIFICATION

Mr. Michael A. Pipitone
John F. Kilroy Co., Inc.
JFK International Airport
Cargo Bldg. 80, Suite 227
Jamaica, NY 11430-1718

RE: Classification and country of origin determination for sheet sets; 19 CFR 12.130; substantial transformation; 19 CFR 102.21(c)(2); tariff shift

Dear Mr. Pipitone:

This is in reply to your letter dated March 3, 1999, on behalf of Decrotex Inc., requesting a classification and country of origin determination for sheet sets which will be imported into the United States.

FACTS:

The subject merchandise consists of printed flannel sheet sets. The submitted sample is representative of the twin, full, queen and king size sets that will be imported. The sets will be made from a 100 percent cotton woven napped fabric and will consist of a flat sheet, fitted sheet and one or two pillowcases. You have indicated that all sizes will be manufactured in exactly the same manner as the submitted sample. Each component of the set is cut on all four sides. The flat and fitted sheets are hemmed on all sides and the fitted sheet is elasticized at the top and bottom. The pillowcases are folded in half, sewn together and hemmed at the open end. The sample will be returned as requested.

The manufacturing operations for the sheet sets are as follows:

Turkey:
-fabric is woven.
-fabric is bleached, printed and napped.

Israel:
-fabric is cut to size and shape;
-fabric is sewn/hemmed/elasticized, creating the components of the set.

ISSUE:

What are the classification and country of origin of the subject merchandise?

CLASSIFICATION:

Classification of merchandise under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.

Heading 6302, HTSUSA, provides for among other things, bed linen. The Explanatory Notes to heading 6302, HTSUSA, include sheets, pillowcases, bolster cases, eiderdown cases and mattress covers as examples of bed linen. GRI 3(b) provides that goods put up in sets for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. According to the Explanatory Notes, the official interpretation of the HTSUSA at the international level, "goods put up in sets for retail sale" refers to goods which:

(a) consist of at least two different articles which are, prima facie, classifiable in different headings; (b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and (c) are put up in a manner suitable for sale directly to users without repacking.

Although referred to as a set, the instant merchandise does not meet the qualifications of "goods put up in sets for retail sale" as the components of the set are classifiable within the same subheading. Therefore, each item in the set will be classified separately.

The applicable subheading for the pillowcases will be 6302.21.7010, HTSUSA, which provides for bed linen, table linen, toilet linen and kitchen linen: other bed linen, printed: of cotton: other: napped.... pillowcases, other than bolster cases. The duty rate will be 5 percent ad valorem.

The applicable subheading for the flat and fitted sheets will be 6302.21.7020, HTSUSA, which provides for bed linen, table linen, toilet linen and kitchen linen: other bed linen, printed: of cotton: other: napped... sheets. The rate of duty is 5 percent ad valorem.

The pillowcases fall within textile category designation 360 and the sheets fall within textile category designation 361. The designated textile and apparel categories and their quota and visa status are the result of international agreements that are subject to frequent renegotiations and changes. To obtain the most current information, we suggest that you check, close to the time of shipment, the U.S. Customs Service Textile Status Report, an internal issuance of the U.S. Customs Service, which is available at the Customs Web Site at WWW.CUSTOMS.USTREAS.GOV. In addition, the designated textile and apparel categories may be subdivided into parts. If so, visa and quota requirements applicable to the subject merchandise may be affected and should also be verified at the time of shipment.

COUNTRY OF ORIGIN - 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.

EXCEPTION FOR TEXTILE GOODS PROCESSED IN ISRAEL

Section 102.21(a) specifically states that the rules in Section 102.21 shall not apply "for purposes of determining whether goods originate in Israel or are the growth, product, or manufacture of Israel." The basis for the Israeli exception is Section 334(b)(5) of the Uruguay Round Agreements Act. 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 country of origin was conferred in Israel under Section 12.130, Israel will now 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. 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.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in Section 12.130(d)(2). 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;

The cutting and hemming of the fabric in Israel has created a new and different article of commerce. However, in order for a substantial transformation to occur the processing operations must be sufficiently complex so as to constitute a substantial manufacturing or processing operation. Customs has previously ruled that in order for flat and fitted sheets to be deemed to have undergone a substantial manufacturing process in a particular country or foreign territory, the fabric must undergo, at the minimum, the cutting to length and width of fabric, hemming and yet another processing step. The term "cutting to length and width" has been defined as cutting on all four sides of the fabric so as to create a component with no selvage edges. The steps taken to create an elasticized fitted sheet have been previously considered acceptable as "another processing step".

The fitted sheet has been cut to length and width, further processed and therefore undergone a substantial transformation. The fitted sheet is considered a product of Israel. The pillowcase has undergone a substantial manufacturing process noting Belcrest Linens v. United States, (741 F.2d 1368, Fed. Cir. 1984) and is considered a product of Israel. The flat sheet has been cut to both length and width and hemmed but has not undergone an additional processing step. Even though the fabric used to make the flat sheet was transformed into a new and different article of commerce, the operations performed in Israel (only cutting to length and hemming) are not complex processing operations and are not substantial as required by Section 12.130(b). Accordingly, as Israel does not confer origin as pursuant to Section 12.130, we then apply the rules in Section 102.21 to determine the country of origin.

Although the fitted sheet and pillowcases are considered a product of Israel, they are not entitled to the free rate of duty under the United States-Israel Free Trade Area Implementation Act. In your submission, you have indicated that the cost of processing operations performed in Israel will be 25 percent of the value of the set. General Note 8(b) to the Harmonized Tariff Schedules states that, in addition to other requirements, for a good to be entitled for treatment as a “product of Israel” the direct cost of processing operations in Israel must be not less than 35 percent of the appraised value.

SECTION 102.21 RULES OF ORIGIN FOR TEXTILE AND APPAREL PRODUCTS

Paragraph (c)(1) of Section 102.21, Customs Regulations, states that "The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced." As the subject merchandise is not wholly obtained or produced in a single country, territory or insular possession, paragraph (c)(1) of Section 102.21 is inapplicable.

Paragraph (c)(2) states that "Where 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 of the foreign materials 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:"

Paragraph (e) in pertinent part states that "The following rules shall apply for purposes of determining the country of origin of a textile or apparel product under paragraph (c)(2) of this section":

HTSUS Tariff shift and/or other requirements

6301-6306 The country of origin of a good classifiable under heading 6301 through 6306 is the country, territory, or insular possession in which the fabric comprising the good was formed by a fabric making process.

As the fabric comprising the flat sheet is formed in a single country, that is, Turkey, as per the terms of the tariff shift requirement, country of origin is conferred in Turkey.

HOLDING:

The subject sheet set does not meet the qualifications of "goods put up in sets for retail sale" and each item in the set is classified separately. The pillowcases are classified in subheading 6302.21.7010, HTSUSA, which provides for cotton flannel printed pillowcases. The flat and fitted sheets are classified in subheading 6302.21.7020, HTSUSA, which provides for cotton flannel printed sheets.

The country of origin of the pillowcases and the fitted sheets is Israel. The country of origin of the flat sheet is Turkey. Based upon international textile trade agreements products of Turkey which fall within textile category designation 361 are subject to quota and the requirement of a visa.

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, either directly, by reference, or by implication, is accurate and complete in every material respect.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). 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.

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist John Hansen at 212-637-7078.

Sincerely,

Robert B. Swierupski
Director,

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