HQ 562864 - Country of origin of woven or knit pants, jeans and shorts; 19 CFR 12.130; cutting fabric to shape in Israel - United States International Trade Commision Rulings

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HQ 562864

December 3, 2003

MAR-2-05 RR:CR:SM 562864 CW

CATEGORY: MARKING

Mr. Victor Chung
President
Pacic Apparel Resources, Inc.
2530 Corporate Place, A112
Monterey Park, CA 91754

RE: Country of origin of woven or knit pants, jeans and shorts; 19 CFR 12.130; cutting fabric to shape in Israel

Dear Mr. Chung:

This is in response to your letter of September 17, 2003, requesting a ruling on the country of origin of certain garments that are made from fabric cut in Israel and assembled elsewhere. Three samples were provided; one pair of jeans and two pair of pants.

FACTS:

Pacic Apparel Resources plans to import certain men’s, boy’s, women’s and girls’ non-lined simple woven or knit pants, jeans and shorts. Unmarked fabric of “blended cotton or man-made fiber” will be made in one or more of the following countries: Hong Kong, China, Taiwan, Indonesia and South Africa. The fabric will be shipped to Israel where it will be cut into all the components of the pants, jeans or shorts, excluding trims, findings, and internal pockets (if using different fabric). The components will then be shipped to China, Egypt, Sri Lanka or Turkey where they are assembled into garments with trims, labels, findings and internal pockets (if using different fabric) of non-Israeli origin. The assembled garments will be exported directly from the country of assembly to the U.S.

In addition to the country of origin of the garments, you also inquire as to the visa requirements, if any, for the imported articles.

ISSUE:

What is the country of origin of the garments manufactured as described above?

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 Section 334 of that Act (codified at 19 U.S.C. 3592) provides rules of origin for textiles and apparel entered, or withdrawn from warehouse, for consumption, on and after July 1, 1996.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 (19 CFR 102.21), 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 is determined by sequential application of the general rules set forth in paragraphs (c)(1) through (5) of Section 102.21. However, 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 that 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, which were the rules of origin applicable to textiles and textile products before the enactment of section 334. Section 334(b)(5) makes clear that if, by application of 19 CFR 12.130, Israel was determined to be the country of origin of a product prior to enactment of section 334, the same treatment will be accorded after enactment of section 334. This interpretation of section 334(b)(5) was confirmed in a Notice of a general statement of policy, Treasury Decision (T.D.) 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. A textile or 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), Customs Regulations (19 CFR 12.130(d)), sets forth criteria for determining whether a substantial transformation of a textile product has taken place. This regulation provides 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), Customs Regulations (19 CFR 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:

Commercial designation or identity;
Fundamental character; or
Commercial Use.

Section 12.130(d)(2) (19 CFR 12.130(d)(2)), provides 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 articles; (ii) The time involved in the manufacturing or processing operations; (iii) The complexity of the manufacturing or processing operations; (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. 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 operations 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, for example, Headquarters Ruling Letters (HRLs) 952531, dated November 25, 1992, and 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, HRLs 560882 dated July 1, 1998 (the country of origin of polo-type shirts and basic pull-on pants made from fabric cut to shape in Israel and assembled in another country is Israel); 958383, dated February 14, 1996; and 958737, dated February 22, 1996. However, note 19 CFR 12.130(e)(1)(v) which specifies the following processing as usually effecting a substantial transformation:

Substantial assembly by sewing and/or tailoring of all cut pieces of apparel article 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 this case, when the fabric imported into Israeli is cut into all the components of the pants, jeans and shorts (excluding findings, trimmings and, in certain instances, internal pockets) the fabric is substantially transformed into products of Israel. Thereafter, when the cut components are assembled together in a second country, we believe that the sewing of the cut pieces involves a simple assembly of garment pieces to make the pants, jeans and shorts. The sewing of the components of the garments does not amount to the complex sewing operation required in section 12.130(e)(1)(v) because a limited number of parts are sewn together and there is no individual tailoring of the garments. Therefore, after the assembly in a second country, the pants, jeans and shorts would remain products of Israel. See New York ruling letter (NY) F86326 dated May 8, 2000 (the country of origin of cotton blue denim pull-on pants and shorts and five-pocket trousers and shorts made from fabric cut to shape in Israel and assembled in China is Israel).

HOLDING:

Based on the information provided, the country of origin of the pants, jeans and shorts produced as described above is Israel. Based upon international textile trade agreements, products of Israel are not subject to quota or the requirement of a visa.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). The holding in this ruling only applies to the specific factual situation presented and the merchandise identified in the ruling request. If the information furnished is not accurate or complete, or there is a change in the factual situation, this ruling will no longer be valid. In such an event, a new ruling request should be submitted.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

Myles B. Harmon

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