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NY N009941




May 8, 2007

CLA-2-62:RR:NC:WA:360

CATEGORY: CLASSIFICATION

TARIFF NO.: 6204.49.1000

Ms. Donna L. Shira
Sharretts, Paley, Carter & Blauvelt, P.C. 75 Broad Street
New York, NY 10004

RE: Woman’s dress from Sri Lanka: Generalized System of Preferences (GSP); 35% value content requirement.

Dear Ms. Shira:

In your letter dated April 17, 2007, on behalf of Ventura Enterprise Co. Inc., you requested a ruling regarding the 35% value-content requirement under the General System of Preferences (GSP). The submitted sample will be returned to you as requested.

Style B102T7 is a woman’s dress composed of 100 percent silk woven fabric. There is trim at the neck, sleeve cuffs and waist composed of 100 percent cotton woven fabric.

You have described the manufacturing process as follows: Fabric for the top portion of the dress will be imported from Hong Kong Fabric for the lower portion of the dress will be imported from Korea Fabrics will be cut and wholly assembled into dresses in Sri Lanka Finished garments are shipped directly to the U.S.

Articles are considered “products of” Sri Lanka if they are made entirely of materials originating there, or, if made from materials imported into Sri Lanka, they are substantially transformed into a new or different article of commerce.

A substantial transformation occurs when an article emerges from a process with a name, character, or use different from that possessed by the article prior to processing. Sections 12.130(d) and (e), Customs Regulations (19 C.F.R. §12.130(d) and (e)), set forth criteria for determining whether a textile or textile article has been substantially transformed. 19 C.F.R. §12.130(e)(1)(iv) states that an article or material will be a product of the country where the fabric is cut into parts and those parts are assembled into the completed article. In this case, the cutting of the dress components in Sri Lanka from the foreign fabric into components and the assembly of these components substantially transforms the fabric into "products of" Sri Lanka for purposes of GSP.

If an article is produced or assembled from materials which are imported into Sri Lanka, the cost or value of those materials may be counted toward the 35% value-content minimum as "materials produced in Sri Lanka" only if they are subjected to a double substantial transformation in Sri Lanka. This is consistent with Customs and the courts' interpretation of "materials produced" under the Generalized System of Preferences (GSP) (19 U.S.C. §2461-2466) and the Caribbean Basin Economic Recovery Act (CBERA) (19 U.S.C. §2701-2706).

      In determining whether the 35% value-content requirement is satisfied, the cost or value of the cut to shape component pieces in Sri Lanka may be included in the 35% computation only if the foreign fabric imported into Sri Lanka undergoes the requisite double substantial transformation. This means that for purposes of the 35% value-content requirement, the foreign material is substantially transformed in Sri Lanka and this different product is then transformed into yet another new and different product which is exported to the United States.

Customs has held that, for purposes of the GSP, an assembly process will not work a substantial transformation unless the operation is complex and meaningful. Whether an operation is complex and meaningful depends on the nature of the operation. It is necessary to consider the time, cost, and skill involved, the number of components assembled, the number of different operations, attention to detail and quality control. It would appear that this assembly procedure does not achieve the level of complexity contemplated.

However, the court has held that in situations where all the processing is accomplished in one GSP beneficiary country, the likelihood that the processing constitutes little more than a pass-through operation is greatly diminished.

Consequently, if the entire processing operation performed in the single country is significant, and the intermediate and final articles are distinct articles of commerce, then the double substantial transformation requirement will be satisfied.

We must next determine whether each of the components used to produce the dress will undergo a double substantial transformation in Sri Lanka. Applying these principles to the processing of the foreign fabric in Sri Lanka, we believe that the double substantial transformation requirement is satisfied with respect to the fabric. The cutting to shape of the imported fabric will transform it into new and different articles of commerce. We believe that the cut to shape components are considered to be intermediate articles of commerce which are ready to be put into the stream of commerce where they can be bought and sold. The assembly operation of sewing the component parts into a finished dress is not complex enough to constitute a substantial transformation by itself. Nevertheless, the overall processing operations (i.e., cutting and sewing) performed in Sri Lanka are substantial. For this reason, and in view of the production in Sri Lanka of distinct articles of commerce in the form of a dress, the double substantial transformation requirement is satisfied. Further, this is not the type of minimal, "pass-through" operation that should be disqualified from receiving duty-free treatment under the Generalized System of Preferences.

Based on the information provided, the imported articles will be considered "products of" Sri Lanka. We are unable to state definitively whether the dress will or will not satisfy the 35% value content requirement. A detailed breakdown of the direct costs of processing and an estimate of the appraised value of the sweatshirts at the time of entry into the United States will be necessary to determine whether this requirement is met under these circumstances. However, the value of the material used to make the dress may be used as "materials produced in Sri Lanka" to satisfy this requirement since it will undergo the requisite double substantial transformation.

      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 C.F.R. §177.9(b)(1). This section states that a ruling letter, either directly, by reference, or by implication, is accurate or complete in every material respect.

Articles classifiable under subheading 6204.49.1000, HTSUS, which are products of Sri Lanka may be entitled to duty free treatment under the Generalized System of Preferences (GSP) upon compliance with all applicable regulations. The GSP is subject to modification and periodic suspension, which may affect the status of your transaction at the time of entry for consumption or withdrawal from warehouse. To obtain current information on GSP, check our Web site at www.cbp.gov and search for the term “GSP”.

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 C.F.R. §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 C.F.R. 17.2. 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 Brenda Wade at 646-733-3051.

Sincerely,

Robert B. Swierupski
Director,
National Commodity

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