HQ 955551: Substantial transformation of fabric and various garment components; country of origin, 19 CFR 12.130; 9802.00.80

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 955551

                         March 21, 1994

CLA-2 CO:R:C:T  955551  CMR

CATEGORY: Classification

TARIFF NO.: 9802.00.80

Mr. Hugh Black
Director of Purchasing
Western Textile Products
3400 Tree Court Industrial Blvd.
St. Louis, MO. 63177-1139

RE: Substantial transformation of fabric and various garment
    components; country of origin, 19 CFR 12.130; 9802.00.80

Dear Mr. Black:

     This is in response to your request of November 22, 1993,
regarding the country of origin of certain fabrics and various
garment components produced therefrom.  Specifically, you have
inquired as to whether the processing performed in the United
States substantially transforms the goods so as to convey origin
in the United States.  Your request, along with various exhibits
and samples, has been forwarded to this office for a reply.

FACTS:

     In your letter, you state that your company is a converter
and manufacturer of textile products.  You have requested a ruling
as to whether dyeing and finishing foreign greige fabric  in the
United States constitutes a substantial transformation.  In
addition, you have inquired as to whether waistbands, pre-made hip
pockets, die cut pockets and parts, and GERBERcut parts for apparel
produced from the dyed and finished fabrics in the United States
will qualify as substantially transformed goods and thus, as United
States origin goods.

      You state that these goods will be promoted to customers who
assemble garments outside the United States for importation into
the United States and wish to benefit from the duty exemption
available under subheading 9802.00.80 of the Harmonized Tariff
Schedule of the United States Annotated (HTSUSA).

     Samples of the greige fabric, finished dyed fabric and
waistbands were received as part of your submission, along with
advertising literature, a flow diagram of the imported fabric to -2-


the sale of your products, and discussions of the production
process.

     You have indicated that fabrics of various fabric
constructions, blends, widths and weights are purchased in the
greige state by your company from importers.  You provided six
different fabric descriptions, indicating these are some of your
larger volume items.  The specific fabric descriptions need not be
repeated herein, as it is the processing of the greige fabrics in
the United States which is of importance here, not the specific
fabrics used.  The woven greige goods listed in your letter will
be sourced and made in the following countries: China, Pakistan,
India, Taiwan, South Korea, Indonesia, Malaysia, Philippines and
Thailand.

     The greige fabrics undergo the following processes after
importation into the United States.

     1. Preparation for dyeing and finishing: batch the   
          imported bales or rolls together; desize or bleach to
          remove greige impurities.

     2. Dyeing: process of coloring fabric with natural and/or
          synthetic dyes.

     3. Finishing: the processes through which the fabric is
          passed after bleaching and dyeing.  All fabrics are heat
          set which confers dimensional stability and other desired
          properties.  Chemicals are often applied during the heat
          setting step to change the character of the fabric (deter
          shrinkage and to achieve the specified hand or feel). 
          Other finishing steps such as napping, embossing,
          pressing, or calendering, might be done if required by
          customers.

     4. Inspection and Packing: a final inspection of fabric and
          packaging in a putup specified by customers.  Lab tests
          of fabric are performed to verify that the fabric meets
          the minimum physical characteristics.

     After the greige fabric is processed, the finished fabric is
used to manufacture various components according to the following
steps.

                     WAISTBANDS FOR APPAREL

1. Design waistband to customer's specifications.

2. Sew the finished fabric edges together.
                               -3-

3. Process the finished fabric on a bias machine to change the
     direction of the warp and filling yarns throughout the length
     of the fabric.

4. Slit the biased finished fabric to the specified width.

5. Slit the components.

6. Combine the biased finished fabric with other components (the
     biased fabric from the imported greige fabric usually
     represents 50 to 70 percent by weight of the finished
     waistband, the other components would be either a woven or
     nonwoven buckram, possibly some decorative fabric as a piping
     and thread).

7. Sew and fold the components together.

8. Print customer's logo or trademark information on waistband if
     customer so specifies.

9. Pack the waistbands to customer's specifications.


                      PRE-MADE HIP POCKETS

1. Design pocket to customer's specifications.

2. Hot slit the fabric to required width with edges being fused
     to deter unravelling.

3. Prefold and press the edges.

4. Cut the hot slit and prefolded and pressed fabric to specified
     length.   

5. Pack the premade pockets to customer's specifications.


                    DIE CUT POCKETS AND PARTS

1. Design the pocket to customer's specifications.

2. Prepare dies for equipment to provide maximum utilization of
     the fabric.

3. Spread finished fabric on a cutting table, examining and
     cutting out defects, and preparing fabric for cutting.

4. Cut the pockets or parts.

5. Pack the die cut pockets or parts to customer's
     specifications.           -4-


                GERBER (TM) CUT PARTS FOR APPAREL

1. Design the parts to customer's specifications.

2. Plot or draw parts on a full-size pattern marker.

3. Generate a numerical control cut file on a micro processor to
     program the GERBER (TM) cutter.

4. Calculate how to spread the finished fabric for maximum fabric
     utilization.

5. Spread finished fabric on a cutting table, examining and
     cutting out defects, and preparing the fabric for cutting.

6. Cut the finished fabric into garment parts.

7. Stack groups of like parts into bundles.

8. Shade match the critical garment parts and label with a Soabar
     ticketing machine.  

9. Pack bundles into shipping containers to customer's
     specifications.

ISSUE:

     Are the products at issue substantially transformed in the
United States?

     Would the products at issue qualify for a duty exemption under
subheading 9802.00.80, HTSUSA, as U.S. goods returned?

LAW AND ANALYSIS:

     Subheading 9802.00.80, HTSUSA, provides a partial duty
exemption for:

     [a]rticles assembled abroad in whole or in part of fabricated
     components, the product of the United States, which (a) were
     exported in condition ready for assembly without further
     fabrication, (b) have not lost their physical identity in such
     articles by change in form, shape, or otherwise, and (c) have
     not been advanced in value or improved in condition abroad
     except by being assembled and except by operations incidental
     to the assembly process, such as cleaning, lubricating and
     painting.

All three requirements of subheading 9802.00.80, HTSUSA, must be
satisfied before a component may receive a duty allowance.  An
article entered under this tariff provision is subject to duty  -5-


upon the full cost or value of the imported assembled article, less
the cost or value of the U.S. components assembled therein, upon
compliance with the documentary requirements of section 10.24,
Customs Regulations (19 CFR 10.24).

     For a component to be eligible for subheading 9802.00.80,
HTSUSA, treatment it must first be a "product of" the U.S. 
According to section 10.12(e), Customs Regulations (19 CFR
10.12(e)), a "product of the United States" is an article
manufactured within the customs territory of the U.S. and may
consist wholly of U.S. components or materials, of U.S. and foreign
components or materials, or wholly of foreign components and
materials.  If the article consists wholly or partially of foreign
components or materials, as in the instant case, the manufacturing
process must be such that the foreign components or materials have
been substantially transformed into a new and different article,
or have been merged into a new and different article.  A
substantial transformation occurs when, as a result of
manufacturing processes, a new and different article emerges,
having a distinctive name, character or use, which is different
from that originally possessed by the article or material before
being subjected to the manufacturing process.  See Texas
Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778
(1982).

     Determinations of the country of origin of textiles and
textile products are governed by the terms of section 12.130 of
the Customs Regulations (19 CFR 12.130).  Section 12.130(b)
provides that a textile or textile product which is processed in
more than one country will be considered a product of that country
where it last underwent a substantial transformation.  A
substantial transformation is defined therein as a transformation
by means of substantial manufacturing or processing operations into
a new and different article of commerce.

     Section 12.130(d)(1) provides 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) sets out factors which will be considered
in determining if merchandise has been subjected to substantial
manufacturing or processing operations.  These factors are:

     (i)   The physical change in the material or article as a
           result of the manufacturing or processing operations
     (ii)  The time involved in the manufacturing or processing -6-


     (iii) The complexity of the manufacturing or processing
     (iv)  The level or degree of skill and/or technology
           required in the manufacturing or processing
     (v)   The value added to the article or material in each
           foreign territory or country compared to its value    
      when imported into the U.S.

     Section 12.130(e)(1)and (e)(2) set out processes which will
normally be considered to be substantial and those which will not
be considered substantial.  Section 12.130(e)(1) states, in
pertinent part, that an article will usually be a product of a
particular country when it has undergone in that particular
country:

     (i) Dyeing of fabric and printing when accompanied by two or
          more of the following finishing operations: bleaching,
          shrinking, fulling, napping, decating, permanent
          stiffening, weighting, permanent embossing, or moireing;

                       *        *        *
     (iii) Weaving, knitting or otherwise forming fabric; 

     (iv) Cutting of fabric into parts and the assembly of those
          parts into the completed article; 

                       *        *        *

     Section 12.130(e)(2) states, in pertinent part, that an
article will usually not be a product of a particular country by
merely having undergone:

     (i) Simple combining operations, labeling, pressing,
         cleaning or dry cleaning, or packaging operations, or
         any combination thereof;

                       *        *        *

     (iv) One or more finishing operations on yarns, fabrics, or
          other textile articles, such as showerproofing,
          superwashing, bleaching, decating, fulling, shrinking,
          mercerizing, or similar operations; or 

     (v)  Dyeing and/or printing of fabrics or yarns.

     In regard to the greige fabric which is imported into the
United States where it is dyed and finished, following the language
of section 12.130 and numerous rulings issued by this office,
Customs does not view the fabric as undergoing a substantial
transformation.  Section 12.130(e)(1)(i) specifically states dyeing
and printing plus two other substantial finishing  -7-


operations are required for a substantial transformation to occur. 
Additionally, when reading section 12.130(e)(2)(iv)and (v), it
reinforces the understanding that dyeing and printing are  both
required along with the two or more finishing operations in order
for a fabric to be substantially transformed.  See, HRL 955430 of
January 10, 1994.  As the greige fabric is not substantially
transformed in the United States, it is considered to be a product
of the country in which it was woven. 

     As to the waistbands, pre-made hip pockets, die cut pockets
and parts and GERBERcut garment parts, Customs has repeatedly ruled
that the cutting of fabric into designated garment parts is a
substantial transformation.  The garment parts are thus considered
to be goods of the country in which they are cut.  See, HRL 082924
of March 26, 1990; and, T.D. 85-38 at 67.  In addition to cutting,
the components of the waistbands are assembled.  The result of the
processing in the United States is completed waistbands that are
ready for assembly.  This processing would appear to fall directly
within the terms of section 12.130(e)(1)(iv) [cited earlier] with
the completed article being the finished waistbands.

     The country of origin of the waistbands, pre-made hip pockets,
die cut pockets and parts and GERBERcut garment parts is the United
States as that is where the fabric is cut into the designated
garment parts and thus, substantially transformed.

HOLDING:

     Based upon the information provided, as the dyeing and
finishing of the greige fabric in the U.S. does not result in a
substantial transformation of the fabric into a "product of" the
U.S., the fabric will not be eligible for an allowance in duty
under subheading 9802.00.80, HTSUSA, when returned to the U.S. 
However, cutting fabric into the designated garment parts in the
production of the waistbands, pre-made hip pockets, die cut pockets
and parts and GERBERcut garment parts substantially transforms the
imported fabric into a "product of" the U.S.  Therefore, these
components may be eligible for allowances in duty under subheading
9802.00.80, HTSUSA, provided that all of the other requirements
under this provision are satisfied.

     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  -8-


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