Country of origin determination for baseball caps; 19 CFR 12.130(b)(d)(e); cutting constitutes substantial transformation

HQ 958118 October 3, 1995 CLA-2 CO:R:C:T 958118 NLP CATEGORY: Classification Mr. Samuel Meyerhoff 13401 South Main Street Los Angeles, CA 90061 RE: Country of origin determination for baseball caps; 19 CFR 12.130(b)(d)(e); cutting constitutes substantial transformation Dear Mr. Meyerhoff: This letter is in response to your inquiry of June 21, 1995, on behalf of your clients, Apollo Industries, Ltd., Sportcap, Inc., H.T.T. Headwear, Ltd., Twins Enterprise, Logo 7, Inc., Agron Inc., Ahead Headgear, Kati Sportcap, Inc. and Top of the World, Inc., requesting a country of origin determination for baseball caps processed in more than one country. Samples were submitted to this office for examination. FACTS: You submitted three representative samples of the finished baseball caps and their corresponding component parts. All three of the finished samples consist of a six section crown with a top button, a bill attached to the front crown with a sweatband and an adjustable sizing device in the rear. The sample marked Case A is a six section maroon baseball cap. The sample marked Case B is a six section black baseball cap with the word "Vikings" embroidered across the two front panels. The sample marked Case C is a six section red baseball cap with the word "Bulls" embroidered across the two front panels. The crowns and top visors will be made of either 100% cotton, 65% polyester and 35% cotton or 85% acrylic and 15% wool You state that the baseball caps will be manufactured by either of the following processes: CASE A: All the fabric is woven, dyed and finished in Taiwan. All the other parts also originate in Taiwan. The cutting of the fabric takes place in Taiwan. The complete assembly and finishing takes place in Vietnam. -2- CASE B: All the fabric is woven, dyed and finished in Taiwan. All the other parts also originate in Taiwan. The cutting of the fabric takes place in Taiwan. The front panels are embroidered in Vietnam. The caps are completely assembled in Vietnam. CASE C: Al l the fabric is woven, dyed and finished in Taiwan . All the other parts also originate in Taiwan. The cutting of the fabric takes place in Taiwan. Partial assembly involving the sewing together of the two front panels takes place in Taiwan. Embroidering the two partially assembled front panels takes place in Taiwan. Final assembly by sewing and finishing takes place in Vietnam. ISSUE: What is the country of origin of the baseball caps at issue? LAW AND ANALYSIS: Country of origin determinations for textile products are subject to Section 12.130 of the Customs Regulations (19 CFR 12.130). Section 12.130(b) provides that a textile product that is processed in more than one country or territory shall be a product of that country or territory where it 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) of the Customs Regulations 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) of the Customs Regulations 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) of the Customs Regulations states that in determining whether merchandise has been subjected to substantial manufacturing or processing operations, the following will be considered: -3- (I) The physical change in the material or article as a result of the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S. (ii) The time involved in the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S. (iii) The complexity of the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S. (iv) The level or degree of skill and/or technology required in the manufacturing or processing operations in each foreign territory or country, or insular possession of the U.S. (v) The value added to the article or material in each foreign territory or country, or insular possession of the U.S., compared to its value when imported into the U.S. Section 12.130(e)(1) sets forth manufacturing or processing operations which will usually constitute a substantial transformation. Section 12.130(e)(2) enumerates instances which will usually not constitute manufacturing or processing operation. In Treasury Decision (T.D.) 85-38, published in the Federal Register on March 5, 1985, (50 FR 8714), the final rule document which established 19 CFR 12.130, there is a discussion of how the examples and factors enumerated in the regulations are intended to operate: Examples set forth in 19 CFR 12.130(e) are intend ed to give guidance to Customs officers and other interested parties. Obvious ly, the examples represent clear factual situations where the country of origin of the imported merchandise is easily ascertainable. The examples are illustrative of how Customs, given factual situations which fall within those examples, would rule after applying the criteria listed in 12.130(d). Any factual situation not squarely within those examples will be decided by Customs in accordance with the provisions of 12.130(b) and (d). Section 12.130(e) reads as follows: Manufactur ing or processing operations: (1) An article or material usually will be a product of a particular foreign territory or country, or insular possession of the U.S., when it has undergone prior to importation into the U.S. in that foreign territory or country, or insular possession any of the following: -4- (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; (ii) Spinning fibers into yarn; (iii) Weaving, knitting or otherwise forming fabric; (iv) Cutting of fabric into parts and the assembly of those parts into the completed articles; or (v) Substantial assembly by sewing and/or tailoring of all cut pieces of apparel articles 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). (2) An article or material usually will not be considered to be a product of a particular foreign territory or country, or insular possession of the U.S. by virtue of merely having undergone any of the following: (I) Simple combining operations, labeling, pressing, cleaning or dry cleaning, or packaging operations or any combination thereof; (ii) Cutting to length or width and hemming or overlocking fabrics which are readily identifiable as being intended for a particular commercial use; (iii) Trimming and/or joining by sewing, looping, linking, or other means of attaching otherwise completed knit-to-shape component parts produced in a single country, even when accompanied by other processes (e.g. washing, drying, mending, etc.) normally incident to the assembly process; * * * * * We have previously held that cutting of fabric into pattern pieces constitutes a substantial transformation of the fabric, resulting in the apparel pieces becoming a product of the country where the fabric is cut. See, Headquarters Ruling Letter (HRL) 955125, dated January 27, 1994; HRL 953697, dated July 26, 1993; and HRL 952531, dated November 25, 1992. Customs has also consistently held that the mere assembly of goods by simple sewing, is not enough to substantially transform the components of an article into a new and different article of commerce. See also, HRL 082747, dated February 23, 1989; HRL 086665, dated -5- March 23, 1990; HRL 951169, dated April 1, 1992; HRL 734392, dated August 4, 1992; HRL 953489 dated June 14, 1993; HRL 953698, dated July 19, 1993; HRL 953903, dated August 17, 1993. Customs has also held that sub-assembly operations are considered only a minor part of the complete assembly of merchandise and should not control country of origin determinations. See, HRL 953638, 953639, 953649 and 953641, dated August 19, 1993. In the case of the subject baseball caps, the assembly operations are minor combining and sewing operations and do not possess the requisite degree of complexity to be deemed substantial manufacturing processes for purposes of conferring country of origin status. No great degree of skill or technology is required, nor is tailoring involved. See, HRL 954583, dated August 18, 1993; HRL 954446, dated August 11, 1993; HRL 952916, dated January 29, 1993; and HRL 952918, dated January 29, 1993. The operations performed in Taiwan, i.e., cutting the fabric, materially change the fabric into designated pieces. This constitutes a substantial transformation of the fabric and confers country of origin. See also, HRL 086568, dated May 30, 1990, HRL 957518, dated May 2, 1995, and HRL 957887, dated July 25, 1995, wherein the country of origin of baseball caps was also determined to be the country in which cutting takes place. We also note that the embroidery work performed on the front panels of the cap in Cases B and C does not change the identity or fundamental character of the cut pieces. Customs has previously ruled that embroidery work performed on garments which does not change the identity or fundamental character of the article is not a substantial transformation. See, HRL 089068, July 1, 1991 (embroidering a polar bear design to the front panel of an unfinished sweater was not a substantial transformation); HRL 088565, May 23, 1991 (re-embroidery of lace fabric by sewing around portions of the design of the lace a narrow braid or cord of fabric was not a substantial transformation); HRL 733952, February 15, 1991 (decorating front panels of an unfinished tracksuit top with plastic ornaments, appliques and embroidery in China did not constitute a substantial transformation of the article). HOLDING: The country of origin of the submitted baseball caps is Taiwan. It is in Taiwan where the cutting takes places and where the fabric last undergoes a substantial transformation and is transformed into a new and different article of commerce. 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 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. -6- Should it subsequently be 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 Tariff Classification Appeals Division