Country of Origin determination for backpack; 19 CFR 12.130; fabric cut in Taiwan; assembly of pre-cut components in China; assembly is not a substantial transformation

HQ 958461 January 31, 1996 CLA R:C:T 958461 jb CATEGORY: CLASSIFICATION Daniel J. Gluck, Esq. Serko & Simon One World Trade Center, Suite 3371 New York, NY 10048 RE: Country of Origin determination for backpack; 19 CFR 12.130; fabric cut in Taiwan; assembly of pre-cut components in China; assembly is not a substantial transformation Dear Mr. Gluck: This letter is in response to your inquiry of September 15, 1995, on behalf of your client, Accessory Network, requesting a country of origin determination for a nylon and suede backpack. A sample was submitted to this office for examination and will be returned under separate cover. FACTS: The subject sample consists of a backpack constructed of nylon and suede, measuring approximately 15 inches in length by approximately 13 inches in width by approximately 5-1/2 inches in depth. It features three zippered compartments and one compartment secured by a fold- over cover held in place with Velcro closures. The backpack is designed to be carried on the back by two adjustable nylon carrying straps which fit over the shoulders. A nylon strap for hanging the backpack on a doorknob or hook is attached to the top of the bag. The base of the bag, as well as two areas on the back exterior of the backpack, are made of suede. The fabric for these articles (i.e., cordura nylon and suede) are made in Taiwan, where the materials are also cut into the component pieces. The cut pieces are then sent to China where final assembly by sewing and combining takes place. ISSUE: What is the country of origin of the subject merchandise? LAW AND ANALYSIS: Section 12.130 of the Customs Regulations (19 CFR 12.130) sets forth the principles of country of origin for textiles and textile products subject to Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854). Pursuant to 19 CFR 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. The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d)(2). The following are 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; In this instance, the major operation of cutting the fabric to shape is performed in Taiwan. The cutting operation requires more time and degree of skill than the assembly operation, and converts the component parts dedicated for use into the finished backpack. The production and labor costs incurred in Taiwan are also greater than those incurred in China. The operations performed in China appear to be the simple assembly and combining operations identified in subsection 12.130(e)(2). These operations are not considered substantial manufacturing processes for purposes of conferring country of origin status. No great degree of skill or technology is required in the assembly. Finally, prior Customs country of origin determinations for containers similar to the subject merchandise support the conclusion that these goods originate in Taiwan. See Headquarters Ruling Letter 956377, dated August 9, 1994 (soft sided luggage manufactured and cut into panels in Taiwan which are assembled in China are goods originating in Taiwan); HQ 955477, dated February 16, 1994 (tapestry handbags manufactured and cut into panels in Korea which are assembled in China are goods originating in Korea); HQ 955087, dated December 22, 1993 (textile travel bags and backpacks manufactured and cut into panels in Taiwan which are assembled in China are goods originating in Taiwan); HQ 954225, dated August 30, 1993 (textile tote bags and luggage manufactured and cut into panels in Taiwan which are assembled in China are goods originating in Taiwan); HQ 952642, dated May 10, 1993 (sports bags, knapsacks and insulated lunch bags manufactured and cut to size in Taiwan and assembled/packaged in China are goods originating in Taiwan); HQ 953065, dated April 9, 1993 (bicycle bags consisting of components originating and cut to shape in Taiwan, assembled by simple sewing operations in China, are goods originating in Taiwan); HQ 951899, dated October 31, 1992 (tote bags and luggage with components fabricated and cut to shape in Taiwan, stitched and assembled in China, originated in Taiwan); HQ 088455, dated March 8, 1991 (nylon backpack comprised of components originating and cut to shape in Taiwan, assembled by simple sewing and packaging operations in Indonesia, are products of Taiwan). Based on the foregoing, we conclude that the cutting process performed in Taiwan is where the merchandise last undergoes a substantial transformation. HOLDING: The country of origin of the subject merchandise is Taiwan. However, you should be aware that on December 8, 1994, the President signed into law the Uruguay Round Agreements Act. Section 334 of that Act 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 § 334 (60 FR 46188). § 334 generally provides, with certain exceptions, that the origin of textile goods will be the country in which they are assembled. The subject backpack is not within the products excepted from the assembly rule. Accordingly, based on the facts stated above, effective July 1, 1996, the country of origin of the backpack will be China and will have to be labeled as such. This ruling is issued pursuant to the provisions of sections 181.91 through 181.102, Customs Regulations (19 CFR 181.91-102). If the specific factual situation is not as described above, this ruling may not be valid. In such an event, it is recommended that a new ruling request be submitted. Sincerely, John Durant, Director Tariff Classification Appeals Division