Protest No. 1001-96-105871; substantial transformation;finishing operations; 19 CFR 12.130; dyeing; printing; bleaching;shrinking; mercerizing; rayon fabric

HQ 959804 September 28, 1998 CLA-2 RR:CR:TE 959804 RH CATEGORY: Classification TARIFF NO.: 5516.14.0010 Area Director Port of New York ATTN: Chief, Residual Liquidation & Protest Branch 6 World Trade Center, Room 761 New York, NY 10048-0945 RE: Protest No. 1001-96-105871; substantial transformation; finishing operations; 19 CFR 12.130; dyeing; printing; bleaching; shrinking; mercerizing; rayon fabric Dear Sir: This is in reply to your memorandum dated September 26, 1996, regarding Application for Further Review of Protest (AFR) number 1001-96-105871. The AFR was timely filed by the law firm of Rode & Qualey on behalf of their client, Sunkyong America, Inc., and review is warranted under 19 CFR 174.24(b). FACTS: The merchandise under consideration consists of 100 percent spun rayon woven fabric, style 33367, entered into the United States on February 20, 1996. The protestant contends that the Chinese greige fabric was substantially transformed in Korea as a result of the processing operations it underwent at Kabool Ltd., Kabool Textiles, to wit: printing; dyeing; bleaching; napping; pre-shrinking. - 2- Based on a Customs laboratory analysis, Customs determined that the fabrics had not been substantially transformed in Korea into products of that country, and issued a Notice to Redeliver on May 7, 1996. ISSUE: Were the Chinese greige fabrics in question substantially transformed in Korea pursuant to 19 CFR 12.130? LAW AND ANALYSIS: At the time the fabrics in question entered the United States, Section 12.130(b) of the Customs Regulations (19 CFR 12.130(b)) governed the country of origin determinations for textiles and textile products subject to Section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854). Under that provision, 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. In a Multiple Country Declaration, Kabool Ltd., Kabool Textiles, declared that the Chinese greige fabrics underwent dying; printing; bleaching; and shrinking at their facility in Korea. We note that they did not list napping, as alleged in the protest. The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(e). Section 12.130(e)(1) provides: 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: (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. - 3 - Section 12.130(e)(2) further provides: 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: * * * (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. Customs does not contest that the fabric was dyed, printed and bleached in Korea. However, a Customs laboratory found no indication that the fabric underwent any of the other finishing operations enumerated in 19 CFR 12.130(e)(2). Customs Laboratory Report Number 2-96-10662-00, dated April 24, 1996, contains the following findings with regard to the subject fabrics: the sample, a plain woven fabric, is composed wholly of single ply staple rayon yarns. Based on our examinations performed on the sample, we are of the opinion that the sample has been bleached, dyed and printed. There are no indications that the fabric was fulled, napped, moired, permanently stiffened, permanently embossed, decated, weighted or pre-shrunk. In support of his claim that the fabric was pre-shrunk in Korea, counsel tenders the results of an independent laboratory analysis. Vartest Laboratories, Inc., analyzed a sample fabric which counsel claims is identical to the fabric from the entry in question. The report, dated September 6, 1996, states in part: Based on the results of the three cycle dimensional change test (AATCC 135-95) this fabric has been pre-shrunk and stabilized in addition to being bleached, dyed and printed. If this 100% spun Viscose Rayon had not been pre-shrunk, the length and width shrinkages would have averaged 8 to 15% in machine washing. - 4 - The fabric tested for this report has been scoured, bleached, dyed, discharge printed, pre-shrunk and stabilized undergoing substantial transformation changes. On October 8, 1997, counsel submitted a copy of a letter from Kabool Ltd., Kabool Textiles, listing five production processes performed on the rayon fabric. With regard to shrinking, counsel states: The manufacturer confirms that the fabric was preshrunk. Kabool states that the fabric is shrunk in the greige state by mercerizing using a a caustic soda (sodium hydroxide).' Mercerizing is a process which treats a fabric with sodium hydroxide causing the fabric to shrink and also increasing its color absorption. Customs has already determined in HQ 953905, dated July 30, 1993, that mercerizing is not a finishing operation for purposes of 19 CFR 12.130(e)(1)(i). Accordingly, we find that the fabrics were not substantially transformed in Korea. HOLDING: The fabrics in question were dyed, printed and bleached in Korea. However, they did not meet the requirements for a substantial transformation set forth in 19 CFR 12.130(1)(i). The protest should be denied. In accordance with section 3A(11)(b) of Customs Directive Number 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to the Customs Form 19, Notice of Action, and furnished to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision (o n that date) the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Ruling Module in ACS and to the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels. Sincerely, John Durant, Director Commercial Rulings Division