Classification and country of origin determination for embroidered fabric; Substantial transformation; Section 12.130 of the Customs Regulations.

NY G85392 December 20, 2000 CLA2-RR:NC:TA:352 G85392 CATEGORY: Classification Mr. Karl F. Krueger Danzas AEI Customs Brokerage Services 29200 Northwestern Highway Southfield MI 48034 RE: Classification and country of origin determination for embroidered fabric; Substantial transformation; Section 12.130 of the Customs Regulations. Dear Mr. Kreuger: This is in reply to your letter dated December 8, 2000, on behalf of your client Sheftex, Inc., requesting a classification and country of origin determination for embroidered fabric used as a trimming in the manufacture of bedding which will be imported into the United States. The subject merchandise consists of plain woven strips of fabric which have been embroidered. The base fabric which has been woven in Israel is a bleached plain woven fabric composed of 100% cotton. It contains 30 single yarns per centimeter in the warp and 27 single yarns per centimeter in the filling. This fabric has been constructed using 30/1 c.c. yarns in both the warp and the filling. The fabric weighs approximately 123 g/m2 and will be produced in 100 inch widths. Based on the data provided, the average yarn number for this product has been calculated to be 46 in the metric system. The woven fabric that is produced in Israel will then be exported to Thailand where it will be embroidered with polyester thread, cut to 5 inch or 9 inch widths and 16.5 yard lengths and have holes cut manually in the fabric to emphasize the embroidery work. Your correspondence indicates that the embroidery, which covers only a small portion of the surface of the fabric strips, costs approximately 0.20 dollars per meter while the cost of the Israeli fabric is approximately 2.05 dollars per meter. 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 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. While the country of origin of most textile products is determined by the procedures set forth in Section 102.21 of the Customs Regulations, the determination of whether goods originate in Israel is excepted from those procedures and the determination if a product is the growth, product or manufacture of Israel is determined by the procedures set forth in 12.130 of the Customs Regulations. Section 12.130(d) of the Customs Regulations sets forth criteria to be used in 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) 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: (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. Section 12.130(e)(1) of the Customs Regulations describes manufacturing or processing operations by which an article will usually be considered a product of the country in which the following operations occur: (i) Dying 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). In the instant case, the formation of the woven fabric in Israel constitutes a substantial transformation as per Section 12.130 (e)(1)(iii) cited above. The embroidery work performed in Thailand does not constitute a substantial transformation inasmuch as the embroidery does not serve to change the identity or fundamental character of the fabric: the subject merchandise enters China as fabric and is exported as fabric, albeit enhanced in decorative value. See Headquarters Ruling Letter (HRL) 089068, dated July 1, 1991, in which Customs determined that embroidering a polar bear design to the front panel of an unfinished sweater was not a substantial transformation; HRL 088565, dated May 23, 1991, in which Customs held that re-embroidery of lace fabric was not a substantial transformation, and; HRL 733952, dated February 15, 1991, in which Customs determined that decorating front panels of an unfinished tracksuit top with appliques and embroidery did not constitute a substantial transformation. HRL 082527, dated March 9, 1989, is distinguished in that this ruling dealt with inexpensive fabric which underwent complex eyelet embroidery performed by Schiffli machines and virtually all of the value was imparted by the embroidery. In this case although the fabric is not very expensive the embroidery is very minor both in the surface area it covers and in cost. As the embroidery operations performed in Thailand do not serve to substantially transform the subject merchandise within the purview of Section 12.130 of the Customs Regulations, the country of origin of this product is Israel. The applicable subheading for the embroidered fabric will be 5810.91.0020, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for embroidery in the piece, in strips or in motifs, other embroidery, of cotton, other. The rate of duty will be 9.3 percent ad valorem if imported in 2000 and 9.2 percent ad valorem if imported in 2001. Note that the duty rate is derived from the rate of duty of the ground fabric pursuant to Additional U.S. Note 1 to Chapter 58. 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 CFR 177.9(b)(1). This section states that a ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. 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 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, 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 CFR 177.2. 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 Alan Tytelman at 212-637-7092. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division