HQ 555878: Cutting foreign-origin fabric; substantial transformation; 19 CFR 10.12 (e); 19 CFR 12.130(d); 730128; 555489; 555693; 555719; 733601; 556015; C.S.D. 90-29 (732673)

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 555878

                          June 18, 1991



CLA-2 CO:R:C:S 555878 DSN

CATEGORY:  Classification

TARIFF NO.: 9802.00.80, HTSUS

Mr. Steven L. Markowitz                                          
President
Max Kahn Curtain Corporation
261 Fifth Avenue
New York, New York 10016

RE:  Cutting foreign-origin fabric; substantial transformation; 
     19 CFR 10.12 (e); 19 CFR 12.130(d); 730128; 555489; 555693;
     555719; 733601; 556015; C.S.D. 90-29 (732673)

Dear Mr. Markowitz:

     This is in response to your letter of February 4, 1991,
requesting a ruling on the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States      
(HTSUS), to various comforter shells to be assembled in Haiti 
from U.S.-and foreign-origin fabric.

FACTS:

     You essentially present two scenarios for our consideration.
In the first scenario, solid color or printed fabric of U.S.-
origin will be cut to length and width in the U.S. by spreading 
90 inch wide plies on a cutting table and cutting with a knife. 
The resulting cut fabric pieces to be used as the top of the
comforter shell, will be folded, packed, and shipped to Haiti for
processing to create the finished shell. The second scenario is
similar to the first except that the solid color or printed 
fabric to be used as the top of the shell will be imported into 
the U.S., cut to length and width, and then shipped to Haiti for
assembly operations. In both scenarios, the solid color fabric 
to be used as the back of the comforter shell will be of foreign
origin and will be cut to length and width in Haiti prior to
assembly operations.

     In Haiti, the following operations will be performed to
create the comforter shells:
 
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     1.   move goods to cutting area, using 60-inch wide fabric
          back;

     2.   cut goods to be used for the back of the shell by
          spreading fabric on cutting table and cutting entire
          spread with knife;

     3.   piece together top by using overlock machine with 100%
          polyester thread;                                      
          
     4.   piece together back by using overlock machine with 100%
          polyester thread;

     5.   attach top to back using single needle lockstitch 
          with 100% polyester thread, with face sides;

     6.   fold the comforter shell; and

     7.   box 25 comforter shells per carton


ISSUE:

     Whether the comforter shells qualify for the partial duty
exemption available under HTSUS subheading 9802.00.80 when returned
to the U.S.

LAW AND ANALYSIS:

     HTSUS subheading 9802.00.80 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 HTSUS subheading 9802.00.80 must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty 
upon the full value of the imported assembled article, less the
cost or value of such U.S. components, upon compliance with the
documentary requirements of section 10.24, Customs Regulations 
(19 CFR 10.24).
 
                                3


     For a component to be eligible for subheading 9802.00.80,
HTSUS, treatment it must first be a "product of the United 
States." 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
or materials. If the article consists wholly or partially of
foreign components or materials, the manufacturing process in the
U.S. 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.

     According to T.D. 90-17, published in the Federal Register
on March 1, 1990 (55 FR 7303), the principles of country of
origin for textiles and textile products contained in section
12,130, Customs Regulations (19 CFR 12.130), are applicable to
such merchandise for all purposes including duty and marking. 19
CFR 12,130 requires that the standard of substantial
transformation govern the determination of the country of origin
where textiles and textile products are processed in more than
one country. The country of origin of textile products is deemed
to be that territory, country, or insular possession where the
article last underwent a substantial transformation.   ~

     19 CFR 12.130(d) establishes criteria for determining
whether an article has been substantially transformed.  However,
the criteria set forth in 19 CFR 12.130(d) are not exhaustive;
one or any combination of these criteria may be determinative and
additional factors may be considered.   

     According to 19 CFR 12.130(d)(2), the following factors are
to be considered in determining whether merchandise has been
subjected to substantial manufacturing or processing operations:
the physical change in the materials or article, the time 
involved in the manufacturing or processing operations, the
complexity of the other operations, the level or degree of skill
and/or technology required, and the value added to the article.

     The question presented here is whether cutting foreign-
origin fabric in the U.S. to length an width to create the top 
of the comforter shells constitutes a substantial 
transformation.  Customs has held under certain circumstances 
that the cutting of fabric into specific patterns and shapes
suitable for use to form the completed article constitutes a
substantial transformation. See, Headquarters Ruling Letter 
(HRL) 731028 of July 18, 1988 (cutting of fabric into garment 
parts for wearing apparel constitutes a substantial
transformation), HRL 555489 of May 14, 1990 (cutting of fabric 
into glove pattern pieces results in a substantial

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transformation), and HRL 555693 of April 15, 1991 (cutting of
fabric to create pattern pieces for infant carrier results in a
substantial transformation).

     However, we have ruled that surgical towel fabric which is
cut to length and width, and then hemmed is not substantially
transformed into a product of the country where the operations
were performed. See, HRL 555719 of November 5, 1991 (cotton
fabric for surgical towels cut to length and width, sewn,
trimmed, prewashed, and dried is not substantially transformed),
HRL 733601 of July 26, 1990 (toweling cut, hemmed, washed,
shrunk, and folded in Mexico or the Phillipines does not
constitute a substantial transformation, so the country of origin
of the surgical towels is China--the country where the fabric was
manufactured), and C.S.D. 90-29, 24 Cust. Bull.   (1990) (HRL
732673 of November 6, 1989) (greige terry toweling which was
bleached, cut to length and width, hemmed, desized, and dyed to
create beach towels was not substantially transformed).

     In this case, cutting the fabric into large pieces for the
top of the comforter shells is more analogous to cutting fabric
for toweling.  The cutting of the top pieces for the comforter
shells is not as complex as cutting specific pattern pieces for 
garments, gloves and infant carriers.  In cutting pattern pieces
for garments, care must be taken to properly lay out the pattern
according to the weave of the fabric, as well as carefully
following the shape of the pattern which does not merely involve
cutting fabric to length and/or width (i.e, cutting fabric in 
straight lines).  In the present case, the cutting of comforter
shell pieces involves simply cutting straight lines similar to
cutting toweling fabric to length and/or width.  See, HRL 556015
of May 20, 1991.


     Based on these factors, we conclude that cutting the 
foreign-origin fabric in the U.S. is not a substantial
transformation, and, therefore, the top of the comforter shells 
cut out of foreign-origin fabric in the U.S. would be considered
a foreign product, and not eligible for a duty allowance under
subheading 9802.00.80, HTSUS.

     However, the U.S.-origin fabric which is cut to length and
width in the U.S. and merely assembled in Haiti by sewing to 
create the comforter shells meets the requirements of HTSUS
9802.00.80, and therefore, is entitled to allowances in duty 
under this tariff provision.  Section 10.16(a), Customs 
Regulations (19 CFR 10.16(a)), provides that the assembly 
operation performed abroad may consist of any method used to join
or fit together solid components, and specifically enumerates
sewing as an acceptable assembly process. Therefore, the Haitian

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operations that entail sewing the U.S.-origin comforter top 
pieces together and then sewing the top to the comforter bottom 
are considered acceptable assembly operations pursuant to 19 CFR
10.16(a).

HOLDING:

     On the basis of the information submitted, we are of the
opinion that the foreign-origin fabric which is cut to length and
width in the U.S. to create the top of the comforter shells is 
not substantially transformed into a product of the U.S., and
therefore, is not eligible for an allowance in duty under
subheading 9802.00.80, HTSUS, when returned as part of the
completed shells.

     The sewing operations performed in Haiti on the U.S.,origin
fabric which is cut to length and width in the U.S. 
are acceptable assembly operations pursuant to HTSUS subheading
9802.00.80. Therefore, an allowance in duty may be made under 
this tariff provision for the cost of value of these U.S.
components, upon compliance with the documentary requirements 
of 19 CFR 10.24.


                              Sincerely,




                              John Durant, Director
                              Commercial Rulings Division