HQ 556793: Country of Origin; Thread;Yarn; Textile Products; Dyeing; Finishing; Substantial Transformation; 19 CFR 12.130

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 556793

                         October 1, 1992

CLA-2-CO:R:C:S 556793 RAH

CATEGORY:  Classification

Mr. Alan Robson
General Manager
Central America and Caribbean
A & E de Costa Rica S.A.
Apartado 20-3006
Zona Franca Metropolitana del Barreal de Heredia
Costa Rica

RE:  Country of Origin; Thread;Yarn; Textile Products; Dyeing;
     Finishing; Substantial Transformation; 19 CFR 12.130

Dear Mr. Robson:

     This is in response to your letter of June 12, 1992, in
which you ask whether yarn or thread which is imported into Costa
Rica where it is dyed and finished would be considered "made" in
that country.

FACTS:

     In response to a previous request for a ruling from you, we
issued Headquarters Ruling Letter (HRL) 556523, dated May 29,
1992, which held that U.S.-origin thread exported to Costa Rica
for dyeing and and the application of a lubricant is ineligible
for a duty allowance under subheading 9802.00.80, HTSUS, upon
importation into the United States as part of assembled garments. 
We stated that the thread was not exported from the U.S. in
condition ready for assembly, and that the dyeing and lubricating
operations are not incidental to the assembly of the thread with
fabric, as required by the statute. 

     Since the thread is subject to duty under the above
circumstances, you ask whether it is considered to be "made" in
Costa Rica.  You also ask whether yarn sourced from a third
country and imported into Costa Rica where it is dyed and
finished would be considered "made" in that country.

     For purposes of this ruling, we assume the facts relating to
the processing of the thread in Costa Rica is the same as those
in HRL 556523.  The thread is exported to Costa Rica in
disposable plastic centres where it is dyed to match fabric. 
After dyeing, the yarn is wound onto a plastic cone to a length
of 6000 yards and, as it is winding, it passes over a surface
which contains a silicon/wax mixture which gives the thread
"sewability."  This lubricant keeps the needle cool as the thread
passes through it in sewing operations.  You state that the
undyed and unlubricated thread would not be of use as sewing
thread without these operations.  The character of the thread is
not changed by these operations; the porosity, surface and
texture remain the same.   

ISSUE:

     Whether thread of U.S. origin and yarn from a third country
which are shipped to Costa Rica for dyeing and finishing
operations are considered "products of" that country.  

LAW AND ANALYSIS:
     
          Section 12.130, Customs Regulations (19 CFR 12.130),
sets forth the principles for country of origin determinations
for textile and textile products.  According to 19 CFR 12.130(b),
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.  However, an exception to this rule for U.S.
textile articles sent abroad for processing is set forth in 19
CFR 12.130(c), which provides as follows: 

     Chapter 98, Subchapter II, Note 2, Harmonized Tariff
     Schedule of the United States, provides that any
     product of the U.S. which is returned after having been
     advanced in value or improved in condition abroad, or
     assembled abroad, shall be a foreign article for the
     purposes of the Tariff Act of 1930, as amended.  In
     order to have a single definition of the term "product
     of" and, therefore, a single country of origin for
     textile or textile product, notwithstanding paragraph
     (b), merchandise which falls within the purview of
     Chapter 98, Subchapter II, Note 2, Harmonized Tariff
     Schedule of the United States, may not, upon its return
     to the U.S., be considered a product of the U.S.

     Therefore, U.S.-made thread which is exported to Costa Rica
for dyeing and finishing operations will be considered a "product
of" Costa Rica, as the thread is advanced in value and/or
improved in condition in that country (as discussed in HRL
556523, supra) within the meaning of 19 CFR 12.130(c).

     You also ask whether foreign-origin yarn shipped to Costa
Rica for dyeing and finishing is considered a "product of" that
country.  As stated above, 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.  Factors indicating whether or not a particular
manufacturing processing operation is substantial are set forth
in 19 CFR 12.130(d)-(e).  While section 12.130(e)(1)(i) provides
that an article or material usually will be a product of the
particular country where it has been both dyed and printed when
accompanied by two or more of the finishing operations
enumerated, section 12.130(e)(2) provides that the article or
material usually will not be considered to be a product of the
particular country by virtue of merely having undergone one or
more finishing operations or having been dyed and/or printed.  In
HRL 734392 dated February 10, 1992, we held that sweaters
exported to Hong Kong for dyeing, washing, ironing and packing
for export to the U.S. are not substantially transformed into
products of Hong Kong as the processes performed are only
finishing operations.

     Under the facts presented, we find that the dyeing and
finishing of yarn in Costa Rica constitute mere finishing
operations that fall short of a substantial transformation under
19 CFR 12.130(e)(1)(i).  Accordingly, the foreign-sourced yarn
shipped to Costa Rica for dying and finishing will be considered
a product of the country where the yarn was formed.  However, if
the yarn imported into Costa Rica is woven into fabric after it
is dyed and finished, the resulting fabric would be considered a
product of Costa Rica.  See 19 CFR 12.130(e)(1)(iii).

     For your information, we have enclosed a copy of 19 CFR
12.130.

HOLDING:

     Pursuant to 19 CFR 12.130(c), the country of origin of the
U.S.-origin thread exported to Costa Rica for dyeing and
lubricating is Costa Rica.  The yarn sourced from another country
and exported to Costa Rica for dyeing and finishing operations is
not substantially transformed into a product of Costa Rica, but
remains a product of the country where the yarn was formed.

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Rulings Division