HQ 954212: Applicability of partial duty exemption under HTSUSA subheading 9802.00.80 and labeling requirements for photograph frames and trinket boxes covered with silk; dyeing; cutting-to-shape.

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 954212

                          July 19, 1993

CLA-2 CO:R:C:T 954212 ch

CATEGORY:  Classification

Gwen H.R. Salisbury
Compass Forwarding Co., Inc.
19518 Pacific Highway South
Seattle, Washington  98188

Re:  Applicability of partial duty exemption under HTSUSA
     subheading 9802.00.80 and labeling requirements for
     photograph frames and trinket boxes covered with silk;
     dyeing; cutting-to-shape.

Dear Ms. Salisbury:

     This is in response to your letter of January 7, 1993,
requesting that we rule on the applicability of a partial duty
exemption under subheading 9802.00.80 of the Harmonized Tariff
Schedule of the United States Annotated (HTSUSA) to certain
photograph frames and trinket boxes.  In addition, you inquired
whether the country of origin for these finished articles is
Thailand.  Please reference your client, Fraje Limited. 

FACTS:

     Fraje purchases silk (which is produced abroad) from U.S.
wholesalers.  In the U.S., the silk undergoes a hand-designed
marbleizing technique and is cut into 36 inch squares.  It is
stated that each 36 inch square of silk will be used to
manufacture more than one article.  In Thailand, these squares
are cut and assembled with other components into textile covered
photograph frames and trinket boxes.   With the exception of the
silk, all components used to fabricate the finished trinket boxes
and photograph frames are manufactured in Thailand.  

     The finished photograph frame is rectangular in shape and
measures approximately 7.5 x 10 inches.  It is constructed of
cardboard which is covered with a marbleized piece of dyed silk
fabric bordering 1.75 inches around the edge of the front of the
frame.  A plastic foam padding is inserted between the fabric and
cardboard.  A plastic overlay is placed in the center to protect
the photo area.  The back portion of the frame is covered with a
gray polyester fabric.  A hinged piece of the cardboard is
attached to the back as a stand.  

     The trinket box is constructed of the same materials as the
frame.  It is shaped in the form of a hexagon, and measures
approximately 2.5 inches wide and 1.75 inches deep.  It is
completely covered with the textile materials, except the lid
which is covered with the silk.  From the samples, it appears
that in Thailand the silk for the photograph frame is cut into a
square the size of the outside edge of the frame, and that
another smaller square is cut inside the larger square to form
the frame cover.  The silk for the trinket box appears to be cut
in a hexagonal shape.

ISSUES:

     1.  Whether the photograph frames and trinket boxes will
qualify for the partial duty exemption available under subheading
9802.00.80, HTSUSA, when returned to the U.S.?

     2.  Whether the country of origin for the photograph frames
and trinket boxes is Thailand?

LAW AND ANALYSIS:

                     Partial Duty Exemption

     Subheading 9802.00.80, HTSUSA, 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 subheading 9802.00.80, HTSUSA, 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 cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of section
10.24, Customs Regulations (19 CFR 10.24).

     For a component to be eligible for subheading 9802.00.80,
HTSUSA, 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 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, 24 Cust. Bull. 34 (1990), 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.  The country of origin of textile products is
deemed to be that foreign territory, country, or insular
possession where the article last underwent a substantial
transformation.

     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 issue here is whether marbleizing the silk and/or
cutting it into 36 inch squares in the U.S. constitutes a
substantial transformation.  Customs has held that under certain
circumstances 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 dated July 18, 1988 (cutting of fabric into garment
parts for wearing apparel constitutes 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 dated November 5,
1991.

     In HRL 556015 dated May 20, 1991, fabric made in Hong Kong
was shipped to the U.S. where it was cut into simple geometrical
shapes, including triangles, squares, and trapezoids.  The cut
pieces were then shipped to Jamaica where they were sewn into
duvet covers.  It was held that the Hong Kong-origin fabric was
not substantially transformed into a product of the U.S., and
therefore, was not eligible for an allowance in duty under
subheading 9802.00.80, HTSUSA.  See also HRL 555648 dated July
16, 1991, (foreign-origin fabric cut to length and width remained
a product of the country where the fabric was manufactured, and
was precluded from receiving subheading 9802.00.80, HTSUSA,
treatment).

     Therefore, in this case, cutting the silk into 36 inch
squares is more analogous to cutting fabric for toweling, which
is not as complex as cutting specific patterns; making squares
simply involves cutting straight lines similar to cutting
toweling fabric to length and/or width.  Consequently, the
cutting of the foreign-origin silk in the U.S. is not a
substantial transformation, and the pieces cut out of foreign
silk would be considered a product of the country where the silk
was manufactured, not a fabricated U.S. component which is
eligible for tariff treatment under subheading 9802.00.80,
HTSUSA.
 
     With regard to the marbleizing technique performed in the
U.S., section 12.130(e)(2), Customs Regulations {19 CFR
12.130(e)(2)}, provides that the articles or materials 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 that country. 
However, 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
in 19 CFR 12.130(e)(1)(i).

     In C.S.D. 90-29, 24 Cust. Bull. 350 (1990) (HRL 732673 dated
November 6, 1989), it was held that greige terry toweling which
was bleached, cut to length and width, hemmed, desized, and dyed
to create beach towels was not substantially transformed.  See
also HRL 079909 dated June 4, 1987, (the process of dyeing has
been held not to result in a substantial transformation); and HRL
556793 dated October 1, 1992, (foreign-sourced yarn imported into
Costa Rica where it was dyed, wound on a plastic cone, and
lubricated with a silicon/wax mixture constituted mere finishing
operations that fell short of a substantial transformation under
19 CFR 12.130(e)(1)(i); accordingly, the yarn was considered a
product of the country where the yarn was formed).  Therefore, we
find that the marbleizing technique performed in the U.S. does
not substantially transform the silk into a product of the U.S.

     With regard to marbleizing the silk and cutting it into 36
inch squares in the U.S., in HRL 555734 dated March 20, 1991, we
considered the use of foreign fabric imported into the U.S. where
it was dyed or printed, slit to a required width, and sent to
Haiti to be incorporated into a quilted bedspread.  Based upon 19
CFR 12.130(e)(2)(ii) and (v) which provides that a textile
article or material usually will not be considered to be a
product of a particular country by virtue of merely having
undergone either "cutting to length or width and hemming or
overlocking fabrics which are readily identifiable as being
intended for a particular commercial use", and "dyeing and/or
printing of fabrics or yarn," the foreign fabric imported into
the U.S. was not considered a "product of the U.S."  See also HRL
085336 dated December 20, 1989, (flowers imported into the U.S.
in bulk, sorted, cleaned, cut to length, dyed, centrifuged, and
dried were not substantially transformed into a product of the
U.S. even though the dyeing, painting or heating clearly imparted
a physical change to the flowers and made them more suitable for
retail sale, because the fundamental character of the products
was not changed by the processing); and HRL 555719 dated November
5, 1990, (fabric imported on bolts from South America and dyed
and cut to length and width in Barbados, was not considered a
substantial transformation of the fabric in Barbados). 
Therefore, we find that cutting and marbleizing the silk in the
U.S. does not substantially transform it into a product of the
U.S. pursuant to 19 CFR 12.130(e)(2)(ii), thereby rendering it
ineligible for the partial duty exemption available under
subheading 9802.00.80, HTSUSA.

     As we are unaware of any other tariff provision under which
the photograph frames and trinket boxes would receive a duty
exemption, the articles will be dutiable on their full value when
imported into the U.S.

           Country of Origin for the Finished Articles

     Country of origin determinations for textile products are
subject to Section 12.130 of the Customs Regulations (19 CFR
12.130).  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
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.

     Section 12.130(d) of the Customs Regulations sets forth
criteria 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.

In this case, silk which has been hand marbleized and cut into 36
inch squares is exported from the U.S. to Thailand.  In Thailand,
the silk is cut to specific size and assembled with other
components of Thai origin into finished picture frames and
trinket boxes.  Thus, the operations performed in Thailand change
the commercial identity of various raw materials into finished
products.  

     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 as
     a result of the manufacturing or processing operations
     in each foreign territory or country, or insular
     possession of the United States.

     (ii)  The time involved in the manufacturing or
     processing operations in each foreign territory or
     country, or insular possession of the United States.

     (iii)  The complexity of the manufacturing or
     processing operations in each foreign territory or
     country, or insular possession of the United States.

     (iv)  The level or degree of skill and/or technology
     required in the manufacturing or processing operations
     in each foreign territory or country, or insular
     possession of the United States.

     (v)  The value added to the article or material in each
     foreign territory or country, or insular possession of
     the United States, compared to its value when imported
     into the United States.

     Customs Regulation 12.130(e)(1) provides, in pertinent part,
that:

     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:

                         *      *      *

     (iv) Cutting of fabric into parts and the assembly
          of those parts into the completed article.

     We have already determined that merely cutting the silk into
36 inch squares in the U.S. does not constitute a substantial
transformation.  However, the silk is cut to specific size in
Thailand.  In order to complete the picture frame, it is
necessary to cut the silk so as to form a 1.75 inch border.  To
accommodate the trinket box, the silk is cut to size and
fashioned into the shape of a hexagon.  Hence, we conclude that
the cutting of the silk in Thailand is sufficiently complex so as
to constitute a substantial transformation and render it a
product of Thailand.

     Moreover, the other components of the finished articles are
manufactured in Thailand.  These items include a foam padding, a
plastic overlay, gray polyester fabric and cardboard.  Therefore,
the finished articles are composed of materials substantially
transformed or manufactured in Thailand.  Finally, the components
are assembled in Thailand.  Pursuant to Customs Regulation
12.130(e)(iv), the country of origin for the trinket box and
picture frame is Thailand.

     The textile products in question must satisfy the labeling
requirements of section 304 of the Tariff Act of 1930, as amended
(19 U.S.C. 1304) and Part 134, Customs Regulations (19 CFR Part
134) administered by the Customs Service and the Textile Fiber
Products Identification Act (15 U.S.C. 70 through 70k)
administered by the Federal Trade Commission.

     Section 304 requires with certain exceptions, that every
article of foreign origin (or its container), imported into the
United States be legibly and conspicuously marked in such a
manner as to indicate to an "ultimate purchaser" in the United
States, the English name of the country of origin of the textile.

     Part 134 of the Customs Regulations, implements the country
of origin marking requirements and exceptions of section 1304. 
Section 134.41(b), Customs Regulations (19 CFR 134.41(b),
requires that the marking be conspicuous enough that an ultimate
purchaser will be able to find the marking easily and read it
without strain.  That section further provides that the degree of
permanence should be at least sufficient to insure that in any
reasonably foreseeable circumstance the marking shall remain on
the article until it reaches the ultimate purchaser unless it is
deliberately removed.  Any method of marking which is
sufficiently permanent is acceptable.  

     In this case, affixed to both articles are sticker labels. 
The picture frame is labeled "Made in Thailand," which appears on
the front of the frame under the plastic overlay.  The trinket
box is labeled "100% Thai Silk, 100% Soie Thai, Made in
Thailand," which appears on the bottom of the box.  Both labels
are conspicuous, legible and securely affixed.  Therefore, they
satisfy the labeling requirements outlined above.

 HOLDING:

     1.   On the basis of the information and samples submitted,
it is our opinion that the silk which is manufactured abroad and
purchased in the U.S., where it undergoes a hand-designed
marbleizing technique and is cut into 36 inch squares, is not
substantially transformed into a "product of the United States." 
Therefore, no allowances in duty may be made under subheading
9802.00.80, HTSUSA, for the cost or value of the silk
incorporated into the frames and trinket boxes when they are
returned to the U.S.

     2.   The country of origin for the completed trinket box and
picture frame is Thailand.

     This country of origin determination applies only to the
specific factual situation and merchandise identified in the
ruling request.  This position is clearly set forth in section
177.9(b)(1), Customs Regulations (19 CFR 177.9(b)(1)).  This
section states that a ruling letter is issued on the assumption
that all the information furnished in connection with the ruling
request and incorporated in the ruling letter, either directly,
by reference, or by implication, is accurate and complete in
every material respect.  Should it subsequently be 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, it is recommended that a new
ruling request be submitted in accordance with section 177.2,
Customs Regulations (19 CFR 177.2).  

                         Sincerely,



                         John Durant, Director