us-cbp-cross-rulings-hq-084773•HQ 084773: Internal Advice Request concerning the country of origin of curtain panels
HQ 084773: Internal Advice Request concerning the country of origin of curtain panels
us-cbp-cross-rulings-hq-084773HQ 084773: Internal Advice Request concerning the country of origin of curtain panelsGuidance
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 084773
January 3, 1990
CLA-2 CO:R:C:G 084773 LS
CATEGORY: Classification
Acting Special Agent in Charge
951 Government Street
Suite 700
Mobile, Alabama 36604
RE: Internal Advice Request concerning the country of origin of
curtain panels
Dear Sir:
This Request for Internal Advice was initiated by your
memorandum dated March 29, 1989. The importer, Max Kahn Curtain
Corp., through its attorney, O'Connor & Hannan, submitted its own
Request for Internal Advice on the same matter on May 19, 1989.
FACTS:
This internal advice request was initiated by your office
as a result of a penalty investigation aimed at determining
whether Haiti is the proper country of origin of certain curtain
panels for purposes of duty and marking. We have been asked to
determine, pursuant to 19 CFR 12.130, whether the fabric imported
into Haiti from various countries, including East Germany and
Poland, has undergone a substantial transformation in Haiti in
the production of curtain panels. The determination of country
of origin is significant from a duty standpoint with respect to
those panels made of fabric originating from a Column 2 country.
The importer has also presented its position in the form of an
internal advice request.
You submitted four styles of curtain panels as
representative samples. Styles P7860, P1689, and P1973 are
similar in that they are all made of a lace material of 100
percent polyester with flower patterns. Style P801 is a solid
white 100 percent polyester material which is of a heavier weight
-2-
than the other three styles. All the styles have hems on the
bottom and a rod pocket panel body on the top which comprises a
header and rod pocket. The header, rod pocket, and bottom hems
are of different widths depending on the style of the panel. As
described in the manufacturing sequences below, some of the
panels have side hems.
The fabric used to make these panels is imported into Haiti
on bolts from various countries. The fabric when imported is
uncut and unmarked. The importer describes five manufacturing
operation sequences which it uses to make curtain panels. The
following steps are uniform in the five sequences: (1) the raw
goods are moved to the cutting area using a designated style of
fabric; (2) the fabric is color shaded according to the
customer's specifications; (3) the goods to be used for the
panels are inspected and unrolled; (4) the fabric is cut to
length; (5) a rod pocket panel body is sewn with a header and a
rod pocket using a double needle chainstitch; (6) the bottom hem
is sewn on the panels using a lockstitch, with each style having
a designated sized hem; (7) each panel is folded to a size of 9
inches by 11 inches; (8) each panel is packaged in a bag using
the correctly labeled insert, envelope fold, and tape seal; and
(9) a designated number of packages are placed in a carton and
marked with the appropriate style, size, color, and quantity.
Styles P7860 and P1689 are made of fabric which, when
imported in bolts, has finished edges or selvages on each side.
The importer has informed us that these selvages serve the
purpose of preventing unravelling. We have been informed by the
importer that Style P1689 is normally manufactured with side
hems. Style P7860 is manufactured with or without side hems
depending upon factors such as the quality or condition of the
finished edges, or whether the fabric, when imported, needs to be
shortened in width to meet the style's specifications. The side
hems on Styles P1689 and P7860 are made by folding over the
finished edge, then folding over a larger portion of the side,
and finally sewing a hem using a blindstitch.
We have been informed that Style P801 is normally
manufactured with side hems. We have been shown two samples of
Style P801, one with side hems and one without side hems. The
one with side hems has finished edges, and the one without side
hems does not have finished edges.
-3-
Style P1973 does not have side hems. The material of which
it is made is imported on bolts of fabric which are 40 inches
wide. Both sides of the fabric have border patterns which differ
from the overall pattern. On the outside edge of this border
pattern a scallop shape is cut by using an overlock machine with
no thread. The importer has informed us that the individual who
operates the machine pushes the fabric back and forth with his
hands in a steady rhythm. Style P1973 is normally manufactured
with this scallop shape.
Although all of the curtains are made by cutting fabric on
bolts to length, not all the bolts of fabric are cut to width.
Two of the manufacturing sequences involve slitting the fabric to
width on a slitting machine. For example, one sequence involves
a 120 inch wide bolt of fabric which is slit to width by creating
either two panels, each of which is 60 inches wide, or three
panels, each of which is 40 inches wide. The other sequence
involves a 59 inch wide bolt of fabric which is slit to width to
be used for panels. This sequence does not indicate the widths
of the finished panels. The four styles of panels have the
following dimensions: Styles P1973 and P801, 52 inches wide by
63 inches long; Style 1689, 56 inches wide by 63 inches long; and
Style 7860, 57 inches wide by 90 inches long. The importer has
informed us that it is unable to identify which specific curtain
panels are cut to length only and which are cut to both length
and width. Cutting to width is a process performed on a curtain
panel not by design but is, instead, a function of the width of
fabric ordered and received. A determination is then made
whether that width meets the required specifications for the
curtain style number.
The importer states in its Request for Internal Advice that
the fabric on bolts used to make the subject curtains is not
dedicated for any particular purpose when it arrives in Haiti.
Fabric from the same bolts is said to be used to produce not only
curtains, but also bedspreads, quilts, pillow covers, and pillow
shams. The importer has submitted samples of a bedspread, pillow
sham, and pillow cover which are made in part from the same lace
fabric as Style P1689. The lace material appears as the face
fabric on these items. Although we have not received samples of
matching bedspreads, pillow cases, and pillow shams for the other
three styles of curtains, we have been informed by the importer
that it either manufactures matching items made of the same
fabric as those styles or, in the case of Style P801, the solid
white fabric is known as dress fabric.
-4-
ISSUE:
What is the country of origin of the subject curtain
panels?
LAW AND ANALYSIS:
The country of origin of textiles and textile products is
governed by section 12.130 of the Customs Regulations (19 CFR
12.130). Section 12.130(b) provides that a textile or textile
product which consists of materials produced or derived from, or
processed in, more than one foreign country is considered to be a
product of that country where it last underwent a substantial
transformation. A substantial transformation of a textile or
textile product is said to occur if a commodity undergoes a
transformation by means of substantial manufacturing or
processing into a new and different article of commerce.
Section 12.130(d) sets forth the criteria to be considered
in determining whether the two parts of the substantial
transformation test have been met. The regulation states that:
(1) the criteria are not exhaustive, and additional factors may
be considered; and (2) one or any combination of the criteria may
be determinative. 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 (3) Commercial use." Section 12.130(d)(2) states
that the following factors are considered in determining whether
merchandise has been subjected to substantial manufacturing or
processing operations in the foreign country: (1) the physical
change in the article as a result of the manufacturing or
processing operations; (2) the time involved in the operations;
(3) the complexity of the operations; (4) the level or degree of
skill and/or technology required; and (5) the value added to the
article in each foreign country compared to its value when
imported into the United States.
Section 12.130(e)(1) sets forth examples of manufacturing
or processing operations which usually will qualify as
substantial manufacturing operations for purposes of the
substantial transformation test found in section 12.130(b).
Section 12.130(e)(2) likewise provides examples of manufacturing
-5-
or processing operations which will usually not qualify as
substantial manufacturing operations.
The importer contends that the following example found in
section 12.130(e)(1)(iv) involves the same type of processing as
the fabric in the instant case: "[c]utting of fabric into parts
and the assembly of those parts into the completed article." We
find that this example is inapplicable because there is only one
"part" to each panel and no assembly of parts.
Your office suggests that the following example in section
12.130(e)(2)(ii) is applicable to the facts of this case:
"[c]utting to length or width and hemming or overlocking fabrics
which are readily identifiable as being intended for a particular
commercial use." We believe that the subject curtains do not
fall squarely within this example. The importer has stated that
the bolts of fabric used to make the instant curtain panels are
also cut to make portions of bedspreads, pillow cases, and pillow
shams. Examples of such items using the same fabric as Style
P1689 have been submitted. We are told that the finished edges
on the sides of some of the fabric are for purposes of preventing
unravelling and are found on fabrics used to make many different
items. The bolts of fabric are not marked with cutting lines or
other lines of demarcation. Based upon this evidence we find
that the fabric is not "readily identifiable as being intended
for a particular commercial use," i.e., to make curtains. In
addition, the operation described in section 12.130(e)(2)(ii)
does not apply because the fabric at issue here is sometimes cut
to both length and width. Also, the creation of the scallop
pattern in Style P1973 is a manufacturing step which goes beyond
the processes described in section 12.130(e)(2)(ii).
The discussion of comments with respect to section 12.130,
which is found in T.D. 85-38, states that any factual situation
which does not fall squarely within one of the examples in
section 12.130(e)(1) or (2) will be decided by Customs in
accordance with the provisions of sections 12.130(b) or (d).
Applying the criteria in section 12.130(d)(1), we find that
the imported bolts of fabric have been transformed in Haiti into
a new and different article of commerce. First, it is clear that
the commercial designation and use of the fabric have changed
since the end product is sold and used as a curtain panel, rather
-6-
than fabric. The fabric undergoes a fundamental change in
character in Haiti because when it is imported into that country
it can be used to make a variety of items. After the
manufacturing processes are complete, the resulting product can
only be used as a curtain panel.
The importer and the special agent have provided us with
the following information in relation to the criteria in section
12.130(d)(2). The agent has informed us that the production of
the lace panels from start to finish requires a time frame of
approximately seven to fifteen minutes. The importer asserts
that the work required to transform the raw materials into
curtains is significant since a great deal of effort goes into
quality control, management control, and the overall production
of the product. Max Kahn Curtain Corp. also states that several
hundreds of thousands of dollars of machinery are involved in
producing the panels. With respect to section 12.130(d)(2)(v),
the importer claims that the value added to the product in Haiti
ranges from approximately 20 to 83 percent.
With respect to the curtain panels that are manufactured
simply by cutting to length and hemming the top to create a rod
pocket and header, we find that the processing operations
involved are minimal and are not "substantial" as required by
section 12.130(b). Thus, although we have determined that the
fabric used to make these panels is transformed into a new and
different article of commerce in Haiti, we find that they have
not been transformed by means of "substantial" manufacturing or
processing operations. However, the curtain panels which, in
addition to the above processing operations, are also
manufactured by one or a combination of the following processes
are considered to be products of Haiti because of their
transformation there into new and different articles of commerce
by means of "substantial" manufacturing or processing operations.
These additional processes are: slitting to width, side hemming,
creating a scallop pattern on the sides, and other finishing
processes of the fabric sides such as overlocking. When such
processes are added to the operations of cutting the fabric to
length and hemming the top and bottom of the panels, the overall
processing operation becomes more complex.
-7-
HOLDING:
Based upon the foregoing analysis, we find that the panels
of Styles P7860, P1689, and P801 which have side hems have been
substantially transformed in Haiti. As to the panels of Styles
P7860, P1689, and P801 which are manufactured without side hems,
we find that if they are made by cutting to width, in addition to
length, then they are substantially transformed in Haiti.
However, if they do not involve cutting to width, in addition to
length, they are not substantially transformed in Haiti. The
importer states that it is unable to identify which of these
styles involve only cutting to length and which involve cutting
to both length and width. As to Style P1973, we find that it is
substantially transformed in Haiti because, in addition to
cutting to length and hemming the top and bottom, the sides of
the panel are cut to create a scallop shape. This conclusion is
reached regardless of whether Style P1973 is cut to width.
Since the aforementioned styles are discussed here as
representative curtain panels, the principles applied to them in
this Internal Advice, with respect to what does and does not
constitute substantial processing operations, also apply to other
curtain panels involving the same manufacturing processes. These
principles also apply irrespective of whether the curtain panels
are made of fabric which is not readily identifiable as being
intended for curtain use.
Sincerely,
John Durant, Director
Commercial Rulings Division
6 cc: A.D.,N.Y. Seaport
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