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HQ 084773

January 3, 1990

CLA-2 CO:R:C:G 084773 LS


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.


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
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.

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.


What is the country of origin of the subject curtain panels?


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
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
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.


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.


John Durant, Director
Commercial Rulings Division

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