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HQ 556015

May 20, 1991

CLA-2 CO:R:C:S 556015 KCC


TARIFF NO.: 9802.00.80

Mr. Bruce D. Roberts
Miami International Forwarders
P.O. Box 523730
Miami, Florida 33152-3730

RE: Cutting foreign-origin fabric into pieces for duvet covers. Substantial transformation; 19 CFR 10.12(e); 19 CFR 12.130(d); 730128; 555489; 555693; 555719; 733601; C.S.D. 90-29 (732673)

Dear Mr. Roberts:

This is in response to your letter dated July 31, 1990, on behalf of The Company Store, requesting a ruling concerning whether cutting of foreign-origin fabric in the U.S. renders it eligible for the duty exemption available under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), when it is later incorporated into a duvet cover in Jamaica. We regret the delay in responding to your request and to inform you that we are unable to return your sample as it has been misplaced.


The Company Store intends to assemble duvet covers in Jamaica. The Company Store plans to use 100% woven cotton fabric manufactured in Hong Kong and the U.S. The solid color fabric, which is made in Hong Kong, is shipped to the U.S. where all the fabric is cut into simple geometrical shapes, including but not limited to triangles, squares, trapezoids, parallelograms and rectangles in varying dimensions. Floral printed fabric, manufactured in the U.S., is also cut into various shapes. Large size pieces are cut by hand while smaller size pieces are cut on your client's clicker. The cut pieces are then boxed and shipped to Jamaica.

In Jamaica, the following processes are performed: the cut pieces are assembled into blocks of flower design; the blocks are sewn into sets of three blocks; sets of blocks are sewn to form a front panel. Each duvet cover is made up of about 50 to 60
pieces. The back panel is then attached to the front panel; and a zipper is attached to the side. The duvet is inspected and shipped back to the U.S. for sale to consumers.


Whether the Hong Kong origin fabric is substantially transformed into a product of the U.S., thereby rendering it eligible for the duty exemption available under subheading 9802.00.80, HTSUS, when incorporated into a duvet cover in Jamaica.


Subheading 9802.00.80, HTSUS, 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, HTSUS, 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, 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 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 foreign 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 small geometrical shapes in the U.S. to be made into a duvet cover constitutes a substantial transformation. Customs has held under certain circumstances that 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), HRL 555489 dated May 14, 1990 (cutting of fabric into glove pattern pieces results in a substantial transformation), and HRL 555693 dated 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 dated November 5, 1991(cotton fabric for surgical towels cut to length and width, sewn, trimmed, prewashed, and dried is not substantially transformed), HRL 733601 dated July 26, 1990 (toweling cut, hemmed, washed, shrunk, and folded in Mexico or the Philippines 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 dated 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 simple geometrical shapes is more analogous to cutting fabric for toweling. Cutting the geometrical shapes 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). The geometric shapes involve simply cutting straight lines similar to cutting toweling fabric to length and/or width.

Additionally, the values submitted estimate that the cost of cutting all the pieces for the duvet, which includes the pieces cut out of the U.S. fabric, is only $31.68 out of a total cost of $454.95, or less than 10% of the total cost. In reviewing the total manufacture of a duvet, it appears that the Jamaican operations of developing the color scheme, piecing together the proper shapes and sewing the 50 to 60 geometric pieces properly together is more time consuming, costly and complex than the U.S. cutting operations. Furthermore, there is no evidence that highly skilled or trained workers are required during the U.S. operations.

Based on these factors, we conclude that cutting the Hong Kong fabric in the U.S. is not a substantial transformation, and, therefore, the pieces cut out of Hong Kong fabric would be considered a product of Hong Kong. Assuming that the Jamaican assembly operations satisfy all the requirements of subheading 9802.00.80, HTSUS, allowances in duty under this tariff provision may only be made for the cost or value of the duvet pieces made from U.S.-origin fabric.


On the basis of the information submitted, we are of the opinion that the Hong Kong origin fabric is not substantially transformed into a product of the U.S., and, therefore, will not be eligible for an allowance in duty under subheading 9802.00.80, HTSUS, when it is imported into the U.S. incorporated in the duvet cover.


John Durant, Director
Commercial Rulings Division

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