HQ 558722 - Country of origin marking of shirts knitted and cut in Korea and assembled and finished in China; 19 CFR 134.46; "Knit and Cut in Korea"; HRL 733323; 19 CFR 12.130 - United States International Trade Commision Rulings

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HQ 558722

December 19, 1994

MAR-2-05 CO:R:C:S 558722 WAS

CATEGORY: MARKING

Arthur W. Bodek, Esq.
Siegel, Mandell & Davidson, P.C.
One Astor Plaza
1515 Broadway
43rd Floor
New York, N.Y. 10036-8901

RE: Country of origin marking of shirts knitted and cut in Korea and assembled and finished in China; 19 CFR 134.46; "Knit and Cut in Korea"; HRL 733323; 19 CFR 12.130

Dear Mr. Bodek:

This is in response to your letter dated August 26, 1994, on behalf of Miss Erika, Inc., concerning the country of origin marking of knitted shirts, the fabric of which is knit and cut in Korea and assembled and finished in China.

FACTS:

You state that Miss Erika is proposing to import various different knitted shirts and fine gauge pullovers. Based on the information you have provided, each shirt or pullover will be made from fine (i.e., in excess of 10 stitches per centimeter) gauge fabric which is knitted in Korea. You also state that the fabric will be dyed and then marked and cut to both size and shape in Korea to form the components of the finished garments. You submit that the Korean formed and cut components will then be forwarded, together with Korean origin trim items, including labels, hangtags, polybags, thread, tissue paper, buttons, shoulder pads, etc., to China for assembly by means of simple sewing as well as routine finishing operations (e.g., washing, packing, etc.). After the assembly and finishing operations have been completed in China, the finished garments will be packed for shipment to the U.S.

You state that although Miss Erika is prepared to mark the subject garments with the words "Made in Korea", certain export authorities in China have indicated that this is not acceptable to them and have advised that the marking must include a description of the processing undertaken in both Korea and China. Specifically, you state that Miss Erika proposes to mark the knitted shirts with one of the following country of origin markings:

(1) Assembled and Finished in China
Knit and Cut in Korea; or
(2) Made in Korea,
Assembled and Finished in China,
Knit and Cut in Korea; or
(3) Made in Korea,
Assembled in China.

It is your position that, inasmuch as the garments described herein are, under current Customs administrative practice, properly considered products of Korea, that they may be marked in any manner which clearly indicates such origin. You maintain that, in marking the subject garments, references may be made to the further processing in China, provided that "Korea", the country of origin, appears, permanently and legibly, in a proximate location to such statement.

ISSUE:

Whether the legend "Assembled and Finished in China, Knit and Cut in Korea" is an acceptable country of origin marking for imported knitted shirts and pullovers as described above, or in the alternative, whether the legends "Made in Korea, Assembled and Finished in China, Knit and Cut in Korea," or "Made in Korea, Assembled in China," are acceptable country of origin markings.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the good is the product. The evident purpose is to mark the good so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), Customs Regulations (19 CFR 134.41(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain.

Section 12.130, Customs Regulations (19 CFR 12.130), sets forth the principles for making country of origin determinations for textiles and textile products subject to section 204 of the Agricultural Act of 1956, as amended (7 U.S.C. 1854) ("section 204"). According to T.D. 90-17, published in the Federal Register on March 1, 1990, (55 FR 7303), the rules of origin for textile and textile products contained in 19 CFR 12.130 are applicable to such merchandise for all purposes, including duty and marking. Customs has determined that 19 CFR 12.130 will be applied to determine the country of origin of all imported articles which are classified in Section XI, Harmonized Tariff Schedule of the United States (HTSUS), or to any imported article classified outside of Section XI, HTSUS, under a subheading which has a textile category number associated with it. Because the subject merchandise would be classified under Section XI, HTSUS, 19 CFR 12.130 will be used in making the country of origin determination.

Pursuant to 19 CFR 12.130, the standard of substantial transformation governs the determination of the country of origin where textile 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. Substantial transformation is said to occur when the article has been transformed into a new and different article of commerce by means of substantial manufacturing or processing operations. In other words, for textiles governed by 19 CFR 12.130, there is a two part substantial transformation test: (1) a new and different article of commerce; and (2) a substantial manufacturing or processing operation.

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.

The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR 12.130(d) and (e). Section 12.130(d)(2) lists some of the factors considered in determining whether a substantial manufacturing or processing operation has occurred. These factors include: the physical change in the material or article; the time involved in the processing; the complexity of the operation; the level or degree of skill and technology required in the operation; and the value added to the article or material in the non-U.S. based operation versus the value added to the article or material in the U.S.

Section 12.130(e)(1)(iii),(iv) and (v) state that an article will be a product of a particular foreign country, when it has undergone prior to importation into the U.S. in that foreign country: (iii) Weaving, knitting or otherwise forming fabric; (iv) Cutting of fabric into parts and the assembly of those parts into the completed article; or (v) Substantial assembly by sewing and/or tailoring of all cut pieces of apparel articles which have been cut from fabric in another foreign territory or country, or insular possession, into a completed garment (e.g., the complete assembly of all cut pieces of suit-type jackets, suits and shirts).

The first question that we must address is whether the shirt panels which are knit and cut in Korea are substantially transformed when they are subsequently assembled together in China. In Headquarters Ruling Letter (HRL) 733323 dated May 2, 1990, published as C.S.D. 90-69, 24 Cust. Bull. 23, Customs determined that, for all purposes, including country of origin marking purposes, sweaters which are assembled in Hong Kong from panels knit in China are products of China. See also HRL 734736 dated December 17, 1992 (sweater panels knit in China and sewn together in Guam are considered products of China). Customs has also consistently held that the country of origin of knitted shirts which were manufactured from fabric which was knitted and cut to shape in one country and sent to another country for assembly is the country in which the components were cut. See HRL 955943 dated March 16, 1994 (the country of origin of men's knit shirts which is made of Taiwanese fabric which is cut into component pieces in Taiwan and then shipped to China for assembly by sewing, ironing, folding and packing is Taiwan). In the instant case, the sewing operation performed in China involves the simple combining of component pieces to form a knitted shirt or pullover. It does not involve the complex sewing operation contemplated by section 12.130(e)(1)(v), as for example, that found in the assembly and tailoring of all cut pieces of suit-type jackets, suits and shirts. Accordingly, as the processing performed in China does not constitute a substantial transformation, the shirts and pullovers remain a product of the country where the fabric is knit and cut to shape.

Customs also indicated in HRL 733323, that reference may be made to a second country, provided that the country of origin is clearly stated and the requirements of section 134.46, Customs Regulations (19 CFR 134.46), are satisfied. This regulation requires that in any case in which the name of any country other than the country in which the article was manufactured or produced appears on an imported article or its container, there shall appear, legibly and permanently in close proximity to such name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of," or words of similar meaning.

For instance, Customs has consistently held that the country in which the components of an imported good are assembled and/or finished may be indicated by use of the phrase "assembled in" and/or "finished in" in the country of origin marking of the finished good, provided that the country of origin of the good is clearly stated and satisfies the requirements of 19 CFR 134.46.

In the case of sweaters, Customs has determined that "Knit in" are words of similar meaning to the phrase "Made in." For instance, in HRL 733323, Customs stated that provided that the marking clearly indicated that the country of origin of the sweaters was China, we would accept the word "China" standing alone or any of the following markings: "Made in China", "Product of China" and "Knit in China". Moreover, Customs further stated in HRL 733323 that the words "Assembled and Finished in Hong Kong" may precede or follow "Made in China", "Product of China", or "Knit in China". Thus, Customs concluded that the legend "Knit in China. Assembled in Hong Kong" would be an acceptable country of origin marking. Similarly, Customs has ruled in HRL 733534 dated June 7, 1990, that the phrase "Handknit in China" clearly indicates that China is the country of origin and would not cause any confusion as to the origin of any imported product so marked.

However, Customs has held that the markings "Cut in Taiwan, Assembled in China" and "Fabric Made & Cut in Taiwan, Assembled in China" do not satisfy the marking requirements of 19 U.S.C. 1304 and 19 CFR 134.46. See HRL 735568. In HRL 735568, Taiwanese-origin fabric was cut into garment panels in Taiwan and shipped to China where they were assembled into finished men's gold and polo shirts. Customs held that the words "Cut in" and "Fabric Made & Cut in" are not other words of similar meaning to "Made in" and "Product of", as required by 19 CFR 134.46. We stated in HRL 735568 that the words "Cut in" and "Fabric Made & Cut in" do not clearly indicate that the country of origin of the article is Taiwan. We further stated that an ultimate purchaser reading these markings could only determine that the finished shirt was processed in Taiwan and China, but could not determine the actual country of origin of the shirt as required by 19 CFR 1304 and 19 CFR 134.46. Therefore, we held that the proposed markings "Cut in Taiwan, Assembled in China" and "Fabric Made and Cut in Taiwan, Assembled in China" were not found to be acceptable country of origin markings for the imported shirts and pullovers.

Consistent with our holding in HRL 735568, we are of the opinion that the proposed marking "Knit and Cut in Korea, Assembled and Finished in China" does not satisfy the marking requirements of 19 U.S.C. 1304 and 19 CFR 134.46. As in HRL 735568, we are of the opinion that the ultimate purchaser reading this marking could only determine that the shirt was processed in both Korea and China, but could not determine the single country of origin of the shirts and pullovers. Therefore, the proposed marking "Knit and Cut in Korea, Assembled and Finished in China," is not an acceptable country of origin marking for the imported knitted shirts and pullovers.

However, we find that the alternative proposed markings "Made in Korea, Assembled and Finished in China, Knit and Cut in Korea" and "Made in Korea, Assembled in China" satisfy the marking requirements of 19 U.S.C. 1304 and 19 CFR 134.46. The words "Made in Korea" in both of these proposed markings clearly indicates that Korea is the country of origin of the knitted shirts and pullovers to an ultimate purchaser reading these markings. Therefore, the proposed markings "Made in Korea, Assembled and Finished in China, Knit and Cut in Korea" and "Made in Korea, Assembled in China" are acceptable country of origin markings for the imported shirts and pullovers.

HOLDING:

The proposed marking "Made in Korea, Assembled and Finished in China, Knit and Cut in Korea" and "Made in Korea, Assembled in China" satisfies the marking requirements of 19 U.S.C. 1304 and 19 CFR 134.46, and are acceptable country of origin markings for the imported knitted shirts and pullovers.

The proposed marking "Assembled and Finished in China, Knit and Cut in Korea" does not satisfy the country of origin marking requirements of 19 U.S.C. 1304 and 19 CFR 134.46, and therefore, is not an acceptable country of origin marking for the imported knitted shirts and pullovers. A copy of this ruling should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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