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NY 813627

September 14, 1995

MAR-2-:S:N:N3:352 813627


TARIFF NO.: 5209.42.00

Mr. Ronald Caplan
Samuel Shapiro & Company, Inc.
World Trade Center Suite 1200
401 East Pratt Street
Baltimore, Maryland 21202-3104

RE: The country of origin for the purposes of Section 204 of the Agricultural Act of 1956, as amended and for the purposes of country of origin marking under Section 304 of the Tariff Act of 1930, as amended.

Dear Mr. Caplan:

In your letter dated August 4, 1995, on behalf of your client Cotton States Industries, Inc. you requested a ruling on the country of origin for 100% cotton blue denim fabric that is woven in Argentina and finished in Brazil.

Your letter indicates that you intend to import finished blue denim fabric that has been twill woven in Argentina and then shipped to Brazil for finishing before being imported into the United States. The operation in Argentina involves twill weaving a fabric using indigo dyed warp yarns and unbleached or bleached filling yarns. After weaving the loomstate fabric will be shipped to Brazil where the fabric will be finished by desizing, Sanforizing and skewing the fabric. You correspondence states that the cost of processing in Brazil represents between 12 and 20 percent of the total cost of the finished blue denim fabric.

Section 12.130 of the Customs Regulations (CR) is the implementing regulations for use in determining the country of origin for textiles and textile products which are subject to Section 204 of the Agricultural Act of 1956, as amended. The Agricultural Act provides in part the statutory authority for the use of quotas and visas for the control of textile imports pursuant to the International Arrangement Regarding Trade in Textiles. In addition, these regulations have been extended to include the determination of the country of origin for marking purposes under Section 304 of the Tariff Act of 1930, as amended.

In general, Section 12.130, CR, provides that a textile product that is processed in more than one country shall be the product of the country where it last underwent a substantial transformation. A substantial transformation of a textile product is said to have occurred if the product undergoes a transformation by means of a substantial manufacturing or processing operation. A manufacturing or processing operation in an intermediate country will result in a new and different article of commerce if a change in commercial designation, fundamental character or commercial use occurs.

Section 12.130 (d)(2) states in part 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...

(ii) The time involved in the manufacturing or processing operation...

(iii)The complexity of the manufacturing or processing operation...

(iv) The level or degree of skill and/or technology required...

(v) The value added to the article or material...

In order to make the regulations more transparent and provide guidance in the interpretation of the cited rules for determining whether an article has been substantially transformed, the regulations provide specific examples of processes that will result in a change of country of origin. The regulations state that in the processing of fabric dyeing and printing when accompanied by two or more of the following finishing operations will usually result in a change of the country of origin. The finishing operations listed are bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing.

In the case before us for consideration the blue denim fabric was neither dyed nor printed in Brazil and therefore does not meet the minimum requirements for substantial transformation as set forth in Section 12.130 CR despite the fact that the fabric was desized, Sanforized and skewed. In Mast Industries Inc v.United States, 652 F. Supp 1531, the Court of International Trade affirmed 12.130 of the Customs regulations and specifically endorsed the interpretation that at a minimum a fabric must be both dyed and printed as well as being subjected to two other finishing processes for it to be considered substantially transformed in the processing country.

In summary, the processing in Brazil does not substantially transform the fabric. The blue denim fabric remains a product of Argentina for the purposes of both country of origin marking and for quota and visa.

This ruling is being issued under the provisions of Section 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Alan Tytelman at 212-466-5896.


Roger J. Silvestri

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