Application for Further Review of Protest No. 100196102772; Notice to Mark and/or Notice to Redeliver; CF 4647; Turkey; Hong Kong;printed rayon challis fabric; 19 CFR 12.130

HQ 561247 June 3, 1999 MAR205 RR:CR:SM 561247 MLR/RH CATEGORY: Marking Port Director of Customs Attn: Chief, Residual Liquidation & Protest Branch 6 World Trade Center, Room 761 New York, NY 10048-0945 RE: Application for Further Review of Protest No. 100196102772; Notice to Mark and/or Notice to Redeliver; CF 4647; Turkey; Hong Kong; printed rayon challis fabric; 19 CFR 12.130 Dear Sir: This is in response to your memorandum of December 22, 1998, forwarding the abovereferenced protest and application for further review, filed by Siegel, Mandell & Davidson, P.C. on behalf of Marcus Brothers Textiles, Inc., which contests the issuance of a Notice to Mark and/or Notice to Redeliver for certain printed rayon challis fabric (hereinafter “rayon fabric”). FACTS: The record indicates that the rayon fabric was entered on February 21, 1996; the entry was liquidated and a Notice to Mark and/or Notice to Redeliver was issued on March 4, 1996, claiming that the origin of the fabric was Hong Kong where the fabric was woven; and the protest was timely filed on April 6, 1996. The country of origin of the fabric on the entry was stated to be Turkey. A “Multiple Country Declaration of Origin” filed by Denizli Basma Ve Boya Sanayii A.S. (“Denizli”) is submitted indicating that the fabric was woven in Hong Kong and finished in Turkey by “bleaching, singeing, dyeing (white), printing, steaming, washing off, finishing with stenter, and sanforizing.” - 2 - It is your office’s position that per a previous Customs laboratory analysis of similar merchandise from the same manufacturer, the fabric only underwent two finishing processes, bleaching and printing, in Turkey. The fabric also did not show any evidence of having been dyed. Your office states that based upon the ASTM D4038 standard which is less than 3 percent in both directions for shrinkage for testing purposes for women’s and girl’s apparel, all samples of rayon fabric sent to the laboratory were reported to exceed the 3 percent standard. Therefore, the Customs laboratory was of the opinion that the fabric did not meet the shrinkage requirements. This determination was based on the fact that the finished fabric exhibited shrinking in excess of that for a sanforized product. Therefore, it is your office’s position that the country of origin of the fabric was not Turkey. It is protestant’s position that “based on preliminary information known to the importer, the imported fabrics have been subjected to a stentering process, and based on comparison to previously approved processes, this process does qualify as a shrinking process.” The protestant contests the laboratory’s report that the fabrics were not subject to a sanforizingtype shrinking process. The protestant claims that industry standards to these fabrics as well as customer requirements may require that a higher level of available shrinkage remain in the fabric to prevent slippage of the yarns which would otherwise occur in production and use of the finished product made with the fabric. ISSUE: Whether the fabric underwent a substantial transformation in Turkey pursuant to 19 CFR 12.130(e). LAW AND ANALYSIS: At the time the fabrics in question entered the United States, Section 12.130(b) of the Customs Regulations (19 CFR §12.130(b)) governed the 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). Under that provision, the country of origin of textile products is deemed to be that foreign territory or country 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. - 3 - The factors to be applied in determining whether or not a manufacturing operation is substantial are set forth in 19 CFR §12.130(e), which provides in part: [A]n article or material usually will be a product of a particular foreign territory or country, or insular possession of the U.S., when it has undergone prior to importation into the U.S. in that foreign territory or country, or insular possession any of the following: (I) Dyeing of fabric and printing when accompanied by two or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing. Section 12.130(e)(2) further provides: An article or material usually will not be considered to be a product of a particular foreign territory or country, or insular possession of the U.S. by virtue of merely having undergone any of the following: * * * (iv) One or more finishing operations on yarns, fabrics, or other textile articles, such as showerproofing, superwashing, bleaching, decating, fulling, shrinking, mercerizing, or similar operations; or (v) Dyeing and/or printing of fabrics or yarns. The multiple country declaration of origin states that the fabric was printed and dyed (white) in Turkey. However, your office states that based upon a previous laboratory analysis of similar merchandise from the same manufacturer, the fabric did not show any evidence of being dyed. The protestant claims that the processing performed on the fabric to control the shrinkage to a commercially usable level for such rayon challis fabric constitutes an acceptable shrinking process even if it does not result in shrinking levels comparable to those for sanforized fabrics. It is also claimed that the meaning of “shrinkage” in 19 CFR 12.130(e)(1) does not require that the fabric be preshrunk to a sanforized level, only that there be some shrinking. HQ 953019 dated February 9, 1994, is cited as support, where greige rayon challis fabric was singed which burned away the fiber ends; washed; scoured; bleached; reactive dyed; printed; steam set; washed again; placed in a stenter frame where fulling agents, a softener and cream resistant chemical were applied and baked into the fabric at a high temperature to cause it to shrink. It was found that the fabric had been dyed and printed. It was also found that the - 4 - fabric underwent a bleaching process, albeit a continuous process in preparation for dyeing which is common for rayon fabric. It was also determined that the fabric was subjected to a shrinking operation, and, therefore, the fabric underwent a substantial transformation pursuant to 19 CFR 12.130(e). The protestant also cites HQ 953905 dated July 30, 1993, stating the operations in that case are similar, and erroneously states that the fabric in that case underwent a substantial transformation. In HQ 953905, it was found that fabric subjected to scouring, singeing, mercerizing, dyeing (a white color), printing and a resin finish did not undergo a substantial transformation as two of the finished operations enumerated in 19 CFR 12.130(e)(1)(I) were not performed. HQ 953229 dated December 21, 1993, is also cited where the fabric was stated to have been scoured, bleached, sanforized (preshrunk), printed and dyed. In HQ 953229, the issue whether the bleaching operation was necessary was discussed since manmade fibers such as rayon are commonly white or offwhite. It was determined that based upon the laboratory analysis and samples submitted, the bleaching did reduce the impurities in the fabric. Therefore, in HQ 953229, it was held that the fabric did undergo a substantial transformation. See also HQ 734351 dated March 2, 1992. Customs does not contest that the fabric was bleached and printed in Turkey. However, a Customs laboratory tested samples of the fabric from the same suppliers in another entry found no indication that the fabric underwent any of the other finishing operations enumerated in 19 CFR §12.130. Customs has been consistent in its determinations that where dyeing and printing are not accompanied by two or more of the operations enumerated in 19 CFR §12.130(e)(1), or where processing involves only one or more finishing operation with no dyeing and printing, or dyeing and printing alone, a substantial transformation does not occur for country of origin purposes. See, Headquarters Ruling Letter (HQ) 734262, dated January 6, 1992, wherein Customs held that greige fabric which was treated by bleaching, dyeing, printing, and resin finishing, including special coating of the fabric, was not substantially transformed; HQ 734435, dated January 10, 1991 (greige fabric produced in Taiwan and processed in Hong Kong by desizing, scouring, bleaching, dyeing, softening, stentering and calendering, was not substantially transformed because the dyeing operation was not in conjunction with a printing operation); HQ 089230, dated May 10, 1991 (Chinese greige fabric exported to Hong Kong where it underwent scouring, bleaching, printing, napping and preshrinking, was not substantially transformed in Hong Kong); HQ 953905, dated July 30, 1993 (fabrics which were dyed and printed and then underwent scouring, singeing, mercerizing and bleaching lacked the two additional operations enumerated in 12.130(e) and were not substantially transformed); HQ 953191, dated May 14, 1993 (a substantial transformation did not occur in Kuwait where greige fabric was desized and washed, scoured, shrunk, bleached dyed, sized and finished and cut on four sides and - 5 - hemmed); HQ 088901, dated July 5, 1991 (greige fabric shipped to Israel where it was cut and sewn into 3000 foot lengths, singed and desized, washed, dried, subjected to thermofixation (heating the fabric to fix the final elasticity), bleached, printed, placed on a stentor frame, dyed (a light shading), washed, calendered, washed, and pressed, was not substantially transformed because Customs found that the fabric was not printed and dyed). Customs interpretation of 19 CFR §12.130 was upheld by the United States Court of International Trade in Mast Industries Inc. v. United States, 652 F. Supp. 1531 (1987); aff'd 822.F. 2d 1069 (CAFC, 1989). That case involved greige cotton fabric produced in China and sent to Hong Kong for singeing, desizing, scouring, bleaching, mercerizing, dyeing, softening, and stentering. The court stated that in determining the meaning of an agency's regulation, it would defer to that agency's interpretation unless the interpretation is plainly erroneous or inconsistent with the regulation. The court found that Customs' interpretation was reasonable and approved of Customs denying entry to the finished fabric without a visa from the Government of China. In this case, the protestant has not submitted any evidence to support the claims that the fabric was dyed and preshrunk. For tariff purposes, dyed white fabric is not considered “dyed.” See Subheading Notes 1(d) and 1(g), Chapter 52, HTSUSA. Moreover, as stated in 19 CFR §12.130(e)(1) and in the rulings cited above, an article must be both dyed and printed (accompanied by two or more of the enumerated finishing operations) to undergo a substantial transformation. Since the protestant submitted no evidence to rebut Customs laboratory findings, we find that the fabric was not dyed. As a result, the issue regarding shrinkage is moot. HOLDING: The protest should be DENIED. The fabrics in question did not satisfy the requirement of 19 CFR §12.130(e)(1) for a substantial transformation. Therefore, the protest should be denied in full. Accordingly, the fabrics remain products of the country in which they were woven, i.e., Hong Kong. In accordance with Section 3A(11)(b) of Customs Directive 099 3550065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to the mailing of this decision. - 6 - Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, John Durant, Director Commercial Rulings Division