CLA-2 R:C:S 559366 MLR

Mr. Bill Westhusing
The Alaska Souvenir Company
2000 E. Dowling Road, #15
Anchorage, Alaska 99507-1956

RE: Country of Origin Marking on Ulu knife; Blade; Handle; Substantial Transformation; 19 CFR 134.46

Dear Mr. Westhusing:

This is in reference to your letter of July 28, 1995, requesting a ruling concerning the country of origin marking for ulu knives. Samples of blades and handles were submitted with your request.

FACTS:

The good at issue is an ulu knife consisting of a semi-circular blade and a handle. The ulu knife may be used in the kitchen for culinary and cutlery purposes. It also may be used as a utility knife, and is also stated to be a collector's item.

The ulu knives are made from imported blades. The blades contain two holes, and in the U.S., some of the blades are acid etched with designs, cured, honed, and polished. One of the blades submitted is etched with an airplane and the word "Alaska," and another depicts a landscape scenery of Anchorage, Alaska. The blades are then secured to handles by gluing and inserting dowels. The handles may be made out of Alaskan birch, maple, or walnut wood, or from Corian. These materials are milled into the form of a handle, after which they are sanded, bored, oiled, and dried on racks. Some of the handles are inlaid with designs such as an eagle or a whale. Wood stands for the blades are cut, sanded, kerfed, oiled and dried. The finished ulu knife and wood stand are then packaged in a retail container.

It is stated that handle cutting machines, a shaping machine, a computer numerically controlled machine (to cut Corian and wood handles and the negative inlay in the handle), an acid etching machine, and a dowel pressing machine are required to make the ulu knives. Furthermore, it is stated that 85 percent of the value of the ulu knife is added in Alaska. The retail packaging will contain the words "Alaskan Ulu Knife [measuring approximately « inch], the historic utility knife of the arctic [measuring approximately 3/16 inch]." The following country of origin marking is proposed: "Blade made in China of high-quality, food grade stainless steel by one of the world's top cutlery blade manufacturers" [measuring approximately 3/16 inch]. The packaging also contains the symbol of a polar bear with "Made in Alaska" [measuring approximately 2/16 inch] below this symbol.

ISSUES:

I. Whether the etching of the blades and assembly with U.S.-origin handles constitutes a substantial transformation, thereby excepting the finished ulu knife from country of origin marking.

II. If the blades are not substantially transformed in the U.S., whether the proposed marking on the retail container satisfies the requirements of 19 CFR 134.46.

LAW AND ANALYSIS:

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its 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 goods is the product. The evident purpose is to mark the goods 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. Inc., 27 CCPA 297, 302, C.A.D. 104 (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 134.1(b), Customs Regulations {19 CFR 134.1(b)}, defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations.

For country of origin marking purposes, a substantial transformation of an imported article occurs when it is used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. In such circumstances, the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the "ultimate purchaser" of the imported article, and the article is excepted from marking and only the outermost container is required to be marked. See 19 CFR 134.35.

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (CIT 1983), aff'd, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D. 85-25.

In Headquarters Ruling Letter (HRL) 735181 dated May 17, 1994, Customs considered ulu knives made from imported blades and handles manufactured in the U.S. In the U.S., the blades were polished, embellished with a depiction of a mountain and the words "Mt. McKinley," and sharpened, after which they were affixed to U.S.-origin handles. In HRL 735181, Customs analyzed HRL 732057 dated April 16, 1990 (where Customs determined that the attachment of circular knife blades to handles of a rotary cutting instrument did not constitute a substantial transformation) and HRL 709090 dated June 19, 1978 (where Customs found that a manufacturer who completes a kitchen knife in the U.S. by riveting the imported knife blades to handles and grinding the blade would be the ultimate purchaser of the imported knife blade stubs). Following HRL 732057, Customs determined that since the ulu knives are utility knives, they were required to be marked with their country of origin because the blades were not substantially transformed in the U.S. Furthermore, it was noted that the marking "Made in Alaska" on the retail packaging may violate the laws of the Federal Trade Commission.

In reaching the conclusion in HRL 709090, Customs reviewed ORR Ruling 163-69 dated May 6, 1969, which found that the mere assembly of imported kitchen shanks containing drilled holes to receive a domestic handle did not constitute a substantial transformation, and File RM 363.2 W dated January 29, 1965, which held that the manufacturer of knives in the U.S. using imported cutlery stubs was considered the ultimate purchaser of the imported stubs.

In reaching the conclusion in HRL 732057 that the circular knife blade did not lose its separate identity when it was combined to a domestic handle of a rotary cutting instrument, Customs considered six factors:

1) whether the article is completely finished; 2) the extent of the manufacturing process of combining the article with its counterparts as compared with the manufacturing of the subject article; 3) whether the article is permanently attached to its counterparts; 4) the overall importance of the article to the finished product; 5) whether the article is functionally necessary to the operation of the finished article, or whether it is an accessory which retains its independent function; and 6) whether the article remains visible after the combining.

These factors are not exclusive and there may be other factors relevant to a particular case and no one factor is determinative. Consequently, in finding no substantial transformation of the blade, Customs determined that the circular knife blade was a finished product, the attachment of the blade to the handle was not an extensive process when compared to the amount of processing involved in producing the blade itself, the blade was easily replaced, and the blade was absolutely necessary to the operation of the rotary cutting instrument.

You have also submitted HRL 720065 dated October 21, 1982, where Customs considered raw knife blade blanks. The blank required molded or slab handles, rivets, finish shaping, and sharpening. All parts added to the blade were manufactured in the U.S. It was held that the additional work performed on the raw knife blade constituted a substantial transformation. Customs has also determined that U.S.-made knife blade blanks and wooden or plastic handles and rivets shipped to Mexico where they were assembled together and the blade was sharpened did not constitute a substantial transformation as the assembly of the parts into a finished knife was a minor operation. See HRL 733301 dated August 8, 1990. Finally, in HRL 735470 dated November 16, 1994, Customs determined that imported components of a sword, i.e., blade, handle, scabbard and hilt were not substantially transformed after assembly, polishing, and plating operations. While each component became an essential part of a completed sword, each component was still referred to its respective name after assembly. Additionally, the use of the imported components was predetermined at the time of importation, and the overall shape, form, and size of the finished sword was essentially the same as the imported unassembled sword parts.

After reconsidering HRL 735181, it is our opinion that the imported blades in this case also are not substantially transformed. While the ulu knives in this case are also stated to be used as kitchen knives and not just utility knives, the imported blades already contain two holes and, similar to the finding in HRL 733301, the process of combining the blades with the handles does not appear to be extensive. Furthermore, while the blade is permanently attached to the handle, unlike the circular blades attached to the rotary cutter, the blade is the distinguishing feature that makes it an ulu knife. Although the production of the handle requires skilled craftsmanship and special machinery, its assembly with an imported blade does not change the name, character, and use of the blade, and this determination is consistent with the more recent findings by Customs.

Even considering the etching of the blade with designs, we do not find a substantial transformation. In determining whether machining operations effect a substantial transformation, Customs has distinguished between the kind and amount of further processing performed, i.e. between machining operations performed to achieve a specified form and those performed to achieve more cosmetic or minor processing operations. Customs has consistently found that embellishment and finishing operations, such as polishing, enameling and cleaning, are not regarded as extensive processes that result in a new and different article of commerce. For example, in C.S.D. 89-130, Customs held that polishing and grinding a semifinished aluminum did not result in a substantial transformation. See also C.S.D. 89-121 (glazing and painting of pottery and ceramics did not constitute a substantial transformation). Additionally, in HRL 734716 dated November 27, 1992, applying a No. 8 mirror polish finish on sheets of grade 304 stainless steel with a 2B or BA finish was not a substantial transformation since surface finishes such as mirror finish, chemicolor, and etching art were more accurately described as resulting in a narrowing of or restriction in use rather than a change in use.

Consequently, based on the rulings above, since the blades are not substantially transformed in the U.S. by the etching and assembly operations, they must be clearly marked to indicate to the ultimate purchaser their country of origin. The proposed marking on the retail container will also contain the references "Alaskan Ulu Knife..." and "Made in Alaska." Customs has recognized that the presence of a geographic location other than the country in which the article was produced on an imported article or its container may mislead the ultimate purchaser as to the true country of origin. Therefore, in cases where the name of a location in the U.S. or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appears on an imported article or its container, 19 CFR 134.46 provides that there shall appear, legibly and permanently, in close proximity to such words, letters, or name, and in at least a comparable size, the name of the country of origin preceded by "Made in", "Product of", or other words of similar meaning. Customs has ruled that in order to satisfy the close proximity requirement, the country of origin marking must appear on the same side(s) or surface(s) in which the name of the locality other than the country of origin appears. The purpose of this section is to prevent the possibility of misleading or deceiving the ultimate purchaser as to the actual origin of the imported good. In this case, the retail container of the ulu knives contain the references "Alaskan Ulu Knife..." and "Made in Alaska." Not only are these geographic locations which are not the country of origin of the finished ulu knives, but they are used to suggest that the country of origin of the ulu knife is Alaska. Accordingly, since these references may likely mislead the ultimate purchaser as to the true origin of the article these references should either be deleted from the retail container or they should be changed so that the reference to Alaska only refers to the handle. "Handle Made in Alaska," "Assembled in Alaska," or similar wording would be appropriate. If reference is made to Alaska, it must be in close proximity to the marking "Blade made in China...," and the type must be comparable in size. Additionally, we suggest that you contact the Federal Trade Commission, Division of Enforcement, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508, which has jurisdiction concerning the approval of markings such as "Made in the U.S.A." and "Made in Alaska."

HOLDING:

Based upon the information provided, it is our opinion that the imported blades are not substantially transformed in the U.S. by the etching and assembly operations. Therefore, the retail container must be clearly marked to indicate to the ultimate purchaser the country of origin of the ulu knives. The marking "Blade made in China ..." is acceptable. However, we also find that the words "Alaskan Ulu Knife..." and "Made in Alaska" on the retail container may mislead the ultimate purchaser as to the article's country of origin. Therefore, these words should either be deleted or changed to more accurately reflect the processing performed in Alaska. Furthermore, we suggest that you contact the Federal Trade Commission concerning the use of "Made in Alaska."

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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
Commercial Rulings Division