CLA-2 RR:TC:SM 560155 KBR
Robert L. Raskopf
White & Case
1155 Avenue of the Americas
New York, NY 10036-2787
RE: Country of origin marking of a trading cards; substantial
transformation; 19 CFR 134.35
Dear Mr. Raskopf:
This is in response to your letter to the U.S. Customs
Service, New York, dated October 8, 1996, and subsequently
forwarded to this office, on behalf of your client Pinnacle
Brands, Inc. ("Pinnacle") requesting a ruling regarding the
country of origin marking of trading cards imported into the U.S.
for finishing.
FACTS:
Pinnacle wishes to import pallets of uncut sheets of
trading cards into the U.S. from the United Kingdom for finishing
and combining with U.S. manufactured cards for retail sale and
collection. Pinnacle wants to print on the cards contained on
the imported uncut sheets the marking "Product of U.S.A."
The processes performed in the U.S. to prepare production
film for trading cards prior to shipment to the United Kingdom
for processing are:
1. Acquiring license agreements from U.S. sport
organizations for the use of player and team
identification.
2. Photographs of the trading card subject are produced
and developed on a transparency.
3. Preliminary design of the trading card.
4. Research and compiling of subject's statistics.
5. Biographical material on the subject is prepared.
6. Transparencies separated and stored in digital
images.
7. Color correction to ensure correct colors.
8. Computerized layout and storing of individual cards
using a quark page'.
9. Stripping' card files by placing them on a form in
a particular arrangement.
10. Proofreading and quality control.
11. Final production film for the card form is
produced.
12. Shipping to the United Kingdom.
In the United Kingdom, the film is sent to F.J. Warren. The
film is then printed using a process called "Dufex". The
processes performed in the United Kingdom include:
1. Printing the images onto specialized sheets of paper
stock.
2. Creating a specialized die from the printed images
that is used to emboss (deboss) the sheets.
3. Printing the sheets with the "Dufex" process, which
strikes the die to the sheets.
4. Laminating the sheets with film, packing pallets of
sheets in containers and shipping to Pinnacle in the
U.S.
After the return of the film laminated sheets containing the
trading cards to Pinnacle in the U.S., the cards undergo the
following processes:
1. Slitting the uncut sheets into individual cards. If
the cards are printed on both sides, they are simply
cut into individual cards. If the sheet is printed on
only one side, half the sheet will be the front and
half the sheet will be the back. In this second
instance, the sheet will be scored down the middle, the
halves will then be glued together and then the cards
are cut.
2. Collating the individual cards into packages of
trading cards. The subject cards are combined with
other trading cards wholly produced in the U.S. You
state that the majority of the cards will be of totally
U.S. production. As examples you show packages
containing from 1 "Dufex" card to 7 U.S. cards, to
packages containing 1 "Dufex" card to 360 U.S. cards.
3. Performing quality control.
4. Creating and producing the wrappers for the trading
cards.
5. Wrapping the cards in the wrapper and packaging the
wrapped cards into boxes.
6. Creating and producing shipping cartons for distribution.
7. Creating and disseminating advertisement materials.
You believe that the operations undertaken in the U.S. after
the return of the "Dufex" sheets substantially transform the
sheets into products of the U.S. Further, you state that since
you believe that Pinnacle is the ultimate purchaser of the
pallets of imported cards, the cards should be allowed to be
marked "Product of U.S.A." You also believe that because the
majority of the cards are wholly U.S. produced, that "Product of
U.S.A." should be allowed to be printed on the cards which are
made from the imported sheets.
ISSUE:
Whether the imported sheets of trading cards are
substantially transformed by the processing in the U.S. and may
be printed with "Product of U.S.A."
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 imported into the U.S. shall be marked
in a conspicuous place as legibly, indelibly, and permanently as
the nature of the article 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 the 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 article occurs when it is used
in manufacture, which results in an article having a name,
character, or use differing from that of the article before the
processing. See HQ 558747 (January 20, 1995).
Section 134.35(a), Customs Regulations (19 CFR 134.35(a)),
states that the manufacturer or processor in the U.S. who
converts or combines the imported articles into articles having a
new name, character or use will be considered the ultimate
purchaser of the imported article within the scope of 19 U.S.C.
1304 and the article will be excepted from marking.
A substantial transformation occurs when articles lose their
identity and become new articles having a new name, character, or
use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270
(1940); Koru North America v. United States, 12 CIT 1120, 701 F.
Supp. 229 (1988). The question of when a substantial
transformation occurs for marking purposes is a question of fact
to be determined on a case-by-case basis. Uniroyal Inc. v.
United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd, 1 Fed.
Cir. 21, 702 F.2d 1022 (1983).
In the instant case, Pinnacle gathers information about an
athlete and designs and creates a computerized layout of a
trading card which Pinnacle places on production film. Pinnacle
sends this production film to the United Kingdom where it is used
to print uncut paperboard sheets using the "Dufex" process and
the sheets are laminated. The printed and laminated sheets are
products of the United Kingdom. See e.g. HQ 731882 (October 31,
1989); HQ 731859 (June 2, 1989). Accordingly, it is necessary to
determine if the uncut paperboard sheets of trading cards are
substantially transformed by the processing performed in the U.S.
In a similar situation to the instant case, HQ 734706 (January
15, 1993), Customs held:
At the time they are exported to Mexico, the trading
cards are printed on paper board, but they are clearly
recognizable as trading cards, and they have all the
basic characteristics of trading cards. In Mexico, all
that is done to the paperboard sheets of cards is that
they are cut, sorted, and packaged. The name,
character, and use of the cards are not changed by the
Mexican operations. Rather, we find that these
operations performed in Mexico: cutting the paper
board sheets and the sorting of the cards, are minor
finishing operations. See HQ 555241 (July 3, 1989) (the
cutting of sheets of self- adhesive office labels on
backing paper was not a substantial transformation).
Moreover, the packaging of a product has consistently been
determined not effect a substantial transformation. See HQ
733729 (January 2, 1991); see also HQ 734706 (January 15, 1993).
In the present case, the circumstances are substantially the same
as in HQ 734706, except for when the sheets are printed only on
one side and the two halves must be glued together. We find that
this glueing is just another simple finishing operation.
Therefore, we find that both types of imported sheets of trading
cards are not substantially transformed in the U.S.
The combining of the imported cards with cards that are of
wholly U.S. production is not justification for allowing the
imported cards to be marked with what would be a false marking,
"Product of U.S.A." Instead, the imported cards must be marked
to indicate their foreign origin (United Kingdom). Further,
since the ultimate purchaser of the cards will receive the cards
in a sealed wrapper, the wrapper must inform the ultimate
purchaser of the foreign origin of the imported cards. See 19
CFR 134.24(d)(2).
HOLDING:
Based upon the information provided, we find that for
purposes of 19 U.S.C. 1304, the processing in the U.S. of the
imported sheets of trading cards does not constitute a
substantial transformation; therefore, after finishing in the
U.S., the trading cards may not be marked "Product of U.S.A.",
but must be marked with their country of origin, the United
Kingdom.
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
Tariff Classification Appeals
Division