MAR-05 RR:TC:SM 561025 BLS
Port Director
610 S. Canal Street
Chicago, Illinois 60607-4523
RE: Country of origin marking of photographic film; substantial
transformation;
HRL 732842; HRL 733106; Superior Wire; National Hand Tool;
Ferrostaal
Dear Sir:
This is in reference to letters dated November 12, 1997 and
October 2, 1998, from Dorsey & Whitney LLP, on behalf of Imation
Corp. ("Imation"), concerning country of origin marking of
certain photographic film. The importer has advised that the
merchandise is currently being entered through your port and
through JFK Airport, New York.
FACTS:
Imation imports certain bulk color photographic print film
from its affiliate in Italy. This film, described commercially
as a "jumbo," weighs about 2,000 pounds and is about 8,000 feet
in length. It is about five feet in width, four feet in diameter
and seven millimeters thick. The film is sent to Imation's plant
in Oklahoma for manufacturing operations leading to the
production of 110 and 135 color photographic print film. These
operations are described as follows:
Slitting
The jumbo is slit into 38 "pancakes" of a width of 35
millimeters or 83 pancakes of a width of 16 millimeters, each
pancake being four feet in diameter. The 35 millimeter width is
used to make what is called the 135 color photographic film. The
16 millimeter width is used to make what is called the 110 color
photographic film.
Perforating
Each pancake is perforated with perforations of an exact
size and spacing, for two reasons. First, the perforations
ensure the proper alignment of the film in the camera. Second,
the perforations allow the film to be advanced out of, and
rewound into, the cartridge during the picture-taking process.
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Cutting
The film is cut to the exact lengths required by the 110 and
135 film cartridges, respectively.
Latent Image Flashing
The film is subject to a series of exposing or "flashing"
operations, whereby a series of images is applied through
chemical changes caused by the application of different
wavelengths of light for differing periods. This processing is
required during the manufacturing process to image the following:
1) a 31 bit barcode
2) human readable film generation and speed
3) frames numbers
4) numbers identifying the emulsion coating used on
the film
5) arrows used for the photo finisher's orientation
during processing
6) dots/crosses of specific color to identify the
manufacturer and film generation
7) frames for the 110 film
The importer states that the 31-bit barcode provides a means
to digitally designate the film manufacturer, film generation,
frame number, and film speed (ASA 100, 200, or 400). This
barcode is not visible until the exposed film is developed at the
photo finisher. The barcode is then read by an automatic printer
which sets the color balance based on the film manufacturer, film
generation, and film speed. Without this barcode, the proper
color balance on the finished prints could not be consistently
achieved.
In the manufacturing process, the latent images are produced
by flashing a high intensity light through a mask designed to
allow the film to be exposed to light for the desired image
configuration. The barcode mask uses a technology which allows
the mask to change image configurations up to 40 times for each
length of film in the
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finished cartridge.
Imation explains that by virtue of the light exposure, a
molecular change takes place within the film emulsion. The film
emulsion contains silver halide crystals, which consist of
positively charged ions and negatively charged halide ions, such
as bromide
or iodine. These ions are a form of molecule. When a light
quantum or photon is absorbed by the bromide ion, for example,
that ion loses an electron and thereby undergoes a molecular
change. This electron eventually combines with a silver ion and
reduces it to a neutral silver atom of metallic silver. For
frequently absorbed photons, this process is repeated until a
small but stable cluster of metallic silver atoms is formed in
the crystal, producing a latent image.
Manufacturing 110 Film Cartridge
In the case of the 110 film, the cartridge is made up of the
following five parts, the first three of which are wholly made in
the United States: a plastic body, a plastic cover, plastic
spool, backing paper, and the film. The plastic parts are
automatically fed to the transport fixture, which conveys the
parts to a darkroom for film loading and assembly.
The darkroom consists of spooling, heat-staking, cartridge-closing, and ultrasonic-welding stations. The spooling station
winds the film and backing paper (for light protection) into a
scroll, which is transferred to the plastic body. Next, the
backing paper is heat-staked to the plastic spool, which is used
to advance the film in the camera. After heat-staking, the
plastic cover is automatically loaded onto the plastic body and
ultrasonically welded to complete the assembly. The 110 film
cartridge is now loaded and sealed.
Manufacturing 135 Film Cartridge
In the case of the 135 film, the cartridge is made up of, in
addition to the film, four parts, all of which are made in the
U.S. These include a metal cylinder, end caps, plastic spool,
and velvet strips. The cartridge is made from a section cut from
a U.S-printed metal sheet. An electrically readable encodement
of speed, exposure index, number of exposures, and recommended
exposure latitude is applied to the exterior of
the cartridge via a pattern of conductive or insulating areas.
The metal cylinder, end caps, plastic spool, and velvet strips
are automatically assembled and then conveyed to a darkroom for
film loading.
The darkroom consists of a spooler and film-preparing
equipment. The spooler inserts the film into the cartridge
assembly and mechanically attaches the film to the
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plastic spool. The film is then wound into the cartridge
assembly with a specified length of film extending from the
cartridge. The 135 film cartridge is now loaded and sealed.
Moisture Reduction
During the film emulsion coating process, 3.3% moisture
content by weight is incorporated into the chemical makeup of the
film emulsion. This is necessary in order to minimize the risk
of static discharges during the process of coating the film and
converting it to the cartridge film.
The residual moisture content of the film must then be
reduced from 3.3% to 2.5% after spooling in order to stabilize
the sensitometric properties of the film during its shelf life.
The emulsion layers of film that are not dried to 2.5% are
subject to drastic change, especially if used or stored for long
periods in temperatures above 80 degrees Fahrenheit. Excess heat
will cause a chemical reaction to occur between the emulsion
stabilizers and the excess moisture in the film. In this
chemical reaction, the stabilizers break down, form new
compounds, and no longer protect the film's performance
integrity. In particular, the photographs will be darker, and
both the contrast of colors and the speed will be adversely
affected. Film that has undergone this change can no longer
provide accurate color reproduction.
Defect Removal
As received from Italy, jumbos are about 3% defective on the
average, due to coating defects, base defects under the emulsion
layers, and other defects caused by handling or shipping
problems. Most defects are coating defects, and most coating
defects are linear defects.
Examples of linear defects are emulsion streaks, emulsion
side or backcoat scratches, and base or roller marks. Some
linear defects may run the entire length of the jumbo. Others,
however, may exist at one end of the jumbo or the other and will
disappear before the opposite end. Most linear defects are
continuous, while others are intermittent, repeating at some
interval dictated by the diameter of a roller in the base casting
alley or emulsion coating alley.
Accompanying each jumbo from Italy is a defect location
sheet, which is basically a map of all the defects that are known
by the Italian manufacturer to exist. Prior to slitting a jumbo,
the slitter operator will review the defect location sheet to
determine what special sampling and/or testing will be required
prior to slitting a jumbo.
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Once the location of the defect has been confirmed, it may
be removed at any one of three stages. The defect may be removed
from the jumbo if it runs from side to side. More typically, it
is removed from an individual pancake. In some cases, however,
the defect is not discovered and removed until the film is being
spooled from the pancake. In any event, identifying and removing
defects are necessary to insure the integrity of the film.
ISSUE:
Whether the processing of the bulk film in the U.S.
constitutes a substantial transformation, thereby excepting the
imported article from country of origin marking.
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 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., 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 134.35(a), Customs
Regulations (19 CFR 134.35(a)), applicable to goods of a non-NAFTA country, provides that an article 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 will be within
the principle of the decision of U.S. v. Gibson-Thomsen Co. Inc.,
27 C.C.P.A. 267 (C.A.D. 98) (1940). Under this principle, the
manufacturer or processor in the U.S. who substantially
transforms the imported article into an article with a new name,
character, or use will be considered the "ultimate purchaser" of
the imported article within the contemplation of section 304(a),
Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the
article shall be excepted from marking. The outermost containers
of the imported articles shall be marked in accord with this
part.
In Headquarters Ruling Letter (HRL) 732842 (February 23,
1990), Customs held that bulk color print photographic film, when
cut to width and length and inserted into
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cassettes was not substantially transformed. In addition, in HRL
733106 dated March 19, 1990, Customs reached the same conclusion
with regard to 35 mm photographic film which was cut and placed
in metal cassettes.
The importer believes that this case must be distinguished
from HRLs 732842 and 733106 as Imation's operations include not
only the operations described in those cases, but also additional
operations which entail significant physical and chemical
changes. The importer argues that this processing, particularly
the operations involving latent image flashing, moisture
reduction and defect removal, results in both physical and
chemical changes which alter the fundamental character of the
imported product and its use. As there is also a commercial
change in the name of the imported product, from "jumbo" to
"pancake" to "film cartridge," Imation contends that the
processing in the U.S. constitutes a substantial transformation
of the bulk film product. In support of its position, the
importer believes that the subject processing satisfies the
standard for a substantial transformation as set forth by the
court in Superior Wire v. United States, 867 F.2d. 1409 (Fed.
Cir. 1989)
In Superior Wire, the Court of Appeals for the Federal
Circuit affirmed the determination of the Court of International
Trade (CIT) that drawing wire from wire rod was a minor rather
than substantial transformation, even though the physical
properties of the wire rod, and therefore its use, were affected
as a result of the processing. In that case, the wire that
emerged from the drawing process was stronger and rounder than
the wire rod. However, because these properties of the wire,
which affected the use to which it could be put, were
predetermined by the chemical content of the rod and the cooling
process used in its manufacture, the court found that wire drawn
from the rod was not a new and different product, but the last
stage in the processing of the same product. The court noted
that the "end use of the wire rod is generally known before the
rolling stage and the specifications are frequently determined by
reference to the end product for which the drawing wire will be
used." Accordingly, the court found that the character of the
final product was predetermined and that the processing did not
result in a significant change in either character or use of the
imported material.
In reaching its decision, the court also stated the
following:
Here only the change in name is clearly met, and such a
change has rarely been dispositive. No transformation
from producers' goods took place; no change from a
product suitable from many uses to one with more
limited uses took place; no complicated or expensive
processing occurred, and only relatively small value
was added. Overall, the court
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views the transformation from wire rod to wire to be
minor rather than substantial. Accordingly, the
country of origin of the wire must be considered Spain
rather than Canada.
By contrast with the facts in Superior Wire, the importer is
of the opinion that the processing at issue herein satisfies the
criteria used by the court in making its determination, and that
accordingly, the operations which take place in the U.S.
constitute a substantial transformation of the imported product.
Thus, it is argued that 1) there is a change in name; 2) the
imported product changes from a producer's good to a consumer's
good; 3) complicated and expensive processing occurs in the U.S.;
and 4) the amount of value added in the U.S. is substantial.
Imation concedes that in the instant case there is no change from
a product with many uses to one with limited uses.
In National Hand Tool v. United States, 16 CIT 308 (1992),
989 F.d. 1201 (1993), the Court of International Trade held that
imported hand tool components which were used to produce flex
sockets, speeder handles and flex handles were not substantially
transformed when further processed and assembled in the U.S. The
components were cold-formed or hot-forged into their final shape
prior to importation, except for speeder handle bars, which were
reshaped by a power press after importation. The grip of the
flex handles were also knurled in the U.S., by turning the grip
portion of the handle against a set of machine dies that formed a
cross-hatched diamond pattern. The articles were heat treated,
cleaned, electroplated, and marked with a trademark and size.
The imported parts were then assembled with other parts, which
required some skill and dexterity on the part of the workers.
The court stated that the determination of a substantial
transformation must be based on the totality of the evidence, and
applied a 3-pronged test utilizing name, character, and use, in
determining whether a substantial transformation had occurred.
The court found that the components were unchanged as to form
after processing in the U.S., that the use of the imported
articles was predetermined at the time of importation, and that
the name of the components also remained the same after entry
into the U.S. The court discounted plaintiff's argument that a
substantial transformation should be found based on the value of
the processing performed in the U.S., which plaintiff described
as significant, but decided the issue based solely on name,
character and use.
In Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542
F.Supp. 1026 (1982), the CIT found that the attachment of an
outsole to a shoe upper was a minor manufacturing or combining
process which left the identity of the shoe upper intact, and
that the
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completed upper was the very essence of the finished shoe. The
concept of the "very essence" of a product was also applied in
National Juice Products v. United States, 628 F. Supp. 978, 10
CIT 48 (CIT 1986), where the court determined that imported
frozen concentrated orange juice was not substantially
transformed in the U.S. when it was domestically processed into
retail orange juice products. The court agreed with Customs
that the orange juice concentrate "imparts the essential
character to the juice and makes it orange juice... thus, as in
Uniroyal, the imported product is the very essence of the retail
product." The court also found that the change in name from
"concentrated orange juice for manufacturing" to "frozen
concentrated orange juice" and "orange juice from concentrate" is
not significant to a finding of substantial transformation.
Instead, the court stated that these names "merely refer to the
same product, orange juice, at different stages of production."
Id. at 989. See also Superior Wire, supra, where the court
stated that "[a]lthough the steel and wire industries may have
different names for the same products, wire rod and wire may be
viewed as different stages of the same product." Id. at 867 F.d.
1414. In this case, we view the name change from "jumbo" to
"film cartridge" as the same product at different stages of
production, and not evidence of a substantial transformation.
Accordingly, following the three-pronged test of name,
character and use, it is our opinion that the imported product is
the "essence" of the completed article, and thus does not undergo
a substantial transformation. While commercially identified as a
"jumbo" upon importation and when completed as "cartridge film"
or "film cartridge," we do not find this fact significant as the
imported product is bulk color photographic print film with a
predetermined use which has the essential chemical properties of
the completed product. The chemical and physical changes which
occur in the U.S. do not change its character or its intended use
as photographic film. As in Superior Wire, supra, the imported
and finished articles may be viewed as different stages of the
same product.
Further, while Superior Wire treated the cost added, amount
of labor, and capital investment as a cross-check in substantial
transformation cases, the Court of International Trade has stated
in numerous cases that the name, character and use test is
entitled to continued adherence in view of its affirmance in
recent opinions by the appellate court, and to avoid "ludicrous
results" should generally be determinative of the country of
origin of imported articles. See Ferrostaal v. United States,
664 F. Supp. at 538; and National Hand Tool Corp., supra.
Therefore, as our determination is based on name, character and
use, we do not consider material to the issue of substantial
transformation the added value in the U.S. or other factors
unrelated to these determinants.
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HOLDING:
Bulk photographic color print film of Italian origin
imported into the U.S. for processing into film cartridges does
not undergo a substantial transformation. Therefore, the U.S.
processor is not considered the ultimate purchaser, and the
imported articles must be marked to indicate Italy as the country
of origin in accordance with 19 U.S.C. 1304 and the implementing
regulations. Customs officials at the port of
entry must be satisfied that such marking will be in compliance
with all statutory and regulatory requirements.
Please provide a copy of this decision to John Rehm, Esq.,
Dorsey & Whitney LLP, 1330 Connecticut Avenue, N.W., Washington,
D.C., 20036.
Sincerely,
John
Durant, Director
Commercial Rulings Division