MAR-05 RR:CR:SM 562537 KKV
William A. Zeitler, Esq.
David M. Schwartz, Esq.
Thompson Coburn, LLP
1909 K Street, N.W.
Suite 600
Washington, D.C. 20006-1167
RE: Country of origin marking requirements applicable to flexible magnets manufactured in the U.S. from imported magnetized rubber material; 19 CFR 134.45
Dear Mr. Zeitler and Mr. Schwartz:
This is in response to your letter dated September 19, 2002 (and additional submissions dated October 3, 2002 and November 19, 2002), on behalf of Magnet LLC, which requests a binding ruling regarding the country of origin marking requirements applicable to flexible magnets manufactured in the U.S. from magnetized rubber material imported from China. Samples of the imported magnetized rubber material and finished magnets were submitted for our examination.
FACTS:
We are informed that Magnet LLC is a U.S. producer and importer of promotional products such as key chains, flat flexible magnets, pens, and desk accessories. You indicate that Magnet LLC plans to import flat sheets and/or rolls of magnetized rubber material from China into the U.S. for further processing into flexible magnets. The finished magnets will be custom-made to the specifications of its customers to advertise and display specific customer products, services, trademarks, trade names and logos.
Subsequent to importation into the U.S., the flat sheets/rolls of magnetized rubber material are subject to a variety of processing operations that include designing, cutting, shaping, silk screening and printing, which result in the creation of promotional magnets.
LAW & 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 United States 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 United States 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, 302 (1940). Part 134 of the Customs Regulations implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
“Country of origin” is defined in section 134.1(b), Customs Regulations, as
The country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 this part.
Part 134, Customs Regulations (19 CFR Part 134), implements the requirements and exceptions of 19 U.S.C. 1304. Section 134.35, Customs Regulations (19 CFR 134.35), implementing the principle of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98), 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 considered substantially transformed, and therefore 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 within the contemplation of 19 U.S.C. 1304(a).
The well-established test for determining whether a substantial transformation has occurred is derived from language enunciated by the court in Anheuser-Busch Brewing Association v. United States, 207 U.S. 556, 562 (1908), which defined the term “manufacture” as follows:
Manufacture implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labor and manipulation. But something more is necessary, as set forth and illustrated in Hartranft v. Wiegmann, 121 U.S. 609. There must be transformation; a new and different article must emerge, having a distinctive name, character or use.
Simply stated, a substantial transformation occurs “when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing.” See Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982) (cited with approval in Torrington Co. v. United States, 764 F. 2d 1563, 1568 (1985)).
Customs has issued several rulings involving promotional or personalized material. In Headquarters Ruling Letter (HRL) 731779, dated December 9, 1988, Customs considered whether wooden pens in the shape of baseball bats, hockey sticks, and rulers, imported from Taiwan were substantially transformed in the U.S. when they were imprinted with advertising information. Customs found that both before and after the printing, the essence of the article was a finished writing implement with an unusual shape and that the printing did not materially alter the name, character, or use of the imported articles. Based on these considerations, Customs found that the printing was merely a minor processing and that the pens would have to be marked with the foreign country of origin. Similarly, in HRL 734152, dated August 26, 1991, Customs found that the printing of U.S.-origin balloons in Canada did not materially alter the name, character, or use of the balloons, and therefore the balloons were not substantially transformed into products of Canada.
In HRL 734062, dated April 22, 1991, Customs held that blank keys imported from Mexico were not substantially transformed in the U.S. when the keys were cut to customers' specifications. It was found that the process “of grinding teeth into the imported key blanks by using key cutting machines only constitutes a minor change to the key blanks and the creation of the teeth does not determine the essential character of the finished key.” Customs concluded that the key blanks were not substantially transformed and accordingly, the key blanks were required to be individually marked with their country of origin. Likewise, in HRL 561493, dated March 9, 2000, Customs held that metal identification tags (i.e., “dog tags”) were not substantially transformed in the U.S. when embossed with personalized customer information and sold at retail.
However, unlike the cases referenced above, the processing at issue in the instant case involves more than the mere personalization of an essentially completed article. The magnetized sheeting imported into the U.S. in rolls/sheets is not a finished object but a raw material with a variety of potential applications, and can be used in point-of-purchase displays, visual aids, retail signage, bin markers, menus, message boards, lining for shower cubicles and for directing air flows on vents.
In general, Customs has held that cutting or shaping materials to defined shapes or patterns suitable for use in making finished articles, as opposed to mere cutting to length or width which does not render the article suitable for a particular use, constitutes a substantial transformation. See HRL 557462, dated September 13, 1994 (decorative paper that was shaped, creased, folded, cut to length and glued was held to be substantially transformed); HRL 555702, dated January 7, 1991 (steel plates dedicated to use in the final article by cutting, folding, binding, scraping, etc., considered substantially transformed components); HRL 553574, dated August 15, 1985 (aluminum strip cut to length, punched and/or drilled with holes and notched which gave the strip specific shape or pattern was substantially transformed); and HRL 555265, dated July 3, 1989 (Cutting rolls of aluminum strip into lengths and crowning the cut strips resulted in a new and different article of commerce which had limited uses, e.g., venetian blind slats, surveyor stakes, and lattice fences. Prior to these operations, the aluminum strip was a raw material which possessed nothing in its character which indicated any of these uses.)
Similarly, in this case, we find that the imported magnatized sheeting is substantially transformed into a new and different article by the processing operations performed in the U.S. Cutting and shaping the imported rolls of sheeting to specific sizes, and silk-screening/printing the shapes with personalized information and graphics transforms a product with a number of potential uses to a specific use as a flexible promotional magnet. The magnetized sheeting imported into the U.S. in jumbo rolls/sheets, possesses little or nothing in its character to indicate its ultimate shape or use. Its essential character as promotional material is permanently determined only after the U.S. processing. Therefore, the completed magnets are products of the U.S. and not subject to the marking requirements of 19 U.S.C. 1304. Accordingly, neither the individual magnets nor the containers in which they are sold must be marked with the country of origin of the imported material. However, the outermost containers in which the sheets/rolls of magnetic material are imported must be marked to indicate the Chinese origin of the material.
HOLDING:
Based on the facts provided, imported flat sheets/rolls of magnetized rubber material are substantially transformed into new and different articles of U.S. origin when further processed in the U.S. by designing, cutting, shaping, silk-screening and printing operations into flexible promotional magnets.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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,
Myles B. Harmon
Acting Director
Commercial Rulings Division