MAR 2-05 CO:R:C:V 731484 LR
Area Director of Customs
JFK Airport, Bldg. 178
Jamaica, New York 11430
Re: Application for Further Review of Protest No.
1001-8-004214
Dear Sir:
This protest was filed by N & B Jewelry Corp. (hereinafter
referred to as the importer), against your decision to issue
marking notices and demands for redelivery of jewelry covered by
CE's 915-0192995-3 and 915-0192775-9 which was not marked to
indicate the country of origin, as required by section 304,
Tariff Act of 1930, as amended (19 U.S.C. 1304).
FACTS:
On February 24, 1988, Customs issued a CF 4647, marking/
redelivery notice, to the importer for a shipment of gold chains
which were not marked to indicate their country of origin. Only
the shipping carton was marked. The unmarked sample retained by
Customs is a gold chain which appears to be ready for sale in
its imported condition. On March 3, 1988, the importer's broker
certified that the merchandise in question has been marked to
indicate the country of origin as required by 19 U.S.C. 1304.
A sample was submitted which showed that the jewelry had been
marked with the country of origin by means of a hang tag.
A CF 4647, marking/redelivery notice, was issued to the
importer on March 4, 1988, for another shipment of jewelry
consisting of gold chains and gold bangle bracelets which were
also not marked to indicate the country of origin. Again, only
the shipping carton was marked. On March 7, 1988, the broker
returned the notice to Customs and certified that the merchandise
has been marked to indicate the country of origin. Another
sample was submitted which showed that the jewelry had been
marked with the country of origin by means of a hang tag.
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On March 8, 1988, Customs conducted a marking examination
at the importer's premises and found that most of the jewelry in
question had already been sold and that the remaining jewelry had
not been marked with the country of origin. The record indicates
that the importer's vice president told Customs officials that
the company was in the process of ordering labels to mark future
shipments. The record further indicates that both the importer's
president and vice president informed Customs officials that they
thought that the shipments in question did not have to be marked
and could be freely sold in their imported unmarked condition.
By letter dated March 23, 1988, Customs notified the
importer that since the merchandise had not been marked with the
country of origin, redelivery was ordered as per the CF 4647's,
30 days from the date of each notice.
The gold rope chains are made in the Dominican Republic
from gold of U.S. origin. According to the importer, some of the
chains are imported in a blackened condition as a result of
oxidation and are cleaned after importation in a solution of
hydrogen peroxide and sodium cyanide which removes the oxidation,
other dirt and strips off ten percent of the gold. Some of the
chains are not imported in a blackened condition but purportedly
are cleaned after importation by soaking them in a solution of
ammonia and a special soap to remove dirt and grime which
accumulated during the work performed in the Dominican Republic.
The bangle bracelets, which are made in the Dominican Republic
from U.S. components, are allegedly cleaned after importation in
a "special solution" and may also be polished, buffed and washed.
The bangles are then sold to a buyer who chemically cleans,
polishes, buffs and washes the bangles before reselling them.
The importer is challenging the issuance of the marking/
redelivery notices on the basis that the jewelry was to be
processed in the manner set forth in 19 U.S.C. 1304(a)(3)(G) and
19 CFR 134.32(g) and therefore, was excepted from marking at the
time of importation. The importer claims that only the shipping
cartons were required to be marked with the country of origin.
The importer is also challenging the issuance of the
notices with respect to the bangle bracelets on the basis that
they are products of the U.S. and not subject to the requirements
of the marking statute.
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ISSUES:
Is the merchandise in question entitled to an exception
from marking pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR
134.32(g)?
Are the bangle bracelets considered products of the U.S.
and therefore not subject to the marking requirements of 19
U.S.C. 1304?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19
U.S.C. 1304), requires that every article of foreign origin
(or its container) imported into the U.S., subject to certain
specified exceptions, 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. The purpose of the marking statute is to
inform the ultimate purchaser of the country of origin so that he
can decide whether or not to purchase them.
MARKING EXCEPTION - ARTICLES PROCESSED IN THE U.S.
Pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g),
one of the general exceptions from the marking requirements is
for articles to be processed in the U.S. by the importer or
for his account otherwise than for the purpose of concealing
the origin of such articles, and in such manner that any mark
contemplated by law would necessarily be obliterated, destroyed,
or permanently concealed.
The importer claims that the jewelry qualifies for an
exception under the above provisions. First, it is noted that
due to the small clasp on the gold chains and the fragile nature
of the bangles, the jewelry cannot be marked legibly and cons-
picuously by die-stamping and that the only feasible method of
marking said items is by hang tags. Second, it is claimed that
the jewelry undergoes an extensive cleaning process in the U.S.;
and finally, that the hang tags would have to be removed during
this processing.
As explained more fully below, we are of the opinion
that the importer is not entitled to an exception from marking
pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g) because:
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a) no claim for such an exception and no supporting evidence was
submitted to Customs at the time of entry or in response to the
marking/redelivery notices; b) despite the fact that the
importer's broker certified that the merchandise in question had
been marked after importation by means of a hang tag, the jewelry
was not so marked and was sold or was about to be sold in an
unmarked condition; and c) except for the chains which are
imported in a blackened condition and cleaned by the importer in
a solution of hydrogen peroxide and sodium cyanide to remove the
oxidation, a process which also removes 10 percent of the gold,
the jewelry was not processed by the importer within the meaning
of the statute.
a) The instances in which an exception under 19 U.S.C.
1304(a)(3)(G) and 19 CFR 132.32(g) have been granted by Customs
have been limited. In the cases where the exception was applied,
Customs found that supporting statements of intended processing
to be performed by the importer or for his account was a con-
dition of entitlement to the statutory exception. See RM 363.2
W, dated January 25, 1967 and HQ 729434, dated May 23, 1986.
Although the importer now claims that the issuance of the CF
4647's was in error because the jewelry was not required to be
marked at the time of importation, the importer did not claim
any exception from marking or submit documentation supporting
the exception at the time of entry. After receipt of the marking
notices, the importer again did not raise the issue of a possible
exception from marking, but instead provided samples of the
jewelry, properly marked with the country of origin by means of
hang tags and certified (through its broker) that the articles
in question had been marked accordingly. Even at the time of
the marking examination by Customs officials at the importer's
premises to determine whether the shipments had been marked in
accordance with the certifications, the importer did not raise
the alleged processing.
Since the imported jewelry appeared to Customs to be
finished goods ready for sale in its imported condition without
further processing, and the importer claimed no exception from
marking and provided no evidence to support any exception from
marking, the issuance of the marking notices was proper. More-
over, by failing to raise the arguments that the jewelry was
excepted from marking because it was processed in the manner
set forth in 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g),
Customs did not have the opportunity to consider and verify
such claims.
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b) More importantly, the importer is not entitled to an
exception from marking under 19 U.S.C. 1304(a)(3)(G) and 19 CFR
134.32(g) because the importer did not mark the jewelry after the
alleged processing in accordance with the submitted samples and
certification. In HQ 729434, supra, Customs ruled that articles
which otherwise satisfied the legal requirements were entitled
to an exception from marking under these provisions only if the
district director was satisfied that the finished articles would
be marked in a manner to indicate the country of origin to the
ultimate purchaser. In this case, notwithstanding the fact that
the importer submitted a sample chain and bracelet which were
properly marked with the country of origin by means of a hang
tag and the importer's broker certified that the merchandise in
question had been so marked, the marking examination conducted
at the importer's premises on March 8, 1988, to verify the
certifications, revealed that most of the jewelry had already
been sold without the requisite marking and that the remainder
of the jewelry was also unmarked and was about to be sold with-
out the requisite marking. Representatives of the company
admitted to Customs officials that they did not know that the
current shipments had to be marked and that they ordered new
labels for the purpose of marking future shipments with the
country of origin. Since the importer did not mark the jewelry
in question after the alleged processing, one of the conditions
for an exception from marking under 19 U.S.C. 1304(a)(3)(G) and
19 CFR 134.32(g) as interpreted by Customs, the importer was not
entitled to an exception from marking and issuance of the marking
notices and the demands for redelivery were proper.
c) The statute requires that the articles entitled to the
marking exception are to be "processed" in the U.S. by the
importer or for the importer's account. In this case, we are of
the opinion that with the exception of the gold chains that are
imported in a blackened condition, the imported gold chains and
bangle bracelets are not processed within the meaning of the
statute. Since the term "processed" is not defined in the
statute, it must be given its ordinary meaning. While there are
no court cases that define the term "processed" in the context
of the marking exception, there are numerous cases in which the
ordinary dictionary meaning of this term has been discussed. For
example, in Mitchell v. Oregon Frozen Foods, Co., 264 F.2d 599,
601 (9th Cir. 1958), the court stated that "process" is defined
by the dictionary as to subject to some special process or
treatment, as in the course of manufacture. In Corn Products
Refining Co. v. FTC, 324 U.S. 726,744 (1945), the Supreme Court
in interpreting the provisions of the Clayton Act states, "While
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the Act does not define the term processing, the conversion of
dextrose into candy would seem to conform to the current
understanding that processing is "a mode of treatment of material
to be transformed or reduced to a different state or thing"
(emphasis added).
In RM 363.2 W, one of the cases referred to above in which
Customs applied the exception under 19 U.S.C. 1304(a)(3)(G) and
19 CFR 134.32(g), the imported articles (nickel cadmium storage
battery components and battery parts) were subjected to the
following operations: assembly, installation of insulation,
placement into plastic containers and, in some cases, chemical
treatment. In HQ 729434, another decision in which the exception
was granted, the imported glass ornaments were processed by
cleaning, chrome plating and the addition of hooks and suction
cups. In both these case, the imported articles were clearly
subjected to a special process in the course of manufacture.
In the instant case, we disagree with the importer's
contention that the gold rope chains which are merely soaked in a
solution of ammonia and soap to remove dirt and the gold bangles
that are cleaned in a "special solution" and possibly polished,
buffed and washed, are "processed" within the meaning of the
statute. In our view, the mere cleaning and/or buffing of the
jewelry which has little, if any, effect on the appearance of
these items, does not constitute a special process in the course
of manufacture. We do not believe that Congress intended such
minor operations to warrant an exception from the marking
requirements. Moreover, the fact that the bangles are sold to a
buyer who chemically cleans and again polishes, buffs and washes
them (the same operations performed by the importer) before they
are resold, leads us to question the necessity or legitimacy of
the importer's operations. The language of the statute (i.e.
such article is to be processed in the U.S. by the importer or
for his account) precludes the operations performed by the
importer's buyer from being considered.
We agree with the importer's claim, however, that the gold
chains that are imported in a blackened condition are "processed"
in the U.S. within the meaning of the statute when cleaned in a
solution of hydrogen peroxide and sodium cyanide to remove the
oxidation and other dirt, a process which also strips off ten
percent of the gold. Since the removal of the oxidation has a
definite effect on the imported articles (it significantly
alters the appearance of the jewelry and it removes a signifi-
cant portion of the gold content), we believe that it qualifies
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as processing. Therefore, the importer would be entitled to a
marking exception on future entries of gold chains if it can be
established to Customs satisfaction that the chains are processed
in this manner and the other conditions are satisfied.
MARKING EXCEPTION - PRODUCTS OF THE U.S.
The importer alleges that even if the bangles were not
processed after importation, they still should not have to be
marked because they are products of the U.S. The importer argues
that notwithstanding section 10.12 (sic), Customs Regulations, 19
CFR 10.12 (sic), the bangles are not substantially transformed
abroad and therefore are not subject to the marking requirements.
Because the bangles were assembled in the Dominican
Republic from U.S. components, the bangles were entered under the
provisions of item 807.00, Tariff Schedules of the United States
(TSUS), which permits a reduced duty treatment for the value of
the components manufactured in the U.S. and assembled abroad.
Section 10.22, Customs Regulations (19 CFR 10.22), provides that
assembled article entitled to the item 807.00, TSUS, reduced duty
are considered products of the country of assembly for the
purpose of country of origin marking requirements of 19 U.S.C.
1304.
The importer claims that notwithstanding 19 CFR 10.22, the
bangles should be considered U.S. articles which do not have to
be marked with the country of origin, since the only activity in
the Dominican Republic is assembly. It is argued that on its
face, 19 CFR 10.22 violates the rules of origin for all other
assembled articles as those rules have been established by the
courts and Customs.
Sections 10.12 through 10.23, Customs Regulations, set
forth definitions and interpretative regulations adopted by
Customs pertaining to the construction of item 807.00, TSUS
and related provisions of law. The regulations are promulgated
to inform the public of the constructions and interpretations
that Customs shall give to relevant statutory terms and to as-
sure the impartial and uniform assessment of duties upon
merchandise entered under the provision of item 807.00, TSUS.
Nothing in these regulations purports or is intended to restrict
the legal right of importers or others to a judicial review of
the matters contained therein. If the importer disagrees with
the interpretation of item 807.00, TSUS, as expressed in 19 CFR
10.22, the importer may challenge this interpretation in court.
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HOLDING:
The issuance of the marking/redelivery notices was proper
because the merchandise was not marked in accordance with the
provisions of 19 U.S.C. 1304: 1) the importer did not satisfy
the requirements for a marking exception under 19 U.S.C.
1304(a)(3)(G) and 19 CFR 134.32(g) and 2) the bangles are not
considered products of the U.S. for purposes of the statute.
In view of the foregoing, the protests should be denied.
A copy of this decision should be attached to the Form 19,
Notice of Action, to be sent to the importer.
Sincerely,
John A. Durant, Director
Commercial Rulings Division
CO:R:C:V:LRODBART:gcf 9/22/88