MAR 2-05 CO:R:C:V 732159 NL
Mr. Jamie Boblitt
Superior Jewelry Company
8935 Rossash Road
Cincinnatti, Ohio 45236
RE: Country of Origin Marking of Gold and Silver Plated Chain
Jewelry; Electroplating; Substantial Transformation
Dear Mr. Boblitt:
This is in response to your letter of February 16, 1989, in
which you ask for a ruling that the base metal chain which you
import from Korea undergoes a substantial transformation upon
being plated with gold or silver in the U.S. We regret the
delay in responding.
FACTS:
The jewelry in question is imported from Korea as base metal
chains in necklace length and fitted with clasps. Upon
importation the articles are classifiable under subheading
7117.19.50. of the Harmonized Tariff Schedule of the United
States (HTSUS) as "imitation jewelry of base metal, whether or
not plated with precious metal...other". The cost of the
imported base metal chains is given as $1.54 per dozen. It is
then sent to an electroplater in the U.S. for gold or silver
plating, tagging and packaging. Depending upon the type of
chain, this processing consists of immersing the chain in a
series of chemical solutions. After electroplating and packaging
the cost of the chains per dozen is given as $5.38 for silver and
$4.77 for gold. For classification purposes the same subheading,
7117.19 HTSUS, remains applicable to the imitation jewelry after
gold or silver electroplating. Samples were submitted.
ISSUE:
Does electroplating of the imitation jewelry effect a
substantial transformation such that the chain is excepted from
individual country of origin marking requirements?
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LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires, subject to certain specified exceptions, that
every article of foreign origin imported into the U.S. 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. Part 134, Customs
Regulations (19 CFR Part 134), implements the country of origin
marking requirements and exceptions of 19 U.S.C. 1304.
"Country of origin" is defined in 19 CFR 134.1(b) 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". As provided in 19 CFR 134.35, 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 to have been substantially
transformed. The manufacturer in these circumstances is the
"ultimate purchaser" of the imported article, and the imported
article is excepted from country of origin marking at
importation, provided its outermost container is so marked.
In determining whether further work or material added to an
article has effected a substantial transformation, our inquiry is
whether the article after the further work or added material
emerges having a different name, character or use. U.S. v.
Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940). A
secondary though not unimportant consideration is whether the
imported article has been subjected to a complex process which
adds significantly to its value. Superior Wire v. United States,
669 F. Supp. 472, 480 (CIT 1987), aff'd 867 F. 2d 1409 (Fed. Cir.
1989).
Turning to the chain jewelry, we are of the opinion that the
base metal chain is not substantially transformed by gold and
silver electroplating. The electroplating process is considered
a finishing operation which does not change the character or use
of the article as imported. What was unfinished imitation
jewelry at importation is merely completed by electroplating, and
the slight change in the name of the article cannot overcome the
finding that the article's character and use remain the same.
This conclusion is supported by the HTSUS provision
applicable to imitation jewelry, subheading 7117.19, which does
not recognize a difference, for classification purposes, between
plated and unplated imitation jewelry. To the contrary, Note 10
to Chapter 71 indicates that plating and "minor constituents"
effect no change in imitation jewelry for tariff purposes, as
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opposed to the addition of pearls and precious or semiprecious
stones, or cladding with precious metal, which remove articles
from the subheading for "imitation jewelry".
It is noted that in the electroplating process only a small
amount of gold or silver is added to each article, and that the
amount of time required to process each necklace is small. The
electroplating process itself consists essentially of dipping the
article in a solution. As compared with the process of
manufacturing the base metal chain, cutting it to length, and
fitting it with a clasp, it is our opinion that the
electroplating is not a substantial manufacturing operation, and
does not effect a substantial transformation. On this basis the
value added by electroplating in the U.S. may be disregarded in
favor of more important factors. See, Superior Wire v. United
States, supra, at 478-9 (CIT 1987)(value-added analysis may be an
additional inquiry, or cross-check, in substantial transformation
cases, but is not, by itself, the entire answer). Despite the
added value, electroplating does not change the character or use
of the imitation jewelry, and changes its name only from unplated
to plated, which the HTSUS treats as no change for tariff
purposes.
Customs has not previously addressed this issue with respect
to imitation jewelry. However, a review of prior Customs
determinations regarding electroplating generally reveals a lack
of harmony. In HRL 058661 (November 6, 1978), Customs stated
that for purposes of item 807.00, Tariff Schedules of the United
States (TSUS), "the mere gold plating of a partially assembled or
nearly complete foreign product [here, watch cases and bands] in
the United States is not considered a substantial transformation
of the imported product." Accord, HQ 554692 (March 8,1988)
(electroplating watch bracelets with gold); HRL 063117 (June 28,
1979)(electroplating electrical connectors); HRL 046885
(1976)(electroplating silicon wafers with tin). Other rulings
concerning item 807.00, TSUS, have been contradictory; HRL 058072
(February 7, 1978) held that the gold electroplating of a watch
bezel was a substantial transformation of that part, although
not of the watchcase as a whole. This ruling was followed in HRL
058863 (March 2, 1979), and HRL 058818 (March 19, 1979).
In country of origin marking cases, several rulings are
inconsistent with the position reached in this ruling. In ORR
Ruling 408-71 (June 28, 1971), Customs held that silverplating
and lacquering of a brass wine basket effected a substantial
transformation of the article. In two rulings concerning gold
and silver plated silverware, Customs found that for purposes of
country of origin marking the articles were substantially
transformed or changed by the plating. See, C.S.D. 80-237, 14
Cust. B. & Dec. 1150 (1980)(in view of its high added cost and
value silver plating of imported stainless steel flatware results
in a substantial change to the flatware and cannot be considered
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merely a minor process); HRL 708800 (May 16, 1978)(gold or silver
plating of imported stainless steel cutlery is a substantial
change in the imported article).
The following rulings, which are not in accordance with our
finding here that electroplating does not effect a substantial
transformation, are revoked: ORR Ruling 408-71; C.S.D. 80-237;
and HRL 708800. These revocations assure that Customs' position
on substantial transformation for marking purposes is consistent
with its position with respect to other provisions of Customs
law, such as subheading 9802.00.80, HTSUS (formerly item 807.00,
TSUS). The following rulings are modified to the extent that
gold plating of a watch bezel is no longer considered to be a
substantial transformation of that article: HRL 058072; HRL
058863; and HRL 058818.
HOLDING:
Imitation chain jewelry which is subjected to gold or silver
electroplating after importation is not substantially transformed
into a different article having a new name, character or use
within the meaning of 19 CFR 134.35. Accordingly, the
importer/processor is not the ultimate purchaser of the jewelry,
and it must be marked with its country of origin in accordance
with the requirements of 19 U.S.C. 1304. Prior rulings are
modified or revoked in accordance with this ruling.
Sincerely,
John Durant, Director
Commercial Rulings Division