MAR-2-05 CO:R:C:V 732842 KG
Charles H. Bayar
Whitman & Ransom
200 Park Avenue
New York, N.Y. 10166
RE: Country of origin marking of imported color print film
Dear Mr. Bayar:
This is in response to your letter of October 25, 1989,
requesting a country of origin ruling regarding imported color
print film. The questions raised concerning Federal Trade
Commission requirements are not addressed in this letter.
FACTS:
Your client proposes two different scenarios. In scenario
one, your client would import from Japan a photographic film
base consisting of tri-acetate plastic sheets with a non-
photosensitive undercoating, in the form of rolls measuring 58"
wide and 9,500 feet long. In the U.S. your client will prepare
and apply to the film base a photosensitve emulsion coating
measuring 0.02 mm thick, composed of 10 or more layers, with each
layer consisting of dyes and chemicals containing suspended
microscopic silver halide crystals. All of the ingredients of
the emulsion coating will be purchased in the U.S. Once the
emulsion coating is applied, the film base is usable as bulk
photographic film.
The bulk photographic film is then cut to width and length,
inserted into cassettes, which are placed in plastic sealed
containers and packaged in sealed print paper boxes for retail
sale. The individual boxes of film will be packed in sizeable
corrugated cartons for shipment to wholesale distributors. The
production cost of the imported tri-acetate film base is
projected to be 20% of the total cost.
In scenario two, your client proposes to import bulk
photographic film from Japan and perform the cutting, inserting
and packaging described in scenario one in the U.S. The
projected production cost of the imported bulk photographic film
is 65% of the total cost.
ISSUES:
Whether the imported film products are substantially
transformed in the U.S.
Whether marking the country of origin on the sealed paper
boxes containing the film satisfies section 304 of the Tariff Act
of 1930, as amended.
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. The Court of
International Trade stated in Koru North America v. United
States, 701 F.Supp. 229, 12 CIT (CIT 1988), that: "In
ascertaining what constitutes the country of origin under the
marking statute, a court must look at the sense in which the term
is used in the statute, giving reference to the purpose of the
particular legislation involved. The purpose of the marking
statute is outlined in United States v. Friedlaender & Co., 27
CCPA 297, 302 C.A.D. 104 (1940), where the court stated that:
"Congress intended 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."
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. As noted in your submission, section 134.1(b),
Customs Regulations (19 CFR 134.1(b)), defines the term "country
of origin" to mean 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
country the country of origin within the meaning of Part 134.
Section 134.35, Customs Regulations (19 CFR 134.35), provides
that articles used in the U.S. in manufacture which results in
articles having a name, character or use differing from that of
the imported articles will be within the principle of the
decision in the case of United States v. Gibson-Thomsen Co.,
Inc., 27 CCPA 267 (1940). Under this principle, 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 section 304(a), Tariff Act of 1930, as amended
(19 U.S.C. 1304(a)), and the article shall be excepted from
marking. If the article is substantially transformed in the
U.S., only the outermost container of the imported article shall
be marked.
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), National Juice Products Association v. United States, 10
CIT ___, 628 F.Supp. 978 (CIT 1986), Koru North America v.
United States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988). In ORR
Ruling 217-69 (March 28, 1969), Customs ruled that a U.S.-made
film base was substantially transformed when it was coated with
photographic emulsion in Italy. The resulting x-ray film was
considered a product of Italy for marking purposes. The rolls of
x-ray film were excepted from marking so long as the container in
which the rolls were packaged were marked to indicate that Italy
was the country of origin.
The process of coating the film base with photographic
emulsion which was held in ORR Ruling 217-69 to be a substantial
transformation is virtually identical to the process described in
scenario one. Coating the film base with photosensitive emulsion
containing silver halide crystals creates photographic film, a
new article having a new name, very different physical
characteristics from film base which is not photosensitive and a
new use. Prior to coating, film base cannot be used to make
photographic images. Therefore, in scenario one the film base is
substantially transformed in the U.S. into bulk photographic
film.
The important characteristics of print film are its light
sensitivity and the ability to form an image from which a
positive can be made. The imported article in scenario two
already has those qualities when it enters the U.S. There is no
change in name, character or use as a result of U.S. processing.
The only change that occurs in the U.S. is that the film is cut
to size and inserted into cartridges. This change, in which the
film is prepared for packaging, is not consequential enough to
constitute a substantial transformation. In scenario two, the
imported bulk photographic paper is not substantially
transformed in the U.S. and is considered a product of Japan,
both before and after the U.S. processing.
In HQ 719942 (November 8, 1982), Customs ruled on a conflict
of law question involving Canadian and U.S. law. Although the
focus of that ruling was the conflict of law question, it did
state that film cut to length, loaded into cartridges and
packaged in Canada was substantially transformed there. This
statement is not in accordance with the current views of the
Customs Service. Therefore, to the extent that HQ 719942
conflicts with this ruling, it is modified.
The second issue raised concerns the marking of the retail
film cartridges. This issue was also addressed in ORR 217-69;
Customs ruled that the rolls of film were excepted from marking
and only the container in which the rolls are packaged should be
marked with the country of origin. Pursuant to 19 U.S.C.
1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR
134.32(d)), Customs excepts from individual marking requirements
imported articles for which the marking of the containers will
reasonably indicate the origin of the articles. As discussed
above, the purpose of the marking statute is to allow ultimate
purchasers to make informed buying choices. In scenario two, the
film cartridge is only sold to ultimate purchasers in a sealed
box. As long as the sealed box is properly marked with the
country of origin of the film, the film cartridge itself and the
sealed plastic holders that are inside the sealed paper box are
excepted from marking.
HOLDING:
In scenario one, the imported film base is substantially
transformed in the U.S. into bulk photographic film. Therefore,
pursuant to 19 CFR 134.35 your client is the ultimate purchaser
of the imported film base and the film base is excepted from
marking. Only the outermost container of the film base is
required to be marked. Further, no foreign country of origin
marking is required on the retail boxes.
In scenario two, the imported bulk photographic film is not
substantially transformed in the U.S. and would be considered a
product of Japan for country of origin marking purposes.
Therefore, your client is not the ultimate purchaser and the
imported bulk photographic film must be marked with its country
of origin. However, pursuant to 19 CFR 134.34, an exception may
be authorized, in the discretion of the district director, for
the imported film because it will be repacked after release from
Customs custody if: the containers in which the articles are
repacked will indicate the origin of the film to an ultimate
purchaser in the U.S. and the importer arranges for supervision
of the marking of the containers by Customs officers at the
importer's expense or secures such verification as may be
necessary, by certification and the submission of a sample or
otherwise, of the marking prior to the liquidation of the entry.
In scenario two, the sealed box in which the print film is
sold to ultimate purchasers must be properly marked with the
country of origin of the film. The film cartridge itself and the
sealed plastic holders inside the sealed paper box would be
excepted from country of origin marking pursuant to 19 CFR
134.32(d).
Sincerely,
John Durant
Director,
Commercial Rulings Division