MAR-2-05 CO:R:C:V 734052 GRV
Jerry P. Wiskin, Esq.
Freeman, Wasserman & Schneider
90 John Street
New York, N.Y. 10038
RE: Country of origin marking of finished porcelain plates
imported from Japan to be ornamented in the U.S. with
foreign-sourced decorative decals. 19 CFR 134.35; substan-
tial transformation; Uniroyal; Belcrest Linens; T.D. 89-21;
732964; C.S.D. 84-113; National Juice; Koru North America;
FDA Compliance Policy Guides for lead and cadmium contami-
nation (required and permanent labeling); Superior Wire;
C.S.D. 91-7
Dear Mr. Wiskin:
This is in response to your letters of February 22, July 16,
and October 1, 1991, on behalf of Lenox Inc., requesting and
supplementing a country of origin marking ruling regarding
finished porcelain plates imported into the U.S. to have a
decorative decal applied. Samples of the porcelain plates as
imported and after having been decorated in the U.S. were
submitted for examination.
We have considered in connection with this ruling request
the information provided by you in two meetings that were held at
Customs Headquarters on June 24 and October 1, 1991.
FACTS:
Your client plans to import porcelain plate dinnerware from
Japan and decorative decals from Germany (or another foreign
source) and domestically combine the two items into signed,
numbered collectable plates. Although you denominate the
imported porcelain plates "blanks," they are finished articles--
glazed with an ornamental gold band around their edge; suitable
for use as dinnerware. When imported, each plate is valued at
$1.20 and the country of origin is denoted by an adhesive sticker
affixed to its bottom. The decorative decals are made with inks
containing lead and cadmium. When imported, each decal is valued
at $1.15, however, they are not individually marked to indicate
their foreign origins.
The domestic processing entails attaching two decals to each
plate: the foreign-sourced decorative decal is moistened and
applied to the top, front-side of the "blank," i.e., undecorated,
plate, and a domestically-produced, two-color backstamp decal,
containing the recommended warning of the U.S. Food and Drug
Administration (FDA) that the article is "not for food use," is
moistened and applied to the bottom, back-side of the plate. The
decorated plate is then dried for 24 hours and fired in a kiln.
The plate is then hand-numbered in gold on the bottom side, re-
fired, packaged and sold as a finished, collectible. You submit
that the processing involved here is a sophisticated process,
which occurs over a fixed-period of days. These domestic opera-
tions are valued at $4.20, which includes the cost of packaging
materials. The entire transaction is valued at $6.55 per
decorated plate.
You state that the imported porcelain plates are substan-
tially transformed by these U.S. processing operations so as to
exempt them from the country of origin marking requirements of
304 of the Tariff Act of 1930, and reference certain court
decisions and administrative rulings in support of this conten-
tion. You claim that the domestic processing alters the char-
acter, name and use of the "blank" plate to that of a decorative
collectible item. Further, you state that the domestic process-
ing adds significant value to the imported porcelain plate--
quadrupling its value--and, although the domestic processing
could result in the porcelain plates changing tariff classifica-
tions--from subheading 6911.10.4900 to subheading 6913.10.50,
Harmonized Tariff Schedule of the United States (HTSUS), you
acknowledge that this change is not dispositive on the question
of whether a substantial transformation has occurred. Lastly,
you state that the safety warning required by the FDA is a
significant consideration, which renders the plate unsuitable for
use as tableware intended for food service, and that this
circumstance establishes that the domestic processing has created
a new and different article of commerce.
ISSUE:
Whether the application of decorative decals to finished
porcelain plates constitutes a substantial transformation of the
imported articles for purposes of the country of origin marking
requirements of 19 U.S.C. 1304 and 19 CFR 134.35 and 134.1(d).
LAW AND ANALYSIS:
The marking statute, 304 of the Tariff Act of 1930, as
amended (19 U.S.C. 1304), provides that, unless excepted, every
article of foreign origin (or its container) imported into the
U.S. shall be marked in a conspicuous place as legibly, indelibly
and permanently as the nature of the article (or its container)
will permit in such a manner as to indicate to the ultimate
purchaser 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.
The primary purpose of the country of origin marking statute
is to "enable the 'ultimate purchaser' of the goods to decide
for himself whether he would 'buy or refuse to buy them'."
Uniroyal, Inc., v. United States, 3 CIT 220, 223, 542 F.Supp.
1026, 1028 (1982), aff'd per curium, 1 Fed.Cir. 21, 702 F.2d 1022
(1973).
The "ultimate purchaser" is defined generally as the last
person in the U.S. who will receive the article in the form in
which it was imported. 19 CFR 134.1(d). If an article is to be
sold at retail in its imported form, the purchaser at retail is
the "ultimate purchaser." 19 CFR 134.1(3). However, if an
imported article will be used in manufacture, the manufacturer
may be the "ultimate purchaser" if [s]he subjects the imported
article to a process which results in a substantial transforma-
tion of the article, even though the process may not result in a
new or different article. But, if the manufacturing process is a
minor one which leaves the identity of the imported article
intact, the consumer or user of the article, who obtains the
article after the processing, will be regarded as the "ultimate
purchaser." 19 CFR 134.1(d)(1) and (2).
A substantial transformation occurs when an imported article
is 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. 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, and the article
shall be excepted from marking. However, the outermost contain-
ers of the imported articles must be marked. 19 CFR 134.35.
As the issue of whether a substantial transformation occurs is
for marking purposes a question of fact, it is determined on a
case-by-case basis. Uniroyal.
Taken as a whole and after examining the samples submitted
in this case, the conclusion is clear that a substantial trans-
formation of the porcelain plate has not occurred since the
attachment of the decorative decal to the porcelain plate is a
minor manufacturing or combining process which leaves the
identity of the porcelain plate intact. The domestic processing
in this case ostensibly constitutes a minor assembly operation:
attaching a decorative decal to a plate. See, Headquarters
Ruling Letter (HRL) 555175 dated March 13, 1989, abstracted as
C.S.D. 89-49(13), 23 Cust. Bull. 644 (1989), and HRL 555506
dated January 16, 1990, abstracted as C.S.D. 90-32(3), 24 Cust.
Bull. ___ (1990). And we have long held that mere assembly
operations do not constitute a substantial transformation. In
determining whether the combining of parts or materials consti-
tutes a substantial transformation, the issue is the extent of
operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linens
v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2
Fed.Cir. 105, 741 F.2d 1368 (1984). Assembly operations which
are minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation. See,
C.S.D.s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97. The
assembly operation performed here is a simple --two-step--
combining process which leaves the identity of the imported
porcelain plate--and decal--intact.
Further, regarding the decoration of ceramic products by
painting or with decals in particular, Customs has long held that
neither process constitutes a substantial transformation. In
T.D. 89-21, 23 Cust.Bull. 157 (1989), Customs stated that the
mere decoration of porcelainware does not constitute a substan-
tial transformation. See also, HRL 732964 dated August 3, 1990
(imported ceramic "bisque ware" not substantially transformed by
domestic hand painting operation). In C.S.D. 84-113, 18 Cust.
Bull. 1111 (1084), Customs stated that decorating an already-
glazed article by means of decalcomania, i.e., applying decals,
and kiln firing does not effect a substantial transformation of
the article, and that such processors were not the ultimate
purchasers for marking purposes. In sum, we are not persuaded
that processing here, which merely results in the decoration of
finished ceramics constitutes a substantial transformation, as
the identity of imported article remains intact. Accordingly,
given that no other country of origin marking exception is
applicable, the imported porcelain plates here must be
individually marked.
Addressing the substantial transformation criteria in turn,
we find that the simple combining process performed in the U.S.
does not effect a change in the name, character or use of the
imported porcelain plates. Regarding the change in name, we find
your characterization of the imported porcelain plates as
"blanks" spurious, as they are finished plates, suitable for use
as dinnerware. Further, assuming there is otherwise a change in
name, such change in the name of the product is the weakest
evidence of a substantial transformation. Uniroyal, National
Juice Products Ass'n v. United States, 10 CIT 48, 628 F.Supp. 978
(1986), and Koru North America v. U.S., 12 CIT 1120, 701 F.Supp.
229 (1988). Regarding the change in character, we find none; the
plates retain their essential identity/character as plates,
albeit decorated ones. No change to the physical dimensions of
the base plates occurs. Regarding the change in use, although we
find a more restricted use for the imported plates in the area of
commercial dinnerware--occasioned by the choice of metal poisons
employed in the inks to make the foreign decal which requires
that a FDA warning label be affixed--we do not believe this
circumstance constitutes a substantial change in use for
purposes of finding a substantial transformation.
Regarding the applicability of FDA guidelines requiring a
safety warning in this case, in National Juice, the court noted
that Customs and FDA regulations are promulgated under completely
different statutes and hence one cannot be considered binding on
the other. As FDA standards of identity are intended to aid in
identifying the contents of a product and not to identify the
origin of a product as a whole, they are not binding on Customs
in a determination of whether a substantial transformation has
occurred. Further, contra your assertion that the FDA labeling
requirement evidences the unsuitability of the article for food
service use and establishes that the domestic processing creates
a new and different article of commerce, we note that the safety
warning does not dictate that the ornamented plates cannot be
used, under all circumstances, as food service plates. The warn-
ing label is required because certain ceramic wares have been
found by the FDA to contain significant quantities of metal
poisons, which can be extracted by food acids and could cause
chronic poisoning under continued food use. Thus, the FDA warn-
ing/safety label is cautionary and does not mandate a particular
use. And it is entirely possible, if not probable, that ultimate
purchasers will occasionally offer articles of food on the adul-
terated plates, taking care to ensure that food items are protec-
tively insulated from the plates surface or provide a medium
layer of material to prevent the leaching of the metal poison to
the food item.
Lastly, while significant value has been added to the
imported articles here and a change in tariff classification is
apparent, these considerations are not dispositve of whether a
substantial transformation has taken place. See, Superior Wire
v. United States, 11 CIT 608, 669 F.Supp. 472 (1987), aff'd, 7
Fed.Cir. 43, 867 F.2d 1409 (1989), and C.S.D. 91-7 (no substan-
tial transformation of jewelry despite added value), concerning
the value-added consideration, and Belcrest Linens v. United
States, 6 CIT 204, --- F.Supp. ___ (1983), aff'd, 2 Fed.Cir. 105,
741 F.2d 1368 (1984), concerning the change in tariff classifica-
tion consideration.
We also conclude that the imported decal is also not
substantially transformed when attached to the porcelain plate.
Accordingly, not only must the porcelain plates be marked in a
more permanent method of marking than by means of paper adhesive
labels, C.S.D. 84-113, but after the domestic processing, the
country of origin of the foreign-made decal must also be
indicated on the decorated plate.
HOLDING:
The imported porcelain plates and decals are not substan-
tially transformed by the domestic application of the decals to
the top, front-side of the plates, as the decalcomania operation
is a minor process which leaves the identity of the imported
plates and decals intact. Accordingly, the plates must be
individually marked with a more permanent means than the adhesive
stickers currently used--to survive the U.S. processing operation
--and, after the domestic processing operation, the plates must
be further marked to indicate the country of origin of the
foreign-made decal to satisfy the country of origin marking
requirements of 19 U.S.C. 1304 and 19 CFR 134.1(d).
Sincerely,
John Durant, Director
Commercial Rulings Division