MAR-2-05 CO:R:C:V 734321 ER
Mr. Mukesh Shah
Fritz Companies, Inc.
9401 Koenig Circle Drive
Berkeley, MO 63134
RE: Country of Origin Marking of Loofa imported from Korea
and China and Wooden Handles imported from China;
Substantial Transformation; Ultimate Purchaser; Federal
Trade Commission; United States v. Gibson-Thomsen Co.,
Inc., 27 C.C.P.A. 267 C.A.D. 98 (1940); Gibson-
Thomsen Co., Inc. v. United States, 2 Cust. Ct. 172
(C.D. 117) (1939); 19 CFR 134.1(d); 19 CFR 134.32(d);
19 CFR 134.34; 19 CFR 134.35; C.S.D. 80-111; HQ 556113;
HQ 734394; HQ 734214; HQ 733693.
Dear Mr. Shah:
This is in response to your letters of September 6, 1991 and
September 17, 1991 requesting a country of origin marking ruling
for imported loofa and imported wooden handles. A sample piece
of raw loofa was submitted as well as a sample of the finished
loofa brush with the handle attached. We apologize for the delay
in responding.
FACTS:
In your letter you state that the loofa is imported from
Korea and China and the wooden handle is imported from China.
You import the articles and sell them to your client, Schroeder &
Tremayne ("Schroeder"), a manufacturer in Fenton, Missouri who
processes the articles to create either a "loofa brush" or a "5
inch colored loofa".
The processing and assembly include wetting the loofa,
sorting for quality, cutting to length, dyeing, gluing to a
head/handle block (in the case of the loofa brush) and retail
packaging. The head/handle block is imported from China as a
complete unit.
Specifically you want to know if the loofa brush and the 5
inch colored loofa intended for individual retail sale may be
marked with the words "Made in the U.S.A." after processing in
the U.S. You also inquire whether a gift package containing
these items and items of U.S. manufacture may be marked with the
words "Made in the U.S.A.".
ISSUE:
Whether the imported loofa and wooden handle are excepted
from individual country of origin marking pursuant to 19 CFR
134.35 and if so, whether the assembled items can be marked "Made
in the U.S.A".
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 (or its container) imported into the United States 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 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 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 C.A.D. 104 (1940).
Part 134.1(d) defines the "ultimate purchaser" generally as
the last person in the United States who will receive the article
in the form in which it was imported. If an imported article
will be used in domestic manufacture, the manufacturer may be the
"ultimate purchaser" if he subjects the imported article to a
process which results in a substantial transformation of the
article. However, 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, for country of origin marking
purposes, occurs when an imported article is used in the United
States in manufacture, which results in an article having a name,
character, or use differing from that of the imported article.
United States v. Gibson-Thomson Co., Inc., 27 C.C.P.A. 267, 270
C.A.D. 98 (1940). Under this principle, the manufacturer or
processor in the United States 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. The issue of whether a
substantial transformation occurs is determined on a case-by-case
basis.
In determining whether the combining of parts or materials
constitutes 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, 90-51 and 90-97.
Gibson-Thomson Co., Inc. v. United States, 2 Cust. Ct. 172
C.D. 117 (1939), involved the proper country of origin marking
of certain wood brush blocks and celluloid tooth brush handles to
be imported and manufactured in the U.S. into tooth brushes and
military hair brushes. For the tooth brushes, the first process
was to bore holes for the bristles; the bristles were then
inserted in the holes and fastened in with wire, after which the
bristles were trimmed in three different ways and the handles
were polished, stamped, and packed in containers. The military
hair brushes were made using similar processes. In both cases
the handles were imported from Japan and the other materials,
except for the wire which was of U.S. origin, were from other
countries.
The court found that the "making of tooth brushes and hair
brushes by using the tooth brush handles and the wood brush
blocks herein involved as a base in which the bristles are
inserted is a manufacturing process and the completed articles
are manufactures of the United States..." Gibson-Thomson at 176.
This process was said to result in a new and different article.
Customs believes that the operations you describe --
involving mostly cutting to length, dyeing and gluing -- are
merely finishing and assembly operations and do not result in the
creation of a new article. Unlike the manufacturing process in
Gibson-Thomson which involved boring holes and wiring bristles,
in the instant case the operations performed are much more
simple, less time consuming and not as labor intensive. Customs
has consistently found that such operations do not amount to a
substantial transformation.
Moreover, unlike the handles and bristles in Gibson-Thomson,
the naturally-occurring loofa is perfectly suited for use as a
scrub-sponge for the body and is widely retailed in this manner.
Thus, it has a separate commercial identity before the attachment
of the handle and its name, character and use are not
significantly altered (if at all) by the attachment of a handle -
- it remains a loofa scrub-sponge for the human body.
Consequently, no substantial transformation occurs and the retail
customer, not Schroeder, is the ultimate purchaser. Thus, the
imported articles must be marked to indicate the country of
origin to the retail customer and the loofa and the wooden handle
may not be excepted from country of origin marking pursuant to
section 134.35, Customs Regulations (19 CFR 134.35). See also,
C.S.D. 80-111 (foreign fan components not substantially
transformed by domestic, 20-step, assembly-line operations, as
the identity of the foreign components was not lost or physically
altered, no skilled labor or specialized equipment was required,
and the assembly costs were relatively low).
However, since the imported articles will be repacked in the
U.S., the imported articles may be eligible for an exception from
individual country of origin marking pursuant to 19 CFR 134.32(d)
(which permits marking of a container in lieu of the article
itself) and 19 CFR 134.34 which provides that in the discretion
of the district director, imported articles which are to be
repacked after release from Customs custody may be excepted under
the following conditions: (1) the containers in which the
articles are repacked will indicate the origin of the articles to
an ultimate purchaser in the U.S. (2) 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.
If such an exception is granted, the retail packaging may be
marked with a caption such as "Loofa Product of (name of country)
and Handle Made in (name of country)", or similar wording. In
the instances where the loofa and handle are both from China, the
marking on the retail package may simply be "Product of China",
or similar wording.
Since the finished products are not made in the U.S., the
use of the phrase "Made in the U.S.A." is inappropriate.
Moreover, the Federal Trade Commission ("FTC") has jurisdiction
concerning the use of such a phrase; consequently, any inquiries
regarding its use should be directed to the FTC in the future.
The address is: Federal Trade Commission
Division of Enforcement
6th & Pennsylvania Avenue, N.W.
Washington, D.C. 20508.
HOLDING:
The processing operations performed in the U.S. on loofa
imported from China and Korea and wooden handles imported from
China do not amount to a substantial transformation of the
imported articles; consequently, Schroeder is not the ultimate
purchaser and the loofa and wooden handles are not excepted from
country of origin marking pursuant to 19 CFR 134.35.
However, since the imported articles are to be repacked, at
the discretion of the district director the imported articles may
be excepted from individual marking pursuant to 19 CFR 134.32(d)
and 19 CFR 134.34 so long as the regulatory conditions for this
exception are satisfied (described above) and the outermost
containers of the articles at the time of importation will
reasonably indicate the origin of the articles. The retail
packages of the repacked articles must be legibly, conspicuously
and permanently marked in the manner discussed in this ruling so
as to indicate to the retail purchaser the country of origin of
the imported articles.
Concerning the appropriateness of any use of the phrase
"Made in the U.S.A." you should contact the Federal Trade
Commission.
Sincerely,
John Durant, Director
Commercial Rulings Division