OT:RR:CTF:FTM H311970 TJS
Mr. Aaron Marx
Crowell & Moring LLP
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
RE: Country of Origin Marking of Mixed Greenery Wreath with Gold Leaves
Dear Mr. Marx,
This is in response to your letter, dated June 30, 2020, requesting a binding ruling, on behalf of Caffco International (“Caffco”), with respect to the country of origin marking of a mixed greenery wreath. In addition to your written submission, our decision below takes into consideration a telephone conference with you on October 2, 2020.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R.
§ 177.2(b)(7), your request for confidentiality is approved. The information contained within brackets and all attachments to your request for a binding ruling will not be released to the public and will be withheld from the published version of this ruling.
FACTS:
The merchandise at issue is a 32-inch Mixed Greenery Wreath with Gold Leaves, Style No. 2006012. According to your submission, the wreath will be manufactured in Cambodia from components made in China. The following are the materials from China: polyvinylchloride (“PVC”) sheets on rolls, PVC pine needles, polyethylene (“PE”) pellets, galvanized iron wire, epoxy resin, black iron wire, natural pinecones, and a battery-operated LED light set. The components from Cambodia are the following: gold paint, flexo print packaging, and a brown master carton.
The ruling request describes the operations in Cambodia as follows:
Unload and transport materials to the warehouse;
Inspect incoming materials and light set;
Transfer materials to the manufacturing line;
PVC sheets are fed into a specially designed PVC roping machine that chops the plain sheets and twists them with the galvanized wire to create an artificial pine-shaped rope;
PVC rope cutting, where the PVC ropes are machine-cut into predetermined lengths;
Pine needle roping, where pre-cut three dimensional PVC strands are attached to twisted wires to create an artificial pine-shaped tip;
Final cutting and shaping of the pine needle tips;
Garland twisting, where the PVC rope and PE tips are counted and inserted in order into the garland twisting machine;
Injection molding of three different components, where PE pellets are molded into new finished parts in custom steel injection molds:
Injection molding of plastic berry w/gold tipping;
Injection molding of plastic pine w/brown center; and
Injection molding of plastic laurel leaf;
Shaping, welding, and powder coating the wire wreath base, which includes:
Black iron wire is cut into predetermined lengths for ring shaping and welding;
The wire is bent into a ring shape;
The wire is butt-welded to complete the ring; and
The ring is pretreated, applied with an epoxy resin powder, and cured at high temperature;
Attach the garland and pine needles to the wire frame;
Attach the light set;
Decorating, where natural pine cones, plastic berries, pine tips, and laurel leaf are attached by hand;
Quality assurance (“QA”) testing;
Shaping;
Packing and loading the goods for transport
You state that the process requires twelve types of highly specialized equipment, including: a roping machine; a cutting machine; a pine needle machine; a shaping machine; a garland machine; a plastic injection molding machine; a wire cutting and extension machine; a ring forming machine; a butt welding machine; a spot welding machine; an electrostatic powder coating system; and a binding machine. According to your submission, the labor in Cambodia constitutes more than half of the manufacturing costs. You believe that the materials imported from China are substantially transformed into the finished wreath in Cambodia. Therefore, you argue that the country of origin for marking purposes of the wreath is Cambodia.
In the alternative, you request reconsideration of Headquarters Ruling Letter (“HQ”) H308201, issued to Caffco on May 12, 2020. HQ H308201 also concerned the country of origin of a pine vinyl wreath manufactured in Cambodia from Chinese components. The following were the materials from China: PVC sheet in rolls, PVC pine needles in bundles, plastic berry picks, galvanized iron wire, glitter, pinecones, a battery-operated LED light set, and flexo print packaging. The manufacture of the wreath included cutting, attaching, and shaping the PVC rolls into ropes with bristles; applying glitter to the berry picks, bristle pine bundles and pinecones; inserting the needle bundles into a garland-twisting machine to create a pine vinyl garland; and cutting the wire to length to create a double frame. Workers then attached the garland, picks, pinecones, and light set to the frame. CBP determined that the country of origin of the wreath was China because all the components from China had predetermined uses and the manufacturing process in Cambodia was not complex enough to amount to substantial transformation.
ISSUE:
What is the country of origin for marking purposes of the mixed greenery wreath with gold leaves?
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 United States 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 an ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was that the ultimate purchaser should be able to know by an inspection of the markings on the imported goods the country of which the good is the product. “The evident purpose is to mark the goods so 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 at 302 (1940).
Part 134, Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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” within the meaning of this part.” A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, and use, which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982).
In determining whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the article’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative.
The question presented is whether the components from China are substantially transformed when they are shipped to Cambodia and assembled together. In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative 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, 573 F. Supp. 1149 (Ct. Int’l Trade 1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984).
You assert that the processing in Cambodia results in a change in name, character, and use of the individual materials from China. In support of your proposition, you cite New York Ruling Letter (“NY”) N300541, dated October 5, 2018, and NY B84430, dated May 9, 1997. In NY 300541, CBP considered the country of origin of four styles of gift bows made of plastic ribbons. To manufacture the finished bows, rolls of polypropylene and polyethylene plastic sheeting were manufactured in China and shipped to Cambodia where they were slit into ribbons and then curled or looped and machine-made into the various configurations. CBP found that the bulk rolls of plastic sheeting underwent a substantial transformation in Cambodia to become the finished bows, taking on a new name, character and identity. See also NY N300542 (Oct. 5, 2018); and NY N300572 (Oct. 5, 2018). In NY B84430, CBP considered the country of origin of “wraphia bows,” each consisting of several strips of rayon. The rayon was made in Japan and sent to China on spools of 100 yards. In China, the manufacturer cut the ribbon to length, tied it into a bow formation, and knotted it in the center. CBP found that the Japanese ribbon underwent a substantial transformation in China.
Here, we find that the materials from China lose their individual identities and become an integral part of the new article in Cambodia. First, a roping machine chops the PVC sheets and twists them with the galvanized wire into a “pine rope.” This process causes the PVC sheets and wire to lose their individual names and shapes and form a new and unique article. Similarly, another roping machine attaches the pre-cut PVC strands to twisted galvanized wire and a shaping machine pulls the needles forward to create an artificial pine-shaped tip. Neither do the PVC strands nor the wire have the name and appearance of an artificial pine branch until they are twisted together and shaped. The black iron wire is welded into a double ring and coated with green epoxy resin powder. This process is similar to NY N217593, dated May 20, 2012, where CBP found that iron wire was substantially transformed when it was cut, trimmed, coated, and manufactured into hangers. See also HQ 086826 (July 16, 1990) (cutting, looping, and twisting galvanized wire into single loop bale ties amounted to substantial transformation). Whereas the PVC and wire are multi-use raw materials, processing them into pine ropes, artificial pine-shaped tips, and a wreath frame dedicate their end-use as wreath elements.
Furthermore, the PE pellets are melted and molded into new shapes imitating berry picks, pine tips, and laurel leaves in Cambodia. CBP has held that products created by injection molding have undergone a substantial transformation. See HQ 557077 (July 21, 1993) (plastic pellets imported into Macau where they underwent a thermal injection molding process to create stems and other plastic parts of artificial flowers were substantially transformed into new and different articles of commerce). As a result of injection molding, the PE pellets are transformed into articles with a new name, character, and end-use as decoration for the finished wreaths. Once the pine ropes, artificial pine-shaped tips, wire ring, and injection molded decorative pieces are formed, then they are finally assembled with the light set and pinecones into a finished wreath.
In the instant case, we find that the processing in Cambodia, which includes twisting PVC and wire into garlands, injection molding plastic pellets, welding and treating wire, attaching the components, and hand decorating substantially transform the Chinese-origin components into a finished wreath. In addition to the manual labor, which involves attaching the light set and decorating (i.e. placing the pinecones, plastic berries, plastic pine tips, and plastic laurel leaves), the manufacture of one wreath involves twelve separate machines, each operated by a trained technician. The operations in Cambodia constitute more than minor assembly. Furthermore, the labor in Cambodia constitutes more than half of the total manufacturing costs. Therefore, we find that the Chinese-origin components are substantially transformed when manufactured in Cambodia into the Mixed Greenery Wreath with Gold Leaves. The country of origin for marking purposes of the finished wreath is Cambodia.
Because we find that a substantial transformation exists in the instant case, it is not necessary for us to address reconsideration of HQ H308201. Nevertheless, we note that based on the information provided in HQ H308201, the assembly process in HQ H308201 is not as extensive as the one described here. Specifically, the instant case is distinguishable to HQ H308201 because the assembly operations in the instant case involve injection molding berry picks, pine tips, and laurel leaves in Cambodia, which increases the complexity of the processes and cost of labor.
HOLDING:
Based on the facts provided, the country of origin for marking purposes of the Mixed Greenery Wreath with Gold Leaves is Cambodia.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Yuliya A. Gulis, Chief Food, Textiles and Marking Branch