CLA-2 R:C:S 559366 MLR
Mr. Bill Westhusing
The Alaska Souvenir Company
2000 E. Dowling Road, #15
Anchorage, Alaska 99507-1956
RE: Country of Origin Marking on Ulu knife; Blade; Handle;
Substantial Transformation; 19 CFR 134.46
Dear Mr. Westhusing:
This is in reference to your letter of July 28, 1995,
requesting a ruling concerning the country of origin marking
for ulu knives. Samples of blades and handles were
submitted with your request.
FACTS:
The good at issue is an ulu knife consisting of a semi-circular blade and a handle. The ulu knife may be used in
the kitchen for culinary and cutlery purposes. It also may
be used as a utility knife, and is also stated to be a
collector's item.
The ulu knives are made from imported blades. The
blades contain two holes, and in the U.S., some of the
blades are acid etched with designs, cured, honed, and
polished. One of the blades submitted is etched with an
airplane and the word "Alaska," and another depicts a
landscape scenery of Anchorage, Alaska. The blades are then
secured to handles by gluing and inserting dowels. The
handles may be made out of Alaskan birch, maple, or walnut
wood, or from Corian. These materials are milled into the
form of a handle, after which they are sanded, bored, oiled,
and dried on racks. Some of the handles are inlaid with
designs such as an eagle or a whale. Wood stands for the
blades are cut, sanded, kerfed, oiled and dried. The
finished ulu knife and wood stand are then packaged in a
retail container.
It is stated that handle cutting machines, a shaping
machine, a computer numerically controlled machine (to cut
Corian and wood handles and the negative inlay in the
handle), an acid etching machine, and a dowel pressing
machine are required to make the ulu knives. Furthermore,
it is stated that 85 percent of the value of the ulu knife
is added in Alaska. The retail packaging will contain the
words "Alaskan Ulu Knife [measuring approximately « inch],
the historic utility knife of the arctic [measuring
approximately 3/16 inch]." The following country of origin
marking is proposed: "Blade made in China of high-quality,
food grade stainless steel by one of the world's top cutlery
blade manufacturers" [measuring approximately 3/16 inch].
The packaging also contains the symbol of a polar bear with
"Made in Alaska" [measuring approximately 2/16 inch] below
this symbol.
ISSUES:
I. Whether the etching of the blades and assembly with
U.S.-origin handles constitutes a substantial
transformation, thereby excepting the finished ulu knife
from country of origin marking.
II. If the blades are not substantially transformed in the
U.S., whether the proposed marking on the retail
container satisfies the requirements of 19 CFR 134.46.
LAW AND ANALYSIS:
The marking statute, section 304, 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 in the U.S. 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 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." United States v.
Friedlaender & Co. Inc., 27 CCPA 297, 302, C.A.D. 104
(1940).
Part 134, Customs Regulations (19 CFR Part 134)
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs
Regulations {19 CFR 134.1(b)}, defines "country of origin"
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" within the meaning of the
marking laws and regulations.
For country of origin marking purposes, a substantial
transformation of an imported article occurs when it 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. In such circumstances, 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 is excepted from marking and only the
outermost container is required to be marked. See 19 CFR
134.35.
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, 573 F. Supp.
1149 (CIT 1983), aff'd, 741 F.2d 1368 (Fed. Cir. 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. 85-25.
In Headquarters Ruling Letter (HRL) 735181 dated May 17,
1994, Customs considered ulu knives made from imported
blades and handles manufactured in the U.S. In the U.S.,
the blades were polished, embellished with a depiction of a
mountain and the words "Mt. McKinley," and sharpened, after
which they were affixed to U.S.-origin handles. In HRL
735181, Customs analyzed HRL 732057 dated April 16, 1990
(where Customs determined that the attachment of circular
knife blades to handles of a rotary cutting instrument did
not constitute a substantial transformation) and HRL 709090
dated June 19, 1978 (where Customs found that a manufacturer
who completes a kitchen knife in the U.S. by riveting the
imported knife blades to handles and grinding the blade
would be the ultimate purchaser of the imported knife blade
stubs). Following HRL 732057, Customs determined that since
the ulu knives are utility knives, they were required to be
marked with their country of origin because the blades were
not substantially transformed in the U.S. Furthermore, it
was noted that the marking "Made in Alaska" on the retail
packaging may violate the laws of the Federal Trade
Commission.
In reaching the conclusion in HRL 709090, Customs
reviewed ORR Ruling 163-69 dated May 6, 1969, which found
that the mere assembly of imported kitchen shanks containing
drilled holes to receive a domestic handle did not
constitute a substantial transformation, and File RM 363.2 W
dated January 29, 1965, which held that the manufacturer of
knives in the U.S. using imported cutlery stubs was
considered the ultimate purchaser of the imported stubs.
In reaching the conclusion in HRL 732057 that the
circular knife blade did not lose its separate identity when
it was combined to a domestic handle of a rotary cutting
instrument, Customs considered six factors:
1) whether the article is completely finished;
2) the extent of the manufacturing process of
combining the article with its counterparts as
compared with the manufacturing of the subject
article;
3) whether the article is permanently attached to its
counterparts;
4) the overall importance of the article to the
finished product;
5) whether the article is functionally necessary to
the operation of the finished article, or whether
it is an accessory which retains its independent
function; and
6) whether the article remains visible after the
combining.
These factors are not exclusive and there may be other
factors relevant to a particular case and no one factor is
determinative. Consequently, in finding no substantial
transformation of the blade, Customs determined that the
circular knife blade was a finished product, the attachment
of the blade to the handle was not an extensive process when
compared to the amount of processing involved in producing
the blade itself, the blade was easily replaced, and the
blade was absolutely necessary to the operation of the
rotary cutting instrument.
You have also submitted HRL 720065 dated October 21,
1982, where Customs considered raw knife blade blanks. The
blank required molded or slab handles, rivets, finish
shaping, and sharpening. All parts added to the blade were
manufactured in the U.S. It was held that the additional
work performed on the raw knife blade constituted a
substantial transformation. Customs has also determined
that U.S.-made knife blade blanks and wooden or plastic
handles and rivets shipped to Mexico where they were
assembled together and the blade was sharpened did not
constitute a substantial transformation as the assembly of
the parts into a finished knife was a minor operation. See
HRL 733301 dated August 8, 1990. Finally, in HRL 735470
dated November 16, 1994, Customs determined that imported
components of a sword, i.e., blade, handle, scabbard and
hilt were not substantially transformed after assembly,
polishing, and plating operations. While each component
became an essential part of a completed sword, each
component was still referred to its respective name after
assembly. Additionally, the use of the imported components
was predetermined at the time of importation, and the
overall shape, form, and size of the finished sword was
essentially the same as the imported unassembled sword
parts.
After reconsidering HRL 735181, it is our opinion that
the imported blades in this case also are not substantially
transformed. While the ulu knives in this case are also
stated to be used as kitchen knives and not just utility
knives, the imported blades already contain two holes and,
similar to the finding in HRL 733301, the process of
combining the blades with the handles does not appear to be
extensive. Furthermore, while the blade is permanently
attached to the handle, unlike the circular blades attached
to the rotary cutter, the blade is the distinguishing
feature that makes it an ulu knife. Although the production
of the handle requires skilled craftsmanship and special
machinery, its assembly with an imported blade does not
change the name, character, and use of the blade, and this
determination is consistent with the more recent findings by
Customs.
Even considering the etching of the blade with designs,
we do not find a substantial transformation. In determining
whether machining operations effect a substantial
transformation, Customs has distinguished between the kind
and amount of further processing performed, i.e. between
machining operations performed to achieve a specified form
and those performed to achieve more cosmetic or minor
processing operations. Customs has consistently found that
embellishment and finishing operations, such as polishing,
enameling and cleaning, are not regarded as extensive
processes that result in a new and different article of
commerce. For example, in C.S.D. 89-130, Customs held that
polishing and grinding a semifinished aluminum did not
result in a substantial transformation. See also C.S.D.
89-121 (glazing and painting of pottery and ceramics did not
constitute a substantial transformation). Additionally, in
HRL 734716 dated November 27, 1992, applying a No. 8 mirror
polish finish on sheets of grade 304 stainless steel with a
2B or BA finish was not a substantial transformation since
surface finishes such as mirror finish, chemicolor, and
etching art were more accurately described as resulting in a
narrowing of or restriction in use rather than a change in
use.
Consequently, based on the rulings above, since the
blades are not substantially transformed in the U.S. by the
etching and assembly operations, they must be clearly marked
to indicate to the ultimate purchaser their country of
origin. The proposed marking on the retail container will
also contain the references "Alaskan Ulu Knife..." and "Made
in Alaska." Customs has recognized that the presence of a
geographic location other than the country in which the
article was produced on an imported article or its container
may mislead the ultimate purchaser as to the true country of
origin. Therefore, in cases where the name of a location in
the U.S. or the name of any foreign country or locality
other than the country or locality in which the article was
manufactured or produced appears on an imported article or
its container, 19 CFR 134.46 provides that there shall
appear, legibly and permanently, in close proximity to such
words, letters, or name, and in at least a comparable size,
the name of the country of origin preceded by "Made in",
"Product of", or other words of similar meaning. Customs
has ruled that in order to satisfy the close proximity
requirement, the country of origin marking must appear on
the same side(s) or surface(s) in which the name of the
locality other than the country of origin appears. The
purpose of this section is to prevent the possibility of
misleading or deceiving the ultimate purchaser as to the
actual origin of the imported good.
In this case, the retail container of the ulu knives
contain the references "Alaskan Ulu Knife..." and "Made in
Alaska." Not only are these geographic locations which are
not the country of origin of the finished ulu knives, but
they are used to suggest that the country of origin of the
ulu knife is Alaska. Accordingly, since these references
may likely mislead the ultimate purchaser as to the true
origin of the article these references should either be
deleted from the retail container or they should be changed
so that the reference to Alaska only refers to the handle.
"Handle Made in Alaska," "Assembled in Alaska," or similar
wording would be appropriate. If reference is made to
Alaska, it must be in close proximity to the marking "Blade
made in China...," and the type must be comparable in size.
Additionally, we suggest that you contact the Federal Trade
Commission, Division of Enforcement, 6th & Pennsylvania
Avenue, N.W., Washington, D.C. 20508, which has
jurisdiction concerning the approval of markings such as
"Made in the U.S.A." and "Made in Alaska."
HOLDING:
Based upon the information provided, it is our opinion
that the imported blades are not substantially transformed
in the U.S. by the etching and assembly operations.
Therefore, the retail container must be clearly marked to
indicate to the ultimate purchaser the country of origin of
the ulu knives. The marking "Blade made in China ..." is
acceptable. However, we also find that the words "Alaskan
Ulu Knife..." and "Made in Alaska" on the retail container
may mislead the ultimate purchaser as to the article's
country of origin. Therefore, these words should either be
deleted or changed to more accurately reflect the processing
performed in Alaska. Furthermore, we suggest that you
contact the Federal Trade Commission concerning the use of
"Made in Alaska."
A copy of this ruling letter should be attached to the
entry documents filed at the time the goods are entered. If
the documents have been filed without a copy, this ruling
should be brought to the attention of the Customs officer
handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division