CLA-2 RR:TC:SM 559812 KBR
Jaqueline Paez
Sonnenberg & Anderson
200 South Wacker Drive
33rd Floor
Chicago, Illinois 60606
RE: Country of origin marking of a leather covered desk;
substantial transformation; 19 CFR 134.35
Dear Ms. Paez:
This is in response to your letters received March 29, 1996,
and May 1, 1996, as well as a meeting held on June 14, 1996, on
behalf of your clients Henredon Furniture Industries Inc.
("Henredon") requesting a ruling regarding the country of origin
marking of a leather covered desk imported into the U.S. for
finishing.
FACTS:
Henredon imports desks for its "Tuscany Collection" from the
Philippines. At the time of importation, the desk is completely
assembled except for the drawer pulls (handles). The desk is a
leather covered desk. The raw leather is attached with glue to
the desk prior to the importation into the U.S. The operations
performed in the U.S. are to finish the leather covering on the
desk, to drill holes in the front of the drawers to attach the
drawer pulls, and attaching the drawer pulls.
The desk is totally covered by the raw leather, including
the tops sides and legs. The leather at the time of importation
is unfinished and is pink' in color. Henredon states that it
goes through 56 steps in changing the pink leather to the
precisely matching colors and texture of the "Tuscany
Collection". You state that these steps are precisely controlled
and highly labor intensive. During our meeting on June 14, 1996,
you stated that you were not concerned with the country of origin
of the furniture, and agreed that the country of origin of the
desk was the Philippines. Instead, your concern was that you
wished to know how to mark the desks on importation. You stated
that because of the labor performed on the desks, any country of
origin appearing on the desk itself prior to the finishing of the
leather would be destroyed, or damaging to the desk.
ISSUE:
1. Whether the imported unfinished leather desk is
substantially transformed by the finishing process in the U.S.
2. Whether the unfinished leather desk must be marked with
its country of origin upon importation and what the appropriate
method of marking would be.
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 imported into the U.S. shall be marked
in a conspicuous place as legibly, indelibly, and permanently as
the nature of the article 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 the 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 article occurs when it is used
in manufacture, which results in an article having a name,
character, or use differing from that of the article before the
processing. See HQ 558747 (January 20, 1995).
Section 134.35, Customs Regulations (19 CFR 134.35), states
that the manufacturer or processor in the U.S. who converts or
combines the imported articles into articles having a new name,
character or use will be considered the ultimate purchaser of the
imported article within the scope of 19 U.S.C. 1304 and the
article will be excepted from marking.
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); Koru North America v. United States, 12 CIT 1120, 701 F.
Supp. 229 (1988). The question of when a substantial
transformation occurs for marking purposes is a question of fact
to be determined on a case-by-case basis. Uniroyal Inc. v.
United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd, 1 Fed.
Cir. 21, 702 F.2d 1022 (1983).
Henredon imports a leather covered desk from the Philippines
for finishing. As we discussed in the meeting on June 14, 1996,
while the desk is undeniably a much more beautiful desk after the
extensive labor and detail applied by Henredon in the U.S., the
article starts and remains a leather covered desk. We,
therefore, find that there is no substantial transformation, and
the desk remains a product of the Philippines after the U.S.
processing. Therefore, the leather desk must be marked with its
country of origin, the Philippines.
Articles for which the marking of the containers will
reasonably indicate the origin of the article are excepted from
marking under 19 U.S.C. 1304(a)(3)(D). For an exception to be
granted under 19 U.S.C. 1304(a)(3)(D), the article must be
imported in the container and that container must reach the
ultimate purchaser unopened. See also 19 CFR 134.32(d).
In this situation, the processing of the leather performed
after importation by Henredon, will remove any country of origin
marking appearing on the leather desk prior to importation,
unless the country of origin marking was placed in a manner that
would ultimately detract from the appearance of the desk.
Therefore, Customs finds that the container of the desk may be
marked with its country of origin as long as the ultimate
purchaser will receive the desk in this container. However,
because the desk must be finished after importation, the
container in which the imported desk is shipped will be opened
prior to its reaching the ultimate purchaser in the U.S..
Section 134.34, Customs Regulations, (19 CFR 134.34),
provides that an exception may be authorized in the discretion of
the district director under 19 CFR 134.32(d) for imported
articles which are to be repacked after release from Customs
custody 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 to secure such
verification, as may be necessary by certification and the
submission of a sample or otherwise, of the marking prior to
liquidation of the entry.
The discretion of the district director is quite broad under
19 CFR 134.34, allowing him to determine whether district
supervision, certification, verification, or review of a sample
is necessary to accomplish the purposes of 19 U.S.C. 1304 and to
extend the 60 day liquidation period. See HQ 732808 (December
12, 1989); HQ 734420 (March 31, 1992). It is within the scope of
the district director's discretion to determine that the 19
U.S.C. 1304(a)(3)(D) exception may be approved for all entries
made over an extended or indefinite period of time, rather than
on an entry-by-entry basis. An important element in the exercise
of the district director's discretion is his/her assessment of
whether the company requesting the exception can be relied upon
to carry through on its undertakings. Another factor to be
considered is whether the district has adequate resources to
provide the continuing supervision necessary to ensure proper
country of origin marking after importation. Additional factors
that the district director could consider are the importer's
history of violations and record in complying with Customs
procedures and regulations, whether the importer is doing the
repacking himself, or having another party do the repacking, and
whether the repacking is done on the importer's premises within
the Customs district in which the merchandise was imported. When
it is determined that the importer may not utilize the
certification procedure of 19 CFR 134.34, the district director
must be able to articulate a specific reason for this decision.
See HQ 734420 (March 31, 1992).
Another method of marking which would be appropriate in this
situation would be the attachment to the desk of a card which
would contain the country of origin in a conspicuous manner. In
HQ 734420 (March 31, 1992), concerning earrings, Customs ruled
that using retail cards containing the country of origin is a
common means of selling and marking earrings with their country
of origin. Customs found that the repacker was not likely to
sell the earrings without the retail card, and that since the
importer was also the repacker the supervision by Customs of the
repacking operation should be feasible. Desks and other
furniture are commonly sold by displaying the furniture on a
showroom floor. Such furniture often has cards attached to it
which contains information concerning the size, manufacturer,
materials and other important information. The country of origin
marking for the desk could be placed on this card and the card
attached to the finished desk.
HOLDING:
Based upon the information provided, we find that for
purposes of 19 U.S.C. 1304, the processing in the U.S. of the
imported leather covered desk does not constitute a substantial
transformation; therefore, after finishing in the U.S., the
leather covered desk must be marked with its country of origin,
the Philippines. After finishing, the country of origin of the
leather desk may be indicated either by using a card attached to
the desk or on the container in which the desk reaches the
ultimate purchaser in the U.S.
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
Tariff Classification Appeals
Division
cc: Elliot Feldman
Director, Trade Compliance