MAR-2:05 RR:TC:SM 560327 RSD
Mr. Chris Hoag
Manager of International Operations
North American Communications Inc.
1330 30th Street
San Diego, California 92154
RE: NAFTA Advanced Ruling, marking; Country of origin of printed
mailings distributed free of charge; country of origin
marking of containers; ultimate purchaser reasonably knowing the country of origin; 19 U.S.C. 1304; 19 CFR 134.32(h)
Dear Mr. Hoag:
This is in reference to your letter dated February 14, 1997,
requesting a ruling concerning the country of origin marking
requirements of printed mailings distributed free of charge
through the U.S. Postal Service. Samples of the printed material
were enclosed with your submission
FACTS:
North American Communications, Inc. (NAC) prints and
prepares mail packages of advertisements for mailings in the
United States. The printed material is unsolicited advertising
material. Advertisers contract with NAC to print and mail the
printed material. The advertising packages created for the
mailings consist of an outer envelope stuffed with a return
envelope, a personalized letter, and an occasional flyer or
brochure. In the transaction, the letters and flyers are printed
in Mexico. All parts of the mail packages are made from US
originating paper. Additionally, the envelopes are also made in
Mexico from US origin paper.
Once the advertisements are printed and stuffed into the
envelopes, the packages then are sorted based on US Postal
specifications and requirements. The envelopes are labeled with
a bulk mail permit, live bulk mail stamps, or a US postal
indicia, which serves as proof of payment for distribution to the
US Post Office. The sorted packages are placed, again according
to US Postal requirements, into reusable plastic or cardboard US
Postal supplied boxes or trays, which are imported into the US on
plastic wrapped pallets. They are then delivered to the Post
Office in San Diego for mailing and distribution to the general
public.
You claim that NAC's clients know that the mailings are
prepared in Mexico. Although you claim that this is established
when agreements are reached between NAC and their clients for
services and can be substantiated by written affidavits from your
clients, you have not provided any evidence in support of this
claim.
ISSUES:
Whether the imported mailings are excepted from marking
pursuant to 19 CFR 134.32(h) as goods of a NAFTA country for
which the ultimate purchaser reasonably must know the country of
origin.
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 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. Friedlander & Co., 27
C.C.P.A. 297 at 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.
The country of origin marking requirements for goods of a
NAFTA country are determined in accordance with Annex 311 of the
North American Free Trade Agreement, ("NAFTA") as implemented
under the North American Free Trade Agreement Implementation Act
(Pub. L. 103-182, 107 Stat. 437 (December 8, 1993)). The rules
used for determining whether a good is a good of a NAFTA country
are set forth in 19 CFR Part 102. The marking requirements for
these goods are set forth as amendments to various provisions of
Part 134, Customs Regulations.
Section 134.1(b) of the regulations, 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 this part; however, for a good of a NAFTA
country,
the NAFTA marking rules will determine the country of
origin.
Section 134.1(j), of the regulations, provides that the
"NAFTA marking rules" are the rules promulgated for purposes of
determining whether a good is a good of a NAFTA country. Section
134.1(g) of the regulations, defines a "good of a NAFTA country"
as an article for which the country of origin is Canada, Mexico,
or the U.S. as determined under the NAFTA marking rules.
In determining the country of origin marking requirements
for imported mailings, it first must be determined who is the
ultimate purchaser in the U.S. of the imported article.
Section 134.1(d) of the regulations, provides that the
ultimate purchaser of a good of a NAFTA country is the last
person in the United States who purchases the good in the form in
which it was imported. If an imported article is to be sold at
retail in its imported form, the purchaser at retail is the
ultimate purchaser. However, if an imported NAFTA article is
imported and distributed free of charge, the recipient is not the
ultimate purchaser is the purchaser of the gift rather than the
recipient. See Section 134.1(d)(4) of the regulations.
We note that the recipients of the imported mailings do not
buy them. Instead, the U.S. Postal Service delivers the mailings
to the recipients as unsolicited materials. Therefore, Customs
determines that the mailings may be treated as gifts or
giveaways. See HQ 735555 (November 1, 1994) and HQ 558680, July
10, 1995.
Assuming that the imported article is a good of a NAFTA
country and that NAC is the last person in the United States who
purchases the items in the form in which they were imported, the
recipient of the mailings would not be the ultimate purchaser.
Similarly, although NAC's clients may place an order for the
mailings, there is no indication that they will see the items
after they are imported into the United States. Instead, it
appears that NAC's clients are largely buying a service rather
than a product. Thus, we conclude that for the purposes of 19
U.S.C. 1304, NAC's clients do not receive the imported mailing
and also would not be the ultimate purchasers. Therefore, we
find that the importer, NAC, is the ultimate purchaser of the
imported mailings.
Having determined that NAC is the ultimate purchaser of the
imported mailings, next we consider whether they are excepted
from marking under 19 U.S.C. 1304 (a)(3)(H). 19 U.S.C.
1304(a)(3)(H), implemented in 19 C.F.R. 134.32(h), provides
that an article is excepted from marking where the ultimate
purchaser, by reason of the circumstances of the importation,
must necessarily know the country of origin of such article even
though it is not marked to indicate its country of origin or in
case of a NAFTA country, must reasonably know, the country of
origin by reason of the circumstances of its importation.
Containers or holders of articles within the exception set forth
in 19 C.F.R. 134.32(h) are not required to be marked to indicate
the origin of the contents. See 19 CFR 134.22(e).
Generally speaking, Customs has required that the importer
be the ultimate purchaser of the imported article and have direct
contact with the foreign supplier for 19 C.F.R. 134.32(h) to
apply. See HQ 733781 (April 11, 1991). For example, in C.S.D.
80-114 (HQ 711081, September 26, 1979), Customs found that where
the ultimate purchaser was the importer that owned an interest in
the company from which it purchased the articles, and ordered the
articles directly from that company, the exception under 19
U.S.C. 1304(a)(3)(H) applied. In HQ 733096 (February 8, 1990),
Customs applied this exception where the ultimate purchaser was
the importer and also the parent corporation of its wholly owned
subsidiary, from which the parent corporation ordered the foreign
articles. See also HQ 730243 (March 5, 1987) and HQ 731583 (May
31, 1989).
In U.S. Wolfson Bros. Corp. v. United States, 52 Cust. Ct.
86, 91 (1964), the court cited with approval the following
statement from "Exporting to the United States":
The clearest application of this [19 C.F.R. 134.32(h)]
exemption is when the contract between the ultimate purchaser
in the [U.S.] and the supplier abroad insures that the order will be filled only with articles grown, manufactured, or
produced in a named country.
The Court also stated that the "character of the articles"
required something about the articles themselves that identified
them with a particular country.
In HQ 731967 (May 11, 1990), Customs granted exceptions from
marking under 19 C.F.R. 134.32(h) and 134.22(d)(1) where the
contract between the importer and the ultimate purchaser
specifically required article labeling that identified the name
and country of the manufacturer from whom the goods were ordered.
In that case, the ultimate purchaser was a discrete entity,
namely an agency of the U.S. government, and the disclosure of
the origin of the articles supplied was mandated by requirements
other than Customs laws.
Customs has specifically held that it is not sufficient that
the ultimate purchaser be advised personally or by advertising or
brochures of an article's origin. HQ 559671 (June 7, 1996); see
also HQ 734121 (August 12, 1991), HQ 733266 (August 15, 1990).
Rather, an instance where an ultimate purchaser would necessarily
know the country of origin from the character of an article would
be when the merchandise is only produced in one country, for
example, black diamonds from Brazil. See HQ 732362 (May 26,
1989). In HQ 733291 (July 23, 1990), Customs specifically found
that a letter by the ultimate purchaser of the article stating
that they knew the country of origin of the imported article was
not sufficient to grant a marking exception under 19 C.F.R.
134.32(h).
In this case, because NAC is the importer and the ultimate
purchaser, the exception from marking under 19 CFR 134.32(h)
would be appropriate if NAC directly contracts with the
manufacturer of the mailings, who is producing them in Mexico,
and NAC is given written assurance that the mailings will only be
made in Mexico. You have indicated that NAC directly contracts
with the Mexican manufacturer with the understanding that the
mailings are printed and prepared in Mexico. Although the
criteria for applying the 19 CFR 134.32(h) marking exception for
goods from a NAFTA country is less stringent than for goods from
a non-NAFTA country, in order to have the imported mailings
excepted from marking, you should upon request from the port
director, provide evidence, such as a copy of the contract with
the Mexican producer which establishes that NAC reasonably knows
that the mailings are made in Mexico.
You also inquire as to whether the containers of the
mailings would have to be marked; specifically whether the
envelope or the mail bins must be marked. First, in this case we
find that the envelopes are not separate containers, but are part
of the imported articles, the mailings.
19 CFR 134.22(e) provides that containers or holders of articles
within the exceptions set forth in paragraph (f), (g), or (h) in
134.32 or containers of a good of a NAFTA country within the
exception set forth in paragraph (e), (f), (g), (h) (i), (p) or
(q) of 134.32 are excepted from marking. In this case, if the
mailings are excepted from marking under 19 CFR 32(h), their
containers would not have to be marked to indicate their country
of origin.
HOLDING:
The ultimate purchaser of the imported mailings, which are
a good of a NAFTA country and delivered by the U.S. Postal
Service, is the importer, NAC. Based upon the information
provided, we find that NAC reasonably knows the country of origin
of the mailings, and they are excepted from country of origin
marking under 19 C.F.R. 134.32(h). NAC, however, must provide
upon request from the Port Director evidence to substantiate the
information stated in this ruling request. If mailings are
excepted pursuant to 19 CFR 134.32, the containers are also
excepted under 19 CFR 134.22(e).
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