RR:CR:SM 560776 RSD
James O’Kelly, Esq.
Christopher Pey, Esq.
Barnes, Richardson & Colburn
475 Park Avenue South
New York, N.Y. 10016
RE: Country of Origin Marking Requirements of Home Electronics and Entertainment Systems
Accessories from Various Countries; Commingling; Economically Prohibitive; Repacking;
19 CFR 134.46; 19 CFR 134.32(a); 19 CFR 134.32(c); 19 CFR 134.32(o)
Dear Messrs. O’Kelly and Pey:
This is in response to your letter dated December 4, 1997, on behalf of Gemini Industries, Inc. (Gemini) concerning the country of origin marking requirements for various accessories used for home electronics and entertainment systems which are imported from different countries. Accompanying your request were samples of the kinds of products that Gemini imports. In addition, we have received three supplemental submissions. The cost and price information contained in the submissions will be accorded confidential treatment. A meeting was held at our offices on September 15, 1998, to discuss this matter. We regret the delay in responding to your inquiry.
FACTS:
Gemini is based in Clifton, New Jersey and imports various accessories for home electronic and entertainment systems. In addition to importing accessories, Gemini repackages, distributes, supplies, and/or sells consumer electronic accessories for sale under a number of different brand names in the United States, such as Gemini, Axiom, PC Accessories, Magavox, Southwestern Bell, and AT&T Wireless Services. Currently, Gemini sells over four thousand products in different accessory categories used in the connection, installation, maintenance, storage, and replacement of consumer electronic equipment.
You explain that of the over four thousand products distributed by Gemini, approximately 30% are sourced domestically and need not be marked with their country of origin. Approximately 10% of Gemini’s products are imported in their final packaging and are not the subject of this ruling request. Another 30% are imported in bulk from a single country and are repackaged in containers showing a single country of origin. This ruling also does not concern these products which are imported from only one country. This ruling covers only products imported in bulk from multiple foreign countries and that are repackaged in blister packs or other types of consumer packaging in the U.S.
Gemini obtains the vast majority of its imported products from nine Asian countries (China, Taiwan, Hong Kong, Japan, Malaysia, India, South Korea, Thailand, and the Philippines). The products are imported into the U.S. in bulk and are repackaged for retail sale at Gemini’s Clifton, New Jersey facility. Gemini repackages the imported products in the U.S. in order to perform quality control procedures and because of the quality of the U.S. packaging materials. Many major U.S. retailers in the U.S., such as Walmart, Kmart, Office Depot, Home Depot, and CompUSA sell Gemini’s imported products.
Gemini imports the same products from different countries for several different reasons. In some instances, Gemini’s supplier has plants in more than one country, and the supplier selects the plant which will produce each shipment. In other cases, Gemini obtains products from several companies which may be located in different countries. Frequently, Gemini is unaware when it places an order in which country a product will be produced. The countries where the products are made may change on a shipment-by-shipment basis. You claim that, except in cases where the product is incapable of being marked, the individual items are marked with their country of origin.
After importation, the products are stored in a Gemini warehouse. Each shipment is quality tested in the U.S. before the orders are filled. The products are then packaged using the appropriate blister card and other packaging for the item. Because Gemini often sells the same product under several different labels, it must keep a blister card stock numbering in the thousands of different types of cards with often more than one card applicable to a single product. Gemini checks the actual countries of origin of its imported products on a regular basis, and updates the country of origin listing on the blister card stock the next time blister cards are ordered. It is stated that the repackaging operation adds significantly to the cost of an average product.
Gemini has provided samples of products which are imported in bulk and individually marked with their country of origin. These items will usually be repackaged in a blister pack or other clear packaging for retail sale. You claim that Gemini will certify to Customs that the packaging will not obscure or conceal the country of origin marking on the article. The package will include a list of possible countries of origin for the product with a disjunctive statement such as “Made in Taiwan, Philippines or China”. In addition, on the line beneath the list of countries the statement “Quality Assured & Packaged in USA” appears, and below this statement the words “Clifton, NJ” are printed. You advise that if Customs does not approve the disjunctive marking, Gemini has agreed to put a statement on the packaging adjacent to any origin reference which will advise the consumer to inspect the article to see the actual country of origin on the product.
Gemini also imports a number of low cost items in bulk such as electrical connectors, video connectors, video cable connectors, cellular telephone antenna connectors, telephone coil cords, audio speaker, wire etc. You claim that these items cannot be individually marked because of their small size. You have presented two samples of items that you claim are incapable of being marked: two packages of Coaxial Cable “F” Connectors. Each of the blister packages of the “F” connectors contains two connectors with instructions and the country of origin marking printed on the back side of the package. The blister package containing the Heavy Duty F connectors has the country of origin marking “Made in Taiwan, or China”, while the blister package for the “Twist-on” F connectors specifies the countries of origin as “Made in Taiwan, China or Malyasia”. Some of these products are valued at less than [ ] per piece at the time of importation. After importation, the products are commingled in an inventory with existing stock of similar items produced in different countries. Because the items will originate in a number of different countries, Gemini wishes to indicate the country of origin of these articles by using a disjunctive statement, which lists several possible countries on the blister packs.
You contend that it would be economically prohibitive to indicate a single country of origin on each blister pack. There are about [ ] products imported unmarked in bulk from several different countries which are repackaged using disjunctive country of origin statements. Because the products are sold under several different brands, Gemini estimates that the unmarked products require three blister cards each to account for the several manufacturers under whose names they are sold. Gemini also estimates that on average, there are three countries of origin for each product.
You indicate that the minimum order for a blister card printing run is [ ] at a cost of approximately [ ] a piece. Therefore, a single blister card run will cost Gemini [ ], assuming that Gemini always orders the minimum number of cards. Because approximately [ ] products could be affected, requiring individual country of origin marking would require that Gemini keep an inventory of approximately [ ] blister cards. At [ ] per card, the cost of printing the blister cards would be approximately [ ] in the first year. Gemini estimates that it would be required to purchase an additional [ ] worth of blister cards per year to replace its inventory, as well as to cover the ongoing changes to the countries of origin for the various products. Keeping the [ ] million blister cards would require additional storage facilities which would cost Gemini approximately [ ]. No information was provided regarding the additional inventory costs involved in segregating the imported products according to their country of origin, but you claim that showing a single country of origin on each blister card would cost at least [ ] in the first year and approximately [ ] per year thereafter.
In your submission dated July 13, 1998, you further point out that assuming that each product, on average, comes from one of three countries, and would be sold under three different brand names, Gemini would be required to produce and store nine different blister cards per individual product, at a cost of approximately [ ] per piece [ /cards x countries of origin x brand names], as opposed to the current cost of approximately [ ] per piece.
The individual landed unit price for the items in question ranges from [ ] to
[ ], with a median price of [ ]. Current packaging costs are in the range of [one] to [66 times] Gemini’s cost for buying the goods. Requiring each package to be marked
with a single country of origin would increase the packaging costs to approximately [ ] imes to
[ ] times the price that Gemini is paying for the goods, or a range of more than twice the cost of the method of country of origin marking that Gemini is presently using.
According to the information provided, in 1996 Gemini posted a [ ] profit (net income as a percentage of net sales). It is also contended that in the electronic accessories industry, the profit margins are razor thin. You claim that an increase in the cost of any item of the magnitude which would be necessary to indicate a single country of origin on the blister packs could drive Gemini out of that particular line of business, if not out of business entirely.
ISSUES:
I. Whether Gemini’s use of the disjunctive multiple country of origin marking on the blister packages for the items that are imported in bulk and individually marked with country of origin is acceptable pursuant to 19 U.S.C. 1304 and Part 134 Customs Regulations (19 CFR 134).
II. Whether the requirements of 19 U.S.C. 1304 would be satisfied if there is a statement on the blister card advising the ultimate purchaser to inspect the actual article for its country of origin.
III. Whether the marking requirements of 19 CFR 134.46 are triggered by Gemini’s U.S. address and the phrase “Quality Assured and Packaged in the U.S.”
IV. Whether it is economically prohibitive to indicate a single country of origin on the blister packages for those articles which are imported in bulk and are incapable of being marked.
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 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. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297 at 302, C.A.D. 104 (1940), where the court stated that: “Congress intended 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.” Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
I. Articles Individually Marked with the Country of Origin
The first issue is whether the use of a disjunctive marking statement on the blister cards, such as “Made in Taiwan, China or Malaysia”, for articles that are individually marked with their country of origin, would satisfy the requirements of 19 U.S.C. 1304. Since the article will be repackaged in clear plastic wrap, the country of origin marking on the article will be visible at the time of purchase. It is generally Customs’ policy not to accept disjunctive country of origin marking such as “Made in Taiwan, China or Malaysia” because it does not indicate the actual country of origin as required by 19 U.S.C. 1304. See Headquarters Ruling Letter (HRL) 558647, November 30, 1994. Therefore, we find that labeling the blister card with the use of a disjunctive marking without any additional labeling statement would not satisfy the marking requirements.
II. Ultimate Purchaser Advised to Inspect Article
You advise that if Customs finds the use of a disjunctive marking statement does not satisfy the requirements of 19 U.S.C. 1304, Gemini will put an additional statement on the blister card which instructs the purchaser to inspect the actual article for its country of origin. Customs previously has allowed importers to place a mark on the exterior of a container instructing the ultimate purchaser to view the actual article to determine its country of origin. In HRL 734491, April 13, 1992, Customs ruled that an importer of automobile parts may mark the packaging “Contents Imported, See Article for Country of Origin”. In HRL 734544, July 24, 1992, Customs allowed the importer to mark the cartons not only with the possible countries of origin, but also with the instruction to inspect the item itself for the actual country of origin. In order to qualify for this type of marking, Customs held that the carton must be unsealed allowing the purchaser to inspect the product prior to purchase. See also HRL 732099, November 3, 1989 (“see bulb for country of origin” is acceptable on resale carton); HRL 732374, July 9, 1989 (“refer to neck label” acceptable on polybag containing shirt). We believe that the situation in this case is similar to HRL 734544 because the ultimate purchaser will have the opportunity to see the country of origin marking prior to purchase because it will be visible through the clear plastic wrap.
III. Section 134.46
There is an additional concern of whether the requirements of 19 CFR 134.46 are triggered by the non-origin geographic references, “215 Entin Road, Clifton, NJ 07014" and “Quality Assured & Packaged in USA”, on the blister cards. Section 134.46 contains more rigorous marking requirements designed to alleviate the possibility of misleading an ultimate purchaser with regard to the country of origin of an imported article. Section 134.46 provides that:
In any case in which the words “United States,” or “American,” the letters “U.S.A.,” any variation of such words or letters, or the name of any city or location in the United States, or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appear on an imported article or its container, and those words, letters or names may mislead or deceive the ultimate purchaser as to the actual country of origin of the article, 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.
In Treasury Decision (T.D.) 97-72, published in the Federal Register on August 20, 1997, (62 FR 44211), Customs pointed out that references to the U.S. made in the context of a statement relating to any aspect of the production or distribution of the products, such as “Designed in U.S.A.,” “Made for XYZ Corp, California, U.S.A.” or “Distributed by ABC Inc., Colorado, U.S.A.” are misleading to the ultimate purchaser and would trigger the country of origin marking requirements of 19 CFR 134.46. We believe that the same analysis would apply to this case and that the non-origin references “Quality Assured & Packaged in USA” and “Clifton NJ” appearing on the packaging, would trigger the requirements of 19 CFR 134.46.
In prior rulings, Customs has determined that a marking similar to the proposed marking that Gemini has agreed to put on the blister cards satisfies 19 CFR 134.46. In HRL 734469, September 22, 1992, Customs ruled that hang tags which were affixed to conspicuously marked sunglasses and marked with the words “Country of Origin Indicated On Sunglasses” in close proximity and in at least a comparable size to the non origin geographical reference “Dallas, TX U.S.A.” satisfied the country of origin requirements of 19 CFR 134.46. In HRL 735024, April 7, 1994, Customs held that the same marking as occurred in HRL 734469, supra, also satisfied the requirements of 19 CFR 134.46. Consequently, in this case if the ultimate purchaser is directed to see the country of origin on the actual article, we find that the requirements of 19 CFR 134.46 would be satisfied.
IV. Economically Prohibitive
The last issue in this case is whether requiring Gemini to put a single country of origin marking on the packaging for the articles that are incapable of being marked is economically prohibitive. The articles in question are imported in bulk and repackaged into blister packages after importation. Gemini wants to use a disjunctive origin statement on the blister package such as “Made in China or Taiwan” because it contends that it would be economically prohibitive to put the actual country of origin of each article on its blister package. You have provided only two samples of the products that you claim are incapable of being marked. Accordingly, we can only rule on items for which you have presented samples. However, for the purposes of this ruling, we will assume that the samples that you claim cannot be marked are in fact incapable of being marked, although no specific evidence has been presented to show that these articles cannot be individually marked with their country of origin.
Among the exceptions from the marking requirements is 19 U.S.C. 1304(a)(3)(C) and (K) as implemented by 19 CFR 134.32(c) and (o) for articles which cannot be marked prior to, or after, importation except at an expense that would be economically prohibitive. As previously pointed out, Customs policy is that in most circumstances, it is not acceptable for purposes of 19 U.S.C. 1304 to mark an article with the legend “Made in , or ” because such disjunctive marking does not indicate the actual country of origin as required by 19 U.S.C. 1304. See HRL 559849, dated December 6, 1996. In C.S.D. 89-111, Customs ruled that certain effervescent enzymatic cleaner tablets, the product of either the U.S. or West Germany, were required to be marked for retail sale with the actual country of origin. Although Customs acknowledged that the seller could avoid expense by using only one retail package with the disjunctive marking, “Tablets made in West Germany or the United States” Customs was not satisfied that full accurate marking would be an economic prohibition, and therefore required the item to be marked with only the actual country of origin.
Although Customs normally requires that an article be marked with its specific country of origin, in some cases we have determined that strict compliance with this requirement would be economically prohibitive and alternative methods have been approved. In C.S.D. 84 50, regarding fertilizer, and C.S.D. 84 44, regarding honey, the products were blended from multiple source countries, and Customs required all major source countries to be indicated. In those cases Customs did not agree that it was economically prohibitive to mark the articles with a substantial degree of accuracy.
Customs discussed the commingling and marking of semiconductors in T.D. 75 187 (July 22, 1975). In that case, Customs allowed the containers to be marked to indicate that the semiconductors were made in one or more of the countries if they were made in different countries and were commingled for a bona fide reason. In C.S.D. 84 56, Customs considered the marking of industrial fasteners such as screws, nuts, bolts, and washers which are on the J-list (19 CFR 134.33). That ruling permitted a country of origin label only to list the major source countries from which a repackager acquired his stock and in the order of the greatest percentage of stock (by weight or piece) to the least percentage of stock. Countries from which a repackager only obtained small quantities of fasteners did not have to be listed. This marking was allowed to “eliminate the economic prohibitions of strict compliance but preserved the repackager's obligation to advise the ultimate purchaser of the foreign origin of the repackaged fasteners.” C.S.D. 84 56. It was also stated that 19 U.S.C. 1304(a)(3)(k) exceptions must be strictly construed. See also HRL 732382, November 20, 1989 (regarding how to mark the containers of fasteners when a company commingles foreign and U.S. made fasteners). However, in HRL 735482, April 4, 1995, Customs did not allow the marking “This carton contains domestic fasteners and/or fasteners produced in Taiwan”. In HRL 735482, the fasteners from the U.S. and Taiwan were not commingled and the containers had to be marked with the actual origin of the imported fasteners. In HQ 734165, December 2, 1991, Customs ruled that where U.S. and foreign-made LEGO toy building blocks were commingled together, the container could be labeled “Made in Denmark, Switzerland, and U.S.A.” since it was highly probable that a LEGO set would contain some pieces from all three countries.
In order to use a normally unacceptable disjunctive marking statement in this case we must resolve whether it is economically prohibitive to require that the blister cards be marked with the single country of origin of the article in question. With regard to the marking exception in 19 CFR 134.32(o), we stated in HRL 733889, dated September 13, 1991:
Although relatively little has been written in explaining exactly what the term economically prohibitive means, several factors have been considered to help determine when marking an item would be economically prohibitive. These include situations in which the requirement to mark the article to indicate its country of origin would force the producer to incur a cost that would require the item to be marked at a price at which: (1) the item could not be sold since an individual would not buy it; (2) no profit could have been made; (3) the profit that could have been obtained would not have been sufficient to induce the importer to handle the item. See
Note, Country of Origin Marking, 6 Law and Policy in Int'l Business 485, 501 502 (1974), citing Bur. Cust. Customs Information Exchange Ruling 114/51 (1951).
In this regard, the articles in question are imported in bulk and commingled after importation before they are repackaged in blister packages in the U.S. Thus, requiring the actual country of origin for each article on the blister packs will result in greater inventory costs. However, you have provided relatively little information regarding these potentially greater inventory costs. Instead, much information has been presented concerning the additional printing costs that would be incurred if Gemini has to print separate blister cards to indicate a single country of origin for the items they import. Although you indicate that putting the actual country of origin on the blister packages would greatly increase the costs involved in selling such items, the information presented is not sufficient to justify an economically prohibitive claim because there is no information regarding how much Gemini charges when it resells the products to its customers and whether these increased costs associated with marking the actual country on each blister package would prevent Gemini from earning a profit which is sufficient to allow it to handle the items in question. It is also not clear if Gemini could absorb the increased costs and still earn a profit or whether it could pass these increased costs onto its customers. Along these lines, although Gemini indicates the total profit it earned from all its operations ([ ] in a recent year), there is no information regarding the specific profit that it earns in reselling the particular items that cannot be individually marked.
We are also of the opinion in considering the marking of the semiconductors in T.D. 75-187 and fasteners in C.S.D. 84-56, that these types of articles are normally commingled in sufficient quantity and to such a degree that there is a good likelihood that a container of those articles would be composed of the countries indicated. In this case one sample of the coaxial connectors contains three different possible countries of origin, but the blister package only contains two connectors. Therefore, there will always be one country that is not represented. Furthermore, in HRL 735482, where only two different countries were involved, Customs decided that it would not be acceptable to use a disjunctive marking. We recognize that in HRL 735482 there was no commingling of the fasteners, however, under the circumstances (especially since the second sample of the connectors only is marked with two countries), we cannot conclude that Gemini has established a permanent basis for determining that it is economically prohibitive to put the actual country of origin on the blister packages in which the items are sold. Accordingly, we do not find that an exception from country origin marking is warranted pursuant to 19 CFR 134.32(c) or (o). Therefore, using the disjunctive country of origin marking statement with the word “or” on the blister packages such as shown on the sample blister packages for the cable connectors does not satisfy the statutory requirements of 19 U.S.C. 1304.
An alternative marking method which could be used, would be to list all the various possible countries of origin on the blister package. When the blister package is filled, the appropriate country of origin for the individual product can be checked. This requires only one printed carton for all the various countries of origin, and only minimal work to inform the ultimate purchaser of the country of origin without requiring the purchaser to open the carton and inspect the product. Using this method, the importer still must meet the general Customs marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134.
Additionally, we note that because all of the articles will be repacked after importation, the certification procedures outlined in 19 CFR 134.26 must be followed.
HOLDING:
A statement on the electronic accessories’ packaging which directs the ultimate purchaser to see the country of origin on the article satisfies the requirements of 19 U.S.C. 1304 provided that the article is properly marked and the article is packaged in a clear plastic so that the marking is visible to the ultimate purchaser prior to purchase. The requirements of 19 CFR 134.46 are triggered by the non-origin geographic reference “Quality Assured & Packaged in USA Clifton NJ”, on the blister card. However a statement on the packaging in close proximity to the non-origin geographical reference directing the ultimate purchaser to see the country of origin on the actual article would also satisfy the requirements of 19 CFR 134.46. The evidence presented also does not establish that it is economically prohibitive to indicate the actual country of origin on the blister packages of the articles incapable of being marked.
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