MAR-02 RR:CR:SM 561116 RSD
Ms. Angela Durbrorow
Product Manager
Wolters Group International
954 West Washington MC 37
Chicago, Illinois 60607
RE: Country of origin marking requirements for imported
knives and sharpening sheathes; special marking for knives;
substantial transformation; container exception;
19 CFR134.43; 19 CFR 134.32(d)
Dear Ms. Durbrorow:
This is in response to your letters dated August 24, and 31,
1998, concerning the country of origin marking requirements for
knives and sharpening sheathes imported from Taiwan. We have
received a sample of a type of knife that your company will be
importing.
FACTS:
You describe two scenarios concerning how the knives will be
manufactured and sold. The first scenario describes the logistics
involved in the first year of manufacturing the knives and the
accompanying sharpening sheathes. The second scenario concerns
the logistics of making the same products during the second and
subsequent years.
In the first scenario, the knife blades and handles will be
manufactured in Taiwan, but due to a labor shortage in Taiwan,
both the blades and the handles are shipped to China for assembly
and polishing. After assembly, the knives will be returned to
Taiwan. The components for the sheathes will be manufactured and
assembled in Taiwan. After the assembled knives are returned to
Taiwan, they will be packaged together with the sheathes in a
heat sealed polybag so that they can be sold as a unit. The heat
sealed polybags, each containing a knife, sheath and a leaflet
regarding the product, are shipped from Taiwan to the U.S. You
state that the sheath costs more to produce than the knife.
You state that normally the marking of the blade would occur
after it is stamped and tempered in Taiwan. However, in this
instance, the blades and handles will be shipped to China for
assembly and polishing, and under the laws of China and Taiwan, a
product marked with the words "Taiwan" which is assembled in
China is not allowed to re-enter Taiwan. You claim that marking
the country of origin on the knife after its' assembly cannot be
done without compromising the function and quality of the knife.
Therefore, you ask if it would be acceptable to mark the polybag
in which the knife and sheath are sold instead of marking the
knife itself.
In the second scenario, the knife blade and handle will be
manufactured in Taiwan, but due to a labor shortage in Taiwan,
both the blade and the handle will be shipped to China for
assembly and polishing. The sheath will be manufactured in
Taiwan and shipped to China for assembly. The assembled knife
and sheath and the leaflet will be packaged in the polybag in
China and then shipped directly to the U.S. You indicate that in
the second scenario, the county of origin of the knife could be
stamped or etched on the blade.
You state that, in regard to both scenarios, the country of
origin marking of the sheath would be molded into the plastic of
the sheath. To indicate the country of origin of the knives in
scenario one, you state that a card would be inserted inside the
polybag showing the country of origin of the knife and sheath.
This insert card will be visible to customers interested in
buying the knives. In other words, potential purchasers of the
knife and sheath will be able to see the country of origin of the
product on the cards which are inserted inside the heat sealed
polybags. It is further stated that the product will never be
removed from the polybag until it reaches the final customer in
the United States.
ISSUES:
What is the country of origin for the knives and sheathes
for the two scenarios described above?
What are the country of origin marking requirements
applicable to the finished knives and sheathes?
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. Part 134, Customs Regulations (19 CFR
Part 134), implements the country of origin marking requirements
and exceptions of 19 U.S.C. 1304. 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 good 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. 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. 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. Accordingly, the
country of origin of an article is the country in which it was
wholly manufactured or, if processed in several countries, the
country in which the article last underwent a substantial
transformation. Simply stated, a substantial transformation
occurs "when an article emerges from a process with a new name,
character, or use different from that possessed by the article
prior to processing." See Texas Instruments, Inc. v. United
States, 69 CCPA 152, 681 F.2d 778 (1982) (cited with approval in
Torrington Co. v. United States, 764 F. 2d 1563, 1568 (1985)).
Country of Origin of the Knife and Sheath under the First
Scenario
The first issue concerns the country origin of the knife if
the blade and handle are made in Taiwan but assembled in China.
In determining whether the combining of parts or materials
constitutes a substantial transformation, the issue is the extent
of the operations performed and whether the parts lose their
identity and become an integral part of the new article.
Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149
(1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (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. 80-111, C.S.D. 85-25, C.S.D. 89-110,
C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. The issue of
whether a substantial transformation occurs is determined on a
case-by-case basis.
In Headquarters Ruling Letter 733301 dated August 8, 1990,
Customs considered a situation in which U.S.- made knife blade
blanks, wooden or plastic handles, and rivets were shipped to
Mexico for assembly, sharpening of the blade, and packaging for
shipment to the U.S.
Although there was little information describing the assembly
process, we indicated that the assembly of the parts into a
finished knife plus sharpening the blade were minor finishing
operations which did not result in a substantial transformation.
In the first scenario, the Taiwanese made knife blade and
handle are sent to China for assembly of the knife and for
polishing. The assembly of the blade to the handle appears to be
a simple operation, similar to the processing described in HRL
733301 and thus would not result in a substantial transformation
of these components. Therefore, under the first scenario, the
country
of origin of the knife would be Taiwan-- where the blade and
handle are made. Because the components of the sheath are made
and assembled in Taiwan, its country of origin would also be
Taiwan.
Country of Origin of the Knife and Sheath under the Second
Scenario
In the second scenario (as in the first), the knife blade
and handle will be manufactured in Taiwan but sent to China for
assembly into the finished knife. For the reasons articulated
above, we find that the country of origin of the knife under the
second scenario would be Taiwan. With respect to the sheath, the
parts will be made in Taiwan but will be sent to China for
assembly. Although no information was submitted regarding the
assembly of the sheath, it appears to be a relatively simple
operation involving a small number of components. Accordingly,
we believe that the assembly of the sheath in China from
Taiwanese parts would also not result in a substantial
transformation. Therefore, the country of origin of the
assembled sheath would also be Taiwan. Consquently, in both
scenarios one and two, the country of origin of the finished
knives and sheathes would be Taiwan.
Marking Requirements for the Knife and the Sheath under Scenarios
One and Two
The next issue concerns how the knives and the sheathes must
be marked to indicate their country of origin. In the first
scenario, the knife will not be marked with its country of
origin, but the sheath will have a country of origin marking
molded into the plastic. In the second scenario, the country of
orgin marking will etched into the knife blade and the sheath
will also continue to be marked with its country of origin molded
into the plastic. However, based on the sample submitted, it
appears that the country of origin markings on the knife blade as
well as the sheath will be obscured and will not be visible
through the polybag in which it will be sold.
Section 134.43, Customs Regulations (19 CFR 134.43) requires
that certain types of articles be marked in a specified manner.
Knives are specifically identified in this regulatory provision
as articles that must be marked legibly and conspicuously by die
stamping, cast-in-the-mold lettering, etching, or engraving.
However, Customs has previously ruled that such articles may be
excepted from individual marking if the marking of their
containers will reasonably indicate the origin of the articles
pursuant to 19 CFR 134.32(d). See HRL 733301, dated August 8,
1990, and HRL 732437, dated October 4, 1989. Here, you indicate
that the knives in both scenarios will always be sold to
consumers in heat sealed polybags and that they will not be
repacked after importation. As such, we find that if the plastic
bag as a container is marked with the country of origin of the
knife and sheath, then the knife and sheath would be excepted
from having to be marked with their country of origin pursuant to
19 CFR 134.32(d). Therefore, under scenario one, the country of
origin of knife can be marked on the polybag instead of on the
knife itself. Because the country of origin of both the knife
and the sheath is the same, one marking on the polybag indicating
the country of origin for both the sheath and knife would be
acceptable .
In a situation such as scenario two, where the knives and
sheathes are individually marked, but such markings are not
clearly visible through the sealed polybags, to ensure that
potential ultimate purchasers are informed regarding the country
of origin of the knives and sheathes, the polybags also must be
marked to indicate the country of origin of the knives and
sheathes. See Section 134.24(d)(2), Customs Regulations (19 CFR
134.24(d)(2)). However, putting a conspicuous country of origin
marking on the insert card which is clearly visible through the
polybag is an acceptable method of marking.
HOLDING:
The assembly of the Taiwanese made blade and handle in China
in both scenarios does not result in a substantial
transformation. Similarly, in scenario two, the assembly of the
Taiwanese sheath parts in China does not result in a substantial
transformation. Therefore, in both scenarios, the country of
origin of the finished knife and sheath is Taiwan. If the knives
and sheathes are sold to the ultimate purchasers in unopened heat
sealed polybags which are properly marked to show the country of
origin of the knives and sheathes, then the knives and sheathes
would be excepted from being marked with their country of origin
pursuant to 19 U.S.C. 1304(a)(3)(D) and 19 CFR 134.32(d).
A copy of this 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