CLA-2 CO:R:C:V 732574 EAB
Murray J. Belman, Esquire
Thompson & Mitchell
1120 Vermont Avenue, N.W.
Washington, DC 20005
Re: Country of origin marking exceptions for cold
finished steel bar products
Dear Mr. Bellman:
This is in response to your letter dated July 13, 1989, in
which you request, on behalf of the Cold Finished Steel Bar
Institute, reconsideration of that portion of HQ 732196, May 16,
1989, which pertained in part to the applicability of 19 U.S.C.
1304(a)(3)(G) to imported hot-rolled steel bars which are
processed in the U.S. but not substantially transformed into
cold-finished bars.
FACTS:
You assert that hot-rolled bar processed into cold finished
bar in the U.S. by the importer or for his account would fall
within the marking exception of 19 U.S.C. 1304(a)(3)(G), and
that, pursuant to 19 U.S.C. 1304(b) and 19 CFR 134.22(d)(1), the
steel band containers of such imported articles are excepted from
marking as well. We regret the delay in responding.
ISSUE:
What are the country of origin marking requirements of an
article processed but not substantially transformed in the U.S.?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires 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 the English
name of the country of origin of the article. Articles to be
processed in the U.S. by the importer or for his account
otherwise than for the purpose of concealing the origin of such
articles and in such manner that any mark contemplated by this
section would necessarily be obliterated, destroyed, or
permanently concealed are excepted from marking under 19 U.S.C.
1304(a)(3)(G) and 19 CFR 134.32(g). The containers in which
these articles are imported are excepted from marking as provided
in 19 U.S.C. 1304(b) and 19 CFR 134.22(d)(1).
In HQ 732196, Customs found that no evidence was presented
to support a marking exception under 19 U.S.C. 1304(a)(3)(G), and
we noted that articles excepted from marking under this provision
must be marked with the country of origin after the U.S.
processing, citing HQ 729434, May 23, 1986. You indicate that
cold finished bars are produced in two basic steps: descaling (by
acid pickling or mechanical shot blasting) and cold working (by
drawing the product through a die, turning and/or grinding). You
further indicate that the imported product is excepted from
marking because any of these processes would necessarily
obliterate any marking that might be applied to the hot-rolled
bar itself.
Based on the information presented in your letter, it
appears that there is no marking of the hot-rolled steel bar that
would not be necessarily obliterated in the processing of it into
cold finished products. In view of this, we are of the opinion
that hot-rolled steel bars subjected to the cold finishing
process that you have described may be excepted from marking
under 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g) if the
importer demonstrates to the satisfaction of the District
Director that the requirements of these provisions are satisfied.
In such event, their containers would be excepted from marking
pursuant to 19 U.S.C. 1304(b) and 19 CFR 134.22(d)(1) at the time
of importation.
You are also of the opinion that once an article qualifies
for the "G" exception, Customs has no authority to require
marking of the processed article or its container. We disagree.
The purpose of the marking statute is outlined in United States
v. Friedlaender & Co., 27 CCPA 297 at 302 (1940): "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."
(emphasis added).
As provided in 19 CFR 134.1(d)(1), if an imported article
will be used in manufacture, the manufacturer may be the ultimate
purchaser if he subjects the imported article to a process which
results in a substantial transformation of the article. The
courts and Customs have long recognized that not every
manufacturing process results in a substantial transformation.
Thus, if the manufacturing process is merely a minor one which
leaves the identity of the imported article intact, the consumer
or user of the article, who obtains the article after the
processing, will be regarded as the ultimate purchaser, 19 CFR
134.1(d)(2). In such case, we believe that the processed article
(or its container) is subject to marking.
Our interpretation is consistent with the purpose of the
marking statute. The purpose of the statute would be frustrated
if a processor who is not the ultimate purchaser obliterates the
mark and does not remark the article, thereby denying the
ultimate purchaser his right to make an informed decision. The
exception in 19 U.S.C. 1304(a)(3)(G) must be considered to be a
practical concession to reality: requiring imported articles or
their containers to be marked with the country of origin at the
time of importation when such marking would necessarily be
obliterated during subsequent processing that does not result in
a substantial transformation would neither effectuate the
congressional intent nor serve the purpose of the marking law.
Therefore, we remain of the opinion that the finished
article must be marked in a manner to indicate the country of
origin to the ultimate purchaser.
You also indicate that HQ 729434 should be read to provide
that only the containers of articles excepted under 19 U.S.C.
1304(a)(3)(G) must bear the country of origin marking of the
processed articles within. We do not believe that such a
restrictive reading is appropriate. In that case, Customs
determined that certain imported articles were excepted from
marking under this provision because "any mark placed on them
prior to importation would be obliterated or destroyed in the
U.S. finishing operations." However, the decision states that
"the retail packages for the finished articles shall be marked to
indicate Mexico as the country of origin." The significance of
this ruling is the determination that the processed article had
to be marked in a manner to indicate the country of origin to the
ultimate purchaser. If, as in HQ 729434, the processed article
is to be sold to the ultimate purchaser in a container, it would
be acceptable to mark the container.
HOLDING:
In conclusion, we affirm HQ 732196 in its entirety, and
specifically state that an article and, therefore, its container,
excepted under 19 CFR 134.32(g) and 19 CFR 134.22(d)(1),
respectively, but not substantially transformed as a result of
domestic processing, must itself (or its container) be marked in
any reasonable method by the U.S. manufacturer/processor who
obliterates the marking during the processing.
Sincerely,
John Durant, Director
Commercial Rulings Division