MAR-2-05 CO:R:C:V 732769 KG
District Director of Customs
Baltimore, Maryland
RE: Country of origin marking of imported footwear uppers
for baby shoes
Dear Sir:
This is in response to your memorandum of September 15,
1989 (MAR:2:05:DD:CO:TT:IS:I EB), regarding the country of origin
marking of imported footwear uppers.
FACTS:
You requested advice concerning the proper country of origin
marking of 3 styles of imported footwear uppers for baby shoes.
Style 860 is a baby shoe upper composed of canvas, cotton bias
binding, aluminum eyelets, thread and lasting cord. All of the
components are of U.S. origin. In the U.S. the components are
bundled and shipped to the Dominican Republic. In the Dominican
Republic, the binding is stitched to the edges of the quarter and
tongue and the binding ends are trimmed. The counter is stitched
to the quarter and the eyelets are inserted. The tongue is
stitched on and the lasting cord is attached to the bottom edge
of the upper. The completely open-bottomed uppers are then
bundled and sent to the U.S. In the U.S., the importer will heat
the uppers on an injection machine, string last the upper and
direct attach the sole with an injection moulding machine. The
shoe is stripped from the last and the insole is cemented,
inspected and laced. A cost breakdown, photo of the components
and sample were submitted for examination.
Style 800, a slip-on, is also composed of U.S. origin
components. As with Style 860, the upper is assembled in the
Dominican Republic to the point of being a completely open-
bottomed upper with the lasting cord attached. In the U.S. the
same processes, with the exception of lacing, are performed. A
sample was submitted for examination.
Style 290 is composed of fabric, thread, eyelets, a vinyl
coated insole and a shoelace. In the U.S. the vamp, tongue,
quarter and outsole are cut to shape from imported Taiwanese
fabric. The components are then shipped to the Dominican
Republic where the topband is stitched to the quarter. Eight
eyelets are installed. The counter is cemented into place and
then sewn to the quarter. The quarter and tongue are then
fitted and stitched to the vamp. The upper is then cleaned,
inspected and trimmed. Next, the outsole is stitched to the
upper. The footwear that is imported into the U.S. has the
appearance of a shoe with a closed canvas bottom. The footwear
returned to the U.S. are heated and turned over a turning iron.
The insole is cemented and then inserted into the shoe. The shoe
is then stretched over a plastic last. After removal from the
last, the shoe is cleaned, inspected, laced and packed.
ISSUE:
Whether the three styles of baby footwear are substantially
transformed in the U.S.
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 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. The Court of
International Trade stated in Koru North America v. United
States, 701 F.Supp. 229, 12 CIT (CIT 1988), that: "In
ascertaining what constitutes the country of origin under the
marking statute, a court must look at the sense in which the term
is used in the statute, giving reference to the purpose of the
particular legislation involved. The purpose of the marking
statute is outlined in United States v. Friedlaender & Co., 27
CCPA 297, 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. The ultimate purchaser is defined in section
134.1(d), Customs Regulations (19 CFR 134.1(d)), as generally the
last person in the United States who will receive the article in
the form in which it was imported. If the 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. In such
case, the article itself is excepted from marking pursuant to
section 134.35, Customs Regulations (19 CFR 134.35),
and only the outermost container of the imported article must be
marked.
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), National Juice Products Association
v. United States, 10 CIT ___, 628 F.Supp. 978 (CIT 1986), Koru
North America v. United States, 12 CIT ___, 701 F.Supp. 229
(CIT 1988).
In the leading country of origin marking case involving
imported shoe uppers, Uniroyal, Inc. v. United States, 3 CIT 220,
542 F. Supp. 1026 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983),
the Court of International Trade considered whether the addition
of an outsole in the U.S. to imported uppers substantially
transformed the uppers. The court described the imported upper,
which resembled a moccasin, and the process of attaching the
outsole to the upper. The factors examined included: a
comparison of the time involved in attaching the outsole versus
the time involved in manufacturing the upper, a comparison of the
cost involved in the process of attaching the outsole versus the
cost involved in the process of manufacturing the upper, a
comparison of the cost of the imported upper versus the cost of
outsole and a comparison of the number of highly skilled
operations involved in both processes. The court concluded that
a substantial transformation of the upper had not occurred since
the attachment of the outsole to the upper is a minor
manufacturing or combining process which leaves the identity of
the upper intact. The upper was described as a substantially
complete shoe and the manufacturing process taking place in the
U.S. required only a small fraction of the time and cost involved
in producing the upper.
In this case, style 800 in its imported condition is not a
substantially complete shoe and does not have the physical
appearance of a shoe. The imported article is not shaped or
formed into a shoe and also has no bottom. A comparison of the
cost figures for style 800 indicate that the labor costs incurred
in the Dominican Republic are only $0.18, while the U.S. labor
costs are $0.37. Style 800 becomes a baby shoe, a new and
different product in the U.S. It undergoes a change in name
from an upper to a baby shoe and also undergoes a change in
character. Style 800 is substantially transformed in the U.S.
into a baby shoe, an article with a new name and characteristics
than the imported unformed upper. In accordance with 19 CFR
134.35, the imported uppers known as style 800 are excepted from
country of origin marking and only the outermost container in
which style 800 is imported must be marked.
Style 860 in its imported condition is also not a
substantially complete shoe and does not have the physical
appearance of a shoe. The imported article is not shaped or
formed into a shoe and has no bottom. Further, like style 800,
the cost figures for style 860 indicate that the operations
performed in the Dominican Republic cost only $0.18, while the
cost of operations performed in the U.S. is $0.36. Like style
800, style 860 becomes a new and different product in the U.S.
The upper undergoes both a change in name and in character in the
U.S. Consequently, style 860 is substantially transformed in
the U.S. into a baby shoe, an article with a new name and
characteristics than the imported unformed upper. Therefore, in
accordance with 19 CFR 134.35, the imported uppers known as style
860 are excepted from country of origin marking and only the
outermost container in which style 860 is imported must be
marked.
In contrast to styles 800 and 860, style 290 does have the
appearance and characteristics of a soft moccasin, including a
closed bottom and the form and shape of a shoe, like the imported
upper described in Uniroyal. Although the operations performed
in the U.S. cost $0.42 while the operations performed in the
Dominican Republic cost only $0.25, the product exported from the
Dominican Republic resembles a shoe and does not require
significant processing to complete the baby shoe. Though style
290 does undergo a change in name from an upper to a baby shoe, a
change in name alone is not determinative. Style 290 does not
undergo a significant change in character. The imported upper
physically resembles a shoe and has a closed bottom. Therefore,
style 290 is not substantially transformed in the U.S. and must
be marked with the country of origin. Since the uppers are not
substantially transformed in the U.S., the retail purchaser and
not the U.S. manufacturer is the ultimate purchaser. Therefore,
the imported articles must be individually marked to indicate the
country of origin to the retail purchaser in the U.S.
HOLDING:
Style 290, described above, is not substantially
transformed in the U.S. and must be individually marked to
indicate the country of origin to the retail purchaser in the
U.S. Styles 800 and 860, described above, are substantially
transformed in the U.S. and pursuant to 19 CFR 134.35, only the
outermost container in which these imported styles are contained
must be marked with the country of origin.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch