MAR-2-05 CO:R:C:V 733037 KG
Harold I. Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, N.Y. 10017
RE: Country of origin marking of imported wooden frame to be
assembled into picture frame; combining; substantial
transformation.
Dear Mr. Loring:
This is in response to your letter of January 10, 1990,
requesting a country of origin ruling on behalf of M.W. Carr &
Co., regarding imported wooden frames which you referred to as
"wooden shells", to be assembled into picture frames. We regret
the delay in responding to your inquiry.
FACTS:
You submitted a sample imported wood frame and a finished
picture frame. The imported wood frame has the appearance of the
front of an ornate gold-colored picture frame with decorative
carving in the corners.
In the U.S., the frames are inspected, touched up with
sanding stone, stains, and waxes, as necessary. Depending upon
the style, the shells are then either sent to the assembly
station for assembly with U.S. components into finished picture
frames or, prior to such assembly, further processed into a
completed component which is then ready for assembly. For
instance, in the case of Style 470, a vinyl strip must be cut to
size, notched, formed into a channel and then permanently affixed
to the back of the frame. On the other hand, the configuration
of the wood of Style 771 permits the back-stand (easel) portion
to slide easily into the frame.
At the assembly station, the glass, the lithograph, filler
board, hang clip, labels and the back-stand (easel) are attached
to the frame.
The backstand is made out of chipboard which is cut to size
and either wrapped on two sides with paper or four sides with
cloth. The stand portion is cut to size and laminated with paper
or cloth and then die-cut.
No cost figures were submitted with regard to the foreign or
domestic processing.
ISSUE:
Whether the wooden frames are substantially transformed
when they are combined in the U.S. with a back and a piece of
glass and assembled as described above.
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 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. Section 134.35, Customs Regulations (19 CFR
134.35), states that the manufacturer or processor in the U.S.
who converts or combines the imported article into a different
article having a new name, character or use will be considered
the ultimate purchaser of the imported article within the
contemplation of 19 U.S.C. 1304 and the article shall be
excepted from marking. The outermost containers of the imported
articles shall 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 48, 628 F.Supp. 978 (CIT 1986), Koru North America v. United
States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988).
Two court cases have considered the issue of whether
imported parts combined in the U.S. with domestic parts were
substantially transformed for country of origin marking purposes.
In the first case, Gibson-Thomsen Co., the court held that
imported wood brush block and toothbrush handles which had
bristles inserted into them in the U.S. lost their identity as
such and became new articles having a new name, character and
use. One of the factors considered by the court in reaching its
conclusion was that the domestic bristles used were "by far the
most valuable element." Also, the court looked at whether the
imported article loses its identity as such when combined with
other articles. In that case, the court concluded that wood
handles were mere materials to be used in the manufacture of
toothbrushes and hairbrushes. The court was also concerned that
when an imported article was combined with a domestic material,
that the ultimate purchaser not be confused into thinking that
the domestic article was made in a foreign country. Therefore,
the court concluded that a mere material to be used in the
manufacture of a new article having a new name, character and use
and which, became an integral part of the new article would not
be required to be marked. In contrast to the imported handles in
Gibson-Thomsen, the imported frames involved here cannot be
considered to be "mere materials" used in the manufacture of the
finished articles. To the contrary, the most important element
in terms of appearance and use of the finished product is the
imported frame.
The second case involved imported shoe uppers which were
combined with domestic soles in the U.S. The imported uppers were
held in Uniroyal, Inc., v. U.S., 542 F.Supp. 1026, 3 CIT 220 (CIT
1982), to be the "essence of the completed shoe" and therefore,
not substantially transformed. The court described the imported
uppers as "complete shoes except for an outsole." The shoe had
already "obtained its ultimate shape, form and size." One
process performed in the U.S., relasting, was characterized as
"convenient, not necessary". The processes performed in the
U.S. were significantly less costly and less time consuming than
the foreign manufacturing process. The cost of the upper was
significantly greater than the cost of the outsole. Further, the
manufacture of the upper required at least five highly skilled
operations. The court concluded that the attachment of the
outsole was a minor manufacturing or combining process which
leaves the identity of the upper intact. This case is like
Uniroyal because the imported frames are not only important to
the finished product, but also are the very essence of the
finished product. While the back of the frame is necessary for
the completed frame to be functional, the imported frame
possesses all the essential qualities of the finished picture
frame. Further, the physical appearance of the final product,
which is a very important characteristic of a decorative item
such as this, is determined by the imported wood frame. While
this imported wood frame does undergo a change in name, the
court stated in National Juice that a change in name is the
least important factor to be considered and is not determinative.
In HQ 731432 (June 6, 1988), Customs set forth some factors
to be considered in determining whether imported goods combined
in the U.S. with domestic products were substantially
transformed for country of origin marking purposes. The
following six factors were considered:
1) whether the article is completely finished;
2) the extent of the manufacturing process of combining the
article with its counterparts as compared with the manufacturing
of the subject article;
3) whether the article is permanently attached to its
counterparts;
4) the overall importance of the article to the finished
product;
5) whether the article is functionally necessary to the
operation of the finished article, or whether it is an accessory
which retains its independent function; and
6) whether the article remains visible after the combining.
These factors are not exclusive and there may be other
factors relevant to a particular case and no one factor is
determinative. See HQ 728801 (February 26, 1986).
While some minor finishing may be performed on the imported
frames, the sample submitted appears to be a finished piece. The
attachment of the vinyl strip, which is required on one style,
appears to be a very minor operation which is not complex,
requires no skill and is not time-consuming. In this case, no
information was given regarding the extent of the manufacturing
process of combining the imported frame with its components but
it does not appear to be a complex, expensive or time-consuming
operation. The frame is permanently attached to its domestic
counterparts and is the most important component to the finished
product. There is no doubt that the imported frame is
functionally necessary to the use of the finished picture frame
and that it remains highly visible after the combining. Based on
our consideration of all these factors, we conclude that these
imported wood frames are not substantially transformed in the
U.S. The U.S. manufacturer would not be considered the ultimate
purchaser of the frames under 19 CFR 134.35.
HQ 726001 (September 11, 1984), cited in support of your
position that these frames are substantially transformed,
provides no details concerning the operation involved in that
case and therefore, it is not possible to determine whether the
combining operation involved in making a mechanical pencil is
similar to this case or not. The other ruling cited, HQ 725959
(August 9, 1984), involved an imported product which is very
different from the wood frames involved in this case. That case
involved imported chair castors which were attached to chairs by
original equipment manufacturers. Customs ruled in that case
that the original equipment manufacturer was the ultimate
purchaser of the castors. Although it was not discussed in that
case, chair casters are a relatively minor component of a
finished chair and therefore, that case is distinguishable from
this case.
Section 134.1(d), Customs Regulations (19 CFR 134.1(d)),
defines the ultimate purchaser as generally the last person in
the U.S. who will receive the article in the form in which it was
imported. The definition then gives examples of who might be the
ultimate purchaser if the imported article is used in
manufacture, if the imported article is sold at retail in its
imported form and if an imported article is distributed as a
gift. If an article is to be sold at retail in its imported
form, the purchaser at retail is the ultimate purchaser. Since
the frames are not substantially transformed, it is not
considered to undergo a change in its imported form. Therefore,
the retail purchaser of the finished picture frames are
considered the ultimate purchaser of the imported frames. The
frames must be marked with its country of origin to inform the
ultimate purchaser of its origin.
HOLDING:
These imported wood frames are not substantially
transformed in the U.S. Therefore, the U.S. manufacturer is not
the ultimate purchaser of the imported frames. The retail
purchaser of the finished picture frame is considered the
ultimate purchaser of the imported wood frame. The imported wood
frames must be marked to indicate its country of origin to the
ultimate purchaser in the U.S.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch