Mar-2-05 CO:R:C:V 735338 AT
Steven H. Becker, Esq.
Coudert Brothers
114 Avenue of the Americas
New York, New York 10036-7794
RE: Country of origin marking of athletic footwear; unformed
uppers further processed into finished footwear; substantial
transformation; HQ 953017; HQ 730155
Dear Mr. Becker:
This is in response to your letter of August 12, 1993, on
behalf of Fila USA Inc. ("Fila"), requesting a ruling on the
country of origin marking requirements for athletic footwear
imported into the U.S. from Italy. Samples, including an open
unlasted upper, a closed lasted upper, an outsole, and completed
footwear were submitted with your letter. We regret the delay in
responding.
FACTS:
You state that Fila is contemplating the purchase of certain
footwear on which it wishes to mark "Made in Italy". According
to your submission the production of the athletic footwear will
involve processing operations performed in two countries, the
Czech Republic and Italy. You state that the leather upper of
the footwear is cut and stitched in the Czech Republic from
Italian-origin materials and then imported into Italy completely
open and unlasted. The processes performed in the Czech Republic
involve 26 minutes of labor and incur a cost of $2.90 per upper.
In Italy, the upper is placed on a last, a lasting board is
applied, and the midsole and outsole are mounted. In addition,
two of the component parts are manufactured in Italy before being
incorporated into the completed shoe: (1) the outsole is pressed
from vulcanized rubber, and (2) the midsole is pressed in ethy
vinyl acetate. The cost involved in lasting the shoe and
attaching the midsoles and outsoles is $4.20 per shoe. The cost
of the Italian-made materials is approximately $8.65 for the
upper and $6.90 for the outsole, including the materials for
assembling.
It is your position that the lasting of the upper and the
mounting of the midsole and the outsole result in a substantial
transformation of the upper in Italy, which together with the
manufacture in Italy of the outsole and midsole, result in
footwear that must be marked "Made in Italy".
ISSUE:
What is the country of origin of the imported athletic
footwear processed in the manner described above for
purposes of 19 U.S.C. 1304?
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. 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 goods is the product.
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. Section 134.1(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 this part." For country of
origin marking purposes, a substantial transformation occurs when
an article loses its identity and becomes a new article having a
new name, character, or use. Koru North America V. United
States, 12 CIT 1120, 701 F. Supp. 229 (1988).
In this case, the Italian-made materials are substantially
transformed in the Czech Republic where they are cut and stitched
into a completely opened and unlasted footwear upper. Taking a
raw material, such as leather, which has many uses and processing
it into a completely opened and unlasted footwear upper, only
having one use (part of a shoe), results in a change in the name,
character and use of that material. Therefore, the only issue
that remains is whether the processing performed in Italy to the
completely opened and unlasted upper from the Czech Republic
results in a substantial transformation of the upper so that
Italy becomes the country of origin of the finished footwear. You state that, in Italy, the completely opened and unlasted
upper is placed on a last, a lasting board is applied, and the
Italian-made midsole and outsole are mounted producing the
finished shoe. You also state that the cost involved in lasting
the shoe and attaching the midsoles and outsoles is $4.20 per
shoe.
In HQ 730155 (October 4, 1989), Customs considered whether
open-bottomed shoe uppers were substantially transformed as a
result of the process of lasting and the attachment of outsoles
into the completed shoe. In considering whether the open-
bottomed uppers were substantially transformed, Customs examined
whether the uppers were "substantially complete" prior to the
attachment of the outsole, or alternatively, whether the upper
had the "very essence" of a completed shoe. In that case,
Customs found that an upper that had not been lasted or soled did
not have the "very essence" of a shoe and therefore was
substantially transformed when the shoe was subsequently lasted
and soled. See also, HQ 953017 (January 29, 1993).
Similarly, in this case, the completely open and unlasted
upper imported into Italy cannot be considered to have the very
essence of a completed shoe. Although the sample open and
unlasted upper looks like an unfinished shoe upon our
examination, as was the case with the open-bottomed unlasted shoe
uppers in HQ 730155, it does not have the "very essence" of a
completed shoe. However, the upper is substantially transformed
as a result of the processes performed in Italy (lasting and the
attachment of the midsole and outsole) because the finished
article (shoe) now has the "very essence" of a completed shoe.
Accordingly, the completely opened and unlasted upper from the
Czech Republic is substantially transformed as a result of the
processes performed in Italy and the country of origin of the
imported athletic footwear for marking purposes is Italy.
HOLDING:
For purposes of 19 U.S.C. 1304, the country of origin of the
imported athletic footwear which is processed in the manner
described above is Italy.
Sincerely,
John Durant, Director
Commercial Rulings Division