MAR 2-05 R:C:S 735589 AT
District Director of Customs
300 South Ferry Street
Terminal Island, California 90731
RE: Internal Advice request concerning the country of origin
marking requirements for imported retreaded truck tires;
retreading of truck tires in Korea; substantial
transformation; 19 CFR 134.35; Article 509; NAFTA Marking
Rules; 19 CFR 102.11(a)(3)
Dear Sir:
This is in response to your memorandum dated May 19, 1994,
requesting internal advice on the country of origin marking
requirements for retreaded truck tires imported by DNA Specialty,
Inc. ("DNA") from Korea. We regret the delay in responding.
FACTS:
You state that DNA imports retreaded truck tires from Korea.
Dong Ah Tire Co., located in Korea purchases used tires from the
domestic market in Korea marked with various countries of origin,
such as "USA", "Canada" and "Japan". The tires exhibiting these
markings enter Korea as new tires. The tires are used and
retreaded in Korea. Dong Ah retreads the tires and sells them to
DNA.
DNA has requested advice concerning the country of origin
marking requirements for the imported retreaded truck tires. DNA
believes that the retreading of the tires constitutes a
substantial transformation and thus proposes to obliterate the
words "USA", "Canada" and "Japan" that appear on the used tires
and mark the retreaded tires as products of Korea.
ISSUE:
What are the country of origin marking requirements for
truck tires which are to be retreaded in Korea from used foreign
tires in the manner described above and imported into the U.S.
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.
Section 134.1(b), Customs interim 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 this part; however, for
a good of a NAFTA country, the NAFTA Marking Rules will
determine the country of origin. (Emphasis added).
Country of Origin Marking Requirements of the Imported Retreaded
Tires Processed in Korea From Used Tires of U.S. and Japanese
Origin:
The country of origin marking requirements for the imported
retreaded tires that are retreaded in Korea from used tires of
U.S. and Japanese origin depends upon whether a substantial
transformation occurs in Korea as a result of the retreading
operation performed there. If the used tires are substantially
transformed as a result of the retreading operation, then the
country of origin of the retreaded tires is Korea.
For country or origin purposes, a substantial transformation
occurs when an article loses its identity and becomes a new
article having a new name, character or use. United States v.
Gibson-Thomsen Co., 27 CCPA 267 (1940); National Juice Products
Association v. United States, 10 CIT 48 (1986). Whether a
substantial transformation occurs is determined on a case-by-case
basis.
In this case, we find that the U.S. and Japanese used tires
are substantially transformed as a result of the retreading
operation performed in Korea. The retreading operation changes the name, character and use of the used U.S. and Japanese tires.
After the retreading operation is completed, the used tire has a
new name, "retreaded tire". Also, the retreaded tire is
recognized as a commercially new type of tire with a different
use and character from that of the used tire. Retreaded tires
are classified under a separate subheading 4012.10, HTSUS, from
used tires, subheading 4012.20, HTSUS. Thus, the U.S. and
Japanese origin used tires are substantially transformed as a
result of the retreading operation performed in Korea.
Accordingly, the country of origin of the imported retreaded
tires is Korea and the retreaded must be marked to indicate Korea
as the country of origin of the imported tires.
Country of Origin Marking Requirements of the Imported Retreaded
Tires Processed in Korea From Used Tires of Canadian Origin:
The country of origin marking requirements for a "good of a
NAFTA country" are determined in accordance with Annex 311 of the
North American Free Trade Agreement ("NAFTA"), and Part 102 and
134, Customs Interim Regulations (19 CFR Part 102 and 134).
Section 134.1(j) of the interim regulations, provides that
the "NAFTA Marking Rules" are the rules promulgated for purposes
of determining whether a good is a good of a NAFTA country.
Section 134.1(g) of the interim regulations, defines a "good of a
NAFTA country" as an article for which the country of origin is
Canada, Mexico or the United States as determined under the NAFTA
Marking Rules. Section 134.45(a)(2) of the interim regulations,
provides that a "good of a NAFTA country" may be marked with the
name of the country of origin in English, French or Spanish.
You state that Canadian used tires will also be retreaded in
Korea and then imported into the U.S. as retreaded tires. Thus,
in order to determine the appropriate marking requirements for
the retreaded tires that are retreaded in Korea we must apply
the NAFTA Marking Rules.
Part 102 of the interim regulations, sets forth the "NAFTA
Marking Rules" for purposes of determining whether a good is a
good of a NAFTA country for marking purposes. Section 102.11 of
the interim regulations, sets forth the required hierarchy for
determining country of origin for marking purposes. Section
102.11(a) of the interim regulations states that "[t]he country
of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic
materials; or (3) Each foreign material incorporated in that good
undergoes an applicable change in tariff
classification set out in section 102.20 and
satisfies any other applicable requirements of that
section, and all other requirements of these rules
are satisfied."
"Foreign Material" is defined in section 102.1(e) of the interim
regulations as "a material whose country of origin as determined
under these rules is not the same country as the country in which
the good is produced."
For purposes of this ruling, we are assuming that the used
tires marked "Canada" are goods of Canada either under
102.11(a)(1) or (2). Thus, the retreaded tires processed in
Korea are neither wholly obtained/produced nor produced
exclusively from domestic materials. Therefore, paragraphs
(a)(1) and (a)(2) of section 102.11 cannot be used to determine
the country of origin of the retreaded tires. Thus, paragraph
(a)(3) of section 102.11 is the applicable rule that next must be
applied to determine the origin of the finished article.
The retreaded tires are classified under subheading 4012.10,
HTSUS. The used tires are classified under subheading 4012.20,
HTSUS. The applicable change in tariff classification set out in
section 102.20(g), Section VII, Chapters 39 through 40, 4011.10-4012.90 of the interim regulations provides:
4011.10-4012.90 .... A change to subheading 4011.10
through 4012.90 from any other subheading, including
any subheading within the group
In this case, the used tires do undergo the applicable
change in tariff classification set out in section 102.20(g),
and, as a result, the country of origin of the retreaded tires is
Korea, where the retreading operation takes place.
Since the used U.S., Japanese and Canadian tires become
products of Korea as a result of the retreading operation, it is
permissible for DNA to obliterate the "U.S.", "Japan" and
"Canada" markings appearing on the tires and mark the retreaded
tires as products of Korea.
HOLDING:
U.S. and Japanese used tires which are retreaded in Korea,
in the manner described above, are substantially transformed as a
result of the retreading operation. Accordingly, the country of
origin of the retreaded tires is Korea. Pursuant to section 102.11(a)(3) of the interim amendments
to the Customs Regulations, Canadian used tires which are
retreaded in Korea, in the manner described above, undergo the
applicable change in tariff classification set out in section
102.20(g), and the country of origin of the retreaded tires is
Korea.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter. On that date the Office of Regulations and Rulings
will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, LEXIS, Freedom of
Information Act and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division