CLA-2 CO:R:C:M 953017 DFC
Steven P. Florsheim, Esq
Grunfeld, Desiderio, Lebowitz & Silverman
Counselors at Law
12 East 49th Street
New York, New York 10017
RE: Footwear; Uppers, sheepskin; Formed uppers, Unformed
uppers; Uniroyal v. United States, 3 CIT 220 (1982);
Substantial transformation
Dear Mr. Florsheim:
In a letter dated October 2, 1992, on behalf of Ugg
International, Inc., you inquired as to the tariff classification
under the Harmonized Tariff Schedule of the United States
(HTSUS), of parts of shearling boots which will be produced in
either Australia or New Zealand. You also made inquiry as to the
proper country of origin marking of the merchandise. Samples
were submitted for examination.
FACTS:
The importations will consist of the following footwear
parts:
1. an open bottomed upper [sample no. 1],
2. a boot upper with an insole assembly attached by
stitching [sample no. 2]; and
3. an insole assembly [sample no. 3] which will be
attached to sample no. 1 after importation.
The uppers involved are made by sewing together pieces of
shearling cut from entire sheepskins. The flesh side of the
shearling forms the outer surface of the uppers and the wool side
forms the inner surface of the uppers. The insole assembly is
made from a cut piece of shearling to which a cardboard-like
material is attached by stitching.
-2-
It is your position that the open bottomed upper [sample no.
1] and the boot upper with an insole assembly attached by
stitching [sample no. 2] are unformed uppers which are properly
classifiable under subheading 6406.10.90, HTSUS, as uppers and
parts thereof, other than stiffeners, other, other, other, other.
It is also your position that the insole assembly [sample no. 3]
is classifiable under subheading 6406.99.90, HTSUS, as parts of
footwear, other, other.
ISSUE:
Is the boot upper with no sole components attached [sample
no. 1] and the boot upper with an insole assembly attached by
stitching [sample no. 2] considered unformed uppers for tariff
purposes?
Should the uppers and the insole assembly be granted an
exemption from individual marking pursuant to 19 C.F.R. 134.35?
LAW AND ANALYSIS:
Classification of goods under the HTSUS is governed by the
General Rules of Interpretation (GRI's). GRI 1 provides that
"classification shall be determined according to the terms of the
headings and any relative section or chapter notes, and provided
such headings or notes do not otherwise require, according to
[the remaining GRI's taken in order]." In other words,
classification is governed first by the terms of the headings of
the tariff and any relative section or chapter notes.
Additional U.S. Note 4 to Chapter 64, HTSUS, which is
pertinent here, reads as follows:
Provisions of subheading 6406.10 for "formed uppers"
cover uppers, with closed bottoms, which have been
shaped by lasting, molding or otherwise but not by
simply closing at the bottom.
Inasmuch as the upper represented by sample no. 1 is an open
bottomed upper, it is considered an unformed upper for tariff
purposes classifiable under subheading 6406.10.90, HTSUS, as
uppers and parts thereof, other than stiffeners, other, other,
other, other. The applicable rate of duty for this provision is
9% ad valorem.
-3-
You assert that the boot upper with an insole assembly
attached by stitching [sample no.2] "does not meet the second
requirement for a 'formed upper' under U.S. note 4 because it has
not been 'shaped by lasting, molding or otherwise.' The upper
was constructed merely by cutting and sewing together pieces of
sheepskin leather. The bottom of the upper was closed by merely
stitching on an insole assembly, which consists of a piece of
shearling stitched to a cardboard-like material. The upper is
not given its complete and final shape until it is lasted and an
outer sole attached, subsequent to importation."
It is our observation that the boot upper with an insole
assembly attached by stitching [sample no. 2] has already
attained it final shape. Specifically, a "stitch-out" of the
upper to a cardboard insole previously stitched (except for its
edge area) to a shearling sock is not a "simple closing" within
the meaning of Additional U.S. Note 4 to Chapter 64, supra.
Consequently, the boot upper represented by sample no. 2 is
classifiable under subheading 6406.10.50, HTSUS, as uppers and
parts thereof, other than stiffeners, formed uppers, other,
other. The applicable rate of duty for this provision is 37.5%
ad valorem.
The insole assembly [sample no. 3] is classifiable under
subheading 6406.99.90, HTSUS, as parts of footwear, other, other.
The applicable rate of duty for this provision is 18% ad valorem.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304) requires that:
Except as hereinafter provided, every article of
foreign origin (or its container, as provided in
subsection (b) hereof) imported into the United States
shall be marked in a conspicuous place as legibly,
indelibly, and permanently as the nature of the article
(or container) will permit in such manner as to
indicate to an ultimate purchaser in the United States
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. 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
-4-
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 CCPA 267 at 270
(1940), National Juice Products Association v. United States,
10 CIT 48, 628 F. Supp. 978 (1986), Koru North America v. United
States, 12 CIT 1120, 701 F. Supp. 229 (1988).
Clearly, the unformed upper [sample no. 1] and the insole
assembly [sample no. 3] are substantially transformed by the
manufacturing process performed in the United States subsequent
to importation into a new article having a new name, character or
use (e.g., unformed upper to completed footwear and insole
assembly to completed footwear). Inasmuch as the importer
substantially transforms the unformed upper and the insole
assembly, the importer is the last person in the United States to
receive the article in the form in which it was imported. Thus,
the importer qualifies as an "ultimate purchaser, pursuant to 19
CFR 134.1(d) and 19 CFR 134.35. Consequently, the subject
unformed upper and insole assembly are excepted from individual
marking since, according to 19 U.S.C. 1304(a)(3)(D), the marking
of the container of such article will reasonably indicate the
country of origin of the unformed upper and the insole assembly
to the ultimate purchaser.
The case of Uniroyal Inc. v. United States, 3 CIT 220, 542
F. Supp. 1026 (1982), aff'd, 702 F.2d 1022 (Fed Cir. 1983),
controls the marking of the boot upper with an insole assembly
attached by stitching [sample no. 2]. In this case the Court
examined whether the addition of an outsole in the United States
to imported uppers lasted in Indonesia changed the fundamental
character of the imported article. After carefully examining
both the imported upper and the finished shoe, the court
concluded that the imported upper did not lose its distinct
identity in the finished shoe, and to the contrary was the very
essence of the completed shoe. This was so even though the
imported upper could not be sold at retail without the rubber
outsole being attached, and even though following attachment of
the rubber outsole the shoe was called by a different name, a
deck shoe, rather than an upper or a moccasin.
Following Uniroyal, supra, it is our view that the
attachment of an outer sole in the United States to sample no.2
does not constitute a substantial transformation within the
meaning of (19 CFR 134.35). Therefore, sample no. 2 will have to
be individually marked "Made in Australia" or "New Zealand.
-5-
HOLDING:
The open bottomed upper [sample no.1] is classifiable under
subheading 6406.10.90, HTSUS.
The insole assembly [sample no. 3] is classifiable under
subheading 6406.99.90, HTSUS.
The boot upper with an insole assembly attached by stitching
[sample no. 2] is classifiable under subheading 6406.10.50,
HTSUS.
Ugg International is the ultimate purchaser in the U.S. of
the open bottomed upper [sample no. 1] and the insole assembly
{sample no. 3.] which are excepted from the requirements of
individual marking pursuant to 19 CFR 134.35. Only the outermost
container in which these parts are contained must be marked with
the appropriate country of origin.
The boot upper with an insole assembly attached by stitching
[sample no.2] will have to be individually marked "Made in
Australia" or "New Zealand."
Sincerely,
John Durant, Director
Commercial Rulings Division