CLA-2-48:OT:RR:NC:N5:130
CLASSIFICATION: 9903.88.03; 4811.41.2100; 9903.88.02; 3919.90.5060
Mr. David G. Forgue
Barnes, Richardson, and Colburn, LLP
303 East Wacker Dr.
Chicago, IL 60601
RE: The country of origin of adhesive-coated sheets for labels
Dear Mr. Forgue:
In your letter, dated May 14, 2024, you requested a binding country of origin ruling for three adhesive-coated labelstock sheet products. The request was returned to you for additional information, which was received by this office on June 18, 2024. Product information was submitted for our review.
The ruling request addresses three items.
Item 1 is self-adhesive, direct thermal paper labelstock. This item consists of thermal paper laminated to an adhesive layer, and a glassine release paper. The thermal paper coating is 4 -Hydroxy-4'-isopropoxydiphenylsulfone, CAS code: 95235-30-6. The paper is imported in rolls measuring between 10 and 22 inches in width.
Item 2 is a self-adhesive, semi-gloss paper labelstock. This item consists of semi-gloss paper laminated to an adhesive layer, and a glassine release paper. The semi-gloss coating consists of kaolin and calcium carbonate. The paper is imported in rolls measuring between 10 and 22 inches in width.
Item 3 is self-adhesive, white or clear polypropylene labelstock. This item consists of clear or white compact polypropylene film coated with an acrylic coating and laminated to an adhesive layer, and a glassine release paper. The polypropylene is imported in rolls measuring between 10 and 22 inches in width.
All of the products will be used by label printers in the United States to print and die cut labels for sale to end-users of labels.
The applicable subheading for the self-adhesive direct thermal paper labelstock and the self-adhesive, semi-gloss paper labelstock will be 4811.41.2100, Harmonized Tariff Schedule of the United States (HTSUS), which provides for aper, paperboard, cellulose wadding and webs of cellulose fibers, coated, impregnated, covered, surface-colored, surface-decorated or printed, in rolls or rectangular (including square) sheets, of any size, other than goods of the kind described in heading 4803, 4809 or 4810: Gummed or adhesive paper and paperboard: Self-adhesive: Other: In strips or rolls. The rate of duty will be free.
The applicable subheading for the self-adhesive polypropylene labelstock will be 3919.90.5060, HTSUS, which provides for self-adhesive plates, sheets, film, foil, tape, strip and other flat shapes of plastic, whether or not in rolls: other: other: other. The general rate of duty will be 5.8 percent ad valorem.
In your letter, you set forth a manufacturing scenario for each of the three products. In each scenario, you argue that that the country of origin of the facestock, i.e., the base paper or polypropylene sheet, is the country of origin of the product imported into the United States. We disagree.
The self-adhesive, direct thermal paper labelstock incorporates 61-inch-wide base paper manufactured in Japan or Korea. The paper weighs 70 grams per square meter, and consists of fiber, 69 percent of which is manufactured by the mechanical process. As the paper will be used for printing labels, the paper is for graphic use. This base paper, classifiable under heading 4802, will be shipped to China, where it will be coated with a thermosensitive coating, 4-Hydroxy-4'-isopropoxydiphenylsulfone, CAS code: 95235-30-6. The resulting coated thermal paper is classified in heading 4811. Then the paper will be laminated to a roll of adhesive-coated glassine release paper. Both the glassine paper and adhesive are Chinese origin. The laminated, self-adhesive, direct thermal paper is classified under subheading 4811.41. Then, the master roll will be shipped to Canada, where it will be slit into rolls measuring 10-22 inches in width. The final product, as noted above, will be classified in 4811.41.2100, HTSUS.
The self-adhesive, semi-gloss paper labelstock incorporates 61-inch-wide base paper manufactured in Korea, Japan, or Indonesia. The base paper is coated with kaolin and calcium carbonate and is classifiable in heading 4810. The base paper will be shipped to China, where it will be laminated to a roll of adhesive-coated glassine release paper. Both the glassine paper and adhesive are Chinese origin. The laminated, self-adhesive semi-gloss paper is classified under subheading 4811.41. The master roll will then be shipped to Canada, where it will be slit into rolls measuring 10-22 inches in width. The final product, as noted above, will be classified in 4811.41.2100, HTSUS.
The polypropylene facestock is produced in either India or the United Arab Emirates. The white polypropylene facestock has a thickness of 0.060 mm and a weight of 44 g/m2. The clear polypropylene facestock has a thickness of 0.050 mm and a weight of 45 g/m2. The master roll of facestock is generally 61 inches wide. The master roll of facestock is shipped to China. In China, the facestock is coated with a thin layer of Chinese origin acrylic coating of approximately 0.002 mm thickness. This coated facestock is then laminated to an adhesive-coated glassine release paper. Both the adhesive and glassine paper are of Chinese origin. This results in the creation of a roll of self-adhesive film which is rolled into jumbo rolls of 10,000 or 20,000 feet by 61 inches. This self-adhesive film, noted to be labelstock, will then be shipped to Canada. The classification of this labelstock, upon entry to Canada, is 3919.90. In Canada, the self-adhesive film is slit into rolls of between 10 inches (25.4 cm) wide and 22 inches (55.88 cm) wide). The final product, as noted above, will be classified in 3919.90.5060, HTSUS.
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.
The "country of origin" is defined in 19 CFR 134.1(b) as "the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin."
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. 102.21. See 19 C.F.R. 102.11.
Applied in sequential order, 19 CFR Part 102.11(a) provides that the 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 Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The self-adhesive, direct thermal labelstock, the self-adhesive, semi-gloss labelstock, and the self-adhesive polypropylene labelstock are neither "wholly obtained or produced" nor "produced exclusively from domestic materials." Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the products, and paragraph (a)(3) must be applied next to determine the origin of the finished articles. The direct thermal and semi-gloss labelstock are classified in subheading 4811.41, HTSUS both before and after processing in Canada. The tariff shift requirement in Part 102.20 states: A change to paper or paperboard in strips or rolls of a width not exceeding 15 cm of heading 4811 from strips or rolls of a width exceeding 15 cm of heading 4811 or any other heading, except from heading 4817 through 4823. The direct thermal and semi-gloss labelstock do not meet this tariff shift. The minimum size of the slit rolls is 10 inches or 25.4cm, which does not meet the term of a width not exceeding 15cm. As a result, part 102.11(a) does not apply. For the self-adhesive polypropylene labelstock, the tariff shift requirement in Part 102.20 states: A change to subheading 3919.10 through 3919.90 from any other subheading outside that group. The labelstock is classified in 3919.90 before and after processing in Canada, therefore, no change in subheading occurs during the processing in Canada. The self-adhesive polypropylene labelstock does not meet the tariff shift. As a result, Part 102.11(a) does not apply.
Section 102.11(b) states, in relevant part:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation [("GRI")] 3, where the country of origin cannot be determined under paragraph (a) of this section:
The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good
In determining the "essential character" of the finished good, Section 102.18(b)(1) provides, in relevant part:
(b) (1) For purposes of identifying the material that imparts the essential character to a good under Part 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under Part 102.20 specific rule or other requirements applicable to the good (ii) Materials that may be considered include materials produced by the producer of the good and incorporated in the good. For example, if a producer of a good purchases raw materials and converts those raw materials into a component that is incorporated in the good, that component is a material that may be considered for purposes of identifying the materials that impart the essential character to the good, provided that the component is classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule
The self-adhesive direct thermal paper labelstock, the self-adhesive semi-gloss paper labelstock, and self-adhesive polypropylene labelstock are each the single component classified in a tariff provision from which a change in tariff classification is not allowed. The self-adhesive labelstock imparts the essential character, and, accordingly, the country of origin of all of the self-adhesive labelstocks for marking purposes is China.
For the applicability of Section 301 trade remedies to the three labelstocks under consideration, CBP relies on the substantial transformation analysis when determining the country of origin for purposes of applying Section 301 trade remedies. The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983) (Uniroyal). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
The three China-origin, self-adhesive labelstocks are transformed into new and different articles i.e., self adhesive labelstock - in China. The substantial transformation of base paper into self-adhesive paper is set forth in NY Ruling N339653. The labelstocks are not substantially transformed in Canada. Therefore, the country of origin of the rolls of both the plastic and paper self-adhesive labelstock for Section 301 duty purposes will be China. As China is the country of origin, Section 301 remedies are applicable.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 4811.41.2100, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 4811.41.2100, HTSUS, listed above. Products of China classified under 3919.90.5060, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.02, in addition to the subheading 3919.90.5060, HTSUS, listed above.
The HTSUS is subject to periodic amendment, so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, including information on exclusions and their effective dates, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china, respectively.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at https://hts.usitc.gov/.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Laurel Duvall at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division