CLA-2 RR:TC:SM 559244 BLS
Port Director
477 Michigan Avenue
Detroit, Michigan 48226-2568
RE: Internal Advice 19/95; Country of origin marking of wire
rod; 19 CFR 134.26;
Article 509; modification of HRL 558831
Dear Sir:
This is in reference to your memorandum dated May 17, 1995,
requesting internal advice (IA 19/95) in connection with country
of origin marking requirements of wire rod imported from Canada.
FACTS:
Ivaco Rolling Mills ("Ivaco") is a producer of steel wire
rod in Canada and is the importer of record for that product.
The company sells the rod to unrelated U.S. customers who in turn
process the rod into wire for resale. The rod is not
individually marked upon importation, but its containers or
holders, i.e., steel banding or strapping, are marked with the
country of origin. Additional marking duties under 19 U.S.C.
1304 have been assessed for failure to comply with the
certification and notification requirements of section 134.25,
Customs Regulations (19 CFR 134.25), in connection with
unliquidated entries filed during 1994. Ivaco is currently
complying with the certification requirements of 19 CFR 134.25,
but seeks clarification of its obligations pertaining to country
of origin marking requirements of the imported product, and
believes that marking duties in this situation were improperly
assessed.
ISSUES:
1) Whether the U.S. processor or a subsequent purchaser is
the "ultimate purchaser" of the imported wire
rod.
2) Whether wire rod is on the "J-list", section 134.33 (19
CFR 134.33).
3) Whether the notice and certification requirements of 19
CFR 134.25 are applicable if the imported product
is capable of being marked but is not on the "J-list."
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4) If wire rod is not on the J-list, whether notices and
certifications must be provided by the importer
for wire rod pursuant to 19 CFR 134.26 when the product is (a)
not entered in bulk containers, and (b) not
repacked in retail containers after importation to conceal the
country of origin marking.
5) Whether Ivaco, as importer of record, can be liable for
marking duties due to its customers'
failure to mark and/or notify their customers when Ivaco has
properly marked and entered the merchandise with
the country of origin, and certified to Customs and
provided notice to its customers at the time of sale
pursuant to section 134.25 or 134.26,
Customs Regulations (19 CFR 134.25, 134.26).
6) Whether paragraph 9 of NAFTA (North American Free Trade
Agreement) Annex 311 limits the imposition of
duties or penalties for failure to comply with country of origin
marking requirements in situations in which the
importer of record has (a) properly marked and
entered the merchandise with the country of origin, but (b) has
not certified to Customs and provided notice at the
time of sale pursuant to 19 CFR 134.25 or 134.26.
LAW AND ANALYSIS:
Ultimate Purchaser
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires 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
manner as to indicate to the ultimate purchaser the English name
of the country of origin of the article. The regulations
implementing the requirements and exceptions to 19 U.S.C. 1304
are set forth in Part 134, Customs Regulations (19 CFR 134).
Section 134.1(d), Customs Regulations (19 CFR 134.1(d)),
provides that for a good of a NAFTA country, the "ultimate
purchaser" is generally the last person in the U.S. who purchases
the good in the form in which it was imported. If an imported
article will be used in manufacture, the manufacturer may be the
"ultimate purchaser"if the process results in one of the changes
prescribed in the NAFTA Marking Rules as effecting a change in
the article's country of origin. If the manufacturing process
does not result in one of the changes prescribed in the NAFTA
Marking Rules as effecting a change in the article's country of
origin, the consumer who purchases the article after processing
will be regarded as the ultimate purchaser. Canada is a NAFTA
country (see 19 CFR 134.1(g)), and, therefore, the NAFTA Marking
Rules set forth under Part 102, Interim Customs Regulations (19
CFR Part 102) are applicable. (For purposes of this ruling, we
are assuming that the country of origin of the wire rod is
Canada.)
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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 provides
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."
Since the wire is produced in the U.S. from Canadian wire rod,
the wire is neither wholly obtained or produced nor is it
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 finished article. Thus,
paragraph (a)(3) of section 102.11 is the applicable rule that we
must first apply to determine the origin of the product.
We find that the imported rod will be classified under
headings 7213-7215. The wire products resulting from the U.S.
processing of the wire rod are classified under heading 7217.
The specific tariff rule set out in section 102.20(a), Section
XV, Chapters 72 through 83, 7217 of the interim regulations,
provides:
7217....A change to heading 7217 from any other
heading, except from
7213 through 7215.
Under this rule, the imported rod does not undergo the
applicable change in tariff classification set out in section
102.11(a). Therefore, under the hierarchal rules, we must apply
the next applicable rule, section 102.11(b), to determine the
country of origin of the wire.
Section 102.11(b) of the interim regulations provides, in
pertinent part, that where the country of origin cannot be
determined under paragraph (a), the country of origin of the good
is the country or countries of origin of the single material that
imparts the essential character of the good. Section
102.18(b)(2) provides that for purposes of section 102.11(b),
"only domestic and foreign materials ...that are classified in a
tariff provision from which a change in tariff classification is
not allowed in the [102.20] rule for the good...shall be taken
into consideration in determining the parts or materials that
determine the essential character of the good." In the instant
case, only the Canadian wire rod is classified under a provision
from which a change in
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tariff classification is not allowed under the 102.20 rule for
the wire.
Therefore, we find that the material that imparts the
essential character to the wire is the wire rod. Accordingly,
since under the NAFTA Marking Rules the processing of the wire
rod does not effect a change in its country of origin, a person
who purchases the article after such processing will be regarded
as the ultimate purchaser. (See also Headquarters Ruling Letter
558831 dated January 31, 1995.)
J-list - 19 CFR 134.25
The importer of articles which are intended to be repacked
for sale to an ultimate purchaser is subject to the certification
and notification requirements of 19 CFR 134.25, if the articles
are on the "J-list", or are incapable of being marked. See 19
CFR 134.32 and 19 CFR 134.33. While excepted from individual
marking requirements, the containers or holders of these articles
are required to be marked. The importer of articles intended to
be repacked in retail containers not subject to the requirements
of 19 CFR 134.25 is subject to the certification and notification
requirements of 19 CFR 134.26. In either case, the importer
must certify to the district director that if the articles are
intended to be sold or transferred to a subsequent purchaser or
repacker, the importer will notify such person of the marking
requirements. These rules (19 CFR 134.25 and 134.26) are
intended to ensure that the ultimate purchaser will be advised of
the country of origin, and apply to repacked articles unless the
importer is considered to be the ultimate purchaser, in which
case the rules do not apply.
Since in the instant case the ultimate purchaser is a person
who purchases the imported product after it is processed into
wire, the importer of the repacked articles must comply with the
requirements of 19 CFR 134.25 or 19 CFR 134.26, depending upon
whether the wire rod is on the J-list. That is the issue which
we now address.
In HRL 558831, we held that wire rod was on the J-list, and
that the importer was subject to the requirements 19 CFR 134.25.
However, in an earlier ruling, HRL 723781 dated January 17,
1984, we noted that while "Wire (except barbed wire) " was a J-list article, wire rod was specially and separately defined
(under the Tariff Schedules of the United States (TSUS),
predecessor to the Harmonized Tariff Schedule of the United
States, (HTSUS)). Therefore, we held in HRL 732781 that wire
rod was not on the J-list. We note that under the HTSUS, wire
rod is classified under headings 7213 through 7215, while wire is
separately classified under heading 7217. Accordingly, after
reconsideration of our determination in HRL 558831, we now hold
that wire rod is not on the J-list.
Since wire rod is capable of being marked, we find that the
importer is not subject to the requirements of 19 CFR 134.25,
inasmuch as that provision applies only to J-list articles or to
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articles incapable of being marked. HRL 558831 is hereby
modified to the extent the ruling holds that wire rod is on the
J-list, and that 19 CFR 134.25 is applicable to the repacked
articles.
Applicability of 19 CFR 134.26
Section 134.26 of the Customs Regulations (19 CFR
134.26),which applies to articles that are
repacked or manipulated after importation, provides the
following:
(a) Certification requirements. If an
article subject to these
requirements is intended to be repacked
in retail containers
(e.g., blister packs) after its release
from Customs custody,
or if the district director having
custody of the article, has
reason to believe such article will be
repacked after its release,
the importer shall certify to the
district director that: (1) if the
importer does the repacking, he shall
not obscure or conceal
the country of origin marked to
indicate the country of origin
of the article, or else the new
container shall be marked to
indicate the country of origin of the
article in accordance with
the requirements of this part; or (2)
if the article is intended to
be sold or transferred to a subsequent
purchaser or repacker, the
importer shall notify such purchaser or
transferee, in writing, at
the time of sale or transfer, that any
repacking of the article must
conform to these requirements.
Ivaco contends that 19 CFR 134.26 is not applicable to the
importation of wire rod,
for the reason that this provision applies only to articles that
are individually marked, entered in bulk containers, and then
repacked in retail containers after importation to conceal the
country of origin marking. Thus, Ivaco states that the
imported product in this case is not individually marked nor
imported in "bulk", and that the repacking does not obscure or
conceal the country of origin, since only the steel bands or
strapping are marked. Further, the importer points out that its
customer does not repack the processed wire for retail sale.
Ivaco also notes that in C.S.D. 92-25 (Cust. Bull., Vol 26,
1992), we stated that 19 CFR 134.26 "does not apply to articles
imported in bulk, not individually marked, which are to be
repackaged after importation for retail sale to ultimate
purchasers, unless they are otherwise excepted from country of
origin marking ." Ivaco points out that wire rod is not
individually marked with the country of origin, and that only its
container, i.e., strapping or banding, is so marked. Upon
receipt of the rod, the U.S. processor by necessity merely
removes the tag identifying the product as wire rod, and does not
by its processing obscure or conceal any country of origin
marking. Ivaco also argues that the processed wire is not
packaged by its customer in "retail" containers, but instead is
wound on large spools that are sold to companies that further
fabricate the wire.
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We disagree with Ivaco's contentions and find that 19 CFR
134.26 is applicable in the instant case. Thus, we have
previously held that articles not individually marked upon
importation were subject to the requirements of 19 CFR 134.26.
(See HRL 734733 dated November 25, 1992, where we found that the
importer of frames and parts of safety glasses that were marked
with their country of origin on printed stickers affixed to
plastic bags was subject to the requirements of 19 CFR 134.26, if
the articles were repacked or manipulated.) Further, we find
no language in the regulation or other authorities restricting
its requirements to articles imported in "bulk", even if we were
to find that the wire rod was not imported in this manner.
Similarly, while we agree that the regulation was intended in
part to minimize the practice of concealing or obscuring country
of origin information appearing on repacked articles, we find no
language in the regulation which restricts its requirements to
that situation only. It is clear that 19 CFR 134.26 also
covers situations where the containers and not the articles are
marked (as an exception to the marking requirements) and the
articles will be repacked. In addition, it is our opinion that
the reference to repacking of the article in retail containers
refers to the final repacking, which may or may not be performed
by the first repacker, and that the importer's obligations under
19 CFR 134.26 apply to the repacker of the articles, whether or
not that person is the repacker of the articles for retail sale.
Finally, we find that C.S.D. 92-25 does not provide support
for the importer's argument.
The statement in C.S.D. 92-25 was made in the context of an
importer of unmarked or improperly marked goods attempting to
secure their release by executing a certification under 19 CFR
134.26. We stated that the provision was not applicable in such
case, unless the goods were otherwise excepted from country of
origin marking. Since under 19 CFR 134.32(d) an exception is
provided to the marking requirements if the containers of the
imported articles will reasonably indicate their country of
origin, as in the subject case, the quoted statement in C.S.D.
92-25 is not applicable to the present situation. We further
note that the importer's interpretation of 19 CFR 134.26 would
compromise the intent of 19 U.S.C. 1304, and the underlying
regulations, i.e., to ensure that the ultimate purchaser is
advised of the country of origin of the imported article. An
importer is responsible under 19 U.S.C. 1304 to ensure that the
article of foreign origin (or its container) remains marked as to
its origin when it reaches the ultimate purchaser in the U.S.
Sections 134.25 and 134.26 provide a mechanism for an importer to
comply with this statutory requirement within the practical
limitations of the trading environment.
Under the circumstances, we find that Ivaco is subject to
the requirements of 19 CFR 134.26.
Therefore, if Ivaco complies with the requirements of 19 CFR
134.26 in connection with subsequent entries, it will not be
liable for marking duties because of a subsequent repacker's
failure to properly mark the articles. Similarly, an importer
who is subject to and complies with
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the requirements of 19 CFR 134.25 will not be liable for marking
duties as a result of a subsequent repacker's failure to properly
mark the articles.
Marking Duties Under NAFTA
Paragraph 9 of NAFTA Annex 311 generally provides that,
except for repeated violations of the marking requirements as set
forth in paragraph 8, no special duty or penalty shall be imposed
for failure to comply with the country of origin marking
requirements of a party, unless the good is removed from Customs
custody or control without being properly marked, or a deceptive
marking has been used. (The importer contends that since in
this case the wire rod was properly marked when released from
Customs custody, and the marking was not deceptive, pursuant to
this provision marking duties cannot be assessed.)
In this case, the wire rod was not individually marked upon
importation into the U.S. Although the articles could have
been excepted from marking under 19 CFR 134.32(d), for the reason
that the marking of the containers would reasonably indicate the
origin of the articles, in the case of imported articles such as
the wire rod which are to be repacked this exception is
authorized only if the port director is satisfied that:
(1) The containers in which the articles are repacked will
indicate the origin of the articles to an ultimate purchaser in
the U.S.; and
(2) The importer arranges for supervision of the marking of
the containers by Customs officers at the importer's expense or
secures such verification as may be necessary by certification
and the submission of a sample or otherwise of the marking prior
to liquidation of the entry. 19 CFR 134.34.
In this case, since the foregoing conditions for receiving
the exception under 19 CFR 134.32(d) were not met, the wire rod
(or its container) was not considered properly marked when
released from Customs custody. Therefore, paragraph 9 of Annex
311 of the NAFTA cannot be used to limit the imposition of
marking duties in this case for failure to comply with the
requirements of 19 CFR 134.26.
HOLDING:
1) Under the NAFTA Marking Rules, the processing of the
Canadian wire rod in the U.S. into wire does not effect a change
in its country of origin. Therefore, a person who purchases the
article after such processing will be regarded as the ultimate
purchaser of the imported product.
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2) Wire rod is not on the "J-list", 19 CFR 134.33, and it is
capable of being marked. Therefore, the importer is not subject
to the certification requirements of 19 CFR 134.25, which applies
only to J-list articles, and articles incapable of being marked.
HRL 558831 is modified to the extent it held that wire rod is on
the J-list.
3) Metal bands or straps used to secure wire rod are
considered containers for purposes of 19 U.S.C. 1304(a)(3)(D) and
19 CFR 134.32(d). Since marking of the containers will
reasonably indicate the origin of the wire rod, the exception to
the individual marking requirements under
19 CFR 134.32(d) is applicable.
4) The importer is subject to the certification and
notification requirements of 19 CFR 134.26, inasmuch as the
imported product is intended to be sold to a subsequent purchaser
or repacker.
5) Marking duties cannot be assessed against the importer
due to its customer's failure
to properly mark repacked merchandise with the country of origin,
if the imported articles are properly marked upon entry, and the
importer complies with the certification and notification
requirements of 19 CFR 134.26.
6) Since the importer failed to comply with the conditions
pertaining to repacked articles for receiving the exception to
the marking requirements under 19 CFR 134.32(d) (allowing marking
of the containers only), the wire rod was not properly marked
when released from Customs custody, and paragraph 9 of NAFTA
Annex 311 cannot be used to limit the imposition of marking
duties, assessed for failure to comply with the requirements of
19 CFR 134.26.
This decision should be mailed by your office to the person
requesting internal advice 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 Ruling Module in ACS and the public via
the Diskette Subscription Service, Freedom of Information Act and
other public access channels 60 days from the date of this
decision.
Sincerely,
John Durant, Director
Tariff Classification Appeals Division
MAR-2 RR:TC:SM
559244 BLS
U.S. CUSTOMS
SERVICE
GENERAL
NOTICE
MODIFICATION OF CUSTOMS RULING RELATING
TO COUNTRY OF ORIGIN MARKING OF WIRE ROD
AGENCY: U.S. Customs Service, Department of the Treasury
ACTION: Notice of modification of country of origin marking
letter.
SUMMARY: Pursuant to section 625(c)(1), Tariff Act of 1930 (19
U.S.C. 1025(c)(1)), as
amended by section 623 of Title VI (Customs Modernization) of the
North American Free Trade
Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993),
this notice advises interested
parties that Customs is modifying a ruling pertaining to country
of origin marking of wire rod.
Notice of the proposed modification was published January 31,
1996, in the Customs Bulletin,
Volume 30, Number 4/5.
EFFECTIVE DATE: Merchandise entered, or withdrawn from
warehouse, for consumption on
or after (60 days after publication in the Customs Bulletin).
FOR FURTHER INFORMATION CONTACT: Burton Schlissel, Special
Classification
and Marking Branch (202) 482-6945.
SUPPLEMENTARY INFORMATION:
BACKGROUND
On January 31, 1996, Customs published a notice in the
Customs Bulletin, Volume 3,
Number 4/5, proposing to modify Headquarters Ruling Letter (HRL)
558831 issued
2
January 31, 1995, by the Director, Commercial Rulings Division
(now Division of Tariff
Classification Appeals), U.S. Customs Service Headquarters. The
ruling pertained to country of
origin marking of wire rod.
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 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. In United States v.
Friedlaender & Co., 27 CCPA 297 at
302, C.A.D. 104 (1940), 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
origin 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 are produced, be
able to buy or refuse to buy them, if such marking should
influence his will."
Part 134, Customs Regulations (Part 134), implements the
country of origin marking
requirements and exceptions of 19 U.S.C. 1304. Section 134.33,
Customs Regulations,
(19 CFR 134.33), known as the "J-list", specifies certain classes
of articles which are excepted
from individual country of origin marking pursuant to section
304(a)(3)(J), Tariff Act of 1930,
as amended (19 U.S.C. 1304(a)(3)(J)). Among the classes of
articles enumerated under 19 CFR
134.33 are "Metal bars, except concrete reinforcement bars;
billets, blocks, blooms; ingots; pigs;
plates; sheets, except galvanized sheets; shafting; slabs; and
metal in similar forms."
3
In Headquarters Ruling Letter (HRL) 558831 dated January 31,
1995, we found that
wire rod falls within the class of articles which include "Metal
bars, except concrete
reinforcement bars ...." specified on the "J-list." As a result
of this finding, we held that the
importer of wire rod to be repacked into new containers after
leaving Customs custody was
required to comply with the certification requirements of section
134.25, Customs Regulations
(19 CFR 134.25), which applies to repacked "J-list" articles and
articles incapable of being
marked. In an earlier ruling, HRL 723721 dated January 17,
1984, we found that while
wire (except barbed wire) was a "J-list article", wire rod was
specifically and separately
defined (under the Tariff Schedules of the United States (TSUS),
predecessor to the Harmonized
Tariff Schedule of the United States (HTSUS)). Therefore, we
held in HRL 732781 that wire
rod was not on the "J-list." We note that under the HTSUS, wire
rod is classified under headings
7213 through 7215, while wire is separately classified under
heading 7217.
Accordingly, after reconsideration of our determination in
HRL 558831, we now find that wire
rod is not on the "J-list." Therefore, Customs proposed in a
document published in the Customs
Bulletin, Volume 30, Number 4/5, dated January 31, 1996, to
modify HRL 558831 to reflect that
wire rod is not on the "J-list" (19 CFR 134.33), and that the
certification requirements of 19 CFR
134.25 are not applicable to wire rod. We also stated, in that
document, that the importer of
wire rod which will be repacked is subject to the certification
requirements of 19 CFR 134.26.
Two comments were received in response to the notice. One
commenter expressed support
for Customs position that wire rod is not on the J-list, and for
the other findings reflected in the
proposed ruling, but believes that it should be clarified to
emphasize that the exception to marking
4
under 19 CFR 134.32(d), which permits the marking of containers
rather than the individual
article, is applicable to wire rod. Otherwise, this commenter
believes that there may be some
misinterpretation of the ruling by Customs field personnel, since
articles on the J-list are also
excepted from the individual marking requirements. In addition,
this commenter suggests that
Customs should affirm its position that the steel banding or
strapping which secures wire rod
constitutes a container, and that the common trade practice of
marking these containers will
satisfy the marking requirements.
Customs understands the commenter's concern regarding the
marking of wire rod, and
has clarified the proposed ruling by providing in the holding
that bands or straps which
are customarily used in the trade to secure wire rod are
considered containers under 19 U.S.C.
1304(a)(3)(D) and 19 CFR 134.32(d), and that marking of these
containers will satisfy the
exception under 19 CFR 134.32(d) as applied to the imported
articles.
The second commenter believes that 19 CFR 134.26 was never
intended to be used in this
situation where the articles are not individually marked upon
entry. Rather, this commenter
believes that Customs should use other existing remedies, such as
19 CFR 134.34, which
authorizes the district director (now port director) to grant an
exception under 19 CFR 134.32(d)
for articles intended to be repacked after release from Customs
custody under certain conditions.
In addition, the commenter points out that the express provisions
of 19 CFR 134.25 and 19 CFR
134.26 deal only with the repacking" of imported articles, and
as a result confusion arises when
articles are subject to further processing which does not result
in a substantial transformation
and are then repacked.
5
While Customs agrees that 19 CFR 134.34 is an existing
remedy which may be used to
authorize the exception to the marking requirements under 19 CFR
134.32(d), we believe
that 19 CFR 134.26 is also applicable to cover unmarked articles
such as wire rod in
the instant situation. In this regard, as noted in the
proposed ruling, we find no language
in 19 CFR 134.26 which restricts its requirements only to
situations which involve an attempt to
conceal or obscure country of origin information appearing on
repacked articles. Moreover, the
basic requirement under section 19 U.S.C. 1304(a) is that unless
excepted, all articles of foreign
origin must be marked to indicate to the "ultimate purchaser" in
the U.S. the name of their
country of origin. If the U.S. processor does not
"substantially transform" an imported article
into a new and different having a new name, character or use, the
U.S. processor is not the
"ultimate purchaser" of that article, and such article must be
marked pursuant to section 1304(a)
after such processing in the U.S. until it reaches the "ultimate
purchaser" in the U.S.
However, Customs recognizes that the language of 19 CFR
134.26 may be ambiguous and
accordingly may have been misinterpreted in the past by the
importing community, as well as
Customs personnel. In order to clarify this provision as well
as other country of origin marking
regulations, Customs is undertaking a complete revision of Part
134. The proposed amendments
to the regulations will be published at a future date in the
Federal Register, and at that time, the
trade community will be given the opportunity to comment and
offer suggestions with respect to
6
Customs proposals.
The final ruling modifying HRL 558831 is set forth in the
Attachment to this document.
Dated:
John Durant, Director
Division of Tariff Classification Appeals