CLA-2 CO:R:C:V 732574 EAB

Murray J. Belman, Esquire
Thompson & Mitchell
1120 Vermont Avenue, N.W.
Washington, DC 20005

Re: Country of origin marking exceptions for cold finished steel bar products

Dear Mr. Bellman:

This is in response to your letter dated July 13, 1989, in which you request, on behalf of the Cold Finished Steel Bar Institute, reconsideration of that portion of HQ 732196, May 16, 1989, which pertained in part to the applicability of 19 U.S.C. 1304(a)(3)(G) to imported hot-rolled steel bars which are processed in the U.S. but not substantially transformed into cold-finished bars.


You assert that hot-rolled bar processed into cold finished bar in the U.S. by the importer or for his account would fall within the marking exception of 19 U.S.C. 1304(a)(3)(G), and that, pursuant to 19 U.S.C. 1304(b) and 19 CFR 134.22(d)(1), the steel band containers of such imported articles are excepted from marking as well. We regret the delay in responding.


What are the country of origin marking requirements of an article processed but not substantially transformed in the U.S.?


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 a manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. Articles to be processed in the U.S. by the importer or for his account otherwise than for the purpose of concealing the origin of such articles and in such manner that any mark contemplated by this section would necessarily be obliterated, destroyed, or permanently concealed are excepted from marking under 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g). The containers in which these articles are imported are excepted from marking as provided in 19 U.S.C. 1304(b) and 19 CFR 134.22(d)(1).

In HQ 732196, Customs found that no evidence was presented to support a marking exception under 19 U.S.C. 1304(a)(3)(G), and we noted that articles excepted from marking under this provision must be marked with the country of origin after the U.S. processing, citing HQ 729434, May 23, 1986. You indicate that cold finished bars are produced in two basic steps: descaling (by acid pickling or mechanical shot blasting) and cold working (by drawing the product through a die, turning and/or grinding). You further indicate that the imported product is excepted from marking because any of these processes would necessarily obliterate any marking that might be applied to the hot-rolled bar itself.

Based on the information presented in your letter, it appears that there is no marking of the hot-rolled steel bar that would not be necessarily obliterated in the processing of it into cold finished products. In view of this, we are of the opinion that hot-rolled steel bars subjected to the cold finishing process that you have described may be excepted from marking under 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g) if the importer demonstrates to the satisfaction of the District Director that the requirements of these provisions are satisfied. In such event, their containers would be excepted from marking pursuant to 19 U.S.C. 1304(b) and 19 CFR 134.22(d)(1) at the time of importation.

You are also of the opinion that once an article qualifies for the "G" exception, Customs has no authority to require marking of the processed article or its container. We disagree. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297 at 302 (1940): "Congress intended 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. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." (emphasis added).

As provided in 19 CFR 134.1(d)(1), if an 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. The courts and Customs have long recognized that not every manufacturing process results in a substantial transformation. Thus, if the manufacturing process is merely a minor one which leaves the identity of the imported article intact, the consumer or user of the article, who obtains the article after the processing, will be regarded as the ultimate purchaser, 19 CFR 134.1(d)(2). In such case, we believe that the processed article (or its container) is subject to marking.

Our interpretation is consistent with the purpose of the marking statute. The purpose of the statute would be frustrated if a processor who is not the ultimate purchaser obliterates the mark and does not remark the article, thereby denying the ultimate purchaser his right to make an informed decision. The exception in 19 U.S.C. 1304(a)(3)(G) must be considered to be a practical concession to reality: requiring imported articles or their containers to be marked with the country of origin at the time of importation when such marking would necessarily be obliterated during subsequent processing that does not result in a substantial transformation would neither effectuate the congressional intent nor serve the purpose of the marking law.

Therefore, we remain of the opinion that the finished article must be marked in a manner to indicate the country of origin to the ultimate purchaser.

You also indicate that HQ 729434 should be read to provide that only the containers of articles excepted under 19 U.S.C. 1304(a)(3)(G) must bear the country of origin marking of the processed articles within. We do not believe that such a restrictive reading is appropriate. In that case, Customs determined that certain imported articles were excepted from marking under this provision because "any mark placed on them prior to importation would be obliterated or destroyed in the U.S. finishing operations." However, the decision states that "the retail packages for the finished articles shall be marked to indicate Mexico as the country of origin." The significance of this ruling is the determination that the processed article had to be marked in a manner to indicate the country of origin to the ultimate purchaser. If, as in HQ 729434, the processed article is to be sold to the ultimate purchaser in a container, it would be acceptable to mark the container.


In conclusion, we affirm HQ 732196 in its entirety, and specifically state that an article and, therefore, its container, excepted under 19 CFR 134.32(g) and 19 CFR 134.22(d)(1), respectively, but not substantially transformed as a result of domestic processing, must itself (or its container) be marked in any reasonable method by the U.S. manufacturer/processor who obliterates the marking during the processing.

John Durant, Director
Commercial Rulings Division