MAR-2-05 CO:R:C:V 732842 KG

Charles H. Bayar
Whitman & Ransom
200 Park Avenue
New York, N.Y. 10166

RE: Country of origin marking of imported color print film

Dear Mr. Bayar:

This is in response to your letter of October 25, 1989, requesting a country of origin ruling regarding imported color print film. The questions raised concerning Federal Trade Commission requirements are not addressed in this letter.

FACTS:

Your client proposes two different scenarios. In scenario one, your client would import from Japan a photographic film base consisting of tri-acetate plastic sheets with a non- photosensitive undercoating, in the form of rolls measuring 58" wide and 9,500 feet long. In the U.S. your client will prepare and apply to the film base a photosensitve emulsion coating measuring 0.02 mm thick, composed of 10 or more layers, with each layer consisting of dyes and chemicals containing suspended microscopic silver halide crystals. All of the ingredients of the emulsion coating will be purchased in the U.S. Once the emulsion coating is applied, the film base is usable as bulk photographic film.

The bulk photographic film is then cut to width and length, inserted into cassettes, which are placed in plastic sealed containers and packaged in sealed print paper boxes for retail sale. The individual boxes of film will be packed in sizeable corrugated cartons for shipment to wholesale distributors. The production cost of the imported tri-acetate film base is projected to be 20% of the total cost.

In scenario two, your client proposes to import bulk photographic film from Japan and perform the cutting, inserting and packaging described in scenario one in the U.S. The projected production cost of the imported bulk photographic film is 65% of the total cost.

ISSUES:

Whether the imported film products are substantially transformed in the U.S.

Whether marking the country of origin on the sealed paper boxes containing the film satisfies section 304 of the Tariff Act of 1930, as amended.

LAW AND ANALYSIS:

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 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 Court of International Trade stated in Koru North America v. United States, 701 F.Supp. 229, 12 CIT (CIT 1988), that: "In ascertaining what constitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297, 302 C.A.D. 104 (1940), where 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 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."

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. As noted in your submission, section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines the term "country of origin" to mean 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 country the country of origin within the meaning of Part 134. Section 134.35, Customs Regulations (19 CFR 134.35), provides that articles used in the U.S. in manufacture which results in articles having a name, character or use differing from that of the imported articles will be within the principle of the decision in the case of United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267 (1940). Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the ultimate purchaser of the imported article within the contemplation of section 304(a), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the article shall be excepted from marking. If the article is substantially transformed in the U.S., only the outermost container of the imported article shall 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 C.C.P.A. 267 at 270 (1940), National Juice Products Association v. United States, 10 CIT ___, 628 F.Supp. 978 (CIT 1986), Koru North America v. United States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988). In ORR Ruling 217-69 (March 28, 1969), Customs ruled that a U.S.-made film base was substantially transformed when it was coated with photographic emulsion in Italy. The resulting x-ray film was considered a product of Italy for marking purposes. The rolls of x-ray film were excepted from marking so long as the container in which the rolls were packaged were marked to indicate that Italy was the country of origin.

The process of coating the film base with photographic emulsion which was held in ORR Ruling 217-69 to be a substantial transformation is virtually identical to the process described in scenario one. Coating the film base with photosensitive emulsion containing silver halide crystals creates photographic film, a new article having a new name, very different physical characteristics from film base which is not photosensitive and a new use. Prior to coating, film base cannot be used to make photographic images. Therefore, in scenario one the film base is substantially transformed in the U.S. into bulk photographic film.

The important characteristics of print film are its light sensitivity and the ability to form an image from which a positive can be made. The imported article in scenario two already has those qualities when it enters the U.S. There is no change in name, character or use as a result of U.S. processing. The only change that occurs in the U.S. is that the film is cut to size and inserted into cartridges. This change, in which the film is prepared for packaging, is not consequential enough to constitute a substantial transformation. In scenario two, the imported bulk photographic paper is not substantially transformed in the U.S. and is considered a product of Japan, both before and after the U.S. processing.

In HQ 719942 (November 8, 1982), Customs ruled on a conflict of law question involving Canadian and U.S. law. Although the focus of that ruling was the conflict of law question, it did state that film cut to length, loaded into cartridges and packaged in Canada was substantially transformed there. This statement is not in accordance with the current views of the Customs Service. Therefore, to the extent that HQ 719942 conflicts with this ruling, it is modified.

The second issue raised concerns the marking of the retail film cartridges. This issue was also addressed in ORR 217-69; Customs ruled that the rolls of film were excepted from marking and only the container in which the rolls are packaged should be marked with the country of origin. Pursuant to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR 134.32(d)), Customs excepts from individual marking requirements imported articles for which the marking of the containers will reasonably indicate the origin of the articles. As discussed above, the purpose of the marking statute is to allow ultimate purchasers to make informed buying choices. In scenario two, the film cartridge is only sold to ultimate purchasers in a sealed box. As long as the sealed box is properly marked with the country of origin of the film, the film cartridge itself and the sealed plastic holders that are inside the sealed paper box are excepted from marking.

HOLDING:

In scenario one, the imported film base is substantially transformed in the U.S. into bulk photographic film. Therefore, pursuant to 19 CFR 134.35 your client is the ultimate purchaser of the imported film base and the film base is excepted from marking. Only the outermost container of the film base is required to be marked. Further, no foreign country of origin marking is required on the retail boxes.

In scenario two, the imported bulk photographic film is not substantially transformed in the U.S. and would be considered a product of Japan for country of origin marking purposes. Therefore, your client is not the ultimate purchaser and the imported bulk photographic film must be marked with its country of origin. However, pursuant to 19 CFR 134.34, an exception may be authorized, in the discretion of the district director, for the imported film because it will be repacked after release from Customs custody if: the containers in which the articles are repacked will indicate the origin of the film to an ultimate purchaser in the U.S. and 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 the liquidation of the entry.

In scenario two, the sealed box in which the print film is sold to ultimate purchasers must be properly marked with the country of origin of the film. The film cartridge itself and the sealed plastic holders inside the sealed paper box would be excepted from country of origin marking pursuant to 19 CFR 134.32(d).

Sincerely,

John Durant
Director,
Commercial Rulings Division