MAR-2-05 CO:R:C:V 733199 KG
Stephen M. Creskoff, Esq.
Frank, Bernstein, Conaway & Goldman
6701 Democracy Boulevard
Suite 600
Bethesda, Maryland 20817
RE: Country of origin marking of imported paint brushes;
substantial transformation; combining;
Dear Mr. Creskoff:
This is in response to your letter of September 6, 1989,
requesting a country of origin ruling regarding imported paint
brushes. HQ 555491 (January 3, 1990), discussed the
applicability of the Generalized System of Preferences to these
paint brushes. We regret the delay in responding to your
inquiry.
FACTS:
Your client plans to manufacture paint brushes in the
Philippines from bristle heads and metal ferrules imported from
China and brush handles made in the Philippines.
The manufacturing process will be as follows: The bristle
heads will be trimmed so that the tops of the bristles are
completely level and flat. The bristle heads will then be
cleaned so that all loose bristles will be removed. Wooden
handles made in the Philippines will then be inserted into the
bristle heads. Either before or after insertion, the handles
will be imprinted with a commercial logo and country of origin
information and hang-up holes will be drilled. The bristle heads
will be securely nailed, stapled or crimped to the handle.
Each completed brush will then be inspected and inserted
into a poly bag. The brushes will be packed 12 or 36 pieces per
inner carton; then 288, 432 or 864 pieces per master carton. You
submitted estimated manufacturing costs of the various materials
and processes performed. The work done in the Philippines is
estimated at about 18% of the total; the estimated cost of the
imported bristle heads and metal ferrules which are made in China
is about 55% of the total cost; and the estimated cost of the
handles which are made in the Philippines is 20%.
ISSUE:
Whether the Chinese bristle heads and metal ferrules which
are attached to brush handles made in the Philippines and
processed in the Philippines are substantially transformed for
country of origin marking purposes in the Philippines.
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 at 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. Section 134.1(b), Customs Regulations (19 CFR
134.1(b)), defines the country of origin as 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 other country the country
of origin within the meaning of 19 CFR Part 134.
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 48, 628 F.Supp. 978 (CIT 1986), Koru North America v. United
States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988).
Two court cases have considered the issue of whether
imported parts combined in the U.S. with domestic parts were
substantially transformed for country of origin marking purposes.
In the first case, Gibson-Thomsen Co., the court held that
imported wood brush block and toothbrush handles which had
bristles inserted into them in the U.S. lost their identity as
such and became new articles having a new name, character and
use. One of the factors considered by the court in reaching its
conclusion was that the U.S.-made bristles used were "by far the
most valuable element." These bristles were about 60% of the
cost of manufacturing hair brushes and 40% of the cost of
manufacturing toothbrushes. Also, the court looked at whether
the imported article loses its identity as such when combined
with other articles. In that case, the court concluded that wood
handles were mere materials to be used in the manufacture of
toothbrushes and hairbrushes. The court was also concerned that
when an imported article was combined with a domestic material,
that the ultimate purchaser not be confused into thinking that
the domestic article was made in a foreign country. Therefore,
the court concluded that a mere material to be used in the
manufacture of a new article having a new name, character and use
and which, became an integral part of the new article would not
be required to be marked.
The processing that will be done in the Philippines to make
paint brushes is very similar to the processing performed in
Gibson-Thomsen. Also, the finished product is very similar.
The distinguishing characteristic is that in this case, the
bristles, which are the most costly component of the finished
product and also are the most important component, are not made
in the country where the paint brush is assembled and the handle
is made. While in Gibsen-Thomsen the court focused on whether
the imported handles were substantially transformed in the U.S.,
here the focus is on whether the imported bristles are
substantially transformed in the Philippines. Therefore, this
case presents the issue of how much weight should be given to the
cost and importance of a particular component to a finished
product in making the determination of whether or not a
substantial transformation has occurred. This case in particular
presents a close question because the processing performed is
merely trimming and cleaning the bristles and inserting the
handle, relatively minor finishing operations.
The second case involved imported shoe uppers which were
combined with domestic soles in the U.S. The imported uppers were
held in Uniroyal, Inc., v. U.S., 542 F.Supp. 1026, 3 CIT 220 (CIT
1982), to be the "essence of the completed shoe" and therefore,
not substantially transformed. The court described the imported
uppers as "complete shoes except for an outsole." The shoe had
already "obtained its ultimate shape, form and size." One
process performed in the U.S., relasting, was characterized as
"convenient, not necessary". The processes performed in the
U.S. were significantly less costly and less time consuming than
the foreign manufacturing process. The cost of the upper was
significantly greater than the cost of the outsole. Further, the
manufacture of the upper required at least five highly skilled
operations. The court concluded that the attachment of the
outsole was a minor manufacturing or combining process which
leaves the identity of the upper intact. This case is like
Uniroyal because the imported bristles are the very essence of
the finished product; the essential qualities of a paint brush
are the type, diameter and qualities of the bristles. Further,
as stated above, the bristles are the single most costly
component of the finished product and the processing done in the
Philippines, trimming, cleaning and insertion of the handle, are
not costly, complex, or substantial. Although this case presents
a close question, after a thoughtful consideration of the cases
discussed above, we conclude that the attachment of Philippine-
made handles to Chinese-made bristles in the Philippines is not a
substantial transformation. The bristles are the very essence of
the finished paint brush and do not become a new article having a
new name, character or use.
There is also a ruling in which Customs set forth some
factors to be considered in determining whether imported goods
combined in the U.S. with domestic products were substantially
transformed for country of origin marking purposes. In HQ 732057
(April 16, 1990), Customs considered whether or not a circular
knife blade lost its separate identity when assembled into a
rotary cutting instrument. In reaching the conclusion that the
knife blade did not lose its separate identity when it was
combined with a domestic article, Customs considered six factors:
1) whether the article is completely finished;
2) the extent of the manufacturing process of combining the
article with its counterparts as compared with the manufacturing
of the subject article;
3) whether the article is permanently attached to its
counterparts;
4) the overall importance of the article to the finished
product;
5) whether the article is functionally necessary to the
operation of the finished article, or whether it is an accessory
which retains its independent function; and
6) whether the article remains visible after the combining.
These factors are not exclusive and there may be other
factors relevant to a particular case and no one factor is
determinative. See HQ 728801 (February 26, 1986).
An examination of the six factors enumerated in HQ 732057
supports the conclusion that no substantial transformation
occurred in the Philippines. On the one hand, the Chinese-made
bristles are substantially finished and only require minor
finishing and attachment to the handle to constitute a finished
paintbrush; the processing done in the Philippines is not very
complex or expensive; and the bristles do remain visible after
the paintbrush is finished. The bristles are the most valuable
element of the finished paint brush in terms of cost and are
essential to create a functional article of commerce. The
bristles are not accessories or minor components.
On the other hand, the bristles and handles are permanently
attached to each other and the bristles are not completely
finished in China. However, these factors alone are not
significant enough to support a finding of substantial
transformation. The imported bristles and metal ferrules are
not substantially transformed for country of origin marking
purposes in the Philippines. Therefore, pursuant to 19 CFR
134.1(b), the country of origin of the paint brushes is China.
HOLDING:
The imported bristles and metal ferrules are not
substantially transformed for country of origin marking purposes
in the Philippines. Therefore, pursuant to 19 CFR 134.1(b) the
country of origin is China and the paint brushes must be marked
to indicate that China is the country of origin.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch