MAR-2-05 CO:R:C:V 734301 ER
Marguerite Trossevin, Esq.
Johnson & Gibbs
1301 K Street, NW
Washington, DC 20005-3307
RE: Country of Origin Marking Requirements for Natural
Tropical Driftwood; Substantial Transformation;
Ultimate Purchaser; Hartranft v. Wiegmann, 121 U.S. 609
30; 30 L.Ed. 1012; 7 S.Ct. 1240 (1887); C.S.D. 89-3;
C.S.D. 85-25; HQ 555881; HQ 734143; HQ 081888; HQ
733693; 19 CFR 134.32(g); 19 134.35.
Dear Ms. Trossevin:
This is in response to your letters of August 12, 1991 and
March 17, 1992, on behalf of your client Fritz Chemical Co.
Corp., ("Fritz"), 230 Sam Houston Rd., Mesquite, Texas 75149, in
which you request a ruling concerning the country of origin
marking requirements for various pieces of tropical driftwood
imported from Malaysia.
FACTS:
In your submissions you state that Fritz imports tropical
driftwood in its natural state. The driftwood is picked from the
riverbanks and from a swamp-type area close to the river. The
imported driftwood ranges in size from approximately six inches
to two feet in length. Once in the U.S., the pieces are sorted
according to size -- small, medium and large -- and country of
origin stickers are placed on each piece. The pieces are
processed by Fritz in such a way so as to make them suitable for
use in aquariums.
The processing consists of dipping each piece of driftwood
into an epoxy resin to seal the pores and block the release of
tannic acid, a toxin harmful to aquarium life. When released
into water, tannic acid emits a heavy yellow vapor that clouds
the water and changes the aquarium water chemistry thereby
rendering the aquarium unfit for most tropical fish. The small
pieces are imported with a plastic rectangular bases already
attached, and are subjected in this condition to the sealing
process. The medium and large sizes are not treated in any way
before entry. Before dipping, a molded base that serves to
anchor the driftwood to the bottom of the aquarium is affixed by
hand to these larger and medium pieces. A Fritz technician
creates the base out of natural rock epoxy that is designed to be
artistically appropriate for each piece. Without the base, the
wood would float. You state that molding the base to fit the
size and shape of each piece of wood is a technique requiring
care and craftsmanship. The epoxy and all other materials used
to process the driftwood are of U.S. origin.
You state that during the molding and sealing process, all
country-of-origin stickers are either obliterated or lost. After
the manufacturing process, the pieces are marked again with
country-of-origin labels and are packaged according to size -- a
package of small pieces contains six; a package of medium pieces
contains three; and a package of large pieces contains two.
It is your position that the natural tropical driftwood is
substantially transformed within the meaning of section 134.35,
Customs Regulations (19 CFR 134.35), and is, therefore, excepted
from the country of origin marking requirements. Alternatively,
you maintain that if a substantial transformation is not found,
the driftwood is excepted from marking pursuant to section
134.32(g) Customs Regulations (19 CFR 134.32(g)) because the
processing performed in the U.S. would necessarily obliterate any
country of origin marking.
ISSUE:
Whether the imported driftwood is excepted from country of
origin marking pursuant to 19 CFR 134.35 and if not, whether it
is excepted from marking at the time of importation pursuant to
19 CFR 134.32(g).
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 (or its container) imported into the United States
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. Part
134, Customs Regulations (19 CFR 134) implements the country of
origin marking requirements and exceptions of 19 U.S.C. 1304.
The primary purpose of the country of origin marking statute
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. United States v. Friedlaender & Co., 27
C.C.P.A. 297, 302 C.A.D. 104 (1940).
Part 134.1(d) defines the "ultimate purchaser" generally as
the last person in the United States who will receive the article
in the form in which it was imported. If an imported article
will be used in domestic 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. However, if the manufacturing process is 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)(1) and (2)).
A substantial transformation, for country of origin marking
purposes, occurs when an imported article is used in the United
States in manufacture, which results in an article having a name,
character, or use differing from that of the imported article.
Under this principle, the manufacturer or processor in the United
States who converts or combines the imported article into the
different article will be considered the "ultimate purchaser" of
the imported article, and the article shall be excepted from
marking. However, the outermost containers of the imported
articles must be marked (19 CFR 134.35). The issue of whether a
substantial transformation occurs is determined on a case-by-case
basis.
In determining whether the combining of parts or materials
constitutes a substantial transformation, the issue is the extent
of operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linens
v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2
Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which
are minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation. See,
C.S.D. 85-25 (September 25, 1984).
"The well-established test for determining whether a
substantial transformation has occurred is derived from language
enunciated in Anheuser-Busch Brewing Association v. United
States, 207 U.S. 556, 562 (1908), ..." C.S.D. 89-3 (September
23, 1988). There, the court defined the word "manufacture", as
follows:
Manufacture implies a change, but every change is not a
manufacture and yet every change in an article is the
result of treatment, labor and manipulation. But
something more is necessary, as is set forth and
illustrated in Hartranft v. Wiegmann, 121 U.S. 609.
There must be transformation; a new and different
article must emerge, having a distinctive name,
character or use.
"Simply stated, a substantial transformation occurs when an
article emerges from a process with a distinctive name, character
or use, different from that possessed by the original material
that was processed. See, Torrington Co. v. United States, 764
F.2d 1563, 1568 (1985) (citing Texas Instruments, Inc. v. United
States, 681 F.2d 778 at 782)." C.S.D. 89-3.
In the instant case, the only manufacturing performed on the
driftwood is a protective dipping process and the attachment of a
base. Before the dipping, bases of U.S. origin are added to the
medium and larger pieces of driftwood. The smaller pieces are
imported with bases already attached and are dipped, in this
condition, in the protective epoxy-resin coating.
In your submission you argue that the driftwood "is in no
way similar to the essential character or use of the
'substantially transformed' product [meaning the driftwood after
dipping and the attachment of the base]; it is, in fact, the
antithesis of the ultimate product. Any attempt to use the
imported article before processing would obstruct and could
endanger the ultimate product's purposes -- preserving and
enhancing an aquarium environment." Assuming the driftwood has
enough residual tannin in it to prove harmful to fish in the
enclosed environment of an aquarium, it is understandable that a
protective coating is requisite. However, it is difficult to
imagine how the driftwood, once processed, could have any purpose
other than as a decorative piece. Only in the aesthetic sense is
it possible that the aquarium environment is "enhanced" by the
driftwood; we can conceive of no other manner by which the
aquarium environment is actually benefitted by the presence of
the coated driftwood. Likewise, no protective or preservative
property is imaginable aside from the fact that the protective
coating may "preserve" the aquarium environment from the
potentially harmful toxins emitted from the driftwood itself.
Therefore, the essential character and use of the driftwood
remain the same before and after processing -- the driftwood is
still driftwood.
You state that while the driftwood can be used in a variety
of ways before processing, it is not ready for any specific use
in its natural state -- especially for use as aquarium pieces.
Customs disagrees. In its natural state, driftwood is perfectly
suited for the use to which it is being put in the instant case -
- namely a decorative use to simulate a naturally occurring
aquatic environment. The atmosphere that is being sought to
recreate is the kind of aquatic environment that is associated
with driftwood. The only difference between the article in its
natural state and article after the processing is the protective
coating and the addition of a base, a minor assembly. In
HQ 555881 (May 18, 1991), Customs found that adding a protective
coating to knee pads and floats was not a substantial
transformation even though without the protective coating the
articles could not be used in the manner intended. There
protestant argued that the floats and pads were not dedicated in
name, character or use as pool floats or knee pads and could be
used in a number of different ways before the protective coating
was added. Customs discounted the argument and found that prior
to the dipping process, the pads and floats had the essential
character as pads and floats. Furthermore, Customs found that
even though the undipped floats and pads may be suitable as
articles of commerce was not dispositive of whether the vinyl
dipping resulted in a new or different article of commerce.
Customs concluded by stating that it was not persuaded that the
floats and pads which underwent the dipping process were new or
different articles when compared to the articles before the
dipping process. Similarly here, Customs is not persuaded that
the processes performed on the driftwood amount to a substantial
transformation of the article. With or without the protective
coating, the essential character of the driftwood remains the
same.
Hartranft v. Wiegmann, 121 U.S. 609; 30 L.Ed. 1012; 7
S.Ct. 1240 (1887), involved the interpretation of "manufacturing"
for purposes of determining the classificaton and duty for
certain shells. Nonetheless, the case is frequently looked to
for guidance in matters involving substantial transformation.
There, London merchants obtained shells from all parts of the
world. In England the shells were cleaned and prepared for
market. The epidermis was removed, the shells were ground or
polished, cleaned by acid, and ground on an emery wheel to expose
the interior. The shells were sold as ornaments, buttons,
handles for penknives, etc... There, the Supreme Court found
that the shells were not manufactured into new and different
articles, having a distinctive name, character or use from that
of a shell. They were still shells. Hartranft at 615. Like the
seashells, the driftwood is collected in its natural state to be
used in a decorative manner and even though it is subject to some
processing, the processing does not amount to a substantial
transformation resulting in a new and different article.
Customs agrees that the imported driftwood qualifies for the
marking exception set forth in 19 U.S.C. 1304(a)(3)(G) and
section 134.32(g), which excepts "articles to be processed in the
U.S. for his account otherwise than for the purpose of concealing
the origin of such articles and in such a manner that any mark
... would necessarily be obliterated, destroyed, or permanently
concealed." The driftwood surface is uneven, cracked, knobby and
the wood is often twisted. Marking a surface such as this is
extremely difficult. You state that efforts have been made,
unsuccessfully, to find a reasonable marking method that will
survive the dipping process. So long as country of origin
marking is performed in a satisfactory manner after the
processing and in a sufficiently permanent manner so as to reach
the ultimate purchaser, the driftwood is not required to be
marked at the time of importation. Appropriate arrangements
should be made with Customs officials at the port of entry to
ensure that the processed driftwood is properly marked.
HOLDING:
The driftwood imported from Malaysia is not substantially
transformed into a new and different article by the processing
operation performed in the U.S. Accordingly, Fritz is not the
ultimate purchaser of the driftwood and it does not qualify for
an exception from country of origin marking pursuant to section
134.35, Customs Regulations (19 CFR 134.35).
However, pursuant to section 134.32(g), Customs Regulations
(19 CFR 134.32(g)), the driftwood is not required to be marked
with its country of origin at the time of its importation, as any
marking would be necessarily obliterated by the U.S. processing.
Nonetheless, the articles must be marked after processing in the
U.S. in a manner acceptable to Customs.
Sincerely,
John Durant, Director
Commercial Rulings Division