CLA-2 OT:RR:CTF:TCM H187035 CkG
Roger Crain
Harmonized Tariff Services LLC
11901 Reynolds Ave.
Potomac, MD 20854-3334
RE: Request for Binding Ruling on Country of Origin Marking of Footwear Uppers
Dear Mr. Crain,
This is in response to your request of September 21, 2011, on behalf of NMF, Inc., for a binding ruling on the country of origin marking of footwear.
FACTS:
The assembly process for the subject footwear is as follows: First, U.S.-origin cowhide (which will become the external surface of the upper) will be shipped to Mexico for tanning. The cowhide will be assembled into footwear uppers, either in Mexico or the Dominican Republic, by the sewing and/or gluing together of components such as eyelets, linings, fittings and thread from either Mexico or the Dominican Republic. The uppers will then be shipped to the U.S., where the final assembly will take place. The final assembly in the U.S. will incorporate all remaining parts into the finished footwear, including outsoles, midsoles, insoles and shanks (all of U.S. origin). The shoes will be finished by lasting, bottoming, finishing and packing in the U.S.
You propose to mark the footwear by stamping the inside of the tongue “Upper Made in [Mexico or Dominican Republic], Assembled in the United States,” depending on where the uppers are assembled after tanning. You also propose to emboss an American flag on the side of the ankle.
ISSUE:
What is the correct country of origin marking for footwear assembled in the United States from uppers of Mexico or the Dominican Republic?
LAW AND ANALYSIS
The marking statute, section 304 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 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 United States the English name of the country of origin of the article.
Uppers assembled in the Dominican Republic:
If the uppers are assembled in the Dominican Republic and then returned to the U.S. for processing into the finished footwear, Section 134.1(b), CBP Regulations (19 CFR §134.1(b)), applies for the purpose of assessing the country of origin of the finished footwear.
19 CFR §134.1(b), defines “country of origin” as:
the country of manufacture, production or growth of any article of foreign origin entering the United States. 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 this part;….
A substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Juice Products Association v. United States, 628 F. Supp. 978 (Ct. Int’l Trade 1986).
19 CFR §134.35 provides, in pertinent part, as follows:
Articles substantially changed by manufacture. (a) Articles other than goods of a NAFTA country. An article 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, will be within the principle of the decision in the case
of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98). 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 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. The outermost containers of the imported articles shall be marked in accord
with this part.
In this case, a substantial transformation occurs when the tanned cowhide is
formed into an upper in the Dominican Republic, and again when the uppers are assembled in the U.S. into a finished shoe. The open, unlasted upper imported into the U.S. does not have the “very essence” of a completed shoe, unlike the formed upper subject to Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd, 702 F.2d 1022 (Fed Cir. 1983). The unformed uppers at issue are assembled in the U.S. with insoles, midsoles, and shanks, all of which play an important role in the formation and use of the finished footwear. The uppers are further shaped by lasting and bottoming. The assembled components all lose their individual identities and merge into a new and different article of commerce, with a new name, character and use. See HQ 735338, dated January 28, 1994; HQ 952886, dated December 8, 1992; HQ 730155, dated October 4, 1989. As a result of the substantial transformation of the imported upper, the subject footwear is excepted from the marking requirements of 19 U.S.C. §1304, per 19 CFR §134.35(a), supra.
Uppers assembled in Mexico:
If the upper is assembled in Mexico and then processed into finished footwear in the United States, then the NAFTA marking rules of 19 CFR §102.11 and 19 CFR §102.20 will apply for the purpose of assessing the country of origin of the finished footwear.
19 CFR §102.11 provides, in pertinent part, as follows:
19 CFR §102.11 General rules. The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by §102.21. (a) The 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 §102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The instant uppers are not wholly obtained or produced in a single country, nor are they produced exclusively from domestic materials. 19 CFR §102.11(a)(3) thus requires that we apply the tariff shift rules of 19 CFR §102.20.
19 CFR §102.20 provides, in pertinent part:
The following rules are the rules specified in 19 CFR §102.11(a)(3) and other sections of this part. Where a rule under this section permits a change to a subheading from another subheading of the same heading, the rule will be satisfied only if the change is from a subheading of the same level specified in the rule.
Because the uppers are made of leather, the finished footwear would be classified in heading 6403, HTSUS, which provides for “Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather.”
The 19 CFR §102.20 tariff shift rule for footwear provides, in pertinent part, as follows:
6401-6405: A change to heading 6401 through 6405 from any other heading outside
that group, except from formed uppers.
Shoe uppers are classified in heading 6406, HTSUS, and specifically in subheading 6406.10, HTSUS, which provides for “Parts of footwear (including uppers whether or not attached to soles other than outer soles); removable insoles, heel cushions and similar articles; gaiters, leggings and similar articles, and parts thereof; Uppers and parts thereof, other than stiffeners.” Formed and unformed shoe uppers are both provided for under subheading 6406.10, HTSUS. Note 4 to Chapter 64, HTSUS, explains that a “formed upper” covers “uppers, with closed bottoms, which have been shaped by lasting, molding or otherwise but not by simply closing at the bottom.” The instant uppers lack closed bottoms and have not been shaped by lasting or molding. They are therefore unformed uppers pursuant to Note 4 to Chapter 64, and are classified in subheading 6406.10.65, HTSUS, as unformed uppers of leather. Accordingly, they satisfy the tariff shift rule of 19 CFR §102.20.
19 CFR §134.35(b) provides as follows:
Goods of a NAFTA country. A good of a NAFTA country which is to be processed in the United States in a manner that would result in the good becoming a good of the United States under the NAFTA Marking Rules is excepted from marking. Unless the good is processed by the importer or on its behalf, the outermost container of the good shall be marked in accord with this part.
The instant uppers become a good of the United States under 19 CFR §102.20 and are thus excepted from the marking requirements of 19 U.S.C.S. §1304 pursuant to 19 CFR §134.35(b).
You also seek our advice with regards to the embossing of an American flag on the ankle of the shoe. Your concern is whether the depiction of a flag on this shoe triggers the proximity requirements of 19 CFR §134.46 with regard to the location of the country of origin marking. 19 CFR §134.46 deals with cases in which the words "United States," or "American," the letters "U.S.A.," any variation of such words or letters, or the name of any city or locality in the United States, or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced, appears on an imported article or its container, and those words, letters or names may mislead or deceive the ultimate purchaser as to the actual country of origin. In such a case there shall appear, legibly and permanently, in close proximity to such words, letters, or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," Product of," or other words of similar meaning.
Because the shoes are excepted from marking by virtue of satisfying the aforementioned tariff shift rule or being substantially transformed after importation, the requirements of 19 CFR §134.46 are not applicable. The embossing of the American flag on the ankle of the finished shoe is thus permissible under 19 CFR §134.46, and no further clarification of origin is necessary.
HOLDING:
If the imported shoe uppers are assembled in the Dominican Republic and finished in the United States, they are substantially transformed in the United States pursuant to 19 CFR §134.1(b). As such, per 19 CFR §134.35(a), the U.S. processor is considered the ultimate purchaser of the imported components.
If the imported shoe uppers are assembled in Mexico and incorporated into the finished footwear in the United States, they become products of the United States pursuant to 19 CFR §102.20 for marking purposes.
Inasmuch as marking requirements of 19 U.S.C. §1304 are applicable only to articles of "foreign origin," the finished footwear will be excepted from the marking requirements of 19 U.S.C. §1304.
However, regarding your proposal to emboss the American flag on the finished shoes and to include the phrase “Assembled in the United States” on the label, we note that whether an article may be marked with the phrase "Made in the USA" or similar words denoting U.S. origin, is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the FTC Division of Enforcement, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580 on the propriety of proposed markings indicating that an article is made in the U.S.
A copy of this ruling letter should be attached to the entry documents filed
at the time the goods are entered. If the documents have been filed without a
copy, this ruling should be brought to the attention of the CBP officer handling the
transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch