CLA-2 OT:RR:CTF:TCM H254360 MG
Joseph F. Donohue, Jr., Esq.
Donohue and Donohue
26 Broadway, Suite 2300
New York, New York 10004
RE: Country of origin marking requirements for certain hand bags
Dear Mr. Donohue:
This letter pertains to your correspondence of May 20, 2014, on behalf of your client Burberry Limited of London (Burberry), in which you requested a binding ruling on the country of origin marking requirements for two styles of women’s handbags produced in Italy and another country.
FACTS:
You submitted a finished sample referred to as “Medium Orchard” assembled in Italy. You also submitted samples of the components cut in Italy (together with hardware, ready for subassembly work in the second country); and samples of subassemblies, which are returned to Italy from the second country. Your submission also refers to a “Small Orchard” handbag, which is said to be identical to the “Medium Orchard,” except that it is smaller. The assembly processes are the same for both bags.
The Medium Orchard measures approximately 16.5 x 13 x 6 inches, and the exterior surface is constructed of a Jacquard woven nylon fabric bearing the Burberry trademarked check pattern with a cotton backing. Two leather handles measuring approximately 16 inches in length are attached to the front and back panels by metal O-rings that are joined to a leather trim assembly. A leather shoulder strap measuring approximately 46 inches long is attached to the front and back panels by a claw clasp hooked to a D-ring, which is attached to a leather strap trim assembly. The top and sides are trimmed in leather. A zipper at the top extends the length of the bag and may be closed and opened by either of two leather tabs attached to the zipper by a metal D-ring. Four small metal “feet” are affixed to the bottom. The interior compartment of the handbag has a polyester fabric inner lining with a two pocket “organizer” on one wall and a zippered pocket on the other wall. Stitched to the face of the zippered pocket is a leather tab with the Burberry name and trademark debossed thereon. On the opposite panel, stitched to the top of the right pocket of the organizer, is a black leather tab with the country of origin marking “Made in Italy” debossed thereon in black letters approximately three sixteenths of an inch in height.
The Small Orchard bag measures approximately 10 x 14.5 x 5.5 inches. Except for size, the Small Orchard is an identical version of the Medium Orchard in design, description and material composition.
The materials comprising the handbags consist of the following: 100% genuine leather originating in Italy purchased in the form of skins measuring approximately 16.5 square feet; fabric produced in Italy and purchased in bulk rolls; and hardware (e.g. zippers, D-rings, etc.) produced in Italy and purchased in bulk quantities. The leather will be used in producing the bottom, handles, trim and trim assemblies, shoulder strap and shoulder strap pad; the fabric in producing the outer surfaces and the inner linings; and the hardware for closures and for other purposes.
You submit the details of production operations in making these bags as follows:
Pre-Cutting and Cutting Operations Performed in Italy and applicable to Medium and Small Orchard.
The production begins with the design or drawing and selecting which materials should be used, the style of construction and the hardware. When the sample has been finally approved, it is translated into a computer-aided design (“CAD”), which forms the basis for production. Each style has its own original set of CAD blueprints, and those for one style handbag cannot be used for any other style. The CAD department then creates a set of steel templates, referred to as “knives”, for use as tooling. The knives will cut the various materials to the specific size and shapes called for by the design. Each style article has a unique set of knives that can be used only for that article. In addition to cutting to a specific size and shape, certain knives create cuts, holes or notches in the leather or fabric to facilitate later stages of assembly.
Following arrival at the producer’s facility in Italy, the leather and fabric are examined. Checks are continuously carried out before, during and after cutting. Precise cutting of all materials is required to ensure that the gluing and stitching operations to be performed later in the second country can be done with maximum ease and precision. Scoring (i.e., marking with lines, grooves, notches, etc.) and guide holes (incorporated into the knives) are done on some materials to facilitate subassembly work in the second country.
Subassembly Operations Performed in the Second Country.
Following receipt of the pre-cut components and hardware items, the following operations are performed in the second country: The leather pieces are “skived” and the edges are sanded smooth and buffed, and then edge-painted. The pre-cut nylon outer panels and pre-cut cotton backing are affixed together by gluing. Two pre-cut leather strips are attached vertically with glue to each of the pre-cut nylon outer panels and then stitched in place. A smaller pre-cut leather strip is attached vertically to each outer panel with glue, looped through a D-ring and stitched. Pre-cut leather strips are attached with glue around the perimeter of each of the outer panels and then stitched in place (in a sense, “framing” the fabric outer panel with leather). The pre-cut leather handle pieces are glued and stitched, and O-rings attached, to form the two handles. The handles are then attached to the outer panels by joining the O-rings to the top of the previously-attached vertical leather strips. The outer panels are partially joined together at the mid-point with approximately 1 cm corner tack in a simple stitching process; the top, bottom and rest of the sides of the panels remain unstitched and open. The pre-cut shoulder strap pieces are glued and stitched, and the buckle assembly and claw clasp attached, to form the shoulder strap.
There are two pre-cut inner lining panels. On the panel with the horizontal slit (the slit operation was done in Italy), a zipper pocket lining is sewn behind the slit and the zipper added by stitching. A 2-section organizer panel is sewn onto the other panel of the lining. The 2 lining panels are then partially sewn together with 1 cm corner tack at each side in a simple stitching process; the lining bottom, top, and rest of the sides remain unstitched and open. The outer bottom panel is formed by gluing the blotter-like reinforcing material to the pre-cut leather bottom panel, attaching the 4 pre-supplied gunmetal feet and forming the shape on a wooden mould. The zipper pulls are cut, sewn and edge-painted. The subassemblies and other components are packed for shipping to Italy.
3) Final Assembly Operations Performed in Italy.
Upon return of the component parts/subassemblies from the second country, the following operations are performed in Italy: All items are checked for damage and imperfections and a quality control check is undertaken and pieces with defective assembly are removed. All items are counted, packed and distributed for final production. Country of origin marking (“Made In Italy”) is debossed onto the leather tab previously stitched to the 2-pocket organizer. The front and back outer panels are joined to the base by gluing the 3 separate pieces onto a wooden mould in the shape of the finished bag. The wood block or mould is then removed and the base of the bag is then stitched with a post sewing machine.
The label reporting the fiber composition and other information required by the Textile Fiber Products Identification Act (see 15 USC § 70b(b)) is stitched to the interior of the zipper pocket.
A leather tab is attached /stitched to each side at the place where the zipper will eventually start/stop. The zipper (excluding the zipper pull) is lightly stuck in place (by lightly gluing it) onto a wooden mould/block which is the shape of the finished bag. The wooden block (with the zipper attached to it) is placed inside the bag and then the sides of the bag are stuck in place (by gluing) to the zipper, thus completing the appearance of the top line/opening of the bag. The wooden block is removed from the bag, leaving the shaped zipper stuck in place to the sides of the bag. The bottom panel of the internal lining is stitched to the 2 side panels, creating the “bag” feature of the lining; the inner lining is then positioned inside the bag. The final stitching on top of the bag (closing) is completed. This attaches the outer panels, the lining and the zipper, essentially completing the bag. All threads are cut and sealed. The zipper pulls are attached to the bag by D rings. The shoulder strap is attached to each side by hooking the claw clasp to the D-ring. The handbag is then cleaned. The raw edges of leather are trimmed and painted and the handbag is left to dry.
Throughout the above process, there is constant quality control of the product at each stage. The product then passes to the Quality Control Department for a final examination for any manufacturing faults. A label and inspection recognition card are placed inside the handbag. The handbag is then wrapped in anti-humidity protective foam, then placed in a “dust bag”, and then sealed in a cellophane bag. A “swing ticket” is added. The handbag is then packed and shipped.
You submit that the country of origin of the handbags is Italy, and that marking the country of origin in indented (debossed) lettering on a label that is stitched to one of the interior pockets satisfies the marking requirements.
ISSUE:
What is the country of origin of the handbags?
Does the proposed country of origin marking meet the requirements of the marking rule?
LAW AND ANALYSIS:
Country of Origin
Section 334 of the Uruguay Round Agreements Act (URAA) (codified at 19 U.S.C. §3592), enacted on December 8, 1994, provided rules of origin for textiles and apparel entered, or withdrawn from warehouse for consumption, on or after July 1, 1996. Section 102.21, CBP Regulations (19 C.F.R. §102.21), published September 5, 1995, in the Federal Register, implements Section 334 (60 FR 46188). Section 334 of the URAA was amended by section 405 of the Trade and Development Act of 2000, enacted on May 18, 2000, and accordingly, §102.21 was amended (68 FR 8711). Thus, the country of origin of a textile or apparel product shall be determined by the sequential application of the general rules set forth in paragraphs (c)(1) through (5) of §102.21. The relevant provisions are set forth below. We will consider each of these rules in turn:
(c) General rules. Subject to paragraph (d) of this section, the country of origin of a textile or apparel product shall be determined by sequential application of paragraphs (c) (1) through (5) of this section and, in each case where appropriate to the specific context, by application of the additional requirements or conditions of §§ 102.12 through 102.19 of this part. (1) The country of origin of a textile or apparel product is the single country, territory, or insular possession in which the good was wholly obtained or produced. (2) Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) of this section, the country of origin of the good is the single country, territory, or insular possession in which each foreign material incorporated in that good underwent an applicable change in tariff classification, and/or met any other requirement, specified for the good in paragraph (e) of this section.
(3) Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1) or (2) of this section: (i) If the good was knit to shape, the country of origin of the good is the single country, territory, or insular possession in which the good was knit; or (ii) Except for goods of heading 5609, 5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit to shape and the good was wholly assembled in a single country, territory, or insular possession, the country of origin of the good is the country, territory, or insular possession in which the good was wholly assembled. (4) Where the country of origin of a textile or apparel product cannot be determined under paragraph (c)(1), (2) or (3) of this section, the country of origin of the good is the single country, territory, or insular possession in which the most important assembly or manufacturing process occurred.
Because the handbags are not wholly obtained or produced in a single country, territory, or insular possession, paragraph (c)(1) is inapplicable.
Paragraph (c)(2) requires a determination whether each foreign material incorporated in the handbags underwent an applicable change in tariff classification, and/or met any other requirement, specified paragraph (e). The handbags are classified in subheading 4202.22.80, Harmonized Tariff Schedule of the United States, HTSUS, as “Handbags with outer surface of textile materials: Other: Other: Other.” Paragraph (e) provides in relevant part:
A change to subheading 4202.22.40 through 4202.22.80 from any other heading, provided that the change is the result of the good being wholly assembled in a single country, territory, or insular possession.
Insofar as the handbags are not wholly assembled in a single country, a country of origin determination can not be determined by paragraph (c)(2). Paragraph (c)(3) is also inapplicable since the handbags are neither knit to shape nor wholly assembled in a single country. Pursuant to paragraph (c)(4), the country of origin of the good is the single country, territory, or insular possession in which the most important assembly or manufacturing process occurred.
We note that the assembly work performed in the second country advances the pre-cut raw materials and hardware to the next stage in the production process to the status of various subassemblies. In such condition, they are not identifiable, marketable or usable as handbags. More importantly, they lack the essential character of an article defined as a handbag because they are incapable of holding small personal articles, money, accessories or anything else. As they leave the second country for Italy they are a group of components, none of which has any “holding” capability.
By contrast, the assembly or manufacturing processes occurring in Italy transform the subassemblies into identifiable, marketable and usable handbags. In this regard, we agree with your position that when viewed against the operations performed in the second country, those performed in Italy are of greater significance or importance and from the standpoint of producing a handbag, they are more ‘meaningful’ having the appearance and all the common characteristics and features of a finished handbag, including the capability of holding and carrying small personal articles and money. Therefore, while assembly operations occur in both countries, those performed in Italy are of greater significance because they transform the various components and subassemblies into an article that actually conforms to the definition of “handbag.”
In this regard, Headquarters Ruling Letter (HQ) 962288, dated April 28, 1999, is instructive. This ruling involved the production of a backpack produced partly in China and partly in Indonesia. We concluded that because the most important manufacturing operations occurred in Indonesia because that was where all the individual panels were sewn together, “creating the identity of the backpack.” Similarly with the instant handbags, it is in Italy where, among other things, the outer panels are sewn together to form the outer husk, the inner panels are sewn together to form the inner compartment and the two are joined together and to the bottom panel of the bag, creating the identity of the handbags and imparting their functional characteristics.
Marking
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 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 in the United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. §1304 was "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." United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).
Pursuant to 19 C.F.R. §134.41(b), the country of origin marking is considered to be conspicuous if the ultimate purchaser in the United States is able to find the marking easily and read it without strain. The marking must survive the normal distribution and store handling. CBP has found certain factors to be indicative but not conclusive of compliance with the requirements of 19 C.F.R. §134.41 and 19 U.S.C. §1304.
In this regard, HQ H059996, dated August 5, 2009 and HQ H025104, dated April 18, 2008, offer valuable guidance. As stated in these rulings, some factors we consider are the size, location, and legibility of the marking, and whether or not the marking stands out. CBP has generally found that the size of the marking should be large enough so that the ultimate purchaser can easily see the marking without strain. The location of the marking should be in a place where the ultimate purchaser could expect to find the marking or where he/she could easily notice it from a casual inspection. Whether the marking stands out is generally dependent on where it appears in relationship to other print on the article and whether it is in contrasting letters to the background. Overall, CBP has found that the totality of the circumstances determines whether or not the marking conforms to the marking rules.
In this regard, we note that CBP has found non-contrasting lettering to be acceptable, even when not in the “most conspicuous place,” when it can be read without strain. For instance, in HQ 733146, dated Aug. 10, 1990, a mini notepad holder marked with country of origin on the spine in raised non-contrasting letters measuring one sixteenth of an inch high and pencil holder marked with country of origin on bottom of the front of the holder in raised letters measuring one sixteenth of an inch high, was found to be acceptable because the marking was found easily and read without strain. In HQ 733691, dated May 24, 1991, CBP held that country of origin marking put on the sole of a shoe by injection molding that leaves raised letters measuring approximately one eighth of an inch in the same color as the shoe was found to be acceptable as the letters are easy to find and the print size is large enough to be read without strain.
We note that the lettering in the bags at issue is three sixteenths of an inch in height, which is fifty percent larger than the non-contrasting lettering in the shoe at issue in HQ 733691, and three times the size of the non-contrasting lettering in the note pad holder and pencil holder at issue in HQ 733146. Although the non-contrasting lettering in these rulings was raised, the indented lettering in the Orchard bags at issue is equally acceptable, as the feel of the letters is in contrast with the smooth surface of the leather.
As the words “Made in Italy” are located on a tab stitched to the top of the open pocket of the organizer, you conclude that a buyer will notice the country of origin marking when he or she views the inside of the bag. You further argue that the large size of the letters and their prominent indentation on the leather tab, satisfies the legibility requirement under 19 C.F.R. §134.41(b) by virtue of the fact that the contrasting effect of the indented lettering makes the country of origin marking stand out as well as easy to read.
We agree with the conspicuousness of the location of the marking. We further agree that the contrasting effect of the indented lettering would also serve to catch the eye of the purchaser and the size of the lettering makes the letters stand out so that the marking is easy to read. We also agree with your assessment of the permanence of the country of origin label. The leather label securely sewn to the inside of the handbags would survive normal distribution and store handling. Accordingly, we find that the proposed country of origin marking for the Small and Medium Orchard handbags meet the requirements of 19 C.F.R. §134.41(b).
HOLDING:
The country of origin of the Small and Medium Orchard handbags is Italy. The proposed country of origin marking for both styles satisfies the marking requirements of 19 C.F.R. §134.41(b).
Sincerely,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch