MAR-2-05 R:C:S 558994 WAS
Mr. Ray Reynolds
Lee Hardeman
P.O. Box 45545
Atlanta, GA 30320-0545
RE: Country of origin marking of used military surplus clothing which is processed in the U.S.; 19 CFR 134.32(c) & (g)
Dear Mr. Reynolds:
This is in reference to your letter dated January 18, 1995, on behalf of Sturm
European Military Surplus Teesar, concerning the country of origin marking
requirements for worn used military surplus clothing which is produced in
Germany and imported into the U.S.
FACTS:
You state that Sturm European Military Surplus proposes to purchase
various articles of clothing from Sturm Armeebestande Import Export. The clothing
was originally produced in Germany for use by the East German military. You
claim that the articles of clothing show appreciable wear and will be imported into
the U.S. where they will be processed into marketable articles of clothing.
Specifically, you state that a jacket with ripped sleeves will have the sleeves
removed, thereby transforming the jacket into a vest-type garment; long pants with
ripped knees will have the pant legs removed just above the knee, thereby
transforming the pants into a bermuda short-type garment. The importer estimates
that an additional 50 to 75 percent would be added to the cost of each garment if
the required additional processing occurred in Germany, rather than in the U.S.
The additional processing specifically includes "sorting by degree of repair needed,
making necessary cosmetic repairs if possible, transforming articles that are beyond
simple cosmetic repair, marking with country of origin, and marking under the
Textile Act rules when required."
The importer claims that because of the high cost of further processing in
Germany relative to the initial cost of the used garments, the garments should be
excepted from marking pursuant to 19 CFR 134.32(c). In the alternative, the
importer submits that because of the extensive processing which will be performed
in the U.S. to make the articles marketable in the U.S., there exists the possibility
that any marking will be obliterated; therefore, the garments should be excepted
from marking pursuant to 19 CFR 134.32(g).
ISSUE:
Whether the used military surplus garments are excepted from the country of
origin marking requirements pursuant to 19 CFR 134.32(c) or (g).
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires
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 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. Friedlaender & Co., 27
C.C.P.A. 297 at 302 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements the country of
origin marking requirements and the exceptions of 19 U.S.C. 1304. Section
134.1(b), Customs Regulations (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 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 the marking laws and regulations. The
case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940),
provides that an article used in manufacture which results in an article having a
name, character or use differing from that of the constituent article will be
considered substantially transformed.
You assert that the used clothing should be excepted from country of origin
marking pursuant to 19 U.S.C. 1304(a)(3)(C) and 19 CFR 134.32(c), which allows
an exception from country of origin marking for "articles that cannot be marked
prior to shipment to the United States except at an expense economically
prohibitive of its importation." The fact that such marking would result in
economic hardship is not in and of itself sufficient to except the articles from the
requirements of country of origin marking. See Headquarters Ruling Letter (HRL)
733990 dated June 17, 1991 and HRL 733527 dated May 20, 1991.
You should note that even if the garments are excepted from country of
origin marking under the provisions of 19 U.S.C. 1304, if the imported samples are
textile fiber products subject to the requirements of the Textile Fiber Identification
Act, or wool products subject to the requirements of the Wool Labeling Act of 1939,
as amended (15 U.S.C. 68 et seq.), under the rules and regulations issued by the
Federal Trade Commission (FTC) under these Acts, the imported samples, as well
as the products themselves, are required to be marked (subject to specified
exceptions) with their respective fiber contents and other required information,
including country of origin. See 16 CFR 303.21 and 300.22. Pursuant to sections
11.12 and 11.12b, Customs Regulations (19 CFR 11.12 and 11.12b), the Customs
Service is responsible for the enforcement of the labeling requirements of these Acts
at the time of importation. If you have any questions regarding the interpretation
of the FTC rules and regulations, the FTC should be contacted.
The question that must be answered in the instant case is whether marking
the country of origin on the garments in Germany would be economically
prohibitive of their importation. Although neither the statute nor the regulations
defines the term "economically prohibitive", several factors have been considered to
help determine when marking an item would be economically prohibitive. These
include situations in which the requirement to mark the article to indicate its
country of origin would force the producer to incur a cost that would require the
item to be marked at a price at which: (1) the item could not be sold since an
individual would not buy it; (2) no profit could have been made; (3) the profit that
could have been obtained would not have been sufficient to induce the importer to
handle the item. See Note, Country of Origin Marking, 6 Law and Policy in Int'l
Business 485, 501-502 (1974), citing Bur. Cust. Customs Information Exchange
Ruling 114/51 (1951).
It is the opinion of this office that you have not provided sufficient
information upon which to grant an exception from individual marking based upon
prohibitive economic expense. While we do not doubt the veracity of your statement
that marking by means of placing labels on each garment would be economically
burdensome, the mere assertion that marking will be "prohibitive," unsupported by
some actual cost estimates for marking the garments, could never be the basis for
granting an exception to individual marking. Accordingly, in the absence of any
basis upon which to make a finding, the garments cannot be excepted from country
of origin marking under 19 U.S.C. 1304(a)(3)(C) and 19 CFR 134.32(c).
Articles to be processed in the U.S. by the importer or for his account
otherwise than for the purpose of concealing the origin of such articles and in such
manner that any mark contemplated by this section would necessarily be
obliterated, destroyed, or permanently concealed are excepted from marking under
19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g). Customs has limited the
applicability of the "G" exception to precise circumstances. As provided in section
134.36(a), Customs Regulations (19 CFR 134.36(a)), an article which is to be
processed in the U.S. by the importer or for his account shall not be considered to be
within the "G" exception if there is a reasonable method of marking which will not
be obliterated, destroyed, or permanently concealed by such processing. In
addition, Customs has ruled that supporting statements of intended processing to
be performed by the importer or for his account are a condition of entitlement to the
exception. See C.S.D. 89-6, October 3, 1988 (731484); HRL 729434 dated May 23,
1986, and RM 363.2 W (January 25, 1967). Customs has also ruled that another
condition of entitlement to the exception is that the district director must be
satisfied that the processed article will be marked in a manner to indicate the
country of origin to the ultimate purchaser in the U.S. This would require the U.S.
processor to mark the processed article unless the U.S. processor is the ultimate
purchaser. (Pursuant to 19 CFR 134.35, a U.S. processor is considered to be the
ultimate purchaser if the processing constitutes a substantial transformation, i.e.,
results in a new name, character or use.)
In the instant case, Customs does not find that an exception under 19 U.S.C.
1304(a)(3)(G) and 19 CFR 134.32(g) is warranted, since merely indicating that the
country of origin marking "may" be obliterated during processing which takes place
in the U.S. is insufficient to apply this exception. Customs has granted the
exception in cases where the marking on imported component parts would be
permanently concealed as a result of the assembly of the parts into a completed
article. See HRL 734566 dated June 15, 1992 (Customs held that water pump
components which are imported into the U.S. may not remain visible after assembly
into a completed water pump, and therefore, any such components would be
excepted from marking at the time of importation pursuant to 19 U.S.C.
1304(a)(3)(G) and 19 CFR 134.32(g), since any marking thereon would necessarily
be permanently concealed as a result of the U.S. processing). Moreover, we are not
satisfied that pursuant to 19 CFR 134.36(a), a reasonable method of marking which
will not be "obliterated, destroyed, or permanently concealed" as a result of the
operations performed in the U.S. is not possible. Therefore, the garments are not
excepted from marking under this provision and must be properly marked in
accordance with the requirements in 19 U.S.C. 1304 and 19 CFR Part 134.
HOLDING:
Based on the information submitted, as no documentary evidence was
submitted to support the claim that the garments could not be marked prior to
shipment to the U.S. except at an expense economically prohibitive of their
importation, the marking exception under 19 U.S.C. 1304(a)(3)C) and 19 CFR
134.32(c) is not applicable. In addition, merely indicating that the country of origin
marking "may" be obliterated during processing which takes place in the U.S. is
insufficient to apply the exception under 19 U.S.C. 1304(G) and 19 CFR 134.32(g).
Therefore, the garments must be properly marked to indicate their country of origin
in accordance with the requirements in 19 U.S.C. 1304 and 19 CFR Part 134.
A copy of this ruling letter should be attached to the entry documents filed at
the time this merchandise is entered. If the documents have been filed without a
copy, this ruling should be brought to the attention of the Customs officer handling
the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division