MAR-05 RR:TC:SM 560187 BLS
John M. Peterson, Esq.
Neville, Peterson & Williams
80 Broad Street
New York, New York 10004
RE: Country of origin marking of decorative bows imported from
China;
substantial transformation
Dear Mr. Peterson:
This is in reference to your letter dated November 12, 1996,
on behalf of Berwick Industries, Inc., requesting a ruling
concerning the country of origin of certain decorative bows to be
imported from China. Supplemental information was furnished with
your fax dated July 17, 1997.
FACTS:
Polypropylene ribbon is manufactured in the U.S., using an
extrusion process and embossed with a weave-like pattern. One
side of the polypropylene ribbon features a "flocked" coating of
short textile fibers which are superimposed on to the side of the
ribbon. The flocking process also takes place in the U.S.
The ribbons are exported to China in continuous length. In
China, the ribbons are cut to various lengths and folded into
various patterns representing parts of the bow. These components
are then fastened together by tying with a gold-braided wire
cord, which is also of U.S.-origin. (We will assume for purposes
of this ruling that the wire cord is also exported from the U.S.
in continuous length and merely cut to size in China.) The
finished bows are then placed in header cards and re-imported
into the U.S.
ISSUE:
What are the country of origin marking requirements for the
imported bows?
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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 manner as to indicate to the
ultimate purchaser in the
U.S. the English name of the country of origin of the article.
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 this part. For a good of a NAFTA country,
however, the NAFTA Marking Rules will determine the country of
origin.
A substantial transformation occurs when articles lose their
identity and become articles having a new name, character or use.
See United States v. Gibson-Thomsen Co., 27 CCPA 267 at 270
(1940), National Juice Products v. United States, 10 CIT 48, 628
F. Supp. 978 (CIT 1986).
However, with certain exceptions not here pertinent, the
rules for determining the country of origin of textile and
apparel products is governed by regulations implementing the
provisions of section 334 of the Uruguay Round Agreements Act
(19 U.S.C. 3592). See section 102.21, Customs Regulations (19
CFR 102.21).
Accordingly, the initial issue to be resolved is whether the
imported articles are textile products subject to the rules under
19 CFR 102.21 for determining the country of origin for textile
products.
A. Classification of Decorative Bows
Classification of goods under the HTSUS is governed by the
General Rules of Interpretation (GRI's). GRI 1 provides that
"classification shall be determined according to the terms of the
headings and any relative section or chapter notes, and, provided
such headings or notes do not otherwise require, according to
[the remaining GRI's]." In other words, classification is
governed by the terms of the headings of the tariff and any
relative section or chapter notes.
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The classification of plastics and textile combinations,
such as the bows at issue here, is governed by the legal notes to
the HTSUS. Specifically, the EN's to Chapter
39 indicate, in pertinent part that:
[T]he classification of plastics and textile
combinations is essentially governed by Note 1(h)
to Section XI, Note 3 to Chapter 56 and Note 2 to Chapter 59.
However, because the flocking portion of the bow qualifies
as "nonwovens" or as "textile fabric" as referred to within these
Section and Chapter Notes, the notes are not indicative of
classification in this case. See Headquarters Ruling Letter
(HRL) 953177 dated April 7, 1993, explaining that flock is not
considered to be a fabric within the scope of Section XI, which
provides for textiles and textile articles.
A review of the other potential HTSUS headings indicates
that the bows are comprised of a plastics material of Chapter 39,
HTSUS, specifically other plates, sheets, film, foil and strip of
plastics, combined with textile materials, provided for within
heading 3921, HTSUS. Accordingly, the bows are classifiable,
pursuant to GRI 1, in heading 3926, HTSUS, which provides for
other articles of plastics or materials of headings 3901 to 3914.
Insofar as the bows are decorative and designed to adorn gifts
and other similar articles, they are appropriately described by
the terms of subheading 3926.40, HTSUS, as ornamental articles.
Customs has issued rulings classifying similar articles in
heading 3926, HTSUS. For example, in HRL 955586 dated March 15,
1994, we considered the classification, inter alia, of a 100
percent polypropylene ribbon with acrylic flocking. We
determined that the flocking was not a nonwoven or textile fabric
and was not classified within Section XI, HTSUS. See also HRL
955587 dated March 21, 1994; HRL 957710 dated September 1, 1995;
HRL 952969 dated March 15, 1994, and New York Ruling Letter
813391 dated August 30, 1995.
Since the subject articles are not classifiable as textile
articles, we must now determine whether the processing in China
substantially transforms the U.S.-origin material into a product
of that country.
B. Substantial Transformation
In National Hand Tool Corp. v. United States, 16 CIT 308, 312
(1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), certain hand tool
components used to make flex sockets, speeder handles, and flex
handles, were imported from Taiwan. The imported components were
either cold-formed or hot-forged into their final shape before
importation, with the exception of the speeder handle bars,
which were reshaped by a power press after importation. In the
U.S., the components were subject to heat
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treatment, which increased the strength of the components,
sand-blasting (a cleaning process), and electroplating (enabling
the components to resist rust and corrosion).
After these processes were complete, the components were
assembled into the final products, which were used to loosen and
tighten nuts and bolts.
The Court of International Trade decided the issue of
substantial transformation based on three criteria, i.e., name,
character, and use. Applying these rules, the court
found that the name of the components did not change after the
post-importation processing, and that the character of the
articles similarly remained substantially unchanged after heat
treatment, electroplating and assembly, as this processing did
not change the form of the components as imported. The court
further pointed out that the use of the articles was
predetermined at the time of importation, i.e., each component
was intended to be incorporated in a particular finished
mechanic's hand tool. The court concluded that the substantial
transformation test utilizing name, character and use criteria
should generally be conclusive in country of origin marking
determinations, and that whether a substantial transformation
took place should be determined on a case-by-case basis. In that
situation, the court concluded that the processing in the U.S.
which resulted in the completed tools did not effect a
substantial transformation of the foreign components.
A similar finding was made in Superior Wire v. United
States, 867 F. 2d 1409 (Fed. Cir. 1989), where the appellate
court affirmed the Court of International Trade's holding that no
substantial transformation occurred from the multi-stage process
of drawing wire rod into wire. In that case, the court noted
that the "end use of the wire rod is generally known before the
rolling stage and the specifications are frequently determined by
reference to the end product for which the drawing wire will be
used." Accordingly, the court found that the character of the
final product was predetermined and that the processing did not
result in a significant change in either character or use of the
imported material. While the wire rod and processed wire had
different names and identities in the industry, the court
concluded that they were essentially different stages of the same
product.
In HRL 556608 (July 24, 1992), involving a case under the
Generalized System of Preferences (GSP), U.S.-origin ribbon in
spools or precut length was sent to Mexico with thread, glue, a
velcro patch and a barrette. In Mexico, the ribbon (if not
precut) was cut to the proper lengths, the velcro patch was glued
to the barrettes, and the ribbon glued or sewn to the barrette in
the form of a bow. The completed hair bow was then returned to
the U.S. In that case, we held that the production of the bows
did not result in a substantial transformation of the U.S.-origin
ribbon, whether or not it was pre-cut in Mexico, and thus the
returned hair bow was not eligible for duty-free treatment under
the GSP.
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While there appears to be a name change in the instant case,
from ribbon to bow, there is no significant change in either the
character or use of the U.S.-origin ribbon. The attributes of
the finished bow, i.e., the width of the ribbon, the surface
texture, the tensile strength and form, are determined by the
ribbon used in production of the bow.
Under the circumstances, we find that the U.S.-origin ribbon (and
wire tie) do not undergo a substantial transformation as a result
of the operations performed in China. Therefore, the country of
origin of the imported decorative bow is the U.S. As a product
of the U.S., the imported articles are excepted from the marking
requirements. See 19 CFR 134.32(m).
HOLDING:
1) The imported decorative bows are classifiable under
subheading 3926.40 HTSUS, as ornamental articles of plastic.
2) As the U.S.-origin materials do not undergo a substantial
transformation in China, the country of origin of the imported
bows is the U.S. Therefore, the articles are not subject to the
country of origin marking requirements under 19 U.S.C. 1304. See
19 CFR 134.32(m). The Federal Trade Commission ("FTC") has
jurisdiction concerning the use of the phrase "Made in the
U.S.A.", or similar words denoting U.S. origin. Consequently,
any inquiries regarding the use of such phrases reflecting U.S.
origin should be directed to the FTC, at the following address:
Federal Trade Commission, Division of Enforcement, 6th &
Pennsylvania Avenue, N.W., Washington, D.C. 20508.
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
Tariff
Classification Appeals Division