MAR-2-05 CO:R:C:V 734567 KR
Mr. Allan L. Ford, President
The American Belt Company
Adams Road at Adams Circle
P.O. Box A
Pensalem, PA 19020-0848
RE: Country of origin marking of unsized leather strips imported
from China and processed in the U.S. into finished belts;
substantial transformation; 19 CFR 134.35.
Dear Mr. Ford:
This is in response to your letters dated March 17, 1992, and
August 27, 1992, on behalf of The American Belt Company, requesting
a country of origin ruling regarding unsized leather strips to be
imported and manufactured into finished belts in the United States.
Samples of the product were submitted for examination demonstrating
the various manufacturing stages. Samples of the unfinished
product made into other types of straps, and a Dooney and Bourke
catalogue, were also submitted to show other uses of the leather
strips.
FACTS:
You state that The American Belt Company intends to import
unsized leather strips from China. The strips will be further
processed in the U.S. to become finished belts. It is your
position that this further processing amounts to a substantial
transformation.
You have divided the U.S. processing into 8 steps:
1. Sizing the leather strips into particular lengths.
2. Punching the point end, including punching holes in
the belt and rounding the end.
3. Punching the buckle end, including rounding the
buckle end.
4. Polishing the point end.
5. Polishing the buckle end.
6. Stitching both sides of the entire length of the belt
and stamping.
7. Attaching the buckle and loop.
8. Packaging, including attaching the hanger and price
ticket.
The leather strips are made in China. The buckle, loop and
packaging are of U.S. origin. You state that the value of the
leather strips is $0.9589. You state that the value added in the
U.S. with the low priced buckle is 58.9% of the total cost of the
belt. The value added in the U.S. with the higher priced buckle
is 69.2% of the total cost. You state the average value of a
buckle is approximately $0.50, making an average value added in the
U.S. $1.692 or 63.8% or the total cost of the finished belt.
The leather undergoes a nineteen step process in China prior to the
importation into the U.S.:
1. Wash out packing salt.
2. Unhair.
3. Place in lime to plump the hide.
4. Flesh - to remove excess flesh.
5. Split the hide into two sections, grain and split.
6. Neutralize the hide - remove the lime.
7. Tan with chrome (can be done with vegetable).
8. Wring to remove excess moisture.
9. Shave to desired thickness.
10. Rotan with a vegetable rotan.
11. Dye the crust.
12. Lubricate with fat liquor.
13. Set out to stretch and remove moisture.
14. Toggle or paste to dry.
15. Finish - basecoat, tumble or mill, print with
haircell, color coat, antique, and top coat.
16. Stake to soften the leather.
17. Block the finished hide and lining to panels.
18. Strip the hide panels and lining panels to the
desired width.
19. Laminate the strip of leather and lining together.
You state that the leather strips as imported can be finished
into belts, as you do, or into various other types of straps for
luggage, handbags, camera cases, and other uses. You submitted a
catalogue from Dooney and Bourke to demonstrate other uses of the
leather strips; as well as mock up other straps made from the
leather strips.
The containers holding the leather strips are marked "Made in
China" when entered into the U.S. You believe that the processing
of the leather strips into belts is a substantial transformation
and wish to mark the finished belts "Made in U.S.A."
ISSUES:
Whether the imported leather strips are substantially
transformed by the additional processing performed in the U.S.
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 a manner as to indicate
to the ultimate purchaser in the U.S. the English name of the
country of origin of the article. The Court of International Trade
stated in Koru North America v. United States, 701 F. Supp. 229,
12 CIT 1120 (CIT 1988), that "in ascertaining what constitutes the
country of origin under the marking statute, a court must look at
the sense in which the term is used in the statute, giving
reference to the purpose of the particular legislation involved."
The purpose of the marking statute is outlined in United States v.
Friedlaender & Co., 27 CCPA 297 at 302, C.A.D. 104 (1940), where
the court stated that: "Congress intended 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."
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. Section 134.35, Customs Regulations (19 CFR
134.35), states that the manufacturer or processor in the U.S.
who converts or combines the imported article into a different
article having a new name, character or use will be considered the
ultimate purchaser of the imported article within the contemplation
of 19 U.S.C. 1304 and the article shall be excepted from marking.
A substantial transformation occurs when an article loses its
identity and becomes a new article having a new name, character or
use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270
(1940); National Juice Products Association v. United States, 628
F. Supp. 978, 10 CIT 48 (CIT 1986); Koru North America v. United
States, 701 F. Supp. 229, 12 CIT 1120, (CIT 1988). However, in
Uniroyal, Inc. v. United States, 542 F. Supp. 1026, 1029 (CIT
1982), the court held that where the "manufacturing or combining
process is merely a minor one which leaves the identity of the
imported article intact, a substantial transformation has not
occurred...." The court said that where the "substantially
complete ... [product] ...is readily recognizable as a distinct
item apart from" the further processing, there is no substantial
transformation, but the imported part was the "very essence of the
completed" product. Id. at 1029-30.
In ORR Ruling 72-83 (Dated May 2, 1972), Customs determined
that unfinished leather belt straps were substantially transformed
in the U.S. when processed in the manner described below:
[T]he belts will be imported with the buckle end
completely unfinished. It will be necessary for you to
first cut or trim the end of the strap so that there is
a straight and smooth edge. Then you will either sew or
glue the end so that it will be ready for the buckle to
be attached by rivets, snaps, or by sewing. In addition,
the end of the belt will have to be stained to match the
color of the rest of the belt in color or shade.
Finally, you propose to stain the belt holes....
In the instant case, The American Belt Company is importing
unfinished leather strips made in China. In China the hides
undergo nineteen processing steps and are substantially transformed
into a new a different article, leather strips. These strips are
imported into the U.S. and can be processed into various different
products not only belts, such as straps for luggage, handbags, and
camera cases. The American Belt Company processes the leather
strip through eight steps to create a belt. These steps are
similar to those performed in ORR ruling 72-83 supra. The
processing in the U.S. adds approximately 58.9% of the total cost
of the belt with the low priced buckle, and approximately 69.2% of
the total cost of the belt with the high priced buckle. At the
time of importation the product is unfinished leather strips which
are far from completion. At that time, they possess none of the
characteristics of belts. They are not the proper length; they
have unfinished ends and no stitching, no holes, no buckle, and no
loop. Based on the further processing and ORR Ruling 72-83, supra,
we conclude in this instance that the imported leather strips are
substantially transformed in the U.S. as a result of the further
processing in the U.S. Accordingly, we find that American Belt
Company is the ultimate purchaser of the leather strips under 19
CFR 134.35. As such, the leather strips are excepted from marking
provided the cartons in which they are imported are marked.
This ruling does not address the issue of whether "USA" may
be marked on the packaging, or belts. The determination of marking
an item with the "USA" symbol is under the primary jurisdiction of
the Federal Trade Commission. We, therefore, recommend that you
contact the Federal Trade Commission, Division of Enforcement,
located at 6th and Pennsylvania Avenue, N.W., Washington, D.C.
20580, for any views concerning marking the belts with the "USA"
symbol.
HOLDING:
Imported leather strips are substantially transformed into
belts in the U.S. by the further processing steps performed in the
U.S. as described above. Therefore, American Belt Company is the
ultimate purchaser of the leather strips. The leather strips are
excepted from marking provided they are imported in a properly
marked carton and the District Director at the port of entry is
satisfied that this carton will reach your company intact and that
the strips will be used only in the manner discussed in this
ruling.
Sincerely,
John Durant, Director