MAR-2-05 CO:R:C:V 735287 AT
David A. Eisen, Esq.
Tompkins & Davidson
One Astor Plaza
1515 Broadway, 43rd Floor
New York, New York 10036-8901
RE: Country of origin marking requirements for gift tags and
wall/window decorations which are designed and
lithographically printed in the U.S. and exported to foreign
countries for further processing; applicability of Subheading
9802.00.80, HTSUS, to flocking operation; substantial
transformation; assembly; U.S. goods exported and returned;
19 CFR 10.22; 19 CFR 134.32(m); HQ 734706; HQ 734399
Dear Mr. Eisen:
This is in response to your inquiry dated January 13, 1994,
on behalf of Cleo, Inc. ("Cleo"), amending your original ruling
request dated July 28, 1993, regarding the country of origin
marking requirements for gift tags and wall window decorations
which are designed and lithographically printed in the U.S.,
exported to various foreign countries for further processing and
returned to the U.S. for retail sale. Samples were submitted for
review. For purposes of this ruling, we assume that the foreign
processing is done in countries other than Mexico or Canada. A
separate ruling letter will be issued addressing the processing
that is to be performed in Mexico, a NAFTA country, the issue
involved in your original request. We regret the delay in
responding.
FACTS:
According to your submission, the imported gift tags and
wall/window decorations are designed and lithographically printed
in the U.S. on large sheets of paperboard and will be exported to
various foreign countries (in sheet form). Also exported to the 2
foreign countries will be adhesive, and nylon flocking fibers in
very short (described as "minute") length. In the foreign
countries, the paperboard sheets will be either (1) inserted into
an automatic cutting machine which cuts (i.e. straight edge
and/or die-cut) the sheets, or (2) "popped-out" along pre-cut,
perforated lines, to produce the individual articles.
The individual items will then be placed on a conveyor-belt
type machine which transports the articles through various
stations at which different operations are performed. The first
station involves application of the adhesive to the designated
area(s); the second station entails depositing the flocking
materials onto the adhesive; the third station includes a
vacuuming process which removes excess flocking materials; and
the fourth station contains radiant heat which serves to dry and
harden the adhesive. The article is then removed from the
machine and set on a rack for further drying and hardening. The
articles are then sorted and grouped in various numbered
quantities and blister packed for return to the U.S. for retail
sale. You advise that the gift tags and wall/window decorations
may also be subjected to an embossing or "hot stamping"
(application of metallic ink to the article) operation in the
foreign countries as well.
ISSUES:
What are the country of origin marking requirements for
imported gift tags and wall/window decorations which are to be
processed in various foreign countries, in the manner described
above?
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 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
exceptions of 19 U.S.C. 1304.
As stated above, U.S. components (large sheets of U.S.
lithographically printed and designed gift tags and wall/window
decorations, adhesive and nylon flocking fibers) will be exported
to various foreign countries to be further processed in the
manner described above, prior to being re-imported into the U.S. 3
Section 10.22, Customs Regulations (19 CFR 10.22), provides
special marking requirements for goods assembled abroad entirely
from U.S. components, as represented here, which are eligible for
a duty exemption under subheading 9802.00.80 HTSUS. Section
10.22 provides that:
Assembled articles entitled to the exception are
considered products of the country of assembly for
the purposes of the country of origin marking
requirements of section 304, Tariff Act of 1930, as
amended (19 U.S.C. 1304). If an imported assembled
article is made entirely of American-made materials,
the United States origin of the material may be
disclosed by using a legend such as "Assembled in ---
from material of U.S. origin," or a similar phrase.
The first question presented in this case is whether the
processing performed in the foreign country constitutes an
assembly operation within the contemplation of subheading
9802.00.80, HTSUS so that when imported into the U.S. the
finished gift tags and wall/window decorations are eligible for a
duty exemption under subheading 9802.00.80 HTSUS. If such is the
case, the country of assembly would be the country of origin of
the imported gift tags and wall/window decorations.
The proposed processing that is to be performed to the U.S.
components (cutting, flocking operation and/or embossing or "hot-
stamping operation) to finish the articles in a foreign country
does not constitute an acceptable assembly operation within the
purview of subheading 9802.00.80 and no duty exemption exists
under that subheading.
Accordingly, the special marking requirements of 19 CFR 10.22 do
not apply.
The remaining issue is whether the U.S. materials are
substantially transformed abroad, so as to become a product of
the foreign country.
Section 134.1(b) of the interim regulations, 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; however, for a good of a NAFTA
country, the NAFTA Marking Rules will determine the
country of origin. (Emphasis added). 4
In this case, assuming that the foreign countries where the
processing operations of cutting, flocking and/or embossing or
"hot-stamping" are performed do not include Mexico or Canada
(NAFTA countries as defined in section 134.1(g) of the interim
regulations), the general substantial transformation test cited
in section 134.1(b) of the interim regulations must be applied in
order to determine the country of origin of the imported gift
tags and wall/window decorations for marking purposes. For
country of origin marking purposes, a substantial transformation
occurs when an article loses its identity and becomes a new
article having a new name, character or use. Koru North America
v. United States, 12 CIT 1120, 702 F. Supp. 229 (1988).
In HQ 734706 (January 15, 1993), Customs ruled that certain
trading cards which were lithographically printed in the U.S.,
exported to Mexico for cutting, sorting and packaging, and
returned to the U.S. were not substantially transformed (no
change in the name, character or use) as a result of the Mexican
operations.
Similarly, in this case, we find that the operations of
cutting, flocking and/or embossing or "hot-stamping" that are to
be performed in a foreign country, in the manner described above,
do not substantially transform the U.S. components. Although the
gift tags and wall/window decorations may look somewhat different
as a result of the foreign operations, such as raised symbols or
diagrams my appear as a result of embossing, metallic colors
(e.g. gold or red) may be added to the front side of the gift
tags as a result of "hot-stamping, and/or flocking operation adds
color and gives the tag or wall/window decoration a fury-like
feeling, these operations only enhance and add more appealing
qualities to the finished article. Nevertheless, the finished
article still has the same use, name and character of a gift tag
or wall/window decoration. The glue and flocking material also
do not change in name, character or use as a result of the
foreign operations, albeit they are now affixed to the tags or
wall/window decorations. Therefore, the U.S. origin gift tags
and wall/window decorations are not substantially transformed by
being further processed in a foreign country, in the manner
described above.
Section 134.32(m), Customs Regulations (19 CFR 134.32(m)),
provides that products of the U.S. exported and returned are
excepted from country of origin marking requirements. Customs
has ruled that this exception applies when U.S. goods are
processed, but not substantially transformed abroad and then
returned. See, HQ 734399 (December 28, 1992); U.S. origin 5
lipstick mass exported to China to be further processed into
lipstick bullets was not substantially transformed as a result of
the Chinese processing and was excepted from marking under 19 CFR
134.32(m) as a U.S. good exported and returned. Accordingly, the
finished gift tags and wall/window decorations imported from
foreign countries are excepted from country of origin marking
requirements under section 134.32(m).
HOLDING:
U.S. components which are to be exported to various foreign
countries, and further processed in the manner described, prior
to re-importation into the U.S., are not eligible for a duty
exemption under subheading 9802.00.80, HTSUS and therefore are
not subject to the special marking requirements of 19 CFR 10.22.
The U.S. gift tags and wall/window decorations are not
substantially transformed as a result of the foreign processing
operations described above. Accordingly, the finished gift tags
and wall/window decorations imported into the U.S. are excepted
from country of origin marking under 19 CFR 134.32(m), as a U.S.
product exported and returned.
Sincerely,
John Durant, Director