HQ 0732409 - Country of origin marking of used clothing - United States International Trade Commision Rulings

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HQ 732409
September 25, 1989

MAR-2-05 CO:R:C:V 732409 KG

CATEGORY: MARKING

Joel R. Junker
Bogle & Gates
The Bank of California Center
Seattle, Washington 98164

RE: Country of origin marking of used clothing

Dear Mr. Junker:

This is in response to your letters of May 12, and September 11, 1989, your reference 01287/01301, requesting a ruling on the country of origin marking of used clothing being imported from Canada.

FACTS:

Your client ("the importer") anticipates importing containers of used clothing in bales purchased from the Salvation Army in Canada. There are several intended uses for the used clothing after it is sorted in the U.S. About 15% will be sold in the U.S. after fabrication into industrial wipers. Wool items will be sorted and sold for re-export to Italy. General clothing will be sorted by type and sold for re-export to a number of countries. About 10 to 15% will be taken to landfills for destruction.

The used clothing to be made into industrial wipers go through several steps in the U.S. The used clothing is inspected and separated. The clothing appropriate for fabrication into industrial wipers is opened to lay flat by cutting the seams and removing the collars, buttons and zippers. The flat fabric is cut into square pieces, the edges of the fabric are folded over and sewn closed and fabric which is soiled is washed.

In support of the importer's argument that the importation of used clothing and marking it with the proper country of origin cannot be conducted except at an expense economically prohibitive of their importation, cost figures were submitted. The current cost of a 40 ton container of used clothing is about $3,200 or $.08 per pound. The importer estimates that the additional cost of sorting by country of origin, if possible to identify, would be $6,000 per container. Further, the imported estimates that the additional cost of individually marking each piece of clothing would be approximately $.25 per pound or an additional $10,000 per container. The importer states that this estimate is based on the labor cost of examining each piece of clothing, removing any label indicating a country of origin other than Canada and properly labeling each garment.

ISSUE:

What is the proper country of origin marking for imported used clothing.

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. 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 exceptions of 19 U.S.C. 1304. The importer asserts 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."

In HQ ruling 730174 (March 31, 1987), Customs addressed the issue of used clothing purchased in the U.S., exported to Mexico for sorting and re-imported for sale in the U.S. Customs found that an exception from marking pursuant to 19 CFR 134.32(c), was unnecessary. The used clothing was regarded as of U.S. origin because it was purchased from the Salvation Army, Goodwill Industries stores and similar organizations within the U.S. and therefore, presumed to have been worn and used in the U.S. In this case, the used clothing is purchased from the same type of organization in Canada. Therefore, it is presumed that the clothing was worn and used in Canada and the imported used clothing can all be marked "Made in Canada". This would eliminate the need to sort the clothing by original country of origin and also eliminate the problem of not knowing the original country of origin of every single garment.

The ultimate purchaser is defined in section 134.1, Customs Regulations (19 CFR 134.1), as generally the last person in the United States who will receive the article in the form in which it was imported. The regulation gives the following relevant examples: If an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article, even though the process may not result in a new or different article. If the manufacturing process is merely a minor one which leaves the identity of the imported article intact, the consumer or user of the article, who obtains the article after the processing will be regarded as the ultimate purchaser.

A substantial transformation occurs when articles lose their identity and become new articles 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, 10 CIT____ , 628 F. Supp. 978 (Ct. Int'l Trade 1986), Koru North America v. United States, 12 CIT ____, 701 F. Supp. 229 (Ct. Int'l Trade 1988).

The question presented is whether that portion of the imported used clothing that is processed into industrial wipers by the importer is substantially transformed in the U.S. If the imported used clothing is substantially transformed in the U.S., the importer would be considered the ultimate purchaser and pursuant to section 134.35, Customs Regulations (19 CFR 134.35), only the outermost container in which the used clothing is imported must be marked. In this instance, the name of the imported article changes from used clothing to cloth squares or rags. However, the change in name alone is not determinative. Koru North America at 235. The use of the article clearly changes; the used clothing can be worn as clothing while the cloth squares clearly cannot be worn as clothing. Further, the character of the article changes. The used clothing has zippers, buttons and collars, is different sizes and presumably would include pants, blouses, jackets, sweaters, etc., while the processed used clothing is merely cloth squares of uniform size. The used clothing that is processed by the importer in the U.S. is substantially transformed and therefore, pursuant to 19 CFR 134.35, the individual items of used clothing are excepted from country of origin marking and only the outermost containers of the used clothing to be processed into industrial wipers must be marked with the country of origin.

For the used clothing that will be re-exported or destroyed, the importer is the last person in the U.S. to receive the goods in the form in which they were imported. Therefore, the importer is the ultimate purchaser. Marking the outermost container will inform the importer of the country of origin.

HOLDING:

The country of origin for the imported used clothing is Canada. The used clothing that is processed into industrial wipers in the U.S. as described above is substantially transformed and therefore, is excepted from individual country of origin marking. For the remainder of the used clothing which is either re-exported or destroyed, marking the outermost container will inform the ultimate purchaser of the country of origin. As long as the District Director is satisfied that the used clothing not made into industrial wipers is re-exported or destroyed, only the outermost container of the used clothing must be marked with the country of origin.

Sincerely,

Marvin M. Amernick

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