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HQ 733037

August 13, 1990

MAR-2-05 CO:R:C:V 733037 KG

CATEGORY: MARKING

Harold I. Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman 12 East 49th Street
New York, N.Y. 10017

RE: Country of origin marking of imported wooden frame to be assembled into picture frame; combining; substantial transformation.

Dear Mr. Loring:

This is in response to your letter of January 10, 1990, requesting a country of origin ruling on behalf of M.W. Carr & Co., regarding imported wooden frames which you referred to as "wooden shells", to be assembled into picture frames. We regret the delay in responding to your inquiry.

FACTS:

You submitted a sample imported wood frame and a finished picture frame. The imported wood frame has the appearance of the front of an ornate gold-colored picture frame with decorative carving in the corners.

In the U.S., the frames are inspected, touched up with sanding stone, stains, and waxes, as necessary. Depending upon the style, the shells are then either sent to the assembly station for assembly with U.S. components into finished picture frames or, prior to such assembly, further processed into a completed component which is then ready for assembly. For instance, in the case of Style 470, a vinyl strip must be cut to size, notched, formed into a channel and then permanently affixed to the back of the frame. On the other hand, the configuration of the wood of Style 771 permits the back-stand (easel) portion to slide easily into the frame.

At the assembly station, the glass, the lithograph, filler board, hang clip, labels and the back-stand (easel) are attached to the frame.

The backstand is made out of chipboard which is cut to size and either wrapped on two sides with paper or four sides with cloth. The stand portion is cut to size and laminated with paper or cloth and then die-cut.

No cost figures were submitted with regard to the foreign or domestic processing.

ISSUE:

Whether the wooden frames are substantially transformed when they are combined in the U.S. with a back and a piece of glass and assembled as described above.

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 (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. The outermost containers of the imported articles shall be marked.

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 48, 628 F.Supp. 978 (CIT 1986), Koru North America v. United States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988).

Two court cases have considered the issue of whether imported parts combined in the U.S. with domestic parts were substantially transformed for country of origin marking purposes. In the first case, Gibson-Thomsen Co., the court held that imported wood brush block and toothbrush handles which had bristles inserted into them in the U.S. lost their identity as such and became new articles having a new name, character and use. One of the factors considered by the court in reaching its conclusion was that the domestic bristles used were "by far the most valuable element." Also, the court looked at whether the imported article loses its identity as such when combined with other articles. In that case, the court concluded that wood handles were mere materials to be used in the manufacture of toothbrushes and hairbrushes. The court was also concerned that when an imported article was combined with a domestic material, that the ultimate purchaser not be confused into thinking that the domestic article was made in a foreign country. Therefore, the court concluded that a mere material to be used in the manufacture of a new article having a new name, character and use and which, became an integral part of the new article would not be required to be marked. In contrast to the imported handles in Gibson-Thomsen, the imported frames involved here cannot be considered to be "mere materials" used in the manufacture of the finished articles. To the contrary, the most important element in terms of appearance and use of the finished product is the imported frame.

The second case involved imported shoe uppers which were combined with domestic soles in the U.S. The imported uppers were held in Uniroyal, Inc., v. U.S., 542 F.Supp. 1026, 3 CIT 220 (CIT 1982), to be the "essence of the completed shoe" and therefore, not substantially transformed. The court described the imported uppers as "complete shoes except for an outsole." The shoe had already "obtained its ultimate shape, form and size." One process performed in the U.S., relasting, was characterized as "convenient, not necessary". The processes performed in the U.S. were significantly less costly and less time consuming than the foreign manufacturing process. The cost of the upper was significantly greater than the cost of the outsole. Further, the manufacture of the upper required at least five highly skilled operations. The court concluded that the attachment of the outsole was a minor manufacturing or combining process which leaves the identity of the upper intact. This case is like Uniroyal because the imported frames are not only important to the finished product, but also are the very essence of the finished product. While the back of the frame is necessary for the completed frame to be functional, the imported frame possesses all the essential qualities of the finished picture frame. Further, the physical appearance of the final product, which is a very important characteristic of a decorative item such as this, is determined by the imported wood frame. While this imported wood frame does undergo a change in name, the court stated in National Juice that a change in name is the least important factor to be considered and is not determinative.

In HQ 731432 (June 6, 1988), Customs set forth some factors to be considered in determining whether imported goods combined in the U.S. with domestic products were substantially transformed for country of origin marking purposes. The following six factors were considered:

1) whether the article is completely finished;

2) the extent of the manufacturing process of combining the article with its counterparts as compared with the manufacturing of the subject article;

3) whether the article is permanently attached to its counterparts;

4) the overall importance of the article to the finished product;

5) whether the article is functionally necessary to the operation of the finished article, or whether it is an accessory which retains its independent function; and

6) whether the article remains visible after the combining.

These factors are not exclusive and there may be other factors relevant to a particular case and no one factor is determinative. See HQ 728801 (February 26, 1986).

While some minor finishing may be performed on the imported frames, the sample submitted appears to be a finished piece. The attachment of the vinyl strip, which is required on one style, appears to be a very minor operation which is not complex, requires no skill and is not time-consuming. In this case, no information was given regarding the extent of the manufacturing process of combining the imported frame with its components but it does not appear to be a complex, expensive or time-consuming operation. The frame is permanently attached to its domestic counterparts and is the most important component to the finished product. There is no doubt that the imported frame is functionally necessary to the use of the finished picture frame and that it remains highly visible after the combining. Based on our consideration of all these factors, we conclude that these imported wood frames are not substantially transformed in the U.S. The U.S. manufacturer would not be considered the ultimate purchaser of the frames under 19 CFR 134.35.

HQ 726001 (September 11, 1984), cited in support of your position that these frames are substantially transformed, provides no details concerning the operation involved in that case and therefore, it is not possible to determine whether the combining operation involved in making a mechanical pencil is similar to this case or not. The other ruling cited, HQ 725959 (August 9, 1984), involved an imported product which is very different from the wood frames involved in this case. That case involved imported chair castors which were attached to chairs by original equipment manufacturers. Customs ruled in that case that the original equipment manufacturer was the ultimate purchaser of the castors. Although it was not discussed in that case, chair casters are a relatively minor component of a finished chair and therefore, that case is distinguishable from this case.

Section 134.1(d), Customs Regulations (19 CFR 134.1(d)), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. The definition then gives examples of who might be the ultimate purchaser if the imported article is used in manufacture, if the imported article is sold at retail in its imported form and if an imported article is distributed as a gift. If an article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser. Since the frames are not substantially transformed, it is not considered to undergo a change in its imported form. Therefore, the retail purchaser of the finished picture frames are considered the ultimate purchaser of the imported frames. The frames must be marked with its country of origin to inform the ultimate purchaser of its origin.

HOLDING:

These imported wood frames are not substantially transformed in the U.S. Therefore, the U.S. manufacturer is not the ultimate purchaser of the imported frames. The retail purchaser of the finished picture frame is considered the ultimate purchaser of the imported wood frame. The imported wood frames must be marked to indicate its country of origin to the ultimate purchaser in the U.S.

Sincerely,

Marvin M. Amernick
Chief, Value, Special Programs

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