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HQ 732159


September 7, 1990

MAR 2-05 CO:R:C:V 732159 NL

CATEGORY: MARKING

Mr. Jamie Boblitt
Superior Jewelry Company
8935 Rossash Road
Cincinnatti, Ohio 45236

RE: Country of Origin Marking of Gold and Silver Plated Chain Jewelry; Electroplating; Substantial Transformation

Dear Mr. Boblitt:

This is in response to your letter of February 16, 1989, in which you ask for a ruling that the base metal chain which you import from Korea undergoes a substantial transformation upon being plated with gold or silver in the U.S. We regret the delay in responding.

FACTS:

The jewelry in question is imported from Korea as base metal chains in necklace length and fitted with clasps. Upon importation the articles are classifiable under subheading 7117.19.50. of the Harmonized Tariff Schedule of the United States (HTSUS) as "imitation jewelry of base metal, whether or not plated with precious metal...other". The cost of the imported base metal chains is given as $1.54 per dozen. It is then sent to an electroplater in the U.S. for gold or silver plating, tagging and packaging. Depending upon the type of chain, this processing consists of immersing the chain in a series of chemical solutions. After electroplating and packaging the cost of the chains per dozen is given as $5.38 for silver and $4.77 for gold. For classification purposes the same subheading, 7117.19 HTSUS, remains applicable to the imitation jewelry after gold or silver electroplating. Samples were submitted.

ISSUE:

Does electroplating of the imitation jewelry effect a substantial transformation such that the chain is excepted from individual country of origin marking requirements?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires, subject to certain specified exceptions, that every article of foreign origin imported into the U.S. be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article 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. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

"Country of origin" is defined in 19 CFR 134.1(b) 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". As provided in 19 CFR 134.35, an article used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article will be considered to have been substantially transformed. The manufacturer in these circumstances is the "ultimate purchaser" of the imported article, and the imported article is excepted from country of origin marking at importation, provided its outermost container is so marked.

In determining whether further work or material added to an article has effected a substantial transformation, our inquiry is whether the article after the further work or added material emerges having a different name, character or use. U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940). A secondary though not unimportant consideration is whether the imported article has been subjected to a complex process which adds significantly to its value. Superior Wire v. United States, 669 F. Supp. 472, 480 (CIT 1987), aff'd 867 F. 2d 1409 (Fed. Cir. 1989).

Turning to the chain jewelry, we are of the opinion that the base metal chain is not substantially transformed by gold and silver electroplating. The electroplating process is considered a finishing operation which does not change the character or use of the article as imported. What was unfinished imitation jewelry at importation is merely completed by electroplating, and the slight change in the name of the article cannot overcome the finding that the article's character and use remain the same.

This conclusion is supported by the HTSUS provision applicable to imitation jewelry, subheading 7117.19, which does not recognize a difference, for classification purposes, between plated and unplated imitation jewelry. To the contrary, Note 10 to Chapter 71 indicates that plating and "minor constituents" effect no change in imitation jewelry for tariff purposes, as
opposed to the addition of pearls and precious or semiprecious stones, or cladding with precious metal, which remove articles from the subheading for "imitation jewelry".

It is noted that in the electroplating process only a small amount of gold or silver is added to each article, and that the amount of time required to process each necklace is small. The electroplating process itself consists essentially of dipping the article in a solution. As compared with the process of manufacturing the base metal chain, cutting it to length, and fitting it with a clasp, it is our opinion that the electroplating is not a substantial manufacturing operation, and does not effect a substantial transformation. On this basis the value added by electroplating in the U.S. may be disregarded in favor of more important factors. See, Superior Wire v. United States, supra, at 478-9 (CIT 1987)(value-added analysis may be an additional inquiry, or cross-check, in substantial transformation cases, but is not, by itself, the entire answer). Despite the added value, electroplating does not change the character or use of the imitation jewelry, and changes its name only from unplated to plated, which the HTSUS treats as no change for tariff purposes.

Customs has not previously addressed this issue with respect to imitation jewelry. However, a review of prior Customs determinations regarding electroplating generally reveals a lack of harmony. In HRL 058661 (November 6, 1978), Customs stated that for purposes of item 807.00, Tariff Schedules of the United States (TSUS), "the mere gold plating of a partially assembled or nearly complete foreign product [here, watch cases and bands] in the United States is not considered a substantial transformation of the imported product." Accord, HQ 554692 (March 8,1988) (electroplating watch bracelets with gold); HRL 063117 (June 28, 1979)(electroplating electrical connectors); HRL 046885 (1976)(electroplating silicon wafers with tin). Other rulings concerning item 807.00, TSUS, have been contradictory; HRL 058072 (February 7, 1978) held that the gold electroplating of a watch bezel was a substantial transformation of that part, although not of the watchcase as a whole. This ruling was followed in HRL 058863 (March 2, 1979), and HRL 058818 (March 19, 1979).

In country of origin marking cases, several rulings are inconsistent with the position reached in this ruling. In ORR Ruling 408-71 (June 28, 1971), Customs held that silverplating and lacquering of a brass wine basket effected a substantial transformation of the article. In two rulings concerning gold and silver plated silverware, Customs found that for purposes of country of origin marking the articles were substantially transformed or changed by the plating. See, C.S.D. 80-237, 14 Cust. B. & Dec. 1150 (1980)(in view of its high added cost and value silver plating of imported stainless steel flatware results in a substantial change to the flatware and cannot be considered
merely a minor process); HRL 708800 (May 16, 1978)(gold or silver plating of imported stainless steel cutlery is a substantial change in the imported article).

The following rulings, which are not in accordance with our finding here that electroplating does not effect a substantial transformation, are revoked: ORR Ruling 408-71; C.S.D. 80-237; and HRL 708800. These revocations assure that Customs' position on substantial transformation for marking purposes is consistent with its position with respect to other provisions of Customs law, such as subheading 9802.00.80, HTSUS (formerly item 807.00, TSUS). The following rulings are modified to the extent that gold plating of a watch bezel is no longer considered to be a substantial transformation of that article: HRL 058072; HRL 058863; and HRL 058818.

HOLDING:

Imitation chain jewelry which is subjected to gold or silver electroplating after importation is not substantially transformed into a different article having a new name, character or use within the meaning of 19 CFR 134.35. Accordingly, the importer/processor is not the ultimate purchaser of the jewelry, and it must be marked with its country of origin in accordance with the requirements of 19 U.S.C. 1304. Prior rulings are modified or revoked in accordance with this ruling.

Sincerely,

John Durant, Director
Commercial Rulings Division

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