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HQ 734052


October 17, 1991

MAR-2-05 CO:R:C:V 734052 GRV

CATEGORY: MARKING

Jerry P. Wiskin, Esq.
Freeman, Wasserman & Schneider
90 John Street
New York, N.Y. 10038

RE: Country of origin marking of finished porcelain plates imported from Japan to be ornamented in the U.S. with foreign-sourced decorative decals. 19 CFR 134.35; substan- tial transformation; Uniroyal; Belcrest Linens; T.D. 89-21; 732964; C.S.D. 84-113; National Juice; Koru North America; FDA Compliance Policy Guides for lead and cadmium contami- nation (required and permanent labeling); Superior Wire; C.S.D. 91-7

Dear Mr. Wiskin:

This is in response to your letters of February 22, July 16, and October 1, 1991, on behalf of Lenox Inc., requesting and supplementing a country of origin marking ruling regarding finished porcelain plates imported into the U.S. to have a decorative decal applied. Samples of the porcelain plates as imported and after having been decorated in the U.S. were submitted for examination.

We have considered in connection with this ruling request the information provided by you in two meetings that were held at Customs Headquarters on June 24 and October 1, 1991.

FACTS:

Your client plans to import porcelain plate dinnerware from Japan and decorative decals from Germany (or another foreign source) and domestically combine the two items into signed, numbered collectable plates. Although you denominate the imported porcelain plates "blanks," they are finished articles-- glazed with an ornamental gold band around their edge; suitable for use as dinnerware. When imported, each plate is valued at $1.20 and the country of origin is denoted by an adhesive sticker affixed to its bottom. The decorative decals are made with inks containing lead and cadmium. When imported, each decal is valued at $1.15, however, they are not individually marked to indicate their foreign origins.
The domestic processing entails attaching two decals to each plate: the foreign-sourced decorative decal is moistened and applied to the top, front-side of the "blank," i.e., undecorated, plate, and a domestically-produced, two-color backstamp decal, containing the recommended warning of the U.S. Food and Drug Administration (FDA) that the article is "not for food use," is moistened and applied to the bottom, back-side of the plate. The decorated plate is then dried for 24 hours and fired in a kiln. The plate is then hand-numbered in gold on the bottom side, re- fired, packaged and sold as a finished, collectible. You submit that the processing involved here is a sophisticated process, which occurs over a fixed-period of days. These domestic opera- tions are valued at $4.20, which includes the cost of packaging materials. The entire transaction is valued at $6.55 per decorated plate.

You state that the imported porcelain plates are substan- tially transformed by these U.S. processing operations so as to exempt them from the country of origin marking requirements of 304 of the Tariff Act of 1930, and reference certain court decisions and administrative rulings in support of this conten- tion. You claim that the domestic processing alters the char- acter, name and use of the "blank" plate to that of a decorative collectible item. Further, you state that the domestic process- ing adds significant value to the imported porcelain plate-- quadrupling its value--and, although the domestic processing could result in the porcelain plates changing tariff classifica- tions--from subheading 6911.10.4900 to subheading 6913.10.50, Harmonized Tariff Schedule of the United States (HTSUS), you acknowledge that this change is not dispositive on the question of whether a substantial transformation has occurred. Lastly, you state that the safety warning required by the FDA is a significant consideration, which renders the plate unsuitable for use as tableware intended for food service, and that this circumstance establishes that the domestic processing has created a new and different article of commerce.

ISSUE:

Whether the application of decorative decals to finished porcelain plates constitutes a substantial transformation of the imported articles for purposes of the country of origin marking requirements of 19 U.S.C. 1304 and 19 CFR 134.35 and 134.1(d). LAW AND ANALYSIS:

The marking statute, 304 of the 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 to the ultimate purchaser 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.

The primary purpose of the country of origin marking statute is to "enable the 'ultimate purchaser' of the goods to decide for himself whether he would 'buy or refuse to buy them'." Uniroyal, Inc., v. United States, 3 CIT 220, 223, 542 F.Supp. 1026, 1028 (1982), aff'd per curium, 1 Fed.Cir. 21, 702 F.2d 1022 (1973).

The "ultimate purchaser" is defined generally as the last person in the U.S. who will receive the article in the form in which it was imported. 19 CFR 134.1(d). If an article is to be sold at retail in its imported form, the purchaser at retail is the "ultimate purchaser." 19 CFR 134.1(3). However, if an imported article will be used in manufacture, the manufacturer may be the "ultimate purchaser" if [s]he subjects the imported article to a process which results in a substantial transforma- tion of the article, even though the process may not result in a new or different article. But, if the manufacturing process is 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." 19 CFR 134.1(d)(1) and (2).

A substantial transformation occurs when an imported article is 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. Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the "ultimate purchaser" of the imported article, and the article shall be excepted from marking. However, the outermost contain- ers of the imported articles must be marked. 19 CFR 134.35. As the issue of whether a substantial transformation occurs is for marking purposes a question of fact, it is determined on a case-by-case basis. Uniroyal.

Taken as a whole and after examining the samples submitted in this case, the conclusion is clear that a substantial trans- formation of the porcelain plate has not occurred since the attachment of the decorative decal to the porcelain plate is a minor manufacturing or combining process which leaves the identity of the porcelain plate intact. The domestic processing in this case ostensibly constitutes a minor assembly operation: attaching a decorative decal to a plate. See, Headquarters Ruling Letter (HRL) 555175 dated March 13, 1989, abstracted as C.S.D. 89-49(13), 23 Cust. Bull. 644 (1989), and HRL 555506 dated January 16, 1990, abstracted as C.S.D. 90-32(3), 24 Cust. Bull. ___ (1990). And we have long held that mere assembly operations do not constitute a substantial transformation. In determining whether the combining of parts or materials consti- tutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed.Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D.s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97. The assembly operation performed here is a simple --two-step-- combining process which leaves the identity of the imported porcelain plate--and decal--intact.

Further, regarding the decoration of ceramic products by painting or with decals in particular, Customs has long held that neither process constitutes a substantial transformation. In T.D. 89-21, 23 Cust.Bull. 157 (1989), Customs stated that the mere decoration of porcelainware does not constitute a substan- tial transformation. See also, HRL 732964 dated August 3, 1990 (imported ceramic "bisque ware" not substantially transformed by domestic hand painting operation). In C.S.D. 84-113, 18 Cust. Bull. 1111 (1084), Customs stated that decorating an already- glazed article by means of decalcomania, i.e., applying decals, and kiln firing does not effect a substantial transformation of the article, and that such processors were not the ultimate purchasers for marking purposes. In sum, we are not persuaded that processing here, which merely results in the decoration of finished ceramics constitutes a substantial transformation, as the identity of imported article remains intact. Accordingly, given that no other country of origin marking exception is applicable, the imported porcelain plates here must be individually marked.

Addressing the substantial transformation criteria in turn, we find that the simple combining process performed in the U.S. does not effect a change in the name, character or use of the imported porcelain plates. Regarding the change in name, we find your characterization of the imported porcelain plates as "blanks" spurious, as they are finished plates, suitable for use as dinnerware. Further, assuming there is otherwise a change in name, such change in the name of the product is the weakest evidence of a substantial transformation. Uniroyal, National Juice Products Ass'n v. United States, 10 CIT 48, 628 F.Supp. 978 (1986), and Koru North America v. U.S., 12 CIT 1120, 701 F.Supp. 229 (1988). Regarding the change in character, we find none; the plates retain their essential identity/character as plates, albeit decorated ones. No change to the physical dimensions of the base plates occurs. Regarding the change in use, although we find a more restricted use for the imported plates in the area of commercial dinnerware--occasioned by the choice of metal poisons employed in the inks to make the foreign decal which requires that a FDA warning label be affixed--we do not believe this circumstance constitutes a substantial change in use for purposes of finding a substantial transformation.

Regarding the applicability of FDA guidelines requiring a safety warning in this case, in National Juice, the court noted that Customs and FDA regulations are promulgated under completely different statutes and hence one cannot be considered binding on the other. As FDA standards of identity are intended to aid in identifying the contents of a product and not to identify the origin of a product as a whole, they are not binding on Customs in a determination of whether a substantial transformation has occurred. Further, contra your assertion that the FDA labeling requirement evidences the unsuitability of the article for food service use and establishes that the domestic processing creates a new and different article of commerce, we note that the safety warning does not dictate that the ornamented plates cannot be used, under all circumstances, as food service plates. The warn- ing label is required because certain ceramic wares have been found by the FDA to contain significant quantities of metal poisons, which can be extracted by food acids and could cause chronic poisoning under continued food use. Thus, the FDA warn- ing/safety label is cautionary and does not mandate a particular use. And it is entirely possible, if not probable, that ultimate purchasers will occasionally offer articles of food on the adul- terated plates, taking care to ensure that food items are protec- tively insulated from the plates surface or provide a medium layer of material to prevent the leaching of the metal poison to the food item.

Lastly, while significant value has been added to the imported articles here and a change in tariff classification is apparent, these considerations are not dispositve of whether a substantial transformation has taken place. See, Superior Wire v. United States, 11 CIT 608, 669 F.Supp. 472 (1987), aff'd, 7 Fed.Cir. 43, 867 F.2d 1409 (1989), and C.S.D. 91-7 (no substan- tial transformation of jewelry despite added value), concerning the value-added consideration, and Belcrest Linens v. United States, 6 CIT 204, --- F.Supp. ___ (1983), aff'd, 2 Fed.Cir. 105, 741 F.2d 1368 (1984), concerning the change in tariff classifica- tion consideration.
We also conclude that the imported decal is also not substantially transformed when attached to the porcelain plate. Accordingly, not only must the porcelain plates be marked in a more permanent method of marking than by means of paper adhesive labels, C.S.D. 84-113, but after the domestic processing, the country of origin of the foreign-made decal must also be indicated on the decorated plate.

HOLDING:

The imported porcelain plates and decals are not substan- tially transformed by the domestic application of the decals to the top, front-side of the plates, as the decalcomania operation is a minor process which leaves the identity of the imported plates and decals intact. Accordingly, the plates must be individually marked with a more permanent means than the adhesive stickers currently used--to survive the U.S. processing operation --and, after the domestic processing operation, the plates must be further marked to indicate the country of origin of the foreign-made decal to satisfy the country of origin marking requirements of 19 U.S.C. 1304 and 19 CFR 134.1(d).

Sincerely,


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