HQ 0734282 - Country of Origin Marking of Cigarettes; Habitual Non- compliance; 19 U.S.C. 1304; 19 CFR 134.32; 19 CFR 134.33; 19 CFR 134.51; 19 CFR 134.52; C.S.D. 91-16. - United States International Trade Commision Rulings

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HQ 734282
February 10, 1992

MAR-2-05 CO:R:C:V 734282 ER

CATEGORY: MARKING

Mr. Charles Di Prinzio
Branch Manager
A.N. Deringer, Inc.
1010 Niagara Street
Buffalo, NY 14213

RE: Country of Origin Marking of Cigarettes; Habitual Non- compliance; 19 U.S.C. 1304; 19 CFR 134.32; 19 CFR 134.33; 19 CFR 134.51; 19 CFR 134.52; C.S.D. 91-16.

Dear Mr. Di Prinzio:

This is in response to your letter of July 24, 1991, on behalf of your client, JR Attea Wholesale of Ashland City, Tennessee, in which you request a ruling regarding procedures to be followed in instances of noncompliance with country of origin marking requirements.

FACTS:

In your letter you describe the merchandise as shipments of cigarettes from Canada which on occasion are not marked to indicate their country of origin. Customs in Buffalo, New York, requests that the merchandise be put into a bonded warehouse or a Foreign Trade Zone to complete the marking. You state that as a U.S. Customs broker and international freight forwarder, you possess warehouse facilities, not bonded, which are sufficiently spacious so as to enable the importer to perform the corrective marking of the nonconforming merchandise. Additionally, you claim that by performing these remedial operations in your own facilities, the importer realizes a reduction in costs, while at the same time facilitating the marking and release of the merchandise. Accordingly, you request whether the merchandise can be released to the importer under a Customs Form 4647 for marking at your warehouse facilities.

ISSUE:

What procedures should Customs follow when a person habitually imports merchandise which is not legally marked?

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 United States 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 United States 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.

While two regulations concerning exceptions from marking are potentially applicable to imported cigarettes, each regulation nonetheless mandates the marking of the containers of the articles which ordinarily reach the ultimate consumer. The first exception is set forth in section 134.33, Customs Regulations (19 CFR 134.33), in which a list of articles, including cigarettes, is specifically designated by the Secretary of Treasury as exempt from individual country of origin marking. The second exception provision, section 134.32(a)-(o), Customs Regulations (19 CFR 134.32(a)-(o)), is general in scope and sets forth a number of circumstances under which articles may be subject to an exemption from marking. In any event, and without determining whether cigarettes are covered only by the former regulation or whether they are covered by both regulations, subsequent corrective country of origin marking of the subject merchandise need only be performed on the containers of the cigarettes and not on the cigarette itself.

The procedures to be followed when articles are not legally marked are set forth in 19 CFR 134.51 and 19 CFR 134.52. 19 CFR 134.51(a) provides that the district director shall notify the importer on Customs Form 4647 to arrange with the district director's office to properly mark the article or containers, or to return all released articles to Customs custody for marking, exportation, or destruction. 19 CFR 134.51(c) provides that verification of marking shall be at the expense of the importer and shall be performed under Customs supervision unless the district director accepts a certificate of marking as provided for in 19 CFR 134.52 in lieu of marking under Customs supervision. The procedure you request is the latter certification procedure outlined in 19 CFR 134.52. After the importer is notified on Customs Form 4647 that the merchandise is improperly marked, the importer submits a certificate of marking, usually supported by samples certifying that the goods have been legally marked. Customs then performs spot checks to ensure that the merchandise is marked in accordance with the certification.

In your letter you state your belief that the noncomplying shipments of cigarettes should be released to the importer under a Customs Form 4647. However, given the repetitive nature of these marking violations Customs disagrees with your position. This issue is the subject of both Headquarters Ruling Letter HQ 733856 (March 8, 1991), published as C.S.D. 91-16, 25 Cust. Bull. No. 32 (August 7, 1991) and a subsequent memo, HQ 734291 (August 26, 1991), issued to the district director of customs in Miami (copies enclosed). The ruling discusses what procedures Customs should follow in cases of repeated noncompliance with marking requirements. As the ruling points out, the procedure requested by you, releasing the merchandise to the importer for marking at your warehouse, is intended for nonhabitual violations. The following rationale is applied in the ruling:

The primary benefit of the certification procedure is that it is not too burdensome for the importer. This procedure enables the importer to correct a marking problem without expense or inconvenience. The drawbacks of this procedure are that numerous spot checks by Customs are required to ensure that the goods have been marked as certified and the importer is not given any incentive to import legally marked goods in the future. In the case of the occasional (emphasis added) violator, however, the benefits of the procedure generally outweigh the drawbacks. (C.S.D. 91-16)

The ruling goes on to expressly exclude the habitual violator and notes that:

[W]ith regard to the person who routinely imports merchandise which is not legally marked, this procedure places a drain on Customs limited inspectional and import specialist resources because for every shipment, the merchandise must be examined, a CF 4647 issued, and the certification reviewed and verified. Also, because this procedure makes it so easy to correct marking after importation, the importer is given no incentive to bring in legally marked merchandise at the time of importation. (C.S.D. 91-16)

Applying the balancing test in C.S.D. 91-16 to the present set of facts, it is apparent that the benefit to the importer would be outweighed by the drain on Customs resources if the procedure you are requesting were applied to an importer who habitually fails to comply with marking standards. Additionally, the use of such a procedure in anything other than the most occasional instance could potentially discourage efforts to comply with marking requirements and indeed might create perverse incentives to circumvent the marking regulations.

In accordance with C.S.D. 91-16, Customs maintains that it is up to the discretion of each district director to determine whether a violation is occasional and to select which procedures should be followed when not legally marked merchandise is imported, including whether or not the merchandise in question may be marked at a place other than a bonded warehouse or Foreign Trade Zone. Factors to be considered may include "the previous history of the importer, the number of CF 4647's the importer has received, whether previous spot checks have revealed problems of noncompliance, and whether Customs has the personnel and resources necessary to perform the spot checks, etc." (C.S.D.

HOLDING:

When an importer has a history of importing merchandise into the United States which is not legally marked, the district director is not required to utilize the certification procedure provided for in 19 CFR 134.52. The district director may instead utilize one or more of the procedures discussed above and at his discretion may also decide whether or not to require that marking be performed in a bonded warehouse or Foreign Trade Zone.

Sincerely,

John Durant

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