HQ 0734397 - Internal Advice request on the country of origin marking requirements of highway pavement markers imported by Apex Universal, Inc., substantial transformation, 19 CFR 134.35 - United States International Trade Commision Rulings

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HQ 734397
December 24, 1991

MAR-2-05 CO:R:C:V 734397 RSD

CATEGORY: MARKING

District Director of Customs
300 South Ferry Street
Terminal Island Room 2017
San Pedro, California 90731

RE: Internal Advice request on the country of origin marking requirements of highway pavement markers imported by Apex Universal, Inc., substantial transformation, 19 CFR 134.35

Dear Sir:

This is in response to your memorandum dated November 6, 1991, forwarding a request for internal advice from Apex Universal, Inc., concerning the country of origin marking of highway pavement reflective markers. The samples of the reflective plastic shell and the finished pavement marker were submitted for our consideration. In addition, a copy of the significant importation report concerning this merchandise was also received.

FACTS:

Apex Universal, Inc. (Apex), sells reflective highway pavement markers. It imports empty shells for the pavement markers from Taiwan. These marker shells consist of a plastic housing with reflective acrylic lenses. They are made of a yellow plastic in trapezoid shape with the two orange reflectors permanently affixed on its opposite sides. Inside of the concave section of the plastic shell, molded into the plastic, there are lines with ridges. There is a blind stamped country of origin marking, "Made in Taiwan", on the inside concave section of the shell in non-contrasting letters of approximately 0.05 of an inch in height. This marking is almost illegible to the naked eye.

After importation, Apex coats the inner side of the reflective lenses to protect them from chemical actions caused by the subsequent processing steps. The plastic shells are put on a small production line with the open ends up for finishing. The assembly line workers fill the empty shells with a resinous/ceramic mixture (poured in by automated machinery). This filling material gives the finished pavement markers strength as well as weight. The filling also covers the country of origin marking on the inside concave section of the shells. The completed markers then proceed down the assembly for curing and packaging. They are packaged 50 markers to a box. The boxes do not show any country of origin markings.

Apex also manufactures a significant percentage of the plastic shells in the U.S. by using the same mold that is used in Taiwan. They do not separate the plastic shells made in Taiwan from those made in the U.S. Instead, both the foreign and the domestic shells are commingled in the same cartons.

According to the information submitted by Apex, the cost of the imported shells is $.12 apiece and their final cost after processing is $.65 apiece.

ISSUE:

Are the plastic shells for highway pavement markers substantially transformed by the domestic processing 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 its 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; C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" 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" within the meaning of the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked (see section 134.35, Customs Regulations).

In this case, the plastic housing shells are imported into the U.S. with the reflective acrylic lenses already permanently attached. The processing in the U.S. basically consists of filling the plastic shells with a ceramic material which gives the pavement markers strength and weight. Although the pavement markers cannot be used on roadways without the ceramic fill being added, we believe that the U.S. processing does not constitute a substantial transformation. The processing described above does not change the name, character or use of the plastic shells. It is our opinion that it is the reflective lenses that give the highway payment markers their essential character. Because the plastic shells are imported with the reflectors attached, we find that they already have the essential character of the finished highway pavement markers. The plastic shells are dedicated to use and will not be used for any other purpose, but as the pavement markers. The plastic shells are recognizable as and very closely resemble the finished pavement markers. Although filling the plastic shells is necessary before they can be used, it must be considered a finishing operation which does not alter the basic nature of the article.

Similarly, although the cost of the processing done to the markers in the U.S. exceeds the cost of the work done in Taiwan, this fact is not determinative. See HQ 734246, October 21, 1991. Moreover, there has been no showing that filling the highway markers is a particularly complex process requiring an extensive amount of skill. Accordingly, we find that the processing done in the U.S. does not substantially transform the plastic shells into new articles of commerce and that Apex is not their ultimate purchaser. Therefore, the plastic shells must be legibly marked in a conspicuous location that will remain visible after the domestic processing. In other words, the marking must be on the outside portion of the plastic shell. If changing the molds would be too burdensome, a sticker may be used so long as the stickers are permanent enough to stay on the highway pavement markers until they reach the ultimate purchaser. HOLDING:

The imported plastic shells of highway pavement markers are not substantially transformed by coating the lenses and filling them with a ceramic mixture after importation. As such, the shells must be marked legibly, permanently and conspicuously in accordance with 19 U.S.C. 1304 to indicate their country of origin, Taiwan, in a manner that will remain visible after the domestic processing.

Sincerely,

John Durant, Director

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