HQ 0734765 - Country of origin marking requirements for earrings and button covers made from buttons imported from Taiwan, jewelry; substantial transformation; 19 CFR 134.35; 19 CFR 134.1 - United States International Trade Commision Rulings

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HQ 734765
February 23, 1993

MAR-2-05 CO:R:C:V 734765 RSD

CATEGORY: MARKING

District Director of Customs
P.O. Box 619050
1205 Royal Lane
Dallas, Texas 75261

RE: Country of origin marking requirements for earrings and button covers made from buttons imported from Taiwan, jewelry; substantial transformation; 19 CFR 134.35; 19 CFR 134.1

Dear Sir:

This is in response to your memorandum dated August 7, 1992, forwarding a request for internal advice submitted Jon Tom Staton, Esq., on behalf of his client Witcher Earring Co. Inc., of Caney, Oklahoma. We have received samples of the buttons and the earrings. You also advise that there are no ongoing investigations concerning the importer.

FACTS:

The importer, Witcher Earring Co., Inc., of Caney, Oklahoma, imports buttons from Taiwan to make costume jewelry in the form of earrings and button covers which are sold in arts and crafts shows. The importation in question involved seven hundred (700) gross of buttons.

The first step in processing the buttons after importation is to physically remove the shank on the back through which the button is sewn onto a garment. This removal process is accomplished by cutting the shank off with a metal tool. The second step involves cutting and grinding the remaining portion of the shank until no part of the shank remains and a small portion of the back of the button has been removed by cutting and grinding. This removes a portion of the button that lies directly below the shank. This process of cutting and grinding is accomplished by using an end cut carbide burr in a power machine (drill press). The third step consists of cleaning the back and front of the item. This is done with a brush to remove cuttings and a metal probe to remove any burrs that remain in the cut portion. Once this is done, the item is cleaned on the back with an alcohol base solution to remove dust and to release any other material that may interfere with the next step. The fourth step involves placing a measured amount of industrial adhesive in the ground out area on the back of the item. The fifth step involves the careful placement of a button cover (fashion snap) or an earring post over the ground area with the adhesive. Either piece must be carefully centered and positioned in order to make the end product salable. The products then must cured for at least 24 hours before being placed on card or placed in plastic bags for resale.

The buttons cost 4.1 cents each as imported from Taiwan. The earring post costs ten (10) cents each and the button cover attachment costs eleven (11) cents each. The labor cost is twenty-three cents per unit. The earring posts and button cover attachments are manufactured by C and C Metal Products of Englewood, New Jersey. Of the total cost of thirty-seven or thirty-eight (38) cents, nearly 90 percent is parts and labor from the United States. The buttons come in bulk in packages marked made in Taiwan.

The Dallas District reviewed the facts of this case, and reached the conclusion that the buttons were not substantially transformed when they were processed in the U.S. to make buttons covers and earrings. Therefore the country of origin of these products was Taiwan.

ISSUE:

Are the imported buttons substantially transformed when they are made into earrings and button covers?

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. (See 19 CFR 134.35). In such circumstances, the imported article is excepted from marking. The outermost containers of the imported articles shall be marked.

After review of the samples and the description of the steps involved in processing the buttons into the earrings and button covers, we find that they are not substantially transformed. The most important characteristics of the finished earrings and button covers are conveyed by the imported buttons. The buttons are by far the dominant components of the finished earrings and the button covers. There are minimal changes in the size, shape, and appearance of the buttons. The sample imported buttons appear on the front side to be almost identical to the finished earrings. The fundamental identity and character of the buttons clearly are not lost when they are made into the earrings and the button covers. We believe that consumers will buy the earrings because of their appearance and that the imported button is the most important element on how the final product looks. The processing done in the U.S. to make the buttons into the earrings or button covers is done by adding a post or adding a button cover attachment. These are finishing operations which are not especially complex and do not require a great deal of skilled labor. Although it is claimed that the U.S. processing adds a great deal of value, the addition of significant value in producing an article is not dispositive of a whether a substantial transformation has taken place. See HQ 734052 (October 17, 1991). Accordingly, the country of origin of the finished earrings and button covers is Taiwan.

Importer's letter indicates that it was previously advised by Customs to mark the earrings and button covers "Assembled in the United States from Imported Taiwanese material". Because the country of origin of the buttons is Taiwan and they are not substantially transformed in the U.S., this marking is unacceptable. The importer may disclose that the earrings and button covers are assembled or processed in the U.S. as long as the country of origin is clearly indicated in accordance with 19 CFR 134.46. For example the marking "Made in Taiwan-Assembled in the USA" would be acceptable for Customs purposes. The importer should also contact the Federal Trade Commission regarding the proper use of any marking which contains the words USA or the United States.
With respect to the importer's request for a one time only exception from the country of origin marking requirements, the decision to grant a decision from proper marking on a one time only basis is within your discretion. However, no exception can be permitted for false or deceptive marking which indicates that the products are made in the United States.

HOLDING:

The processing of the buttons to make earrings and button covers is not a substantial transformation. The country of origin of the earrings and button covers is the country of origin of the buttons, Taiwan.

Sincerely,

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