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HQ 735014


July 13, 1993
MAR-2-05 CO:R:C:V 735014 ER

CATEGORY: MARKING

Mr. Sidney Freidin, President
Sidney Freidin, Inc.
1119 Santa Isabel Avenue
P.O.Box 1029
Laredo, Texas 78042

RE: Country of Origin Marking Requirements for U.S. inserts for U.S. envelopes stuffed in Mexico and returned to the U.S. for mailing; 19 CFR 10.22; 19 CFR 134.32(m); 19 CFR 134.35; Substantial Transformation; Gifts; Ultimate Purchaser; 19 CFR 134.1(d); 19 CFR 134.1(d)(4); Pabrini, Inc. v. United States, 630 F.Supp. 360 (C.I.T. 1986).

Dear Mr. Freidin:

This is in response to your letter dated March 1, 1993, on behalf of your client, Focus Direct, in which you request a ruling on the tariff classification and marking requirements for certain U.S. printed matter which is sent to Mexico then returned to the U.S. after undergoing certain operations. This ruling pertains to the marking requirements. A separate ruling will be issued which addresses the tariff classification.

FACTS:

American produced envelopes and inserts are shipped to Mexico where they are subjected to certain operations and stuffed into envelopes before return to the U.S. The following is a list of the American components:

1. Laser printed 8-3/4 x 12 inch (approx. size) paper sheets. Each sheet is printed with an array of graphics and different names and addresses, arranged in columns and rows. These sheets will be stacked in groups of 25 in such a manner that each individual's name will arranged vertically. The stacks of 25 will, in turn, be stacked one upon the other with a paper separator, forming a total of 250 sheets in each stack.

2. Loose coins (nickels and pennies).

3. Printed solicitation letters.

4. Window mailing envelopes.

5. Printed descriptive pamphlets.

6. Padding compound.

7. Printed business reply envelopes.

8. Rubber bands.

9. Cardboard boxes or bags, property of U.S. Postal Service, on loan for mailing purposes.

In Mexico, the following operations are performed on the U.S. components:

1. The stacks of printed sheets will be cut vertically between columns.

2. Each stack of columns will receive a coating of padding compound along the left edge.

3. The padded stacked columns will be separated and each will be cut horizontally between the names, leaving a square stack, known as a "cube".

4. Each individual set of labels will be glued to the solicitation letter or business envelope in such a way that the address will appear through the window in the envelope.

5. The letter or business reply envelope with the affixed labels will be stuffed into the mailing window envelope along with the solicitation letter and pamphlet.

6. In some cases, two coins, instead of labels, will be glued to the solicitation letter.

7. These stuffed envelopes will be bound into packs with rubber bands, packed into either the U.S. Postal Service carton or bag and imported into the U.S. for mailing.

ISSUE:

What are the country of origin marking requirements for printed matter of U.S. origin which is shipped to Mexico where it undergoes certain operations before return to the U.S.?

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 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. The purpose of the marking statute is outlined in U.S. v. Friedlaender & Co., 27 CCPA 297 at 302, C.A.D. 104 (1940), where the court stated that: "Congress intended 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." Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

Section 134.1(d), Customs Regulations (19 CFR 134.1(d)), defines the "ultimate purchaser" as generally the last person in the United States who will receive the article in the form in which it was imported. 19 CFR section 134.1(d)(4), Customs Regulations (19 CFR 134.1(d)(4)), specifies that if the imported article is distributed as a gift the recipient is the "ultimate purchaser". Customs has ruled that the recipient of brochures, advertisements, flyers, return mailers, etc. used for self- promotion, is the ultimate purchaser of such articles. See, HQ 731543 (May 17, 1989). Similarly in the instant case, the recipient of the mailed printed matter is the ultimate purchaser for country of origin marking purposes. Also see, Pabrini, Inc. v. United States, 630 F.Supp. 360, 361 n.5, 362 n.7 (C.I.T. 1986).

Products of the U.S. are not subject to these marking requirements. Since 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, a U.S. product sent to another country for mere processing or assembly, which is not substantially transformed in that country, remains a product of the U.S. and is not required to be marked upon its return. However, an exception to this is set forth in section 10.22, Customs Regulations (19 CFR 10.22). Section 10.22 provides that articles assembled in whole or in part from U.S. components which are entitled to entry under subheading 9802.00.80, HTSUS, are considered products of the country of assembly for purposes of 19 U.S.C. 1304. If an imported assembled article is made entirely of American-made materials, the U.S. origin of the material may be disclosed by using a legend such as "Assembled in from material of U.S. origin", or a similar phrase. Section 10.22 applies to articles entitled to entry under subheading 9802.00.80, HTSUS, irrespective of whether the foreign assembly operation effects a substantial transformation of the U.S. origin components. Requisite marking if the articles are entitled to entry under subheading 9802.00.80, HTSUS.

If the imported articles are entitled to entry under subheading 9802.00.80, HTSUS, then 19 CFR 10.22 applies and the articles may be marked with the words: "Assembled in Mexico from material of U.S. origin", or a similar phrase. The marking legend should appear on the outermost container in which the goods reach the ultimate purchaser. The addressees are the ultimate purchasers of the printed matter, for purposes of country of origin marking. The outermost containers, in this case, presumably are the envelopes in which the solicitation letter, labels, coins, etc. are mailed to and received by the addressees. Accordingly, the marking legend must be printed on the envelopes. Additionally, each article inside the envelope may be marked, if your client so chooses.

Requisite marking if the articles are not entitled to entry under subheading 9802.00.80, HTSUS.

If, on the other hand, the articles are not entitled to entry under subheading 9802.00.80, HTSUS, the country of origin marking must be determined in accordance with section 134.32(m), Customs Regulations (19 CFR 134.32(m)) regarding American goods returned and section 134.35, Customs Regulations (19 CFR 134.35) regarding substantial transformation. Under 19 CFR 134.32(m), products of the U.S. which are exported and returned are excepted from the marking requirements of 19 U.S.C. 1304 unless further processing in the foreign country constitutes a substantial transformation of the products. See HQ 734558 (July 22, 1992) and HQ 732480 (July 31, 1989). Accordingly, it is necessary to determine if, after the operations are performed in Mexico, the various U.S. components are substantially transformed into new and different articles.

In U.S. v. Gibson-Thomsen Co., Inc., 27 CCPA 267 (C.A.D. 98) (1940), the court found 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. In the instant case, since the name, character and use of the articles are not changed by the operations performed in Mexico, Customs is of the opinion that the articles are not substantially transformed and that they remain products of the U.S. The letters, envelopes, brochures and coins require no further processing in Mexico and the labels only need to be cut to size and gummed together with the padding compound. These articles are then simply stuffed into the envelopes and returned to the U.S. Such operations are minor finishing operations. See, HQ 734706 (January 15, 1993)(sheets of uncut trading cards are not substantially transformed by cutting, sorting and packaging operations) and HQ 555241 (July 3, 1989)(the cutting of sheets of self-adhesive office labels on backing paper was not a substantial transformation). Moreover, packaging a product is not a substantial transformation. See HQ 733729 (January 2, 1991).

HOLDING:

If the printed matter, envelopes, coins and labels of U.S. origin which are sent to Mexico and later imported into the U.S. are eligible for an exemption from duty as provided for under subheading 9802.0080, HTSUS, the country of origin marking "Assembled in Mexico from material of U.S. origin" (or a similar phrase) is appropriate pursuant to 19 CFR 10.22.

If such articles are not eligible for such a duty exemption Customs finds that no substantial transformation occurs in Mexico, and consequently that the finished articles are excepted from marking pursuant to 19 CFR 134.32(m).

Sincerely,

John Durant, Director

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