United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1994 HQ Rulings > HQ 0735275 - HQ 0735473 > HQ 0735287

Previous Ruling Next Ruling


HQ 735287


April 15, 1994

MAR-2-05 CO:R:C:V 735287 AT

CATEGORY: MARKING

David A. Eisen, Esq.
Tompkins & Davidson
One Astor Plaza
1515 Broadway, 43rd Floor
New York, New York 10036-8901

RE: Country of origin marking requirements for gift tags and wall/window decorations which are designed and lithographically printed in the U.S. and exported to foreign countries for further processing; applicability of Subheading 9802.00.80, HTSUS, to flocking operation; substantial transformation; assembly; U.S. goods exported and returned; 19 CFR 10.22; 19 CFR 134.32(m); HQ 734706; HQ 734399

Dear Mr. Eisen:

This is in response to your inquiry dated January 13, 1994, on behalf of Cleo, Inc. ("Cleo"), amending your original ruling request dated July 28, 1993, regarding the country of origin marking requirements for gift tags and wall window decorations which are designed and lithographically printed in the U.S., exported to various foreign countries for further processing and returned to the U.S. for retail sale. Samples were submitted for review. For purposes of this ruling, we assume that the foreign processing is done in countries other than Mexico or Canada. A separate ruling letter will be issued addressing the processing that is to be performed in Mexico, a NAFTA country, the issue involved in your original request. We regret the delay in responding.

FACTS:

According to your submission, the imported gift tags and wall/window decorations are designed and lithographically printed in the U.S. on large sheets of paperboard and will be exported to various foreign countries (in sheet form). Also exported to the 2
foreign countries will be adhesive, and nylon flocking fibers in very short (described as "minute") length. In the foreign countries, the paperboard sheets will be either (1) inserted into an automatic cutting machine which cuts (i.e. straight edge and/or die-cut) the sheets, or (2) "popped-out" along pre-cut, perforated lines, to produce the individual articles.

The individual items will then be placed on a conveyor-belt type machine which transports the articles through various stations at which different operations are performed. The first station involves application of the adhesive to the designated area(s); the second station entails depositing the flocking materials onto the adhesive; the third station includes a vacuuming process which removes excess flocking materials; and the fourth station contains radiant heat which serves to dry and harden the adhesive. The article is then removed from the machine and set on a rack for further drying and hardening. The articles are then sorted and grouped in various numbered quantities and blister packed for return to the U.S. for retail sale. You advise that the gift tags and wall/window decorations may also be subjected to an embossing or "hot stamping" (application of metallic ink to the article) operation in the foreign countries as well.

ISSUES:

What are the country of origin marking requirements for imported gift tags and wall/window decorations which are to be processed in various foreign countries, in the manner described above?

LAW AND ANALYSIS:

The marking statute, section 304, 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 the ultimate purchaser in the U.S. 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.

As stated above, U.S. components (large sheets of U.S. lithographically printed and designed gift tags and wall/window decorations, adhesive and nylon flocking fibers) will be exported to various foreign countries to be further processed in the manner described above, prior to being re-imported into the U.S. 3

Section 10.22, Customs Regulations (19 CFR 10.22), provides special marking requirements for goods assembled abroad entirely from U.S. components, as represented here, which are eligible for a duty exemption under subheading 9802.00.80 HTSUS. Section 10.22 provides that:

Assembled articles entitled to the exception are considered products of the country of assembly for the purposes of the country of origin marking requirements of section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304). If an imported assembled article is made entirely of American-made materials, the United States 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.

The first question presented in this case is whether the processing performed in the foreign country constitutes an assembly operation within the contemplation of subheading 9802.00.80, HTSUS so that when imported into the U.S. the finished gift tags and wall/window decorations are eligible for a duty exemption under subheading 9802.00.80 HTSUS. If such is the case, the country of assembly would be the country of origin of the imported gift tags and wall/window decorations.

The proposed processing that is to be performed to the U.S. components (cutting, flocking operation and/or embossing or "hot- stamping operation) to finish the articles in a foreign country does not constitute an acceptable assembly operation within the purview of subheading 9802.00.80 and no duty exemption exists under that subheading.
Accordingly, the special marking requirements of 19 CFR 10.22 do not apply.

The remaining issue is whether the U.S. materials are substantially transformed abroad, so as to become a product of the foreign country.

Section 134.1(b) of the interim regulations, 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. (Emphasis added). 4

In this case, assuming that the foreign countries where the processing operations of cutting, flocking and/or embossing or "hot-stamping" are performed do not include Mexico or Canada (NAFTA countries as defined in section 134.1(g) of the interim regulations), the general substantial transformation test cited in section 134.1(b) of the interim regulations must be applied in order to determine the country of origin of the imported gift tags and wall/window decorations for marking purposes. For country of origin marking purposes, a substantial transformation occurs when an article loses its identity and becomes a new article having a new name, character or use. Koru North America v. United States, 12 CIT 1120, 702 F. Supp. 229 (1988).

In HQ 734706 (January 15, 1993), Customs ruled that certain trading cards which were lithographically printed in the U.S., exported to Mexico for cutting, sorting and packaging, and returned to the U.S. were not substantially transformed (no change in the name, character or use) as a result of the Mexican operations.

Similarly, in this case, we find that the operations of cutting, flocking and/or embossing or "hot-stamping" that are to be performed in a foreign country, in the manner described above, do not substantially transform the U.S. components. Although the gift tags and wall/window decorations may look somewhat different as a result of the foreign operations, such as raised symbols or diagrams my appear as a result of embossing, metallic colors (e.g. gold or red) may be added to the front side of the gift tags as a result of "hot-stamping, and/or flocking operation adds color and gives the tag or wall/window decoration a fury-like feeling, these operations only enhance and add more appealing qualities to the finished article. Nevertheless, the finished article still has the same use, name and character of a gift tag or wall/window decoration. The glue and flocking material also do not change in name, character or use as a result of the foreign operations, albeit they are now affixed to the tags or wall/window decorations. Therefore, the U.S. origin gift tags and wall/window decorations are not substantially transformed by being further processed in a foreign country, in the manner described above.

Section 134.32(m), Customs Regulations (19 CFR 134.32(m)), provides that products of the U.S. exported and returned are excepted from country of origin marking requirements. Customs has ruled that this exception applies when U.S. goods are processed, but not substantially transformed abroad and then returned. See, HQ 734399 (December 28, 1992); U.S. origin 5
lipstick mass exported to China to be further processed into lipstick bullets was not substantially transformed as a result of the Chinese processing and was excepted from marking under 19 CFR 134.32(m) as a U.S. good exported and returned. Accordingly, the finished gift tags and wall/window decorations imported from foreign countries are excepted from country of origin marking requirements under section 134.32(m).

HOLDING:

U.S. components which are to be exported to various foreign countries, and further processed in the manner described, prior to re-importation into the U.S., are not eligible for a duty exemption under subheading 9802.00.80, HTSUS and therefore are not subject to the special marking requirements of 19 CFR 10.22.

The U.S. gift tags and wall/window decorations are not substantially transformed as a result of the foreign processing operations described above. Accordingly, the finished gift tags and wall/window decorations imported into the U.S. are excepted from country of origin marking under 19 CFR 134.32(m), as a U.S. product exported and returned.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling

See also: