HQ 0735310 - Country of Origin Marking - Cut Crystal Stemware; Substantial Transformation; HQ 734283 and HQ 734653 Followed. - United States International Trade Commision Rulings

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HQ 735310
April 6, 1994

MAR-2-05 CO:R:C:V 735310 NL

CATEGORY: MARKING

Kimberly J. Maxwell
Vice President
Maxwell Crystal, Inc.
145 Madison St.
Tiffin, OH 44883

RE: Country of Origin Marking - Cut Crystal Stemware; Substantial Transformation; HQ 734283 and HQ 734653 Followed.

Dear Ms. Maxwell:

This in reply to your letter dated August 2, 1993, in which you requested a ruling concerning the country of origin marking requirements for certain crystal stemware. You made a second submission with supplementary information on March 24, 1994. Samples also were submitted. We regret the delay in responding.

FACTS:

Maxwell Crystal imports crystal stemware blanks from Germany. These blanks are made to Maxwell's order by the German supplier using molds provided by Maxwell. You state that these blanks are imported exclusively for Maxwell's use, and that in their imported condition they are not suitable for retail sale.

After importation the blanks are finished by hand cutting and acid polishing. A comparison of the blanks with the finished stemware indicates that the U.S. hand cutting converts articles which are rough and have a generally cloudy appearance into articles elaborately decorated with numerous notches and mitre cuts.

You state that hand cutting and polishing in the U.S. require over four hours per stem. Whereas the cost of each blank is approximately $10, the costs of cutting and polishing are between $75 and $80.

Customs officials in Cleveland, Ohio, were previously of the opinion that the stemware blanks were subject to individual marking, and that the U.S. processing did not affect this requirement. However, upon review of certain rulings (to be discussed below), they now have agreed with your position that the processing in the U.S. performed by Maxwell Crystal effects a substantial transformation of the stemware blanks. This ruling is effective for prospective customs transactions.

ISSUE:

Does the hand cutting and polishing of the stemware blanks effect a substantial transformation?

LAW AND ANALYSIS:

Pursuant to section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), all articles of foreign origin are, unless excepted, required to be marked so as to indicate the name of their country of origin to ultimate purchasers in the U.S.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. As provided at 19 CFR 134.35, a person in the U.S. who processes or manufactures an article of foreign origin in such a manner as to effect a substantial transformation is considered the ultimate purchaser of the imported article. Such an imported article is not required to be individually marked at the time of importation; marking of the container in which it reaches the processor or manufacturer is sufficient.

Recently, Customs has issued two rulings examining whether hand cutting and polishing of rough crystal would be considered to effect substantial transformation. In HQ 734283 (June 16, 1992), this office ruled that blanks made in various countries became products of Ireland by reason of hand cutting, grinding, and acid polishing performed in Ireland. The cutting was found to be a highly skilled, labor intensive operation which added significant value and changed the character of the crude blanks. A similar result was reached in HQ 734653 (October 22, 1992). There, Customs ruled that the ultimate purchaser of imported crystal blanks was the the U.S. company which employed skilled craftsmen to hand cut designs onto the blanks. There were indications that the cost of U.S. processing far exceeded the cost of the blanks.

It is our opinion that the two rulings discussed above control the conclusion here. The hand cutting and polishing performed by Maxwell Crystal are extensive and intricate, and are performed entirely in the U.S. The rough blanks are not suitable for sale. The cost of U.S. processing exceeds the cost of the blanks by a factor of seven or eight to one. Accordingly, the imported blanks are substantially transformed by Maxwell Crystal, which is their ultimate purchaser within the meaning of 19 CFR 134.35. Provided the containers in which the stem blanks reach Maxwell are marked, the country of origin marking requirements will have been satisfied.

HOLDING:

Maxwell Crystal is the ultimate purchaser of crystal stemware blanks which it substantially transforms after importation by hand cutting and polishing. Pursuant to 19 CFR 134.35, the imported articles are required to be marked with their country of origin only on the container in which they reach Maxwell Crystal.

Sincerely,

John Durant
Director, Commercial

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