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HQ 558784





June 28, 1995

MAR-2-05 R:C:S 558784 MLR

CATEGORY: MARKING

James C. Wickens, Esq.
Howard & Howard
The Pinehurst Office Center
Suite 101
1400 North Woodward Avenue
Bloomfield Hills, MI 48304-2856

RE: Country of origin marking of yarn; conspicuous; economically prohibitive; geographic names; 19 CFR 134.32, 134.44, 134.46, and 134.47

Dear Mr. Wickens:

This is in response to a letter dated June 17, 1994, sent to the District Director of Customs, Detroit, Michigan, by prior counsel of Laines Anny Blatt USA ("Laines"), and your letters dated February 28, 1995, March 6, 1995, and June 5, 1995, concerning the country of origin marking on yarn. Samples of the yarn were submitted at a meeting held February 25, 1995, at the Office of Regulations & Rulings.

FACTS:

It is stated that Laines is the sole importer of yarns produced by Anny Blatt of France, and Grignasco of Italy. Laines employs five employees, has annual sales of less than $1 million, and also has been importing and distributing yarn and knitting catalogs to retail outlets for approximately 15 years. The retail outlets are typically small yarn boutiques. The Anny Blatt and Grignasco yarns are stated to be well known to the customers of these retail outlets, as this yarn is expensive and of high quality. The yarn is also advertised in knitting magazines indicating that it is imported (samples of the magazines were submitted).

Questions concerning the labeling on the yarn arose in June 1994, when two Customs inspectors noticed that the country of origin marking on certain catalogs was printed on the inside back cover as opposed to the face of the catalog. It is stated that Laines subsequently has contacted the printer of the catalog, and the marking is no longer in dispute. Additionally, the Customs inspectors questioned the labels, measuring approximately 2 3/4 x 1 3/4 inches, on certain styles of slow moving yarn. The first scenario involves the placement of the country of origin marking on the cardboard stem which is inserted into the yarn ball. The second scenario involves the placement of the country of origin marking on the opposite side of the cardboard labels on seven, out of 120, styles of Grignasco yarn containing geographic names, i.e., "California," "Alaska," "Australia," "Bermuda," "Colorado," "Laguna," and "Mexico." The Customs inspectors indicated to Laines that future shipments of the yarn products, under either scenario, could potentially be seized. Accordingly, prior counsel for Laines contacted the Detroit District Director concerning the marking on these products.

In the interim, Laines states that it has contacted Anny Blatt and Grignasco to request that the new labels include the country of origin on the front of the yarn labels as opposed to the back or the stem of the labels. Letters written to Anny Blatt and Grignasco were submitted, and Anny Blatt and Grignasco now are using the new labels in both scenarios on their yarn products which have a higher turnover rate. Samples of the newer yarn products were submitted to our office, and are not at issue. However, the old labels will still be used on the slow moving yarn styles until they are depleted since these yarn styles are already boxed and in inventory, and because excessive handling damages the yarn. In a letter dated February 23, 1995, Anny Blatt estimates that the cardboard stem labels will be exhausted in 12-18 months. In a letter dated February 21, 1995, Grignasco estimates that the old labels will be depleted in approximately one year.

The yarn imported by Laines is packed in cardboard boxes, approximately 10, 12, or 20 balls or skeins per box depending on the type of yarn being imported. These boxes are then placed inside shipping cartons so that the average shipment consists of between 2,000 to 3,000 individual balls of yarn. Laines does not retain a large inventory. Due to the competition from other importers and trendy nature of the styles, air cargo shipments are immediately forwarded to individual customers. It is stated that Laines has repeatedly contacted its suppliers to obtain estimates as to the amount of inventory of the old labels, and has inquired about the cost to relabel the balls of yarn prior to importation into the U.S. The estimated cost provided by Anny Blatt of changing the location of the marking on the label is 1000 FF ($179.20) per item and new labels will be required for 20 different items. This price does not include the cost of having the labels printed. The French supplier also states that the use of an adhesive sticker would hide other important information, and that it may simply abandon the U.S. market.

If each individual ball of yarn is required to be relabeled after importation, Laines states that the burdens would be the cost of new labels; the cost of labor to unpack the boxes, attach new labels, and to repackage the yarn; and the cost of temporary space to conduct the remarking. Furthermore, Laines states that a sticker affixed to the label would cover other important information, and that the glue from the sticker would harm the yarn if the sticker were affixed directly to the yarn. Additionally, the yarn would be damaged by the excessive handling. A letter from a shop owner is submitted verifying this claim. It is also stated that sales would be lost if the yarn is delayed. A quotation from a third party company is submitted indicating the cost to relabel a shipment of 8 cartons with 30 boxes per carton and 10 balls of yarn per box:

8 cartons at $3.50 to load and unload $28.00 240 boxes of 10 balls = 2,400 balls at $.075 per label $180.00
Estimate labor is 2 « minutes per box for a total of 10 hours at $30.00 per hour $300.00 Extra trucking charges estimate $75.00
Total Cost $583.00

Consequently, the relabeling is estimated to cost 25 cents per ball. The labels used by the third party company measure 7/16 x 1 inch. Laines has provided the cost per ball and the wholesale price, and states that relabeling would increase the cost of the yarn from 5 to 25 percent. Therefore, Laines states that it operates on a nominal gross profit margin of between 35 and 40 percent, which results in little profit when applying the cost of labor, administrative overhead, volume discounts, and the standard 10 percent sales commission. Accordingly, Laines states that if these yarn products are required to be relabeled, it may not import these particular styles.

ISSUES:

I. Whether the yarn products containing the country of origin on the stem of the label which is inserted into the yarn ball are marked conspicuously, and if not, whether the old yarn products may be excepted from marking under 19 CFR 134.32.

II. Whether the country of origin marking on the yarn products with geographic names satisfies the marking requirements of 19 CFR 134.47.

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 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. 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. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.44, Customs Regulations (19 CFR 134.44), states that: "any method of marking at any location insuring that country of origin will conspicuously appear on the article shall be acceptable." Section 134.41, Customs Regulations (19 CFR 134.41), requires that the ultimate purchaser in the U.S. be able to find the marking easily and read it without strain. In regard to the yarn products described under the first scenario with the country of origin on the stem of the label which is inserted into the yarn ball, it is claimed that this marking is conspicuous. First, it is asserted that the country of origin marking is near, or next to, other essential information that a consumer must read prior to any purchase, such as information concerning the fiber content, washing instructions, color lot number, and the needle size to be used for knitting. Secondly, it is claimed that the placement of the country of origin marking has consistently been used for the past 15 years, and is similar to the markings used by numerous foreign manufacturers.

There do not appear to be any rulings concerning the placement of the country of origin marking on balls of yarn, and the regulations also do not specify any special marking requirements for this particular merchandise; accordingly, the basis is any conspicuous location so that the ultimate purchaser may find the marking easily and read it without strain. In Headquarters Ruling Letter (HRL) 731534 dated December 2, 1988, Customs found that nylon sports bags with a fabric label sewn deep inside the bag were not marked conspicuously as required by 19 CFR 134.41. In HRL 731727 dated June 16, 1989, Customs also found that a batting glove containing the country of origin deep inside the glove was not marked conspicuously. Furthermore, in HRL 731061 dated July 18, 1988, it was stated that if the label is not conspicuously placed near the cuff of the glove, nor easily accessible to the ultimate purchaser, then the marking is not acceptable. Additionally, in HRL 730891 dated February 10, 1988, it was held that if an umbrella had to be opened to see the country of origin, the marking was not sufficiently conspicuous. However, in HRL 733659 dated August 20, 1990, Customs determined that although the country of origin marking on plastic bag closing devices, labeled on the interior section of each clip, was not the most conspicuous location, the requirements of 19 U.S.C. 1304 were met because the statute does not require that the country of origin marking be placed in the most conspicuous location of an article. Additionally, it was determined that an ultimate purchaser could reasonably be expected to examine the clips and open them prior to purchase, and once the clip was opened, the marking could easily be found and read without strain.

In this case, we also find that the while the placement of the country of origin on the stem of the label may not be the most conspicuous location, the requirements of 19 U.S.C. 1304 are satisfied. The label contains other information which the ultimate purchaser will need to read prior to purchasing the yarn, such as the lot number, and yarn is a flexible material and can easily be pulled away from the stem in order to read all of the information. Once the yarn is pulled away, the country of origin can easily be read without strain. We also note that it has been established that the stickers used by the third party company, measuring 7/16 x 1 inch, would obstruct other information on the label, and that excessive handling of the yarn damages the structure of the yarn ball. Additionally, Laines has taken action so that the country of origin marking on the newer labels is in a more conspicuous location.

In regard to the second scenario, involving the Grignasco styles of yarn containing geographic names, Customs has recognized that the presence of a geographic location other than the country in which the article was produced on an imported article or its container may mislead the ultimate purchaser as to the true country of origin. Therefore, in cases where the name of a location in the U.S. or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appears on an imported article or its container, 19 CFR 134.46 provides that there shall appear, legibly and permanently, in close proximity to such words, letters, or name, and in at least a comparable size, the name of the country of origin preceded by "Made in", "Product of", or other words of similar meaning. Customs has ruled that in order to satisfy the close proximity requirement, the country of origin marking must appear on the same side(s) or surface(s) in which the name of the locality other than the country of origin appears. The purpose of this section is to prevent the possibility of misleading or deceiving the ultimate purchaser as to the actual origin of the imported good. In this case, the country of origin is on the opposite of the geographic reference. However, 19 CFR 134.47, provides that if a locality name is a trade name or trademark, the country of origin marking needs only to meet the general standard of conspicuousness. Laines has stated that the seven yarn styles with geographic names are not registered as trademarks. A trade name is defined as:
any designation which (a) is adopted and used by person to denominate goods which he markets ... and (b) through its association with such goods ... has acquired a special significance as the name thereof, and (c) the use of which for the purpose stated in (a) is prohibited neither by legislative enactment nor by otherwise defined public policy.

Black's Law Dictionary 1339 (5th ed. 1979). In HRL 722064 dated August 9, 1983, Customs determined that if the term "Paris" was part of the registered trade name "Louis Feraud," and the item or its immediate container was marked in a conspicuous location, then the requirements of 19 CFR 134.47 would be satisfied. In this case, while the seven yarn products containing geographic names are not registered with Customs as trade names, the product names each refer to a particular color and style of yarn, and, therefore, have the characteristics of trade names for purposes of 19 CFR 134.47. Accordingly, inasmuch as the country of origin is conspicuously placed on the opposite side of the cardboard label containing the geographical reference, we are satisfied that the requirements of 19 CFR 134.47 are met.

HOLDING:

On the basis of the information and samples submitted, we find that the yarn products containing the country of origin on the stem of the label which is inserted into the yarn ball, while not marked in the most conspicuous location, are marked conspicuously. Furthermore, we find that the yarn products containing geographic names have the characteristics of trade names. Accordingly, inasmuch as the country of origin is conspicuously placed on the opposite side of the label containing the geographical reference, we are satisfied that the requirements of 19 CFR 134.47 are met.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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