HQ 558994 - Country of origin marking of used military surplus clothing which is processed in the U.S.; 19 CFR 134.32(c) & (g) - United States International Trade Commision Rulings

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HQ 558994

April 21, 1995

MAR-2-05 R:C:S 558994 WAS

CATEGORY: MARKING

Mr. Ray Reynolds
Lee Hardeman
P.O. Box 45545
Atlanta, GA 30320-0545

RE: Country of origin marking of used military surplus clothing which is processed in the U.S.; 19 CFR 134.32(c) & (g)

Dear Mr. Reynolds:

This is in reference to your letter dated January 18, 1995, on behalf of Sturm European Military Surplus Teesar, concerning the country of origin marking requirements for worn used military surplus clothing which is produced in Germany and imported into the U.S.

FACTS:

You state that Sturm European Military Surplus proposes to purchase various articles of clothing from Sturm Armeebestande Import Export. The clothing was originally produced in Germany for use by the East German military. You claim that the articles of clothing show appreciable wear and will be imported into the U.S. where they will be processed into marketable articles of clothing. Specifically, you state that a jacket with ripped sleeves will have the sleeves removed, thereby transforming the jacket into a vest-type garment; long pants with ripped knees will have the pant legs removed just above the knee, thereby transforming the pants into a bermuda short-type garment. The importer estimates that an additional 50 to 75 percent would be added to the cost of each garment if the required additional processing occurred in Germany, rather than in the U.S. The additional processing specifically includes "sorting by degree of repair needed, making necessary cosmetic repairs if possible, transforming articles that are beyond simple cosmetic repair, marking with country of origin, and marking under the Textile Act rules when required."
The importer claims that because of the high cost of further processing in Germany relative to the initial cost of the used garments, the garments should be excepted from marking pursuant to 19 CFR 134.32(c). In the alternative, the importer submits that because of the extensive processing which will be performed in the U.S. to make the articles marketable in the U.S., there exists the possibility that any marking will be obliterated; therefore, the garments should be excepted from marking pursuant to 19 CFR 134.32(g).

ISSUE:

Whether the used military surplus garments are excepted from the country of origin marking requirements pursuant to 19 CFR 134.32(c) or (g).

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires 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 to the ultimate purchaser 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 (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.

You assert that the used clothing should be excepted from country of origin marking pursuant to 19 U.S.C. 1304(a)(3)(C) and 19 CFR 134.32(c), which allows an exception from country of origin marking for "articles that cannot be marked prior to shipment to the United States except at an expense economically prohibitive of its importation." The fact that such marking would result in economic hardship is not in and of itself sufficient to except the articles from the requirements of country of origin marking. See Headquarters Ruling Letter (HRL) 733990 dated June 17, 1991 and HRL 733527 dated May 20, 1991.

You should note that even if the garments are excepted from country of origin marking under the provisions of 19 U.S.C. 1304, if the imported samples are textile fiber products subject to the requirements of the Textile Fiber Identification Act, or wool products subject to the requirements of the Wool Labeling Act of 1939, as amended (15 U.S.C. 68 et seq.), under the rules and regulations issued by the Federal Trade Commission (FTC) under these Acts, the imported samples, as well as the products themselves, are required to be marked (subject to specified exceptions) with their respective fiber contents and other required information, including country of origin. See 16 CFR 303.21 and 300.22. Pursuant to sections 11.12 and 11.12b, Customs Regulations (19 CFR 11.12 and 11.12b), the Customs Service is responsible for the enforcement of the labeling requirements of these Acts at the time of importation. If you have any questions regarding the interpretation of the FTC rules and regulations, the FTC should be contacted.

The question that must be answered in the instant case is whether marking the country of origin on the garments in Germany would be economically prohibitive of their importation. Although neither the statute nor the regulations defines the term "economically prohibitive", several factors have been considered to help determine when marking an item would be economically prohibitive. These include situations in which the requirement to mark the article to indicate its country of origin would force the producer to incur a cost that would require the item to be marked at a price at which: (1) the item could not be sold since an individual would not buy it; (2) no profit could have been made; (3) the profit that could have been obtained would not have been sufficient to induce the importer to handle the item. See Note, Country of Origin Marking, 6 Law and Policy in Int'l Business 485, 501-502 (1974), citing Bur. Cust. Customs Information Exchange Ruling 114/51 (1951).

It is the opinion of this office that you have not provided sufficient information upon which to grant an exception from individual marking based upon prohibitive economic expense. While we do not doubt the veracity of your statement that marking by means of placing labels on each garment would be economically burdensome, the mere assertion that marking will be "prohibitive," unsupported by some actual cost estimates for marking the garments, could never be the basis for granting an exception to individual marking. Accordingly, in the absence of any basis upon which to make a finding, the garments cannot be excepted from country of origin marking under 19 U.S.C. 1304(a)(3)(C) and 19 CFR 134.32(c).

Articles to be processed in the U.S. by the importer or for his account otherwise than for the purpose of concealing the origin of such articles and in such manner that any mark contemplated by this section would necessarily be obliterated, destroyed, or permanently concealed are excepted from marking under 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g). Customs has limited the applicability of the "G" exception to precise circumstances. As provided in section 134.36(a), Customs Regulations (19 CFR 134.36(a)), an article which is to be processed in the U.S. by the importer or for his account shall not be considered to be within the "G" exception if there is a reasonable method of marking which will not be obliterated, destroyed, or permanently concealed by such processing. In addition, Customs has ruled that supporting statements of intended processing to be performed by the importer or for his account are a condition of entitlement to the exception. See C.S.D. 89-6, October 3, 1988 (731484); HRL 729434 dated May 23, 1986, and RM 363.2 W (January 25, 1967). Customs has also ruled that another condition of entitlement to the exception is that the district director must be satisfied that the processed article will be marked in a manner to indicate the country of origin to the ultimate purchaser in the U.S. This would require the U.S. processor to mark the processed article unless the U.S. processor is the ultimate purchaser. (Pursuant to 19 CFR 134.35, a U.S. processor is considered to be the ultimate purchaser if the processing constitutes a substantial transformation, i.e., results in a new name, character or use.)

In the instant case, Customs does not find that an exception under 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g) is warranted, since merely indicating that the country of origin marking "may" be obliterated during processing which takes place in the U.S. is insufficient to apply this exception. Customs has granted the exception in cases where the marking on imported component parts would be permanently concealed as a result of the assembly of the parts into a completed article. See HRL 734566 dated June 15, 1992 (Customs held that water pump components which are imported into the U.S. may not remain visible after assembly into a completed water pump, and therefore, any such components would be excepted from marking at the time of importation pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g), since any marking thereon would necessarily be permanently concealed as a result of the U.S. processing). Moreover, we are not satisfied that pursuant to 19 CFR 134.36(a), a reasonable method of marking which will not be "obliterated, destroyed, or permanently concealed" as a result of the operations performed in the U.S. is not possible. Therefore, the garments are not excepted from marking under this provision and must be properly marked in accordance with the requirements in 19 U.S.C. 1304 and 19 CFR Part 134. HOLDING:

Based on the information submitted, as no documentary evidence was submitted to support the claim that the garments could not be marked prior to shipment to the U.S. except at an expense economically prohibitive of their importation, the marking exception under 19 U.S.C. 1304(a)(3)C) and 19 CFR 134.32(c) is not applicable. In addition, merely indicating that the country of origin marking "may" be obliterated during processing which takes place in the U.S. is insufficient to apply the exception under 19 U.S.C. 1304(G) and 19 CFR 134.32(g). Therefore, the garments must be properly marked to indicate their country of origin in accordance with the requirements in 19 U.S.C. 1304 and 19 CFR Part 134.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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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