HQ 559211 - Country of origin marking for Unrecorded "Infoguard" Writable compact discs; CDs; Recording; Repackaging; Outer container; Mexico; 19 CFR 134.46; 19 CFR 134.32(d) - United States International Trade Commision Rulings

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HQ 559211

September 21, 1995

CLA-2 R:C:S 559211 MLR

CATEGORY: MARKING

Ned H. Marshak, Esq.
Sharretts, Paley, Carter & Blauvelt, P.C. 67th Broad Street
New York, NY 10004

RE: Country of origin marking for Unrecorded "Infoguard" Writable compact discs; CDs; Recording; Repackaging; Outer container; Mexico; 19 CFR 134.46; 19 CFR 134.32(d)

Dear Mr. Marshak:

This is in reference to your letter of May 17, 1995, requesting a ruling on behalf of your client, Eastman Kodak Company ("Kodak"), concerning the country of origin marking requirements for "Infoguard" writable compact discs and other writable compact discs imported by Kodak from Mexico. Samples were submitted with your request.

FACTS:

The goods at issue are two types of unrecorded Writable compacts discs ("CD") stated to be produced by Kodak in Mexico, and to be classifiable under heading 8523, Harmonized Tariff Schedule of the United States (HTSUS). The CDs are used to store various types of data and information. The first type of CD is a Writable CD Media with "Infoguard" system protection (hereinafter "Infoguard CD"). The Infoguard system consists of stable dye chemistry, a special gold reflective layer, protective lacquer coating, and a 12 digit unique bar code etched into the gold reflective layer at the CD's inner diameter and the identical 12 digit human readable code number etched near the hub of the disc. The second type of Writable CD sold by Kodak is without the Infoguard protection system, and without the unique 12 digit bar code associated with Infoguard Writable CDs.

The unrecorded Infoguard CDs are imported in either plastic jewel cases, which are not shrink wrapped, holding one unrecorded Infoguard CD in each case, or plastic beehives, consisting of a spindle and base, holding 50 unrecorded CDs in each beehive. The CDs without Infoguard protection are also imported either in jewel cases (100 to a shipping carton, packaged in four inner cardboard containers holding 25 jewel cases each, without shrink wrap), or beehives (50 to a beehive, four beehives to a shipping carton). All of the shipping cartons are marked with the country of origin of the CDs: "Mexico" or "Made in Mexico." The Infoguard CDs and their jewel cases are marked with Kodak's name and Rochester, N.Y., address. The other CDs without Infoguard protection, jewel cases, beehives, and inner cartons do not contain any country of origin marking, nor do they contain any reference to Kodak's name or address.

Kodak only wishes to mark the outermost shipping container in which both types of CDs are packed. It is stated that companies purchasing unrecorded Infoguard CDs from Kodak either record onto the CDs themselves or resell the CDs in the packing cartons in which they are purchased from Kodak. Once the CDs are recorded in the U.S., it is stated that they are no longer products of Mexico because they are classifiable under heading 8524, HTSUS, and, therefore, do not require marking once the recorded CDs are sold. It is stated that the Infoguard CDs, which are resold by Kodak's distributors without being recorded, are only resold in the packing cartons in which the CDs are purchased from Kodak, and will not be resold in individual jewel cases or beehives, prior to being recorded, because: (1) the jewel cases in which the CDs are packaged are not shrink-wrapped in a tamper-proof factory seal; and (2) the jewel cases do not contain a UPC bar code, which is needed to sell a product at retail.

As to the CDs without Infoguard protection, they are marketed primarily to companies who will repack and resell them prior to recording. Therefore, Kodak states that it advises all companies purchasing these CDs that if the CDs are resold prior to being recorded, the container in which the CDs will reach the ultimate purchaser (the company which will do the recording) must be marked with the country of origin of the unrecorded CD.

ISSUE:

Whether it is acceptable to mark the country of origin of the CDs only on the outermost container.

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 to 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.

Section 134.1(d), Customs Regulations, defines "ultimate purchaser" as generally the last person in the U.S. who will receive the article (or purchases the good if it is a good of a NAFTA country) in the form in which it was imported. The regulations recognize that a manufacturer who substantially transforms an article after importation may be the ultimate purchaser. See 19 CFR 134.1(d)(2); and 19 CFR 134.35.

It is stated that once the CDs are recorded the country of origin changes. Therefore, the companies who record data onto the CDs are the ultimate purchasers of Kodak's writable CDs. In regard to the Infoguard CDs, it is contended that since they will not be resold prior to being recorded, or will be resold only in the outer carton in which they are purchased from Kodak (which will be marked with the country of origin), the CDs, jewel cases, beehives, and inner containers need not be marked with the country of origin of the CDs. Furthermore, it is contended that although the jewel cases and CDs contain the Kodak name and Rochester, N.Y. address, these references are not deceptive since the outermost container is marked "Mexico" or "Made in Mexico."

In regard to the other CDs without Infoguard protection, Kodak states that the possibility exists that purchasers of these CDs may decide to resell and repack them prior to recording. Therefore, because Kodak cannot state with certainty that these CDs will be resold in the same carton in which they are imported (which is properly marked with the country of origin), Kodak states that it will advise its customers that the unrecorded CDs cannot be resold unless the packaging is properly marked with the country of origin of the unrecorded CDs.

Pursuant to 19 U.S.C. 1304 (a)(3)(D) and 19 CFR 134.32(d), an exception from individual marking is applicable where the marking of a container of such article will reasonably indicate the origin of the article. This exception is normally applied in cases where the article is imported in a properly marked container and Customs officials at the port of entry are satisfied that the ultimate purchaser will receive it in the original unopened marked container. Relevant factors regarding whether an article is likely to remain in its original container include the chain of distribution, the type of container, and the nature of the article.

Headquarters Ruling Letter (HRL) 732018 dated February 7, 1990, and HRL 735268 dated October 1, 1993, are cited for support that only the outermost container for both types of CDs needs to be marked, and that the CDs, plastic jewel cases or beehives, and inner containers are not required to be marked.

In HRL 732018 dated February 7, 1990, Customs considered microdisk and minidisk products which consisted of an unrecorded flexible magnetic recording disk, with or without special coating, and a protective plastic shell (microdisk) or protective vinyl jacket (minidisk). Some of the products were sold to companies who recorded computer programs onto each product before selling it, while some were resold without any recording. Each bulk container contained ten shrink wrapped retail cartons, all labeled with the country of origin on the same side as any reference to the importer's address. It was stated that the marking exception under 19 U.S.C. 1304(a)(3)(D) is generally limited to where the importer is the ultimate purchaser, or where the ultimate purchaser (other than the importer) will in all foreseeable circumstances receive the imported article in its original unopened marked container.

In regard to the products sold to companies who recorded computer programs onto each product, HRL 732018 determined that the companies doing the recording were the ultimate purchasers. Therefore, as long as the microdisk and minidisk products were imported in properly marked containers and Customs officials at the port of entry were satisfied that the U.S. computer software company would receive them in the original unopened marked containers, the products were excepted from individual marking pursuant to 19 CFR 134.32(d) and only the outermost bulk container required marking.

In regard to those products which were resold with no computer programming, it was stated that although no information was submitted regarding how these products would be repackaged and resold, and, therefore, Customs could not be sure that the ultimate purchaser, in all foreseeable circumstances, would receive the products in properly marked containers, the exception was allowed because the amount resold without programming was small. However, the importer was required to submit written certification to Customs at the port of entry that the products to be resold without programming would be repacked in containers properly marked to indicate the country of origin.

Similarly, in this case, some of the Infoguard CDs are distributed to companies who record onto the CDs. As in HRL 732018, we find that these companies recording onto the CDs are the ultimate purchasers because recording substantially transforms the CDs, or if the CDs are goods of Mexico, results in a tariff shift to heading 8524 from any other heading (heading 8523, HTSUS). See 19 CFR 102.20(p), Section XVI: Chapters 84 through 85, 8524. Therefore, an exception from marking the individual CDs should be allowed pursuant to 19 CFR 134.32(d) and 19 CFR 134.35. Furthermore, as in HRL 732018, Kodak also states that some of the Infoguard CDs are not recorded but are resold only in the outer carton in which they are purchased from Kodak. In regard to these CDs, as long as Customs officials at the port of entry are satisfied that the ultimate purchasers receive the CDs in the original unopened outer container, the CDs, jewel cases or beehives, and inner containers may also be excepted from individual marking pursuant to 19 CFR 134.32(d). Since the jewel cases do not contain shrink wrapping or the UPC bar codes which is stated to be necessary to sell a product at retail, it is our opinion that this adds assurance that the CDs will not be sold in these unmarked jewel cases, but that the ultimate purchaser will receive the CDs in the properly marked outer container.

As to Kodak's name and U.S. address on the outer container, we find that the marking requirements of 19 CFR 134.46 are triggered. Section 134.46, Customs Regulations (19 CFR 134.46), requires that when the name of any city or locality in which the article was manufactured or produced, appears on an imported article or its container, 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 specifically ruled that in order to satisfy the close proximity requirement, the country of origin marking must generally appear on the same side(s) or surface(s) in which the name of the geographical reference other than the country of origin appears.

In HRL 735268 dated October 1, 1993, Customs considered intravenous sets packaged one set to a plastic pouch, forty pouches to a master carton, and four master cartons to a shipping carton. Both the shipping cartons and the master cartons were marked with the country of origin. The individual intravenous pouches indicated a U.S. address, and pointed to a lot code for the country of origin. The intravenous sets were only to be sold to the ultimate purchasers in the master cartons, and no intravenous sets were supposed to be taken out of the master carton and sold separately. It was found that since the master cartons were properly marked to indicate the country of origin of the intravenous sets, the ultimate purchaser would be advised of the country of origin, and, therefore, the individual intravenous sets were excepted from marking under 19 U.S.C. 1304(a)(3)(D) and 19 CFR 134.32(d). Furthermore the reference on the individual pouches to the lot number for the country of origin was determined to satisfy the requirements of 19 U.S.C. 1304 and 19 CFR Part 134 because the ultimate purchasers would not be misled by the U.S. address as the intravenous sets were only received in the properly marked master carton and the lot code printed on the individual pouches explained how to determine the country of origin.

In this case, it is our opinion that 19 CFR 134.46 is satisfied because the outer containers of the samples submitted are marked "Made in Mexico" in the same size and on the side as the U.S. address. In regard to the U.S. references on the CDs and jewel cases, we do not find that the requirements of 19 CFR 134.46 are triggered because these references cannot be seen until the outer container which is properly marked is opened. Therefore, we do not find that these U.S. references on the CDs and jewel cases are deceiving.

In regard to the CDs without Infoguard protection, Kodak states that some of the CDs will be repackaged prior to being recorded, and, therefore, Kodak cannot state with certainty that these CDs will be resold in the same carton in which they are imported. Because some of the CDs will be repackaged and Kodak cannot state which ones will be repackaged, the requirements of 19 CFR 134.26 must be satisfied.

Section 134.26, Customs Regulations (19 CFR 134.26) provides in pertinent part that:

If an imported article subject to these requirements is intended to be repackaged in retail containers ... after its release from Customs custody, or if the district director having custody of the article, has reason to believe that such article will be repacked after its release, the importer shall certify to the district director that: ... (2) if the article is intended to be sold or transferred to a subsequent purchaser or repacker, the importer shall notify such purchaser or transferee, in writing, at the time of sale or transfer, that any repacking of the article must conform to these requirements.

Accordingly, for the CDs without Infoguard protection which are unlikely to be received by the ultimate purchaser in the properly marked outer container, Kodak must comply with the certification and notify subsequent purchaser of the requirements of 19 CFR 134.26.

HOLDING:

Based on the facts presented, the individual Infoguard CDs, jewel cases or beehives, and inner containers are excepted from individual country of origin marking provided customs officials at the port of entry are satisfied that the Infoguard CDs will reach the ultimate purchasers in properly marked, unopened containers. Furthermore, we find that the outer containers are marked to satisfy the requirements of 19 CFR 134.46, and that Kodak's address on the Infoguard CDs and jewel cases do not trigger the requirements of 19 CFR 134.46 because these references are not seen until the ultimate purchaser opens the properly marked outer container. In regard to the CDs without Infoguard protection, the requirements of 19 CFR 134.26 must be satisfied.

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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