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HQ 735191




June 15, 1994

MAR-2-05 CO:R:C:V 735191 KR

CATEGORY: MARKING

Patricia McCauley, District Director
U.S. Customs Service
1717 E. Loop N. - Room 401
Houston, Texas 77029

RE: Country of origin marking of shotgun shell casings imported and assembled into finished shotgun shells; substantial transformation; 19 CFR ?134.35; 19 CFR

Dear Ms. McCauley:

This is in response to your request for internal advice dated May 13, 1993, and subsequently forwarded to this office, on behalf of Estate Cartridge, Inc. requesting a country of origin ruling regarding shotgun shell casings imported into the U.S. where they are assembled with the remaining components to create finished shotgun shells, and packaged in a box with the label "AMERICAN CARTRIDGE". A photocopy of the flattened box was included for our review. We regret the delay in responding.

FACTS:

You state that Estate Cartridge, Inc. will import plastic shotgun shell casings which is a 2 3/4 inch plastic cylinder open at one end and closed at the other with a 7/8 inch diameter metal base. The metal base includes the primer, a copper ring and metal plate contact point. You state that the same casing can be used in many different end products.

The imported casing is inserted into a shotgun shell automatic manufacturing apparatus which then stuffs the casing with a carefully measured amount of a particular type of gunpowder according to the type of finished shell desired. Each casing is then checked and tested. A particular type of wadding is inserted according to the type of shell required. The wadding is generally either pressed paper formed into a cylinder or a preformed cylindrical plastic part. The shell is again checked and tested. The lead shot is then inserted into the shell. The type and amount of shot will vary according to the type of shell required. The apparatus automatically measures and checks shot for accuracy of the manufacturing process. A buffer, finely granulated polyethylene or polypropelene material designed to fill in the interstices between the lead pellets to protect them from setback deformation, is often inserted and automatically inspected. The end of the casing is then crimped to form a sealed and complete shotgun shell. The shell is individually stamped with the company logo and identification information, loaded into a box usually of 25 shells which are loaded into larger boxes for shipping. The boxes have printed on several sides "AMERICAN CARTRIDGE" with a U.S. flag.

The retail price of a completed shell ranges from approximately $.16 - $.42. the imported shell casing has an imported value of approximately $.032. The value of the gunpowder is approximately $.01 - $.03, the wadding approximately $.006 - $.015, the shot approximately $.017 - $.07, and the cost of manufacturing approximately $.028 - $.05.

ISSUE:

1. Whether the assembly of the various components into the imported shotgun shell casing comprises a substantial transformation, such that the resulting finished shells are not subject to country of origin marking.

2. Is the box containing the finished cartridges which is printed with "AMERICAN CARTRIDGE" and a U.S. flag subject to the requirements of 19 CFR ?134.46?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 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.

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(b), Customs Regulations (19 CFR article in another country must effect a substantial transformation in order to render such other country the country of origin within the contemplation of 19 U.S.C. ?1304.

A substantial transformation occurs when an article loses its identity and becomes a new article having a new name, character or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940); National Juice Products Association v. United States, 628 F. Supp. 978, 10 CIT 48 (CIT 1986); Koru North America v. United States, 701 F. Supp. 229, 12 CIT 1120, (CIT 1988). Customs codified this principle at 19 CFR ?134.35, and further states that: "[u]nder this principle, the manufacturer or processor in the United States who converts or combines the imported article into the different article will be considered the "ultimate purchaser" of the imported article within the contemplation of section 304(a), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the article shall be excepted form marking."

In HRL 799560 (February 21, 1958), Customs ruled that the ultimate purchaser of imported shotgun shell casings was the importer, where the shells were imported without primers and the importer then assembled the casings into finished shotgun shells. In the present case the casings are imported with the primers already attached. However, we still find that the assembly process incorporates a sufficient number of components that once combined have a new name, character and use. The components that are added to the casings are the more important components of a shotgun shell. In fact, the one type of casing can be used to create many different types of finished shotgun shells. The other components, such as the amount of lead shot, gunpowder, buffer and wadding are the determinative parts in creating the different types of finished shotgun shells. We find that the casings are substantially transformed into finished shotgun shells by the further processing which occurs in the U.S. and that Estate Cartridge is the ultimate purchaser. Under the provisions of 19 CFR ?134.35, the imported shell casings are excepted from marking; only the outermost container must be marked. Neither the finished shells nor their containers are subject to the requirements of 19 U.S.C. 1304 and 19 CFR Part 134.

Whether the box containing the finished shotgun shells can be marked with the product name "AMERICAN CARTRIDGE" and the U.S. flag is under the primary jurisdiction of the Federal Trade Commission and not this Service. We therefore recommend that Estate Cartridge, Inc. contact the Federal Trade Commission, Division of Enforcement, located at 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20580, for any views concerning marking the box containing the shotgun shells with the "AMERICAN" symbol or the U.S. flag.

HOLDING:

The shell casings imported to the U.S. for further processing as described above, are substantially transformed into finished shotgun shells. Therefore, the casings are excepted from marking under 19 CFR ?134.35, provided the outermost container which reaches the ultimate purchaser is properly marked and Customs officials at the port of entry are satisfied that the casings are to be used only in the manner described above.

Sincerely,

John Durant, Director

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