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HQ 559347




March 14, 1996

CLA-2-RR:TC:SM 559347 KKV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9801.00.10

Mr. David A. Eisen
Siegel, Mandell & Davidson, P.C.
One Astor Plaza
1515 Broadway
43rd Floor
New York, NY 10036-8901

RE: Products advanced in value or improved in condition outside the U.S.; facial powder; eyeshadow; plastic cosmetic compact; 19 CFR 134.24(d); 19 CFR 134.32(m); HRL 555559; HRL 555883; HRL 557932; HRL 731863; HRL 732480; HRL 734399; T.D. 91-7

Dear Mr. Eisen:

This is in response to your letter dated July 27, 1995, on behalf of Avon Products, Inc., in which you request a ruling regarding the tariff classification and country of origin of certain U.S.-origin cosmetic facial powder and eyeshadow contained in a plastic cosmetic compact which your client proposes to import from China. A sample has been submitted for our examination and will be returned as requested.

FACTS:

It is stated that bulk U.S. origin cosmetic eyeshadow and facial powder preparations will be exported to China in drums, in a loosely compressed condition. In China, the loose powder will be pressed into small metal pans and the surface of the powder sculpted. The metal pans will then be placed and/or pressed into a molded plastic compact incorporating a plastic tray with 33 compartmentalized sections. The preparations are to be utilized by your client in a "Colorations Beauty Collection Kit." as follows:

The 33 compartmentalized sections will contain 24 different shades of U.S. origin eyeshadow, 1 pressed facial powder of U.S. origin, 3 different shades Taiwanese origin highlighter eye shadows, 2 different shades of Taiwanese origin blusher, 1 natural-bristle blusher brush applicator, 1 sponge puff and 2 double-sided sponge applicators all of Taiwanese origin.

We are told that the molded plastic tray will be permanently glued into a rectangular-shaped, injection molded plastic, non-refillable cosmetic compact of Taiwanese origin prior to its importation into the United States for retail sale. The filled compact, which measures approximately seven inches in length by approximately 5 1/4 inches in width, contains a rectangular-shaped mirror on the underside of the lid. The compact is designed for disposal after the contents have been exhausted by the consumer.

ISSUE:

1. Whether the described cosmetic powder will be eligible for the exemption from duty under subheading 9801.00.10, HTSUS, when imported into the U.S.

2. Whether the assembly/packaging performed in China affect the country of origin of the U.S.-origin eyeshadow and facial powder for marking purposes..

LAW AND ANALYSIS:

1). Tariff Classification

Subheading 9801.00.10, Harmonized Tariff Schedule of the United States (HTSUS), provides for the free entry of products of the U.S. that are exported and returned without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, provided the documentary requirements of section 10.1, Customs Regulations (19 CFR 10.1) are met. While some change in the condition of the product while it is abroad is permissible, operations which either advance the value or improve the condition of the exported product render it ineligible for duty free entry upon return to the U.S. See Border Brokerage Co. v. United States, 65 Cust. Ct. 50, C.D. 4052, 314 F.Supp. 788 (1970), appeal dismissed, 58 CCPA 165 (1970). However, in United States v. John V. Carr & Sons, Inc., 69 Cust. Ct. 78, C.D. 4377, 347 F.Supp. 1390 (1972), 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court stated that absent some alteration or change in the item itself, the mere repackaging of the item, even for the purpose of resale to the ultimate consumer, is not sufficient to preclude the merchandise from being classified under item 800.00, Tariff Schedule of the United States (TSUS) (the precursor to subheading 9801.00.10, HTSUS).

In support of your position that the subject cosmetic eyeshadow and facial powder are not advanced in value as a result of processing in China and thus, are entitled to duty free treatment under subheading 9801.00.10 upon their importation into the United States, you reference Headquarters Ruling Letter (HRL) 555559, dated April 20, 1990. There, Customs held that U.S. origin blister-packed contraceptive tablets were not advanced in value or improved in condition where the blister-packs were inserted into compacts along with informational literature, placed with two other compacts into a printed carton together with a physician's instruction pamphlet, which were placed into carton packers and shipping. Likewise, you reference HRL 557932, dated

June 1994, in which Customs held that U.S. origin contraceptive tablets shipped abroad to be inserted into compacts or envelopes, which were then placed into printed cartons, which were placed into carton packers and shipping cartons for shipment to the U.S., were not advanced in value or improved in condition as a result of the foreign processes.

With regard to HRL 555559 and 557932, in both instances the contraceptive tablets are fully prepared products upon exportation from the United States. No aspect of the foreign packaging operations effects an alteration or change in the physical condition of the contraceptive tablets. This is in contrast to the facts at issue, in which the eyeshadow and facial powder are exported in loose bulk form, requiring an intermediary step involving the compressing of the powder into a small metal pan before the pan is pressed/glued into the compartments of the compact.

Your letter also references HRL 734399, dated December 28, 1992, in which Customs held that U.S. manufactured lipstick mass was advanced in value and/or improved in condition as a result of processes performed in China which included heating, forming into stick or- "bullet shapes" by pouring into molds, and inserting into individual applicator tubes, in such a manner as to transform the bulk material into a format most conveniently used by the end user. You assert that, "unlike the lipstick mass, the instant bulk cosmetic powders are not subjected to further processing operations (such as heating, cooling, shaping, etc.) in China but rather are merely repackaged into a compact." Further, it is asserted that, as exported, the "bulk cosmetics are commercially viable and in a form suitable for their intended use as eyeshadow, face powder, etc. by consumers, and clearly identifiable and recognizable as such. There are no preparatory or finishing processes or operations required."

Customs has previously considered the use of U.S.-origin cosmetic components in the assembly/packaging of cosmetic compacts. In HRL 555883, dated June 13, 1991, Customs reviewed foreign operations in which a filled make-up pan, containing U.S.-origin cosmetic powder, was pressed or glued into a one-piece mirrored compact, which also contained an applicator appropriate to the powder preparation utilized. Customs denied duty-free treatment for the cosmetic powder under subheading 9801.00.10, HTSUS, stating, "the attachment of the make-up pans to the three types of compacts by gluing or force fitting constitutes more than a mere repackaging operation and... clearly advances the value and improves the condition of the merchandise."

Likewise, we find the foreign processes at issue in the instant case also exceed mere repackaging. The eyeshadow and facial powder are not fully prepared upon exportation but are subject to further processing: the powder is dispensed into an amount appropriate for an individual user, and this amount is then compressed into a small metal pan and the surface of the powder is sculpted. The filled metal pan is pressed/glued into a compartment of a mirrored compact, along with other powders of its type and appropriate applicators. This combination of processes exceeds the ambit of mere repackaging permissible under subheading 9801.00.10,

HTSUS, with the result that the merchandise has been advanced in value and/or improved in condition outside the United States. Accordingly, the U.S.-origin eyeshadow and facial powder are ineligible for duty-free entry under subheading 9801.00.10, HTSUS, upon its return to the United States.

2). Country of Origin

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.1304), provides that, unless excepted, every article of foreign origin imported into the United States 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 United States 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, 302 (1940). Part 134 of the Customs Regulations implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), mandates that the ultimate purchaser in the United States must be able to find the marking easily and read it without strain.

"Country of origin" is defined in section 134.1(b), Customs Regulations, as
the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 this part.

A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. Texas Instruments, Inc. v. United States, 631 F.2d 778, 782 (CCPA 1982). In determining whether the assembly of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. See, Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (CIT 1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).

By definition, only merchandise which is "of foreign origin," i.e., of a country of origin other than that of the U.S., is subject to the requirements of 19 U.S.C. 1304. In Upjohn Co. v. United States, 623 F. Supp. 1281 (CIT 1985), the U.S. Court of International Trade stated that:

[e]xported American products retain their identity as American products, provided they are not transformed into new products while abroad." Customs has ruled that products of the U.S. which are exported for further processing and subsequently returned, are not subject to country of origin marking upon importation to the U.S. unless the further processing in the foreign country constituted a substantial transformation of the product. See HRL 732480, dated July 31, 1989.

In this case, bulk cosmetic powder from the United States is sent to China, where it is measured and compressed into individual metal pans which are incorporated with other articles into a compact. While these operations exceed mere packaging for purposes of subheading 9801.00.10, HTSUS, they do not effect any significant change in the character or use of the cosmetic powder for purposes of establishing country of origin . Therefore, it is our determination that the foreign processes do not constitute a substantial transformation and the eyeshadow and facial powder remain products of the United States. Accordingly, the imported cosmetic powders are not subject to the country of origin marking requirements of 19 U.S.C. 1304. See also 19 CFR 134.32(m).

Section 134.24(d) provides that usual disposable containers imported full and used as such at the time of importation shall not be required to be marked to show the country of their origin, but shall be marked to indicate the origin of their contents regardless of the fact that the contents are excepted from marking requirements. In HQ 731863, dated February 14, 1990, Customs ruled under a related provision of the Customs Regulations, 19 CFR 134.24(c), that plastic cosmetic compacts which were filled with blush in the U.S. were considered to be disposable non- reusable containers and were excepted from country of origin marking. In that case, Customs found that after the blush was used up, the consumer would dispose of the compact and would then buy a new compact containing blush. Customs also found that as offered in the market, the compact was a disposable container in that it was not sold with intent to be refilled after its contents was used up.

Likewise, in this case, we find that the cosmetic compact which is filled with facial powder, eyeshadow and blusher in China for export to the U.S. is a non-reusable disposable container. As in the Customs previous ruling, the compact is disposed of by the consumer after the contents are depleted. Also, the compact is not marketed as a container which can be refilled by the consumer upon depletion of the contents. Therefore, as a non-reusable disposable container, the compact is exempt from marking under 19 CFR 134.24(d).

While the U.S.-origin eyeshadow and facial powders are exempt from origin marking, in order to satisfy the requirements of 19 U.S.C. 1304, the imported article must be marked with the name of the country of the non-U.S. origin cosmetics and applicators. This information may be indicated at a central location on the compact (e.g., "Blushers and Highlighters Made in Taiwan; Applicators and Sponge Puff Made in Taiwan"). A central origin label permanently affixed to the product in a conspicuous location would be acceptable. If the product is imported and sold only in a sealed retail container, the origin marking should appear on the container. Whatever method
is used, the marking must be legible, permanent and conspicuous. Further, country of origin information should appear in close proximity to any non-origin geographical reference (e.g. "Avon Products, Inc., New York, N.Y. 10019") to alleviate the triggering of the special marking requirements contained in 19 CFR 134.46.

Lastly, we note your letter seeks a determination regarding the country of origin of the subject eyeshadow and facial powder as determined by the proposed amendments to the country of origin rules as set forth in the Federal Register on January 3, 1994, as T.D. 94-4, republished in the Federal Register on May 5, 1995. In seeking such a determination, your letter draws attention to the language of the May 5th Notice, which republishes the proposed amendment to amend section 102 of the interim regulations published as T.D. 94-4, noting that "those interim regulations would apply not only for the purposes stated in Annex 311 of the NAFTA but would also apply in the broader context of country of origin determinations for purposes of the Customs and related laws and the navigation laws of the United States.'" In response, we note that, as the proposed amendment has not yet been codified, any request for a determination utilizing these provisions in a non-NAFTA context is hypothetical in nature, for which the issuance of a binding ruling is not allowed under 19 CFR 177.7.

HOLDING:

Based upon the information provided, the eyeshadow and facial powder imported into the U.S. from China will be ineligible for duty-free entry under subheading 9801.00.10, HTSUS, because the U.S.-origin cosmetic powder exported to China in bulk is advanced in value and/or improved in condition as a result of the processes performed there.

Bulk cosmetic powders of U.S. origin, which are exported to China, where they are compressed into metal pans and then pressed/glued into a compact, are not substantially transformed into products of China; therefore, the country of origin of the eyeshadow and facial powder is the United States. Accordingly, the eyeshadow and facial powder imported into the U.S. from China is not subject to the country of origin marking requirements under 19 U.S.C. 1304.

A plastic cosmetic compact containing facial powder, eyeshadow and blusher, for which refills are not available and which is not marketed as refillable is a disposable container excepted from country of origin marking requirements pursuant to 19 CFR 134.24(d).

To satisfy the requirements of 19 U.S.C. 1304, a disposable plastic compact excepted from marking, which contains non-U.S. origin cosmetics and applicators in addition to U.S. origin cosmetics not subject to marking, must be marked with the country of origin of all non-U.S. origin cosmetics and applicators.

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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