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HQ 559844





December 12, 1996

MAR 2-10 RR:TC:SM 559844 KBR

CATEGORY: MARKING

Port Director
U.S. Customs Service
200 St. Paul Place
Baltimore, MD 21202

RE: Application for Further Review of Protest No. 1303-96-100145 Concerning the Marking of Imported Ferromanganese; Importer Necessarily Knowing the Country of Origin; 19 U.S.C. 1304; 19 CFR 134.32(h); C.S.D. 80-114; HQ 733096; HQ 731967

Dear Sir:

This is in reference to the above-cited Application for Further Review filed by Tompkins & Davidson on behalf of their client, Chemalloy Co., Inc., contesting the imposition of marking duties on the importation of nitrex "85" ferromanganese nuggets from South Africa.

FACTS:

The record indicates that the ferromanganese nuggets were imported in unmarked containers. After the release of the product, Customs issued a Notice to Mark and/or Redeliver (C.F. Form 4647). The product was not redelivered, and ten percent ad valorem marking duties were imposed against the importer. The record indicates that the ferromanganese nuggets are the product of South Africa. The shipper is listed as Ferroalloys Handels AG of Zug, Switzerland and the importer is Chemalloy Company. The ferromanganese nuggets were purchased by Lukens Steel for use in the manufacturing of stainless steel. According to counsel for Chemalloy Company, Lukens Steel "had specified purchase of Chemalloy's South African origin ferromanganese...." The importer submitted a letter written by Lukens Steel to Chemalloy Company, dated February 26, 1996, which states that on December 1, 1994, Lukens Steel "discussed the product's origin as being from South Africa, the specific chemistry and packaging requirements." The record also contains a handwritten internal note from Chemalloy Company dated December 1, 1994, on which there appears the notation, "Fax quote (ours overseas - S.Af.)". Counsel for Chemalloy Company submitted an additional letter, dated November 26, 1996, in which he stated that at the time of the contract there were no source countries other than South Africa for the product in the purity required. Counsel further stated that "in the last six months ... an alternative foreign source (Brazil) has developed for a product meeting the specifications...."

ISSUE:

Did the importer necessarily know the country of origin of the imported ferromanganese nuggets, thus qualifying for a marking exception pursuant to 19 CFR ?134.32(h)?

LAW AND ANALYSIS:

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 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. 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. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (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.

As provided in 19 U.S.C. 1304(a)(3)(H), implemented in 19 CFR ?134.32(h), an article is excepted from marking where the ultimate purchaser, by reason of the circumstances of the importation, must necessarily know the country of origin of such article even though it is not marked to indicate its country of origin. Containers or holders of articles within the exception set forth in 19 CFR 134.32(h) are not required to be marked to indicate the origin of the contents. See 19 CFR ?134.22(d)(1). The applicability of the exception allowed under 19 CFR Section 134.1(d), Customs Regulations (19 CFR ?134.1(d)), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. In this case, Lukens Steel uses the ferromanganese nuggets in the production of stainless steel and, therefore, is the ultimate purchaser of the imported article.

Generally speaking, Customs requires that the importer be the ultimate purchaser of the imported article and have direct contact with the foreign supplier for 19 CFR 134.32(h) to apply. See HQ 733781 (April 11, 1991). For example, in C.S.D. 80-114 (HQ 711081, September 26, 1979), Customs found that where the ultimate purchaser was the importer that owned an interest in the company from which it purchased the articles, and ordered the articles directly from that company, the exception under 19 U.S.C. 1304(a)(3)(H) applied. In HQ 733096 (February 8, 1990), Customs applied this exception where the ultimate purchaser was the importer and also the parent corporation of its wholly owned subsidiary, from which the parent corporation ordered the foreign articles. See also HQ 730243 (March 5, 1987) and HQ 731583 (May 31, 1989).

In U.S. Wolfson Bros. Corp. v. United States, 52 Cust. Ct. 86, 91 (1964), the court cited with approval the following statement from "Exporting to the United States":

The clearest application of this [19 CFR ?134.32(h)] exemption is when the contract between the ultimate purchaser in the [U.S.] and the supplier abroad insures that the order will be filled only with articles grown, manufactured, or produced in a named country.

The Court also stated that the "character of the articles" required something about the articles themselves that identified them with a particular country.

In HQ 731967 (May 11, 1990), Customs granted exceptions from marking under 19 CFR ?134.32(h) and ?134.22(d)(1) where the contract between the importer and the ultimate purchaser specifically required article labeling that identified the name and country of the manufacturer from whom the goods were ordered. In that case, the ultimate purchaser was a discrete entity, namely an agency of the U.S. government, and the disclosure of the origin of the articles supplied was mandated by requirements other than Customs laws.

Customs has specifically held that it is not sufficient that the ultimate purchaser be advised personally or by advertising or brochures of an article's origin. HQ 559671 (June 7, 1996); see also HQ 734121 (August 12, 1991), HQ 733266 (August 15, 1990). Rather, an instance where an ultimate purchaser would necessarily know the country of origin from the character of an article would be when the merchandise is only produced in one country, for example, black diamonds from Brazil. See HQ 732362 (May 26, 1989). In a similar situation to that of Lukens Steel's letter, HQ 733291 (July 23, 1990), Customs specifically found that a letter by the ultimate purchaser of the article stating that they knew the country of origin of the imported article was not sufficient to grant a marking exception under 19 CFR ?134.32(h).

In this case, there is no evidence that the composition of the ferromanganese nuggets is unique to South Africa, or that the average person would know this uniqueness if it existed. In fact, in the letter dated November 26, 1996, the importer itself states that Brazil has been found to be another source. This discovery by protestant in itself, establishes that the product is not unique to one location. Further, it must be shown that at the time of the importation, not only at contracting, that the ultimate purchaser necessarily knows, by the nature of the product, the country of origin of the product. There is no evidence to establish this fact. [In a teleconference with the Minerals Information Team of the Geologic Division, U.S. Geological Survey of the Department of the Interior, we were informed that ferromanganese can be processed to required chemical specifications, and that this processing can be done in many locations, including the U.S.] Further, we are not satisfied from the evidence submitted that the ferromanganese nuggets provided by Chemalloy Company to Lukens Steel were contractually required to be solely obtained from South Africa. There is no evidence that Chemalloy Company could not have supplied the ferromanganese from another source, such as Brazil, without informing Lukens Steel. Under these circumstances, the letter written after-the-fact by Lukens Steel stating that they knew the country of origin of the ferromanganese nuggets and the unclear handwritten note by Chemalloy Company is not sufficient basis upon which to find that these articles are excepted from marking under 19 CFR ?134.32(h).

HOLDING:

Based on the information submitted, there is insufficient evidence that the ferromanganese nuggets qualified for an exception from country of origin marking under 19 CFR 134.32(h). Therefore the imposition of ten percent ad valorem marking duties was appropriate. Accordingly, this protest should be disposed of in accordance with this decision.

In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065 dated August 4, 1993, Subject: Revised Protest Directive, this decision should be attached to Customs Form 19, Notice of Action, and be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Ruling Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Tariff Classification Appeals
Division

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