HQ 560155 - Country of origin marking of a trading cards; substantial transformation; 19 CFR ?134.35 - United States International Trade Commision Rulings

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HQ 560155

April 10, 1997

CLA-2 RR:TC:SM 560155 KBR

CATEGORY: MARKING

Robert L. Raskopf
White & Case
1155 Avenue of the Americas
New York, NY 10036-2787

RE: Country of origin marking of a trading cards; substantial transformation; 19 CFR ?134.35

Dear Mr. Raskopf:

This is in response to your letter to the U.S. Customs Service, New York, dated October 8, 1996, and subsequently forwarded to this office, on behalf of your client Pinnacle Brands, Inc. ("Pinnacle") requesting a ruling regarding the country of origin marking of trading cards imported into the U.S. for finishing.

FACTS:

Pinnacle wishes to import pallets of uncut sheets of trading cards into the U.S. from the United Kingdom for finishing and combining with U.S. manufactured cards for retail sale and collection. Pinnacle wants to print on the cards contained on the imported uncut sheets the marking "Product of U.S.A."

The processes performed in the U.S. to prepare production film for trading cards prior to shipment to the United Kingdom for processing are:

1. Acquiring license agreements from U.S. sport organizations for the use of player and team identification.

2. Photographs of the trading card subject are produced and developed on a transparency.

3. Preliminary design of the trading card.

4. Research and compiling of subject's statistics.

5. Biographical material on the subject is prepared.

6. Transparencies separated and stored in digital images.

7. Color correction to ensure correct colors.

8. Computerized layout and storing of individual cards using a quark page'.

9. Stripping' card files by placing them on a form in a particular arrangement.

10. Proofreading and quality control.

11. Final production film for the card form is produced.

12. Shipping to the United Kingdom.

In the United Kingdom, the film is sent to F.J. Warren. The film is then printed using a process called "Dufex". The processes performed in the United Kingdom include:

1. Printing the images onto specialized sheets of paper stock.

2. Creating a specialized die from the printed images that is used to emboss (deboss) the sheets.

3. Printing the sheets with the "Dufex" process, which strikes the die to the sheets.

4. Laminating the sheets with film, packing pallets of sheets in containers and shipping to Pinnacle in the U.S.

After the return of the film laminated sheets containing the trading cards to Pinnacle in the U.S., the cards undergo the following processes:

1. Slitting the uncut sheets into individual cards. If the cards are printed on both sides, they are simply cut into individual cards. If the sheet is printed on only one side, half the sheet will be the front and half the sheet will be the back. In this second instance, the sheet will be scored down the middle, the halves will then be glued together and then the cards are cut.

2. Collating the individual cards into packages of trading cards. The subject cards are combined with other trading cards wholly produced in the U.S. You state that the majority of the cards will be of totally U.S. production. As examples you show packages containing from 1 "Dufex" card to 7 U.S. cards, to packages containing 1 "Dufex" card to 360 U.S. cards.

3. Performing quality control.

4. Creating and producing the wrappers for the trading cards.

5. Wrapping the cards in the wrapper and packaging the wrapped cards into boxes.

6. Creating and producing shipping cartons for distribution.

7. Creating and disseminating advertisement materials.

You believe that the operations undertaken in the U.S. after the return of the "Dufex" sheets substantially transform the sheets into products of the U.S. Further, you state that since you believe that Pinnacle is the ultimate purchaser of the pallets of imported cards, the cards should be allowed to be marked "Product of U.S.A." You also believe that because the majority of the cards are wholly U.S. produced, that "Product of U.S.A." should be allowed to be printed on the cards which are made from the imported sheets.

ISSUE:

Whether the imported sheets of trading cards are substantially transformed by the processing in the U.S. and may be printed with "Product of U.S.A."

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 imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article 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. Friedlaender & Co. Inc., 27 CCPA 297, 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. 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. For country of origin marking purposes, a substantial transformation of an article occurs when it is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. See HQ 558747 (January 20, 1995).

Section 134.35(a), Customs Regulations (19 CFR ?134.35(a)), states that the manufacturer or processor in the U.S. who converts or combines the imported articles into articles having a new name, character or use will be considered the ultimate purchaser of the imported article within the scope of 19 U.S.C. 1304 and the article will be excepted from marking.

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940); Koru North America v. United States, 12 CIT 1120, 701 F. Supp. 229 (1988). The question of when a substantial transformation occurs for marking purposes is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd, 1 Fed. Cir. 21, 702 F.2d 1022 (1983).

In the instant case, Pinnacle gathers information about an athlete and designs and creates a computerized layout of a trading card which Pinnacle places on production film. Pinnacle sends this production film to the United Kingdom where it is used to print uncut paperboard sheets using the "Dufex" process and the sheets are laminated. The printed and laminated sheets are products of the United Kingdom. See e.g. HQ 731882 (October 31, 1989); HQ 731859 (June 2, 1989). Accordingly, it is necessary to determine if the uncut paperboard sheets of trading cards are substantially transformed by the processing performed in the U.S. In a similar situation to the instant case, HQ 734706 (January 15, 1993), Customs held:

At the time they are exported to Mexico, the trading cards are printed on paper board, but they are clearly recognizable as trading cards, and they have all the basic characteristics of trading cards. In Mexico, all that is done to the paperboard sheets of cards is that they are cut, sorted, and packaged. The name, character, and use of the cards are not changed by the Mexican operations. Rather, we find that these operations performed in Mexico: cutting the paper board sheets and the sorting of the cards, are minor finishing operations. See HQ 555241 (July 3, 1989) (the cutting of sheets of self- adhesive office labels on backing paper was not a substantial transformation).

Moreover, the packaging of a product has consistently been determined not effect a substantial transformation. See HQ 733729 (January 2, 1991); see also HQ 734706 (January 15, 1993). In the present case, the circumstances are substantially the same as in HQ 734706, except for when the sheets are printed only on one side and the two halves must be glued together. We find that this glueing is just another simple finishing operation. Therefore, we find that both types of imported sheets of trading cards are not substantially transformed in the U.S.

The combining of the imported cards with cards that are of wholly U.S. production is not justification for allowing the imported cards to be marked with what would be a false marking, "Product of U.S.A." Instead, the imported cards must be marked to indicate their foreign origin (United Kingdom). Further, since the ultimate purchaser of the cards will receive the cards in a sealed wrapper, the wrapper must inform the ultimate purchaser of the foreign origin of the imported cards. See 19 CFR ?134.24(d)(2).

HOLDING:

Based upon the information provided, we find that for purposes of 19 U.S.C. 1304, the processing in the U.S. of the imported sheets of trading cards does not constitute a substantial transformation; therefore, after finishing in the U.S., the trading cards may not be marked "Product of U.S.A.", but must be marked with their country of origin, the United Kingdom.

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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