HQ 560187 - Country of origin marking of decorative bows imported from China; substantial transformation - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1997 HQ Rulings > HQ 560129 - HQ 560322 > HQ 560187

HQ
560187

July 28,
1997

MAR-05 RR:TC:SM 560187 BLS

CATEGORY: MARKING

John M. Peterson, Esq.
Neville, Peterson & Williams
80 Broad Street
New York, New York 10004

RE: Country of origin marking of decorative bows imported from China; substantial transformation

Dear Mr. Peterson:

This is in reference to your letter dated November 12, 1996, on behalf of Berwick Industries, Inc., requesting a ruling concerning the country of origin of certain decorative bows to be imported from China. Supplemental information was furnished with your fax dated July 17, 1997.

FACTS:

Polypropylene ribbon is manufactured in the U.S., using an extrusion process and embossed with a weave-like pattern. One side of the polypropylene ribbon features a "flocked" coating of short textile fibers which are superimposed on to the side of the ribbon. The flocking process also takes place in the U.S.

The ribbons are exported to China in continuous length. In China, the ribbons are cut to various lengths and folded into various patterns representing parts of the bow. These components are then fastened together by tying with a gold-braided wire cord, which is also of U.S.-origin. (We will assume for purposes of this ruling that the wire cord is also exported from the U.S. in continuous length and merely cut to size in China.) The finished bows are then placed in header cards and re-imported into the U.S.

ISSUE:

What are the country of origin marking requirements for the imported bows?

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 container) will permit, in such 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 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 this part. For a good of a NAFTA country, however, the NAFTA Marking Rules will determine the country of origin.

A substantial transformation occurs when articles lose their identity and become articles having a new name, character or use. See United States v. Gibson-Thomsen Co., 27 CCPA 267 at 270 (1940), National Juice Products v. United States, 10 CIT 48, 628 F. Supp. 978 (CIT 1986).

However, with certain exceptions not here pertinent, the rules for determining the country of origin of textile and apparel products is governed by regulations implementing the provisions of section 334 of the Uruguay Round Agreements Act (19 U.S.C. 3592). See section 102.21, Customs Regulations (19 CFR 102.21).

Accordingly, the initial issue to be resolved is whether the imported articles are textile products subject to the rules under 19 CFR 102.21 for determining the country of origin for textile products.

A. Classification of Decorative Bows

Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1 provides that "classification shall be determined according to the terms of the headings and any relative section or chapter notes, and, provided such headings or notes do not otherwise require, according to [the remaining GRI's]." In other words, classification is governed by the terms of the headings of the tariff and any relative section or chapter notes.

The classification of plastics and textile combinations, such as the bows at issue here, is governed by the legal notes to the HTSUS. Specifically, the EN's to Chapter 39 indicate, in pertinent part that:

[T]he classification of plastics and textile combinations is essentially governed by Note 1(h) to Section XI, Note 3 to Chapter 56 and Note 2 to Chapter 59.

However, because the flocking portion of the bow qualifies as "nonwovens" or as "textile fabric" as referred to within these Section and Chapter Notes, the notes are not indicative of classification in this case. See Headquarters Ruling Letter (HRL) 953177 dated April 7, 1993, explaining that flock is not considered to be a fabric within the scope of Section XI, which provides for textiles and textile articles.

A review of the other potential HTSUS headings indicates that the bows are comprised of a plastics material of Chapter 39, HTSUS, specifically other plates, sheets, film, foil and strip of plastics, combined with textile materials, provided for within heading 3921, HTSUS. Accordingly, the bows are classifiable, pursuant to GRI 1, in heading 3926, HTSUS, which provides for other articles of plastics or materials of headings 3901 to 3914. Insofar as the bows are decorative and designed to adorn gifts and other similar articles, they are appropriately described by the terms of subheading 3926.40, HTSUS, as ornamental articles. Customs has issued rulings classifying similar articles in heading 3926, HTSUS. For example, in HRL 955586 dated March 15, 1994, we considered the classification, inter alia, of a 100 percent polypropylene ribbon with acrylic flocking. We determined that the flocking was not a nonwoven or textile fabric and was not classified within Section XI, HTSUS. See also HRL 955587 dated March 21, 1994; HRL 957710 dated September 1, 1995; HRL 952969 dated March 15, 1994, and New York Ruling Letter 813391 dated August 30, 1995.

Since the subject articles are not classifiable as textile articles, we must now determine whether the processing in China substantially transforms the U.S.-origin material into a product of that country.

B. Substantial Transformation

In National Hand Tool Corp. v. United States, 16 CIT 308, 312 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), certain hand tool components used to make flex sockets, speeder handles, and flex handles, were imported from Taiwan. The imported components were either cold-formed or hot-forged into their final shape before importation, with the exception of the speeder handle bars, which were reshaped by a power press after importation. In the U.S., the components were subject to heat
treatment, which increased the strength of the components, sand-blasting (a cleaning process), and electroplating (enabling the components to resist rust and corrosion). After these processes were complete, the components were assembled into the final products, which were used to loosen and tighten nuts and bolts.

The Court of International Trade decided the issue of substantial transformation based on three criteria, i.e., name, character, and use. Applying these rules, the court found that the name of the components did not change after the post-importation processing, and that the character of the articles similarly remained substantially unchanged after heat treatment, electroplating and assembly, as this processing did not change the form of the components as imported. The court further pointed out that the use of the articles was predetermined at the time of importation, i.e., each component was intended to be incorporated in a particular finished mechanic's hand tool. The court concluded that the substantial transformation test utilizing name, character and use criteria should generally be conclusive in country of origin marking determinations, and that whether a substantial transformation took place should be determined on a case-by-case basis. In that situation, the court concluded that the processing in the U.S. which resulted in the completed tools did not effect a substantial transformation of the foreign components.

A similar finding was made in Superior Wire v. United States, 867 F. 2d 1409 (Fed. Cir. 1989), where the appellate court affirmed the Court of International Trade's holding that no substantial transformation occurred from the multi-stage process of drawing wire rod into wire. In that case, the court noted that the "end use of the wire rod is generally known before the rolling stage and the specifications are frequently determined by reference to the end product for which the drawing wire will be used." Accordingly, the court found that the character of the final product was predetermined and that the processing did not result in a significant change in either character or use of the imported material. While the wire rod and processed wire had different names and identities in the industry, the court concluded that they were essentially different stages of the same product.

In HRL 556608 (July 24, 1992), involving a case under the Generalized System of Preferences (GSP), U.S.-origin ribbon in spools or precut length was sent to Mexico with thread, glue, a velcro patch and a barrette. In Mexico, the ribbon (if not precut) was cut to the proper lengths, the velcro patch was glued to the barrettes, and the ribbon glued or sewn to the barrette in the form of a bow. The completed hair bow was then returned to the U.S. In that case, we held that the production of the bows did not result in a substantial transformation of the U.S.-origin ribbon, whether or not it was pre-cut in Mexico, and thus the returned hair bow was not eligible for duty-free treatment under the GSP.

While there appears to be a name change in the instant case, from ribbon to bow, there is no significant change in either the character or use of the U.S.-origin ribbon. The attributes of the finished bow, i.e., the width of the ribbon, the surface texture, the tensile strength and form, are determined by the ribbon used in production of the bow.
Under the circumstances, we find that the U.S.-origin ribbon (and wire tie) do not undergo a substantial transformation as a result of the operations performed in China. Therefore, the country of origin of the imported decorative bow is the U.S. As a product of the U.S., the imported articles are excepted from the marking requirements. See 19 CFR 134.32(m).

HOLDING:

1) The imported decorative bows are classifiable under subheading 3926.40 HTSUS, as ornamental articles of plastic.

2) As the U.S.-origin materials do not undergo a substantial transformation in China, the country of origin of the imported bows is the U.S. Therefore, the articles are not subject to the country of origin marking requirements under 19 U.S.C. 1304. See 19 CFR 134.32(m). The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the phrase "Made in the U.S.A.", or similar words denoting U.S. origin. Consequently, any inquiries regarding the use of such phrases reflecting U.S. origin should be directed to the FTC, at the following address: Federal Trade Commission, Division of Enforcement, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508. 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,

Previous Ruling Next Ruling