HQ 560195 - Country of origin marking and classification of fabric softener sheets; NAFTA; - United States International Trade Commision Rulings

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HQ 560195

March 19, 1997

MAR-2-05 RR:TC:SM 560195 DEC

CATEGORY: MARKING

Jeremy P. Page
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, Florida 33126-2022

RE: Country of origin marking and classification of fabric softener sheets; NAFTA;
Article 509; essential character; 19 CFR 102.18

Dear Mr. Page:

This is in response to your letters dated November 11 and December 20, 1996, on behalf of The Procter & Gamble Manufacturing Company (Procter & Gamble), requesting a ruling on the proper classification and country of origin marking of fabric softener sheets.

FACTS:

You state that Procter & Gamble is in the process of establishing uniform labeling standards for products sold in the U.S. and Canada. The purpose of this ruling request is to obtain the proper marking and classification of certain fabric softener sheets. Procter & Gamble has two scenarios under which it will produce the fabric softener sheets.

Under scenario one, Procter & Gamble will source fabric, chemicals, and perfumes in the U.S. The fabric will be impregnated with the chemicals and the perfumes and then slit into master rolls in the U.S. These rolls will be shipped to a Procter & Gamble facility in Canada where they will be cut to length and width, folded, and packed into consumer-ready cartons. The individual cartons will then be distributed and sold in Canada and/or returned to the U.S. for further distribution and sales.

Under scenario two, Procter & Gamble will source fabric, chemicals, and perfumes in the U.S. and then ship them to its facility in Canada. The fabric will be impregnated with the chemicals and the perfumes, and then slit into master rolls in Canada. These rolls will then be shipped to a Procter & Gamble facility in the U.S. where they will be cut to length and width, perforated, and packed into consumer-ready cartons. The individual cartons will then be distributed and sold in the U.S. and/or exported for distribution and sale in Canada.

In either case, the consumer-ready cartons will bear both U.S. and Canadian address information identifying the distributor/owner/licensee of the fabric softener sheets. You state that the legends could read as follows:

THE XMEN COMPANY, Toledo, Ohio 46592
In Canada: XMEN, INC., Toronto, Ontario MCX IW7

You state that the country of origin will be affixed to the consumer-ready cartons immediately atop the above-noted address information, in similar fonts and type size. For scenario one, Procter & Gamble is seeking a ruling on the viability of using, in order of preference, any of the following country of origin markings:

A. Processed in Canada
B. Cut and Packaged in Canada
C. Converted in Canada
D. Cut, Folded and Packaged in Canada
E. Further Processed in Canada
F. Cut and Packed in Canada from U.S. Product G. Converted in Canada from U.S. Product
H. Further Processed in Canada from U.S. Product I. Made in Canada

For scenario two, Procter & Gamble will import the master rolls from Canada in shipping containers with an outer marking "Made in Canada." At the time of entry, Procter & Gamble will certify pursuant to section 134.26, Customs Regulations (19 CFR 134.26), that any repacking performed subsequent to importation will be completed in accordance with the Customs' requirements. In furtherance of complying with the 19 CFR 134.26 requirements, Procter & Gamble is seeking a ruling on the viability of using the following country of origin marking requirements, in order of preference, on all subsequently packaged and distributed consumer-ready cartons.

A. Processed in Canada
B. Product of Canada, Cut and Packaged in the U.S.
C. Canadian Product Converted in the U.S.

D. Further Processed in the U.S. from Canadian Product
E. Made in Canada

ISSUE:

1. What is the proper classification of the finished fabric softener sheets described above?

2. Whether the proposed markings described above are acceptable country of origin markings for fabric softener sheets processed in the manner described above.

LAW AND ANALYSIS:

1. Classification

The fabric softener sheets at issue are properly classified under subheading 3809.91, Harmonized Tariff Schedule of the United States (HTSUS). See New York Ruling Letter 891129, dated November 9, 1993.

2. Country of Origin Marking

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 its 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. 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.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the NAFTA, as implemented by section 207 of the NAFTA Implementation Act and the Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations (19 CFR Part 102).

Scenario 1

The first step in the production of the fabric softener sheets under scenario 1 involves sourcing fabric, chemicals, and perfumes of U.S. origin. For purposes of this
ruling, we are assuming that the fabric, chemicals, and perfumes are, in fact, of U.S. origin under Part 102. The fabric will be impregnated with the chemicals and the perfumes and then slit into master rolls in the U.S. These rolls will be shipped to a Procter & Gamble facility in Canada where they will be cut to length and width, folded, and packed into consumer-ready cartons. The individual cartons will then be distributed and sold in Canada and/or reimported into the U.S. for further distribution and sales.

Section 102.11, Customs Regulations (19 CFR 102.11), of the regulations sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the regulations states that

[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.

"Foreign Material" is defined in section 102.1(e) of the regulations as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced."

Section 102.11(a)(1) and section 102.11(a)(2) do not apply to the fabric softener sheets imported into the U.S. from Canada because the sheets will not be wholly obtained or produced in a single country nor will they be produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3). Section 102.11(a)(3) provides that the country of origin is the country in which "[e]ach foreign material incorporated in that good undergoes an applicable change in tariff classification in 102.20. . .."

The finished fabric softener sheets are classified under subheading 3809.91, HTSUS. The applicable tariff shift rule found in section 102.20(f) provides as follows:

HTSUS Tariff Shift and/or other requirements

3809.91 ........... A change to subheading 3809.91 through 3809.99 from any other subheading, including another subheading within that group.

Since the master rolls of fabric softener sheets as well as the finished fabric softener sheets which have been cut, folded and packed into consumer-ready cartons are classified under the same subheading, the required change in tariff classification does not occur for purposes of reaching an origin determination under section 102.11(a)(3). Section 102.11(b) provides that where the country of origin cannot be determined under section 102.11(a), and the good is not specifically designated as a set pursuant to the Harmonized System nor classified as a set under General Rule of Interpretation 3, the country of origin of the article is "the country or countries of origin of the single material that imparts the essential character of the good. . .."

In regard to determining the "essential character" of the fabric softener sheets when they are imported into the U.S., section 102.18(b) of the regulations provides as follows:

(1) For purposes of identifying the material that imparts the essential character to a good under ? 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the ? 102.20 specific rule or other requirements applicable to the good. For purposes of this paragraph (b)(1): . . .
(iii) If there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed under the ? 102.20 specific rule or other requirements applicable to the good, then that material will represent the single material that imparts the essential character to the good under ? 102.11.

In this case, the only material that does not undergo the applicable tariff shift is the master rolls of the fabric softener. Therefore, the U.S.-origin fabric softener master roll is the material that imparts the essential character of the good. The country of origin of the finished fabric softener sheets under scenario 1 is the U.S. Since the finished fabric softener product will be a product of the U.S., it will not be subject to the country of origin marking requirements set forth in 19 U.S.C. 1304. Accordingly, no statement as to the country of origin will be required under the Customs laws.

Whether an article may be marked as "Made in the USA" is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the FTC Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508 on the propriety of proposed markings indicating that an article is made in the U.S.

Also, the provisions of 15 U.S.C. 1124 and 1125 may be applicable. Imported merchandise which "shall bear a name or mark calculated to induce the public to believe that the article is manufactured in the United States, or that it is manufactured in any foreign country or locality other than the country or locality in which it is manufactured shall not be admitted to entry." 15 U.S.C. 1124. Imported merchandise which bears "...any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which is likely to cause confusion, or to cause mistake, or to deceive ... as to the actual country of origin shall not be admitted to entry." 15 U.S.C. 1125. Whether merchandise is violative of these provisions must be decided on a case-by-case basis and the totality of the circumstances presented in the specific case must be taken into account.

For purposes of scenario 1, you requested that we rule on the propriety of the following proposed country of origin marking:

A. Processed in Canada
B. Cut and Packaged in Canada
C. Converted in Canada
D. Cut, Folded and Packaged in Canada
E. Further Processed in Canada
F. Cut and Packed in Canada from U.S. Product G. Converted in Canada from U.S. Product
H. Further Processed in Canada from U.S. Product I. Made in Canada

Any marking describing the processing performed in Canada will be acceptable, so long as it is truthful and does not indicate an incorrect country of origin. Therefore, since the articles are deemed to be of U.S. origin, the marking "Made in Canada" (letter "I") would incorrectly indicate a Canadian origin and thus, constitute a possible violation of 15 U.S.C. 1125. The remaining markings (letters "A-H") appear to be acceptable.

Scenario 2

Under scenario 2, you state that the fabric, chemicals, and perfumes will be sourced in the U.S. (again, we are assuming that they are of U.S. origin) and then shipped to Canada. The fabric will be impregnated with the chemicals and the perfumes, and then slit into master rolls in Canada. These rolls will then be shipped to a facility in the U.S. where they will be cut to length and width, perforated, and packed into consumer-ready cartons. The individual cartons will then be distributed and sold in the U.S. and/or exported for distribution and sale in Canada.

Section 102.11(a)(1) and section 102.11(a)(2) do not apply to the facts presented in this scenario because the fabric softener sheets are not wholly obtained or produced in a single country nor are they produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3). Section 102.11(a)(3) provides that the country of origin is the country in which "[e]ach foreign material incorporated in that good undergoes an applicable change in tariff classification in 102.20. . .."

As stated previously, the finished fabric softener sheets are classified under subheading 3809.91, HTSUS, and the applicable tariff shift rule found in section 102.20(f) provides as follows:

HTSUS Tariff Shift and/or other requirements

3809.91 ........... A change to subheading 3809.91 through 3809.99 from any other subheading, including another subheading within that group.

Since each of the foreign materials (the fabric, chemicals and perfumes) are clearly classifiable in provisions other than subheading 3809.91, they will all undergo the applicable change in tariff classification in Canada. The country of origin under scenario 2 will be Canada.

For purposes of scenario 2, you requested that we rule on the propriety of the following proposed country of origin markings:

A. Processed in Canada
B. Product of Canada, Cut and Packaged in the U.S.
C. Canadian Product Converted in the U.S. D. Further Processed in the U.S. from Canadian Product
E. Made in Canada

Customs has no objection to additional language that provides descriptive information to a prospective purchaser so long as it is truthful and does not indicate an incorrect country of origin.

However, 19 CFR 134.46 provides that when the name of any city or locality in the U.S., or the name of any foreign country or locality other than the name of the country or locality in which the article was manufactured or produced, appears on an imported article or its container, there shall appear, legibly and permanently, in close proximity to such words, letters or name, and in at least a comparable size, the name of
the country of origin preceded by "Made in," "Product of," or other words of similar meaning. The purpose of 19 CFR 134.46 is to prevent the possibility of misleading or deceiving the ultimate purchaser as to the origin of the imported article.

You state that the country of origin marking will be affixed to the consumer-ready cartons immediately atop the address information containing both the U.S. and Canadian distributor/owner/licensee of the fabric softener sheets in similar fonts and type size. For the fabric softener sheets produced under scenario 2, the finished consumer-ready cartons must be marked to indicate Canada as the country of origin. Consequently, the last marking (letter "E") is clearly acceptable provided it is legible and conspicuous. The marking "Product of Canada, Cut and Packaged in the U.S." (letter "B") is also acceptable since it unmistakably identifies the country of origin and the additional descriptive language "packaged in the U.S." will not confuse an ultimate purchaser as to the country of origin of the finished fabric softener sheets.

"Processed in Canada" (letter "A") is not a statement of origin. The statement merely conveys information to an ultimate purchaser that the article was processed in Canada, but the statement alone does not satisfy the requirement that the article of foreign origin be marked with its country of origin. Lastly, the phrase "Canadian Product Converted in the U.S." (letter "C") is not acceptable to the Customs Service because it implies that materials used in the production of the fabric softener sheets were converted into a new and different product in the U.S. Our conclusion that the processing in the U.S. does not result in an origin change directly conflicts with this descriptive language. The statement "Further Processed in the U.S. from Canadian Product" (letter "D") is not an acceptable country of origin marking because it does not comply with the requirements of 19 CFR 134.46 since the name of the country of origin must be preceded by the words "made in" or "product of." Therefore, "Further Processed in the U.S. from Product Made in Canada" would be acceptable provided the same sized lettering is used.

HOLDING:

Under scenario 1, the fabric softener sheets are a product of the U.S., and therefore, are not subject to the country of origin marking requirements set forth in 19 U.S.C. 1304. Customs has no objection to descriptions of processing performed in Canada that appear on the packaging so long as it is truthful and does not indicate an incorrect country of origin. Since the articles are deemed to be of U.S. origin, the marking "Made in Canada" would be improper.

Under scenario 2, the fabric softener sheets are a product of Canada, and therefore, are subject to the country of origin marking requirements set forth in

19 U.S.C. 1304. The proposed markings for production scenario 2 contained in letters B and E are proper, but the proposed markings in letters A, C, and D do not satisfy the requirements of 19 U.S.C. 1304.

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

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