HQ 560327 - NAFTA Advanced Ruling, marking; Country of origin of printed mailings distributed free of charge; country of origin marking of containers; ultimate purchaser reasonably knowing the country of origin; 19 U.S.C. 1304; 19 CFR 134.32(h) - United States International Trade Commision Rulings

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HQ 560327

July 28, 1997

MAR-2:05 RR:TC:SM 560327 RSD

CATEGORY: MARKING

Mr. Chris Hoag
Manager of International Operations
North American Communications Inc.
1330 30th Street
San Diego, California 92154

RE: NAFTA Advanced Ruling, marking; Country of origin of printed mailings distributed free of charge; country of origin marking of containers; ultimate purchaser reasonably knowing the country of origin; 19 U.S.C. 1304; 19 CFR 134.32(h)

Dear Mr. Hoag:

This is in reference to your letter dated February 14, 1997, requesting a ruling concerning the country of origin marking requirements of printed mailings distributed free of charge through the U.S. Postal Service. Samples of the printed material were enclosed with your submission

FACTS:

North American Communications, Inc. (NAC) prints and prepares mail packages of advertisements for mailings in the United States. The printed material is unsolicited advertising material. Advertisers contract with NAC to print and mail the printed material. The advertising packages created for the mailings consist of an outer envelope stuffed with a return envelope, a personalized letter, and an occasional flyer or brochure. In the transaction, the letters and flyers are printed in Mexico. All parts of the mail packages are made from US originating paper. Additionally, the envelopes are also made in Mexico from US origin paper.

Once the advertisements are printed and stuffed into the envelopes, the packages then are sorted based on US Postal specifications and requirements. The envelopes are labeled with a bulk mail permit, live bulk mail stamps, or a US postal indicia, which serves as proof of payment for distribution to the US Post Office. The sorted packages are placed, again according to US Postal requirements, into reusable plastic or cardboard US Postal supplied boxes or trays, which are imported into the US on plastic wrapped pallets. They are then delivered to the Post Office in San Diego for mailing and distribution to the general public.

You claim that NAC's clients know that the mailings are prepared in Mexico. Although you claim that this is established when agreements are reached between NAC and their clients for services and can be substantiated by written affidavits from your clients, you have not provided any evidence in support of this claim.

ISSUES:

Whether the imported mailings are excepted from marking pursuant to 19 CFR 134.32(h) as goods of a NAFTA country for which the ultimate purchaser reasonably must know the country of origin.

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.

The country of origin marking requirements for goods of a NAFTA country are determined in accordance with Annex 311 of the North American Free Trade Agreement, ("NAFTA") as implemented under the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 437 (December 8, 1993)). The rules used for determining whether a good is a good of a NAFTA country are set forth in 19 CFR Part 102. The marking requirements for these goods are set forth as amendments to various provisions of Part 134, Customs Regulations.

Section 134.1(b) of the regulations, 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; however, for a good of a NAFTA country, the NAFTA marking rules will determine the country of origin.

Section 134.1(j), of the regulations, provides that the "NAFTA marking rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA marking rules.

In determining the country of origin marking requirements for imported mailings, it first must be determined who is the ultimate purchaser in the U.S. of the imported article.

Section 134.1(d) of the regulations, provides that the ultimate purchaser of a good of a NAFTA country is the last person in the United States who purchases the good in the form in which it was imported. If an imported article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser. However, if an imported NAFTA article is imported and distributed free of charge, the recipient is not the ultimate purchaser is the purchaser of the gift rather than the recipient. See Section 134.1(d)(4) of the regulations.

We note that the recipients of the imported mailings do not buy them. Instead, the U.S. Postal Service delivers the mailings to the recipients as unsolicited materials. Therefore, Customs determines that the mailings may be treated as gifts or giveaways. See HQ 735555 (November 1, 1994) and HQ 558680, July 10, 1995.

Assuming that the imported article is a good of a NAFTA country and that NAC is the last person in the United States who purchases the items in the form in which they were imported, the recipient of the mailings would not be the ultimate purchaser. Similarly, although NAC's clients may place an order for the mailings, there is no indication that they will see the items after they are imported into the United States. Instead, it appears that NAC's clients are largely buying a service rather than a product. Thus, we conclude that for the purposes of 19 U.S.C. 1304, NAC's clients do not receive the imported mailing and also would not be the ultimate purchasers. Therefore, we find that the importer, NAC, is the ultimate purchaser of the imported mailings.

Having determined that NAC is the ultimate purchaser of the imported mailings, next we consider whether they are excepted from marking under 19 U.S.C. 1304 (a)(3)(H). 19 U.S.C. that 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 or in case of a NAFTA country, must reasonably know, the country of origin by reason of the circumstances of its importation. Containers or holders of articles within the exception set forth in 19 C.F.R. ?134.32(h) are not required to be marked to indicate the origin of the contents. See 19 CFR ?134.22(e).

Generally speaking, Customs has required that the importer be the ultimate purchaser of the imported article and have direct contact with the foreign supplier for 19 C.F.R. ?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 C.F.R. ?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 C.F.R. ?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 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 C.F.R.

In this case, because NAC is the importer and the ultimate purchaser, the exception from marking under 19 CFR 134.32(h) would be appropriate if NAC directly contracts with the manufacturer of the mailings, who is producing them in Mexico, and NAC is given written assurance that the mailings will only be made in Mexico. You have indicated that NAC directly contracts with the Mexican manufacturer with the understanding that the mailings are printed and prepared in Mexico. Although the criteria for applying the 19 CFR 134.32(h) marking exception for goods from a NAFTA country is less stringent than for goods from a non-NAFTA country, in order to have the imported mailings excepted from marking, you should upon request from the port director, provide evidence, such as a copy of the contract with the Mexican producer which establishes that NAC reasonably knows that the mailings are made in Mexico.

You also inquire as to whether the containers of the mailings would have to be marked; specifically whether the envelope or the mail bins must be marked. First, in this case we find that the envelopes are not separate containers, but are part of the imported articles, the mailings.
19 CFR 134.22(e) provides that containers or holders of articles within the exceptions set forth in paragraph (f), (g), or (h) in exception set forth in paragraph (e), (f), (g), (h) (i), (p) or (q) of ?134.32 are excepted from marking. In this case, if the mailings are excepted from marking under 19 CFR 32(h), their containers would not have to be marked to indicate their country of origin.

HOLDING:

The ultimate purchaser of the imported mailings, which are a good of a NAFTA country and delivered by the U.S. Postal Service, is the importer, NAC. Based upon the information provided, we find that NAC reasonably knows the country of origin of the mailings, and they are excepted from country of origin marking under 19 C.F.R. 134.32(h). NAC, however, must provide upon request from the Port Director evidence to substantiate the information stated in this ruling request. If mailings are excepted pursuant to 19 CFR 134.32, the containers are also excepted under 19 CFR 134.22(e).

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,

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