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HQ 734474

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April 13, 1992

MAR-2-05 CO:R:C:V 734474 ER

CATEGORY: MARKING

Mr. Joel Switsky
President
Archer Freight Systems, Inc.
P.O.Box 460067
San Antonio, Texas 78246-0067

RE: Country of Origin Marking Requirements for Frame Front Substrates and Side Temple Substrates for Eyeglasses Imported from Japan, Korea, Hong Kong and Germany; Ultimate Purchaser; Substantial Transformation; Federal Trade Commission; 19 CFR 134.1(d); 19 CFR 134.32(g); 19 CFR 134.35; C.S.D. 80-43; HQ 709266; HQ 709551; HQ 728504; HQ 733693.

Dear Mr. Switsky:

This is in response to your letter of January 16, 1992, on behalf of Optique Marquis, P.O. Box 2078, San Antonio, Texas 78297, in which you ask for a ruling concerning the country of origin marking requirements for frame front substrates and side temple substrates for eyeglasses imported from Japan, Korea, Hong Kong and Germany.

FACTS:

In your submission and by telephone conversations with you on March 5, 1992 and with Optique Marquis on March 9, 1992 the facts set forth below were established. Optique Marquis imports in unfinished condition, frame front substrates and side temple substrates from Japan, Korea, Hong Kong and Germany and further processes them as set forth below. You state that these components are not usable in the form in which they are imported due to the fact that the un-plated frames offer no protection against corrosion, may cause skin reactions on users and have no functional use or decorative appeal. The components of U.S. origin include the nosepads, screws, bolts, paints, lacquers and lenses. You provided samples of the imported components and the finished product complete with demo lenses.

The first stage of the processing, designed to alter the function, form and appearance of the components, is described in your submission as follows: (1) components are tumbled and polished; (2) components are cleaned and hand polished prior to initial plating; (3) copper plating is applied as primer coating; (4) nickel/silver is applied as a secondary coating; (5) substrate with primer and secondary plating are removed and selected areas are masked by hand for plating; (6) gold or silver is applied to secondary plating and reviewed, where necessary, for final gold or silver plating; (7) plated components are cleaned and selected areas are masked for epoxy decorating; (8) epoxy paints are applied by hand and temperature cured (where multi-color processes are used (three or four colors), all steps involved in single-color application must be repeated); and (9) components with gold and/or silver plating and epoxy decorations are coated with a clear lacquer before assembly.

In your submission you describe the next stage of processing, involving the assembly of the frame and temple components with other components, as follows: (10) nosepads are assembled to the bridge of the frame fronts that have been measured and identified for size; (11) temples are measured for size and temple ear tips are applied to provide comfort to the wearer; (12) measured temple with ear tip are formed with two curves so as to hold the complete frame to the patient's head; (13) temples and fronts are assembled; (14) lenses for sunglasses or demo lenses are ground to specification and assembled; and (15) assembled frames with lenses are hand adjusted and individually packaged.

An electroplating system with monitored controls is used and OSHA and EPA standards are observed. Equipment for applying and curing protective coatings and epoxy decorations includes mixing systems, dispensing machinery and thermal controls. You state that 60 percent of the value of the imported merchandise is added in the U.S. after importation.

It is your opinion that these operations substantially transform the imported articles from an unfinished state to a finished state. You have requested a general marking waiver for the articles, as imported, pursuant to 19 CFR 134.32(g) because you state that the processing in the U.S. will necessarily obliterate the original markings. Additionally, you have also requested that you be allowed to mark the finished product as originating in the U.S.

ISSUE:

Whether the imported frame front substrates and side temple substrates for eyeglasses may be excepted from country of origin marking?

Whether the finished product may be marked with a U.S. 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 (or its container) 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 U.S. the English name of the country of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The primary purpose of the country of origin marking statute 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., 27 C.C.P.A. 297, C.A.D. 104 (1940). Section 134.1(d), Customs Regulations (19 CFR 134.1(d)) defines the "ultimate purchaser" generally as the last person in the U.S. who will receive the article in the form in which it was imported.

You assert that the processes performed on the components in the U.S. will destroy or obliterate any country of origin marking, and therefore request an exemption from the country of origin marking requirements pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g). These sections of the Tariff Act and the Customs regulations except from marking those articles to be processed in the U.S. by the importer in such a manner that any mark would necessarily be obliterated.

In HQ 709266 (July 11, 1978), Customs found that there are methods of marking eyeglass frames which will withstand such processes, e.g. die-sinking. Therefore, in the instant case, because the marking will not necessarily be obliterated by the process, the eyeglass frames do not fall within the exception provided for by 19 U.S.C. 1304(a)(3)(G). However, the articles may be eligible for another exception to marking as is discussed below.

Section 134.35, Customs Regulations (19 CFR 134.35), provides that an article used in the U.S. in manufacture which results in an article having a name, character, or use differing from that of the imported article will be within the principle of the decision of U.S. v. Gibson-Thomsen Co. Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940). Under this principle, the manufacturer or processor in the U.S. who substantially transforms the imported article into an article with a new name, character, or use will be considered the "ultimate purchaser" of the imported article within the contemplation of section 304(a) of the Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accordance with this part.

However, if the manufacturing process is merely a minor one which leaves the identity of the imported article intact, the consumer or user of the article after the processing, will be regarded as the "ultimate purchaser." 19 CFR 134.1(d)(2).

In HQ 728504 (October 15, 1985), Customs pointed out that the assembly of imported frames does not constitute a substantial transformation of the item sufficient to make the importer the ultimate purchaser and that in such a case, country of origin marking would be required on the imported fronts and temples. (See also, HQ 709266 (July 11, 1978) assembly of eyeglass frames does not constitute a substantial transformation.) However, Customs also indicated that where there is additional processing performed (i.e. more than mere assembly of the fronts and temples) a substantial transformation may occur, depending on the circumstances.

In C.S.D. 80-43 (July 17, 1979), Customs ruled that a substantial transformation occurred where the importer subjected eyeglass fronts and temples to further processing before assembly and color-dying. There, the processing consisted of the following operations:

1. Temple hinges removed and temples ultrasonically cleaned and sorted.
2. Temples trimmed according to style specifications. 3. Temples machined to accommodate the attachment of trim.
4. Temples cleaned prior to assembly with front. 5. Temples engraved.
6. Temples trimmed further.
7. Temples subjected to five-part milling process. 8. Seven-piece hinge assembled and fixed on temple. 9. Lictite injected into hinge screws.
10. Hinge holes drilled, frame composition tested, and hinges attached.
11. Frame front heated, reformed, and reshaped to assure proper meniscus curve for the lens. 12. Frame front inspected and ultrasonically cleaned. 13. Frame front and temples assembled.
14. Pantoscopic angle for frame determined. 15. Frame sterilized and dye base applied in a 10-step process.
16. Frame immersed in Freon bath.
17. Frame dyed.
18. Protective gloss coating applied to frame. 19. Frame adjusted and set in accordance with fitting requirements.
20. Frame stamped with requisite optical specifications.

Customs ruled that these operations amounted to a substantial transformation; consequently, the importer was found to be the ultimate purchaser of the imported merchandise within the meaning of section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304). (But cf., HQ 733693 (October 17, 1990), applying epoxy and paint to sunglasses frames did not constitute a substantial transformation.)

In HQ 709551 (November 13, 1978), Customs determined that imported eyeglass fronts and temples were substantially transformed when they were cleaned, shaped, electroplated, polished, subjected to acid baths, and joined with other components; i.e. nose pads and plastic ear tips. The following excerpt is relevant:

[We] are of the opinion that the mere addition of nose pads and plastic ear tips by itself does not alter the character of the imported merchandise.

Nevertheless, we are of the opinion that the physical alteration which the imported eyeglass fronts and temples undergo as a result of the manufacturing process performed by petitioner constitutes a substantial transformation within the meaning of 19 U.S.C. 1304.

In so determining we have considered the fact that the manufacturing process performed by petitioner on the subject fronts and temples is a relatively major one which involves significant expenditure of costs, time and materials and which requires machining and the use of special tools and skills.

We have also considered the fact that the plating processes involved are relatively complex involving several distinct procedures and materials which have the effect of altering the characteristics of the metal parts in such a manner as to make them resistant to the tarnishing from perspiration.

In addition, as a result of the further manufacturing processes, the eyeglass fronts and temples acquire the proper shape to be worn and to be capable of holding lenses. Neither the fronts or temples have the proper shape to be worn over the ears and nose, nor to hold lenses when imported, attributes we consider essential to eyeglass frames.

Accordingly, we are of the opinion that as a result of the above processes the imported items acquire a new character and use. This circumstance in addition to the extent of the manufacturing involved, leads us to conclude that the physical alterations suffered by the eyeglass fronts and temples constitutes [sic] a substantial transformation.

We note that such substantial transformation of the imported fronts and temples occurs as a result of the totality of the manufacturing involved rather than by the effect of any particular process.

In the present case, as in the above cases, the imported merchandise must undergo various processing before it is suitable for use and wear. Such processing is virtually the same as that involved in C.S.D. 80-43 and HQ 709551. Moreover, in this case, screws, bolts, nosepads, temple ear tips, paints and lacquers of U.S. origin are used in these processes to finish the frame. Accordingly, based on these rulings, we find that the imported frame front substrates and side temple substrates are substantially transformed as a result of the domestic processing and that Optique Marquis is the ultimate purchaser.

The Federal Trade Commission has jurisdiction over whether or not goods can be marked "Made in the U.S.A." and should be contacted in regard to that question.

HOLDING:

The manufacturer in the U.S. is the ultimate purchaser of the imported frame front substrates and side temple substrates for eyeglasses within the meaning of section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304). Accordingly, the imported merchandise may be excepted from individual country of origin marking pursuant to 19 CFR 134.35 providing the merchandise undergoes the manufacturing processes described above and that Customs officers at the port of entry are satisfied that the manufacturer will receive the merchandise in properly marked containers.

Sincerely,

John Durant, Director
Commercial Rulings Division

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