HQ 562117 - Country of origin marking of metalworking products; 19 CFR 134.32(d); 19 CFR 134.34 - United States International Trade Commision Rulings

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HQ 562117

September 19, 2001

MAR-05: RR:CR:SM 562117 BLS

CATEGORY: MARKING

Mark N. Bravin, Esq.
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20036-5869

RE: Country of origin marking of metalworking products; 19 CFR 134.32(d); 19 CFR 134.34

Dear Mr. Bravin:

This is in reference to your letter dated May 2, 2001, on behalf of Sandvik Coromant Company, Coromant Division (“Sandvik Coromant”), concerning the country of origin marking of certain metalworking products imported from Sweden.

FACTS:

Sanvik Coromant imports three types of products. Industrial tools constitute 30% of its imports; inserts -- cutting edges attached to the tools – constitute 65%; and spare parts for the tools make up the remaining 5%. These products are manufactured primarily in Europe, although Sanvik Coromant also manufactures at plants in Japan, Brazil and several other locations. Products made by Sandvik are shipped to the company’s international distribution facility in Sweden before they are shipped to the United States.

Sanvik Coromant imports its products from Sweden through the port of New York in daily shipments. When the shipment has cleared Customs, it is sent by truck directly to the company’s national distribution center in Erlanger, Kentucky. Sandvik Coromant’s sales and marketing plan in the U.S. is based on a commitment to deliver its tools, inserts and spare parts to the customer’s manufacturing facility promptly – typically within 48 hours of receipt of the order.

Except for a small number of orders, which are shipped directly from Sweden to the U.S. customer, all of Sandvik Coromant’s U.S. deliveries are made out of its central distribution center in Erlanger, Kentucky. (The direct shipments are packaged and marked with the country of origin in Sweden, and are not included in this request.) Industrial customers that have a direct account with Sandvik Coromant place orders for products or reorder replacements for stock, as needed. When a direct account

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customer places an order, the order is filled from Erlanger and shipped via UPS to the customer in the U.S. For products sold through distributors, Sandvik Coromant “drop ships” more than half. In this type of sale, the distributor notifies Sandvik Coromant that a customer has issued a purchase order. In a procedure similar to the company’s direct accounts, Sandvik Coromant sends the order to its central distribution center, which ships the tools from Erlanger directly to the industrial end-user, usually within 24 hours. The remainder of the company’s products is delivered from Erlanger to Sandvik Coromant’s distributors in the U.S.

Sandvik Coromant’s customers are U.S. manufacturers that order replacements on a “just in time” basis” to arrive as needed. Orders are sent at the end of one business day (around 8 PM Eastern Standard time, which is 2 AM in Sweden) and the company fills these orders through a daily shipment to the U.S. that leaves Sweden the next morning at 7:15 Swedish time. For this reason, Sanvik Coromant must prepare the daily shipment at its shipping center in Sweden between 2 AM and 7 AM each morning. At present, the country of origin stickers on the imported products are affixed in Sweden prior to each daily bulk shipment to the U.S. In addition, the commercial invoice accompanying each order is prepared with the current country of origin stated for each imported article. The United States is the only country in which Sandvik Coromant sells its products that requires individual country of origin marking for such products. Because it is company policy that products sold in Europe need not bear a country of origin marking, products are labeled with their country of origin only after they have been identified for shipment to the U.S. Sandvik Coromant personnel must assemble, label, and pack the products in the middle of the night to meet the daily shipping schedule.

As a result of the logistical difficulty in applying country of origin labels during the 5-hour time window each morning in Sweden, including the availability of sufficient personnel, Sandvik Coromant is concerned that it will be unable to fulfill its commitment to deliver products to its U.S. customers within 48 hours of receipt of the order. Further, the company states that it is significantly more expensive to apply the labels in Sweden than it would be to apply them in the U.S. at its facility in Erlanger.

Therefore, Sandvik Coromant requests that country of origin marking be performed in its Erlanger, Kentucky, facility. Under this scenario, the daily bulk shipments which arrive into the port of New York without country of origin markings will be transported by truck to Sandvik Coromant’s Erlanger facility, where the bulk shipping container will be unpacked and country of origin marking labels affixed to the individually packaged products. This operation will be performed under Customs supervision prior to delivery to the ultimate purchaser.

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You state that this proposal has been discussed with the concerned National Commodity Import Specialist and other Customs officials in New York, and with the port director in Cincinnati, Ohio. (Erlanger, Kentucky is within the jurisdiction of the Customs port of Cincinnati.)

ISSUE:

Whether the imported products may be marked with the country of origin after importation in accordance with the proposed scenario.

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 a 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 exceptions of 19 U.S.C. 1304.

Section 134.32(d), Customs Regulations (19 CFR §134.32(d)), provides an exception to the marking requirements for articles where their containers will reasonably indicate the country of origin. For an exception to be granted under 19 CFR §134.32(d), the article must generally be imported in the container and that container must generally reach the ultimate purchaser unopened. See also 19 U.S.C. §1304(a)(3)(D).)

An exception under 19 CFR §134.32(d) may also be authorized in the discretion of the port director for imported unmarked articles which are to be repacked after release from Customs custody provided (1) The containers in which the articles are repacked will indicate the country of origin of the articles to an ultimate purchaser in the U.S. and (2) The importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification, as may be necessary, by certification and the submission of a sample or otherwise, of the marking prior to the liquidation of the entry. See section 134.34(a), Customs Regulations (19 CFR §134.34(a)), and the certification requirements for repacked articles set forth under 19 CFR §134.26.

The discretion of the port director is quite broad under 19 CFR §134.34, allowing the port director to determine whether port supervision, certification, verification, or review of a sample is necessary to accomplish the purposes of 19 U.S.C. §1304. See HRL 734420 (March 31, 1992). It is within the scope of the port director’s discretion to 4
determine that the 19 CFR 134.32(d) exception may be approved for all entries made over an extended or indefinite period of time, rather than on an entry-by-entry basis. An important element in the exercise of the port director's discretion is his/her assessment of whether the company requesting the exception can be relied upon to carry through on its undertakings. Another factor to be considered is whether the port has adequate resources to provide the continuing supervision necessary to ensure proper country of origin marking after importation. Additional factors that the port director may consider are the importer's history of violations and record in complying with Customs procedures and regulations, whether the importer is doing the repacking or having another party do the repacking, and whether the repacking is done on the importer's premises within the Customs port in which the merchandise was imported. See HRL 559812 dated July 30, 1996, and HRL 561269 dated February 29, 2000.

HOLDING:

Accordingly, provided the port directors at New York and Cincinnati are provided with such assurances of compliance as they may require, we are of the opinion that the metalworking products may be eligible pursuant to 19 CFR §134.34 for the exception provided in 19 CFR §134.32(d).

Sincerely,

John Durant, Director
Commercial Rulings Division

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