HQ 563262 - Country of origin marking requirements applicable to certain gift tissue products; substantial transformation; 19 U.S.C. §1304 - 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 > 2005 HQ Rulings > HQ 563136 - HQ 563294 > HQ 563262

Previous Ruling Next Ruling
HQ 563262

July 15, 2005

MAR-2-05 RR:CR:SM 563262 EAC

CATEGORY: MARKING

Ms. Marcela B. Stras
Baker & Hostetler LLP
Washington Square, Suite 1100
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5304

RE: Country of origin marking requirements applicable to certain gift tissue products; substantial transformation; 19 U.S.C. §1304

Dear Ms. Stras:

This is in response to your letter, dated April 13, 2005, requesting a ruling on behalf of Plus Mark, Inc. (“Plus Mark”), pertaining to the country of origin marking requirements applicable to certain gift tissue products. We have also considered the additional information provided by your facsimile of May 23, 2005.

FACTS:

Plus Mark is a manufacturer and distributor of various gift-wrapping products, boxed cards and other related accessories. The items under consideration in this case are identified as “consumer tissue paper” products that you have described by telephone as articles that are used as packaging material for gift-wrapped packages, boxes, or bags. You state that Plus Mark may purchase such consumer gift tissue paper from an overseas producer/supplier located in “Country A.” Depending on the type of end-product produced (as discussed, infra), the producer in Country A will source master rolls of bulk, unprinted tissue paper from China, Vietnam or from within Country A. After obtaining the master rolls of tissue paper, the producer will print some of the rolls with colors and designs and then cut the paper to size. The tissue paper that is not printed will also be cut to size but will remain unprinted when packaged. The consumer tissue paper products will not undergo any processing operations within the United States. We are informed that specific tariff classification numbers for the imported gift tissue products have not been provided because such merchandise may be classified under various subheadings of the Harmonized Tariff Schedule of the United States (“HTSUS”), depending upon the circumstances of each case.

A more detailed description of the processing operations performed in Country A to produce the printed and unprinted tissue products, as well as pertinent cost information for each, follows.

Printed Tissue Paper – Processing Operations and Cost:

The master rolls of tissue paper are imported into Country A from China.

The tissue paper is printed (with either designs or colors) on a six-color gravure printing press with ink that is a product of Country A.

The printed tissue paper is thereafter cut to size on a computer controlled automatic cutter/slitter.

Various printed designs are collated and folded to size by hand.

The folded tissue is either banded or placed into plastic polybags that are packed into master cartons by hand.

Unprinted/White Tissue Paper – Processing Operations and Cost:

The master rolls of tissue paper are normally imported into Country A from Vietnam. If such tissue paper from Vietnam is not available, the master rolls of tissue paper will be sourced from within Country A. In either case, the tissue paper in this context lacks the tensile strength to undergo printing operations and therefore remains unprinted.

The unprinted, plain tissue paper is cut to size on a computer controlled automatic cutter/slitter.

Various printed designs may be collated together with the plain paper and then folded to size by hand. If not collated together, the plain tissue paper will merely be folded to size by hand after cutting.

The folded tissue is either banded or placed into plastic polybags that are packed into master cartons by hand.

Based upon the foregoing, you assert that the processing operations performed in Country A substantially transform the imported master rolls of tissue paper into products of Country A. We are additionally advised that, prior to processing, the master rolls of tissue paper could be used to produce products such as crepe paper, crepe paper streamers, toilet seat covers, and other articles.

ISSUE:

Whether the processing operations described above substantially transform the master rolls of tissue paper from China or Vietnam into a product of Country A.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930 (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. 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 (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. 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 United States. 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 the meaning of the marking laws and regulations. The case of U.S. v. Gibson -Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940), provides that an article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed and, as a result, the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See, 19 CFR 134.35(a).

Generally, U.S. Customs and Border Protection (“CBP”) has held that cutting or shaping materials to defined shapes or patterns suitable for use in making finished articles, as opposed to mere cutting to length or width which does not render an article suitable for a particular use, constitutes a substantial transformation. See, for example, Headquarters Ruling Letter (“HRL”) 555702, dated January 7, 1991 (finding steel plates dedicated to use in “hydraulic balers” by cutting, folding, binding, and scraping were considered substantially transformed) and HRL 553574, dated August 15, 1985 (holding aluminum strips cut to length, punched, drilled, or both with holes and notched which gave the strips specific shape or pattern for use in window frames were substantially transformed). Such cases may be distinguished, however, because the tissue paper presently under consideration is not cut or shaped to a defined shape or pattern for use in making a finished article. Rather, the processed tissue paper in this case appears to be used as an accessory that complements a variety of finished articles such as gift bags, boxes, or baskets.

In support of Plus Mark’s position, counsel cites HRL 557462, dated September 13, 1994, stating that CBP found in that case that decorative paper that was shaped, creased, folded, cut to length, and glued to produce gift bags was substantially transformed. In that case, CBP considered whether various gift-wrapping and packaging articles were substantially transformed in Mexico for purposes of determining their eligibility for preferential treatment under the Generalized System of Preferences (“GSP”). In order to produce the gift bags, gift-wrap paper reams were placed onto a ream rolling machine where the paper was pulled through feed rollers. The gift-wrap paper was thereafter systematically shaped, creased, folded, and cut to the length of the desired gift bag. The completed folded and shaped gift bag was then sent through a machine where liquid adhesive was placed onto the bottom end of the bag and compressed to secure the folds that enclosed the bag. In a separate process involving some of the bags, handles were glued onto the inside of the bag and a peel-off paper backer was applied to the top of the glued handle and also on the inside of the bag to provide stability to the handle. CBP held that the gift bags under consideration were substantially transformed because the operations involved were complex and meaningful and the finished items were new and distinct articles of commerce that possessed a new name, character, and use clearly distinguishable from the material from which it was made.

However, please be advised that CBP also held in that case that reams of gift-wrap were not substantially transformed when put onto cardboard rolls. In making this determination, HRL 557462 noted that the process of cutting the wrapping paper to length, and affixing it to cardboard tubes with one-inch strips of adhesive was a simple assembly process requiring little skill and did not constitute a complex and meaningful operation sufficient for the paper to lose its separate identity.

Also relevant is HRL 561025, dated October 21, 1998, pertaining to the country of origin marking requirements applicable to certain photographic film. In HRL 561025, “jumbo” film (5 feet wide, 4 feet in diameter, 7 millimeters thick, 8,000 feet long, and weighing 2,000 pounds) was imported into the United States for processing into film cartridges. Such processing consisted of slitting the jumbo film into widths of 35 millimeters or 16 millimeters (depending on type of film to be produced); perforating the film to ensure proper alignment in the camera; cutting the film to exact lengths required by the 110 and 135 film cartridges; subjecting the film to latent image flashing operations; assembling the cartridges from various parts; reducing the residual moisture content of the film; and, removing defects. In finding that the imported jumbo film was not substantially transformed, CBP noted that the imported product was the “essence” of the completed article and thus did not undergo a substantial transformation within the United States.

In 734720, dated October 22, 1992, CBP considered self-adhesive tape, normally used in portable or desktop style dispensers, which was manufactured in the United States in continuous rolls of varying widths. After manufacture, these “log rolls” were exported to Canada where they were cut to length and width. In finding that such cutting operations did not substantially transform the log rolls of tape, CBP relied primarily on HRL 729316, dated April 20, 1989. In HRL 729316, abrasive belts were manufactured in the United States in continuous rolls of varying widths. The belts were exported to Mexico where they were cut to length (and in some instances, also to width), 3/8 of an inch of the abrasive was ground off each end, and the two ends were spliced together with an adhesive before being returned to the United States. Under this set of facts, CBP held that the operations performed in Mexico did not substantially transform the abrasive belts of U.S. origin.

With respect to printing operations, please note that by General Notice dated August 11, 1995, and published August 30, 1995, in the Customs Bulletin, Volume 29, Number 35 (which modified HRL 557034/557072, dated July 14, 1993), CBP concluded that the printing of paper rollstock or plastic film used in the production of shopping bags with colors, designs, and/or customer graphics, changes the character of paper or plastic film from a raw material with numerous uses to a material with limited uses to a degree sufficient to constitute a substantial transformation. However, CBP maintained that a substantial transformation does not occur when printing operations do not alter the use of an article. For example, printing roll stock with only labeling information (such as a UPC label, company logo, or country of origin marking) does not substantially transform the rollstock.

In HRL 560155, dated April 10, 1997, pallets of uncut sheets of trading cards were imported into the United States from the United Kingdom for finishing and combination with U.S.-origin cards. In the United Kingdom, images were printed onto specialized sheets of paper stock, the sheets were laminated with film, and the laminated sheets were thereafter packaged for shipment to the United States. In the United States, the uncut sheets were slit into individual cards (in cases where only one side of the sheets were printed, two halves were glued together and then cut). The individual cards were thereafter combined with cards produced entirely within the United States to form completed packages of trading cards, with the majority of the cards being of U.S. origin. CBP held that such processing did not substantially transform the imported sheets into products of the United States and that the finished card packages were required to be marked so as to inform the ultimate purchaser in the United States of the origin of the imported cards, the United Kingdom. Citing, HRL 734706, dated January 15, 1993 (cutting paper board sheets of baseball cards and sorting and packaging the cut cards are minor finishing operations) and HRL 555241, dated July 3, 1989 (cutting sheets of self-adhesive office labels on backing paper was not a substantial transformation).

As the various cases and rulings set forth above demonstrate, in order to determine whether a substantial transformation occurs, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. As
applied, it is our opinion that the master rolls of tissue paper from China are substantially transformed when printed with colors and designs and cut to size within Country A. In making this determination, we note that the printing and cutting operations performed in Country A change the character of the plain tissue paper from a material with numerous uses to a material intended for use as decorative gift packaging material. We additionally recognize that the ink used for printing is a product of Country A and that the totality of the processing which occurs in Country A accounts for a significant portion of the value of the final product.

However, it is also our opinion that a substantial transformation does not occur in instances where master rolls of tissue paper from Vietnam are cut and folded, but not printed, in Country A. We believe that such operations can be construed as mere finishing operations because the essence of the finished product (plain tissue paper) is actually imparted by the material that is imported from Vietnam. Packaging the cut, plain tissue paper with paper that is a product of Country A will not effect a substantial transformation in the Vietnamese-origin product. Accordingly, the country of origin of gift tissue sheets produced under these circumstances will be Vietnam. It should be noted that the country of origin of gift tissue sheets produced in this manner will be Country A only when the master rolls of tissue paper are sourced from within that country as discussed, supra.

HOLDING:

Based upon the specific facts of this case, we find that the master rolls of tissue paper from China are substantially transformed when printed with colors and designs and cut to size to form gift tissue sheets within Country A. Therefore, when imported into the United States, the country of origin of such gift tissue products for marking purposes will be Country A. However, we also find that a substantial transformation does not occur in instances where master rolls of tissue paper from Vietnam are cut and folded, but not printed, in Country A. Therefore, when imported into the United States, the country of origin of such gift tissue products for marking purposes will be Vietnam. The country of origin of gift tissue sheets produced in this manner will be Country A only when the master rolls of tissue paper are sourced from within Country A.

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 CBP officer handling the transaction.

Sincerely,

Myles B. Harmon, Director

Previous Ruling Next Ruling