HQ 0732743 - Country of origin marking of imported small cloth bags - United States International Trade Commision Rulings

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HQ 732743
January 30, 1990

MAR-2-05 CO:R:C:V 732743 KG

CATEGORY: MARKING

G.A. Buder, IV
Pryme Tyme Products Co.
5256 Professional Drive
Suite 64A
Wichita Falls, Texas 76302

RE: Country of origin marking of imported small cloth bags

Dear Mr. Buder:

This is in response to your letter of September 14, 1989, requesting a country of origin ruling regarding imported small cloth bags which you refer to as Tiny Totes.

FACTS:

You import small red cloth bags, approximately 4 inches by 5 inches, with a blue yarn pull- string at the top from Bangladesh. The bags, which you refer to as "blanks," are silk-screened with the "Snoopy" dog image and dried in the U.S. You also plan to use other decorative processes, such as embroidery, on the bags. No details of the other processes were provided. You indicate that your cost for the plain bags is $O.3O/each, and after the artwork is applied, you sell the bags for $1.50 to $2.00 each. Sample tote bags, both with and without the artwork applied, were submitted.

ISSUE:

Whether silk-screening a small cloth bag is a substantial transformation for the purposes of section 304 of the Tariff Act of 1930, as amended.

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. The Court of International Trade stated in Koru North America v. United States, 701 F.Supp. 229, 12 CIT (CIT 1988), that: "In ascertaining what constitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297, 302 C.A.D. 104 (1940), where the court stated that: "Congress intended 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."

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines the 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 the meaning of 19 CFR Part 134." Pursuant to section 134.35, Customs Regulations (19 CFR 134.35), an article which is substantially transformed in the U.S. is excepted from marking the article itself and only the outermost container of the imported article must be marked.

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940), National Juice Products Association v. United States, 10 CIT ___, 628 F.Supp. 978 (CIT 1986), Koru North America v. United States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988). The issue presented is whether the work performed in the U.S. constitutes a substantial transformation.

In HQ 730090 (January 8, 1987), Customs ruled that an imported plastic key chain subjected to a silk-screening process whereby colors, design and logos were applied in the U.S. was not substantially transformed. Customs considered the domestic manufacturing processing to be a minor operation which leaves the identity of the imported article intact. Customs held in HQ 729308 (August 14, 1988), that painting earrings was a minor finishing operation which left the fundamental identity of the earrings intact and not a substantial transformation.

The work performed in the U.S. in this case is merely decorative and a minor finishing operation which leaves the fundamental identity of the cloth bag intact. No change in use or name occurs; the blank is a finished tiny tote bag which could be used for whatever function the completed article would be used for and would still be called a "tiny tote." The only difference between the blank and the completed article is that the completed article has the Snoopy image on it. Further, it is impossible to determine from the information submitted what value the U.S. processing adds to the product since the wholesale price of a good includes distribution costs, advertising, profit and many other factors and is not merely a reflection of the value of the U.S. processing. Because the silk-screening of the Snoopy image results in no change in name or use and only a minimal change in character, no substantial transformation occurs. Since no substantial transformation takes place in the U.S., the tiny totes are not excepted from marking by 19 CFR 134.35 and must be individually marked to indicate that the country of origin is Bangladesh in accordance with 19 U.S.C. 1304 and 19 CFR Part 134.

Since no details or samples were submitted concerning other contemplated methods of decorating the bags, we cannot give you a ruling on those products.

The use of the legend "Made in the U.S.A." is under the jurisdiction of the Federal Trade Commission ("FTC"); any questions regarding the use of the such legend or a similar legend must be addressed by the FTC.

HOLDING:

The small cloth bags are not substantially transformed in the U.S. by silk-screening the Snoopy image on them. Therefore, the bags are required to be individually marked with the country of origin, Bangladesh.

Sincerely,

Marvin M. Amernick
Chief, Value, Special Programs

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