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HQ 734121


August 12, 1991

MAR-2-05 CO:R:C:V 734121 NL

CATEGORY: MARKING

Mr. Robert J. Cromie
Chief, Transportation and
Packaging Division
Contract Management
Defense Logistics Agency Headquarters
Cameron Station
Alexandria, VA 22304-6100

RE: Country of Origin Marking of Articles Procured for the U.S. Military or Sold to Third Countries Under the Foreign Military Sales Program.

Dear Mr. Cromie:

This is in response to your letter of April 4, 1991, in which you request advice from this office concerning the country of origin marking requirements applicable to articles imported from Canada. Your agency imports articles for use by the U.S. military, and supervises the importation of articles for incorporation into Department of Defense (DOD) "end items". You ask also about the marking requirements applicable to articles shipped to the U.S. for forwarding to third countries under DOD Foreign Military Sales procedures.

Your letter indicates that your office in Ottawa plans to gather data concerning specific problems which have arisen with country of origin marking, but that in the meantime it would be of benefit to you and Canadian industry for this office to supply some general guidance.

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.

To determine whether an imported article may be excepted from country of origin marking Customs must consider who, if anyone, is the ultimate purchaser in the U.S. In 19 CFR 134.1(d) the ultimate purchaser is defined generally as the last person in the U.S. to receive the article in the form in which it was imported. Thus, for example, the Defense Logistics Agency would likely be the ultimate purchaser in the U.S. of an article procured for its account for use by the U.S. military. Such an article would be required to be marked at the time of importation, unless otherwise excepted, so as to indicate its foreign origin to the ultimate purchaser in the U.S.

If an imported article is to be used in manufacture, such that after processing a new article will emerge having a new name, character, or use, the manufacturer or processor will be considered, as provided in 19 CFR 134.35, the ultimate purchaser of the imported article. Such an article is said to have been substantially transformed. In that event, only the container of the imported article is required to be marked with the article's country of origin. With respect to articles to be imported for incorporation into Department of Defense "end items", the person in the U.S. who effects a substantial transformation of the imported articles into "end items" will be considered the ultimate purchaser. However, it will not necessarily be the case that all imported articles incorporated into "end items" will be considered by Customs to have been substantially transformed. If a substantial transformation is considered not to have been effected, the imported article must be marked to indicate its origin to the ultimate purchaser, e.g, the DOD unit which is purchasing the "end item".

You have asked about the applicablity of the exception from marking provided at 19 CFR 134.32(f). That exception is available for articles imported for use by the importer and not intended for sale in their imported or any other form. Such uses, under our rulings, have included samples for sales presentations, articles imported for testing, articles for showroom display, and machines, equipment, and supplies used in carrying on a business. In general, this exception applies only to articles imported for the importer's personal use. Thus, an article imported for use in the manufacture of a DOD "end item" would not be eligible for this exception. Assuming that your agency serves as the importer of an item destined for delivery to, and use by, another element of the defense establishment, we think it unlikely that an article so imported would qualify for this exception.

You have also asked whether the exception set forth at 19 CFR 134.32(j) is applicable to articles imported from Canada which are transshipped via the U.S. to third countries under the Foreign Military Sales program. That provision excepts from the marking requirements articles entered or withdrawn from warehouse for immediate exportation or for transportation and exportation. Assuming compliance with Customs formalities for such entries, this exception would be available in accordance with the terms of the exception. The basis for this exception is that there is deemed to be no ultimate purchaser in the U.S., and therefore articles imported for transshipment are not required to satisfy the requirements of 19 U.S.C. 1304 and Part 134, Customs Regulations.

There is a further exception from country of origin marking which may be applicable to articles imported by, or for the account of, your agency. 19 CFR 134.32(h) provides an exception from marking for articles for which the ultimate purchaser must necessarily know the country of origin by reason of the circumstances of their importation, even though they are not marked as to their origin. It is not sufficient that the ultimate purchaser be advised personally or by advertising or brochures of an article's country of origin. In general this exception may not be approved unless there is evidence of direct dealings between the producer in the foreign country and the ultimate purchaser, such as by contractual dealings or if there is a parent/subsidiary relationship between the foreign supplier and the ultimate purchaser.

In the context of civilian and defense procurement, it is likely that the ultimate purchaser, the government, will have purchased on the basis of prior approval of any foreign-origin articles. Even if the foreign articles are being procured through a subcontractor, it is reasonable to assume that the government retains authority to approve the acquisition of foreign end-items or components, and to refuse any articles not specified. In one recent ruling, HQ 731967 (May 11, 1990), this office approved an exception under 19 CFR 134.32(h) when the Army 1) retained approval over all foreign subcontractors and their sources of supply; 2) conducted pre-award surveys; and 3) regularly monitored production activities of foreign subcontractors. It is likely that other similar arrangements for procurement by the government would permit this office to approve exceptions from marking under 19 CFR 134.32(h), it being shown by these circumstances that the ultimate purchaser necessarily knows the country of origin of an article by the circumstances of its importation.

We are not aware of other exceptions from country of origin marking which would apply to the importations you describe, but the possiblity cannot be excluded that other circumstances would warrant the approval of other exceptions. If we can be of further assistance please do not hesitate to contact me or Ned Leigh on (202) 566-5765.

Sincerely,

Thomas L. Lobred
Chief, Value and

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