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HQ 558729




April 10, 1997

MAR 2-10 RR:TC:SM 558729 KBR

CATEGORY: MARKING

Ms. Sue Klabunde
Spots Pots
135-6050 Almon Street
Halifax, Nova Scotia, Canada B3K 138

RE: Marking of Ceramic Articles, NAFTA, Article 509.

Dear Ms. Klabunde:

This is in response to your letters dated March 10, 1994, July 25, 1994, and September 13, 1994, concerning the country of origin and the eligibility for special tariff treatment un the North American Free Trade Agreement ("NAFTA") of ceramic pots and tableware from Canada. We regret the delay in responding.

FACTS:

Spots Pots wishes to import into the U.S. several types of ceramic articles, and wishes to know the country of origin of the articles.

Type A products are ceramic and wood articles manufactured in Canada from 100 percent Canadian materials.

Type B products are ceramic articles manufactured in, and purchased from the United States and imported into Canada. In Canada, each piece is hand-decorated using ceramic paint and/or glazed and then fired in pottery kilns.

Type C products are flower pots, saucers and tableware trays. Type C products are processed in Canada from Italian red clay flower pots, saucers and trays which have been fired but are not glazed or decorated. In Canada, the flower pots, saucers and trays are decorated, glazed, fired, and then exported to the U.S. You state that the red clay flower pots are imported into Canada under subheading 6815.99.91, as other clay items.

Type D products are tableware items such as tea pots, cups and saucers, cream and sugar bowls, mugs, cake stands, platters and trays. They are processed in Canada from Portuguese unglazed white earthenware. You state that the articles imported into Canada are unassembled' because without glaze they are unusable and will not hold water. In Canada, the articles are decorated, glazed and fired, and then imported into the U.S.

For each of the types of ceramic, you state that after importation into Canada, the ceramic is called a "bisque" and remains porous. Because it is porous, the glaze will adhere to the pot. The pot is hand dipped into the glaze and allowed to dry. The ceramic is then hand decorated by using brushes and using three to six colors. The glaze is purchased from U.S. suppliers. The pots are then fired.

In a conversation with this office on August 8, 1995, you indicated that you are no longer interested in importing glassware and that that part of your request need not be considered.

For Type A products, you wish to put an adhesive label that reads "Spots Pots Handmade in Canada" or for smaller items, "Canada Spots Pots". You wish to place an adhesive label that reads "Canada Spots Pots". You wish to place an adhesive label on Type C products that reads "Spots Pots hand-decorated in Nova Scotia Canada" or "Spots Pots, Product of Italy, hand-decorated in Canada". You wish to place an adhesive label on Type D products which reads "Spots Pots hand-decorated in Canada".

ISSUES:

1. Are the ceramic articles eligible for NAFTA duty preferences?

2. What is the country of origin of the ceramic articles imported into the U.S.?

LAW AND ANALYSIS:

NAFTA Preference

To be eligible for tariff preferences under the NAFTA, goods must be "originating goods" pursuant to the rules of origin in General Note 12(b), Harmonized Tariff Schedule of the United States (HTSUS). Based on the facts provided, types A and B are considered "goods originating in the territory of a NAFTA party" pursuant to General Note 12(b)(i), HTSUS, because the articles are "goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States." The phrase "goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States", means, in pertinent part:

(i) mineral goods extracted in the territory of one or more of the NAFTA parties;...

(x) goods produced in the territory of one or more of the NAFTA parties exclusively from goods referred to in subdivisions
(n)(i) through (ix), inclusive, or from their derivatives, at any stage of production.

See, General Note 12(n), HTSUS. "Production" is defined by General Note 12(p), as "growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good."

The information submitted indicates that the wood, and ceramic are "goods wholly obtained or produced entirely in the territory of Canada and/or the United States". Therefore, the articles listed under Type A and Type B are eligible for NAFTA tariff preference.

Type C and Type D products are not "originating goods" pursuant to the rules of origin in General Note 12(b)(i), HTSUS. The second method for determining "originating goods" is that they be "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS, which states in pertinent part as follows:
except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein....

The Type C flower pots, and saucers are classified under subheading 6913.90.50, HTSUS, as other ornamental articles of ceramic. See, New York Ruling (NY) 895976 dated April 8, 1994, and NY 860020 dated February 27, 1991. The Type C trays and the Type D white earthenware products are classified under heading 6912, HTSUS, as "Ceramic tableware, kitchenware, other household articles and toilet articles, other than porcelain or china...." Classification to the exact eight digit level is dependant upon the actual article being imported.

As the Type C and Type D products are classified under chapter 69, HTSUS, a transformation is evident when a change in tariff classification occurs that is authorized by General Note 12(t) 69, HTSUS. General Note 12(t) 69, HTSUS, states:

A change to headings 6901 through 6914 from any other chapter.

Therefore, any non-originating materials must come from a chapter other than chapter 69.

In the case of the Type C products, the non-originating materials are the Italian red clay pots, saucers and trays, and for the Type D products, the non-originating materials are the Portuguese white earthenware. All of these products when imported into Canada are classified under heading 6912, HTSUS. See, NY 860020. A change in tariff classification does not occur. Therefore, the finished Type C products manufactured from non-originating red clay pots saucers and trays, and the Type D products manufactured from non-originating white earthenware are not eligible for preferential tariff treatment under the NAFTA.

We note that you state that the Italian red clay pots enter Canada under subheading 6815.99.91, HTSUS, as other clay items. The only supporting evidence submitted appears to be a computer generated Brokerage bill listing "Red clay products" and the subheading 6815.99.91.00, HTSUS. We do not find this evidence compelling. Heading 6815, HTSUS, provides for:

Articles of stone or of other mineral substances (including articles of peat), not elsewhere specified or included....

In understanding the language of the Harmonized Tariff Schedule (HTSUS), Harmonized Commodity Description and Coding System (HCDCS) Explanatory Notes (ENs) may be consulted. The ENs, although not dispositive, provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See, T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989). EN 68.15 (pgs. 909-910) states that:

This heading covers articles of stone or of other mineral substances, not covered by the earlier headings of this Chapter and not included elsewhere in the Nomenclature; it therefore excludes, for example, ceramic products of Chapter 69 (emphasis in original).

The Italian red clay pots, as well as the other Type C and Type D products, are ceramic products classified in Chapter 69, HTSUS. They are not of the class or kind of stone or mineral substances classifiable under heading 6815, HTSUS. Therefore, the Type C and Type D products are excluded from classification under heading 6815, HTSUS. Therefore, Spots Pots products manufactured from non-originating materials are not eligible for the NAFTA tariff preference because the required tariff shift does not occur.

Country of Origin Marking

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 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 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; C.A.D. 104 (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) of the regulations, defines "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 this part; however, for a good of a NAFTA country, the NAFTA marking rules will determine the country of origin.
(Emphasis added).

Section 134.1(j), of the regulations, provides that the "NAFTA marking rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA marking rules.

Part 102 of the regulations sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied."

In the instant case, as you state that the Type A articles are made in Canada from 100% Canadian materials, these articles are products of Canada pursuant to ?102.11(a)(1) or (2).

Type B, Type C and Type D articles are neither wholly obtained or produced in a single country nor produced exclusively from domestic materials, and therefore, ?102.11(a)(1) and (2) are not applicable for purposes of determining whether the articles are goods of Canada. Therefore, it must be determined whether pursuant to ?102.11(a)(3), the foreign materials incorporated into the ceramic articles meet the specific tariff rule of

As discussed above, the Type B pots and Type C flower pots, and saucers are classified under subheading 6913.90.50, HTSUS, as other ornamental articles of ceramic. See, New York Ruling (NY) 895976 (April 8, 1994), NY 860020 (February 27, 1991). The Type B tray, Type C trays and the Type D white earthenware products are classified under heading 6912, HTSUS, as "Ceramic tableware, kitchenware, other household articles and toilet articles, other than porcelain or china...." Classification to the exact eight digit level is dependant upon the actual article being imported.

Thus, the specific tariff rule for these goods is set out in section 102.20(m) (Section XIII: Chapters 68 through 70) of the regulations, which states:

A change to headings 6901 through 6914 from any other chapter.

Therefore, the foreign materials must come from a chapter other than chapter 69.

In the case of the Type B products, the foreign materials are the ceramic tray and pot; for the Type C products, the non-originating materials are the Italian red clay pots, saucers and trays; and for the Type D products, the non-originating materials are the Portuguese white earthenware. All of these products when imported into Canada are classified under heading 6912, HTSUS. See, NY 860020. A change in tariff classification does not occur.

The next step in the hierarchy, 19 CFR ?102.11(b), states that, where ?102.11(a) is not applicable, the country of origin will be the country or countries of origin of the single material that imparts the essential character to the good. Section 102.18(b), states that the only materials to be considered for purposes of identifying the material that imparts the essential character to a good are those domestic or foreign materials that are classified in a provision from which a change in tariff classification is not allowed under the specific rule or other requirements. In this case, the Type B, Type C and Type D ceramic articles imported from Italy and Portugal impart the essential character to the finished ceramics. Therefore, the country of origin of these articles will be the country of origin of the ceramic which is imported into Canada. Therefore, Type C products must be marked to indicate that Italy is the country of origin of the finished article, and Type D products must be marked to indicate that Portugal is the country of origin of the finished article. However, for Type B products, since the ceramic imported into Canada is from the U.S., this would lead to a country of origin designation of U.S. after it is finished in Canada and exported to the U.S. Therefore, for purposes of country of origin marking, the country of origin of the Type B products is the U.S., and the articles are excepted from the marking requirements under 19 U.S.C. 1304.

Pursuant to 19 CFR ?102.19(b), however, if an originating good of U.S. origin has been exported from, and returned to, the U.S. after having been advanced in value or improved in condition in another NAFTA country, the country of origin for such good for Customs duty purposes only is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the U.S. Therefore, for purposes of the assessment of duties at a NAFTA duty rate, the country of origin for Type B articles will be Canada.

You submitted several samples of adhesive labels that you wished to use to mark the country of origin on the articles. Type A and Type B articles may be marked with the adhesive labels which indicate Canada as the country of origin. "CANADA SPOTS POTS", "SPOTS POTS HANDMADE IN CANADA" or "SPOTS POTS HAND DECORATED IN NOVA SCOTIA CANADA" are all acceptable markings.

For the Type C and Type D articles, you must use a label that indicates Italy and Portugal, respectively, as the country of origin. The adhesive label you wish to use for such a situation is "SPOTS POTS PRODUCT OF ITALY HAND DECORATED IN CANADA". Section 134.46, Customs Regulations (19 CFR ?134.46), requires that when the name of any city or locality in the U.S., or the name of any foreign country or locality other than the name of the country or locality in which the article was manufactured or produced, appears on an imported article or its container, there shall appear, legibly and permanently, in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of," or other words of similar meaning. Customs has ruled that in order to satisfy the close proximity requirement, the country of origin marking must appear on the same side(s) or surface(s) in which the name of the locality other than the country of origin appears. HQ 708994 (April 24, 1978). The purpose of 19 CFR ?134.46 is to prevent the possibility of misleading or deceiving the ultimate purchaser as to the origin of the imported article. On the instant adhesive label, "CANADA" appears in larger print than the country of origin, "ITALY" and therefore is not acceptable pursuant to ?134.46. If the print size is changed so that "ITALY" is in comparable size print to "CANADA", the additional language indicating that additional decoration was done in Canada would be an acceptable country of origin marking.

HOLDING:

Pursuant to General Note 12(b)(i), HTSUS, Type A and Type B articles are eligible for NAFTA tariff preference as goods wholly obtained or produced entirely in the territory of Canada and/or the United States. Type C and Type D articles do not satisfy the required change in tariff classification and are, therefore, not eligible for NAFTA tariff preference.

Based on the information submitted, the Type A articles are products of Canada and must be marked to indicate such. The suggested adhesive labels are acceptable for Type A. Type C articles are products of Italy, Type D articles are products of Portugal and they must be marked to indicate that origin, respectively. The adhesive label for Type C and Type D articles may indicate that additional decoration was performed in Canada; however, the print size used for the country of origin must be at least of comparable size to "CANADA". For purposes of marking , Type B articles are products of the U.S. and are thus excepted from marking requirements under 19 U.S.C. 1304. However, for purposes of Customs duties only, pursuant to section 102.19(b), Type B articles are considered products of Canada.

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 Customs officer handling the transaction.

Sincerely,

John Durant, Director
Tariff Classification Appeals

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