Country of origin marking requirements for vinyl shells

HQ 731433 December 15, 1989 MAR-2-05 CO:R:C:V 731433 EAB CATEGORY: Marking Michael O'Rourke, Esquire Rode & Qualey, Attorneys at Law 295 Madison Avenue New York, NY 10017 Re: Country of origin marking requirements for vinyl shells Dear Mr. O'Rourke: This is in response to Ms. Diane L. Weinberg's letter dated May 10, 1988, submitted on behalf of Royal Waterbeds Internation- al, Ltd. and requesting a ruling on country of origin marking re- quirements for imported vinyl shells used in the manufacture of waterbed mattresses distributed for retail sale in containers. We regret the delay in responding. FACTS: Vinyl fabric is cut and partially seamed to form a shell in Taiwan, then imported to the U.S. for further manufacturing. In the U.S., four layers of polyester fiber and one layer of foam, all products of the U.S., are attached together and inserted into the vinyl shell, which is seamed closed by the importer to form a waterbed mattress. You indicate that the vinyl shell costs the importer $11.34, while the U.S. components used in the manufac- turing process cost $23.51 per mattress. The U.S. operations, which include inspecting and boxing, add $10.08 to the cost of each mattress. ISSUE: For purposes of country of origin marking, whether a U.S. manufacturer substantially transforms imported vinyl shells by further processing and combining them with U.S. components to make waterbed mattresses. LAW AND ANALYSIS: Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that every article of foreign origin (or its con- tainer) 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 indi- cate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. The primary purpose of the country of origin marking statute is to "mark the goods so that at the time of purchase the ultimate purchaser may, by know- ing where the goods were produced, be able to buy or refuse to buy the product, if such marking should influence his will." United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302, C.A.D. 104 (1940); National Juice Products Association v. United States, 10 CIT 48, 628 F. Supp. 978 (1986). Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements of and exceptions to 19 U.S.C. 1304. The ultimate purchaser is generally the last person in the U.S. who will receive the article in the form in which it was imported," 19 CFR 134.1(d). However, a manufactur- er may be the ultimate purchaser if he converts or combines an imported article into an article with a new name, character or use; in such case, "the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with this part," 19 CFR 134.35. It is a well settled principle of customs law that in order for a substantial transformation to be found, an article having a new name, character or use must emerge from the processing. See United States v. Gibson-Thomsen Co. Inc., 27 C.C.P.A. 267 Customs finds that the manufacturing process that includes combining the imported vinyl shell with articles of U.S. origin is a substantial transformation of the vinyl shell into a new and different article of commerce having a new name, character or use, namely a waterbed mattress, and that your client is the ul- timate purchaser of the imported vinyl shell. The vinyl shell loses its separate identity and becomes an integral component of the waterbed mattress. HOLDING: The vinyl shell(s) that are imported by your client are sub- stantially transformed by your client, thus making your client the ultimate purchaser of the imported shells. The vinyl shells are excepted from marking, provided the containers in which they are imported are marked to indicate the country of origin and customs officials at the port of entry are satisfied that the vinyl shell(s) will be used only in the manner described above and will not be otherwise sold. Statements to this effect may be required at the time of entry. Sincerely, Marvin M. Amernick, Chief Value, Special Programs and Admissibility Branch