Country of origin marking for optical frame screws; epoxy; 19 CFR 134.35(a)

HQ 561130 March 3, 1999 MAR-2-05 RR:CR:SM 561130 MLR CATEGORY: Marking Ms. Janice Johnson Hilco, The Hilsinger Company 33 West Bacon Street P.O. Box 1538 Plainville, MA 02762-0538 RE: Country of origin marking for optical frame screws; epoxy; 19 CFR 134.35(a) Dear Ms. Johnson: This is in reference to your letter of August 24, 1998, requesting a ruling concerning the country of origin marking requirements for certain optical frame screws. A catalog, brochures, and samples were submitted with your request. FACTS: Samples of “Sil, Tap’n’Lok” 1.8 dia x 8.0 lg screws and “safe-lok” 1.6 dia x 4.5 lg screws, with their respective vial containers were submitted. These screws are used in optical frames. In a telephone conversation with a member of my staff, you stated that Hilsinger Company imports screws from various countries, including China, Korea, Spain, and Switzerland. Hilsinger also purchases “tight-bond”, a micro-encapsulated two-part epoxy (“epoxy”), which you indicate is made in Michigan. Hilsinger places the imported screws in a vibrator bowl, and sprays the screws with the epoxy. The purpose of applying the epoxy is to avoid the problem of screws loosening and falling out of optical frames. It is indicated that the epoxy adheres to the threads of the screw and is inert until the screw is inserted. When the screw is inserted into the frame, it is stated that the molecules mix together and form an epoxy that holds the screw in place indefinitely. This process increases the back out torque of an ordinary optical screw up to 79 percent. It is stated that Hilsinger developed the use of this process on small optical screws and that the screw can be removed and installed several times and it still continues to provide strong resistance to vibration and unloosening. You state that Hilsinger distributes the coated screws to optical departments that use the screws in optical frames. ISSUE: Whether the application of the epoxy results in a substantial transformation of the imported screws into products of the U.S. LAW AND ANALYSIS: The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) 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. Friedlaender & Co. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940). 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 “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 the marking laws and regulations. I. Substantial Transformation For country of origin marking purposes, a substantial transformation of an imported article occurs when it is used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. In such circumstances, the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the “ultimate purchaser” of the imported article, and the article is excepted from marking, although the outermost container of the imported article is required to be marked. See 19 CFR 134.35(a). In this case, it is claimed that the imported screws are substantially transformed into products of the U.S. by applying the epoxy, as it adds 52 percent to the value of the screw and increases the screw’s back out torque up to 79 percent. The process is stated to be different than the application of liquid glue by the optician, as the epoxy remains inert until it is inserted into the frame. In Headquarters Ruling Letter (HRL) 733579 dated August 20, 1990, Customs determined that formed pots and pans which were imported and further processed in the U.S. by deburring, polishing, painting, coating with a nonstick surface, and attaching handles, were not substantially transformed within the meaning of 19 CFR 134.35, as the U.S. processing constituted a minor operation which left the identity of the imported articles intact. Accordingly, the imported aluminum pots and pans remained products of the foreign country in which they were made. In HRL 734301 dated March 31, 1992, Customs considered imported driftwood dipped into an epoxy resin to seal the pores and block the release of tannic acid, a toxin harmful to aquarium life, in order to make it suitable for use in aquariums. A molded base of U.S. origin was also affixed to the driftwood to prevent it from floating in the aquarium. Customs determined that the U.S. processing did not change the essential character and use of the driftwood, and that the imported driftwood was perfectly suited as a decorative fixture in a naturally occurring aquatic environment even though an epoxy coating was necessary to prevent the release of the tannin. See also HRL 555881 dated May 18, 1991 (adding a protective coating to knee pads and floats was not a substantial transformation even though it was claimed that the floats and pads had other potential uses before the protective coating was added), and HRL 733693 dated October 17, 1990 (merely applying epoxy and paint to sunglasses frames did not constitute a substantial transformation). Similarly, in this case, we find that coating the imported screws with the epoxy does not result in a substantial transformation of the foreign screws into a product of the U.S. The screws as imported are “optical screws” and remain “optical screws” after the coating process. While the epoxy allows the screws to hold the frames together in a superior manner and is an improvement in their performance characteristics, the screws both before and after coating are still used for locking frame components together. The court in National Hand Tool Corp. v. United States, 6 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993), found that while heat treating imported hand tools to strengthen the surface of the steel changed the microstructure of the material, there was no change in the chemical composition of the steel. The court stated that although these “microstructural changes may amount to changes in the characteristics of the material, they do not change the character of the articles.” Similarly, we see no evidence of any change in the metallurgical composition of the screws as a result of the application of the epoxy. Therefore, as the imported screws do not undergo a substantial transformation in the U.S., they must be marked to indicate to the ultimate purchaser in the U.S. their foreign country of origin. It is stated that the screws will be distributed to opticians who will use the screws to connect optical frame components. When opticians use the screws to make and repair optical frames, the screws will lose their identity and under this scenario, the opticians will be the ultimate purchasers. II. Marking of Screws Section 134.33, Customs Regulations (19 CFR 134.33), excepts certain articles from individual country of origin marking in accordance with 19 U.S.C. 1304(a)(3)(J) and only requires that the outermost container in which the article ordinarily reaches the ultimate purchaser be marked with the country of origin. Screws are listed on the so-called “J-list” as one of the articles entitled to this exception. Generally, Customs policy is that absent other circumstances, it is not acceptable for purposes of 19 U.S.C. §1304 to mark an article in the disjunctive, e.g., “Product of ____ or ____”. In C.S.D. 8456 (December 12, 1983), Customs allowed industrial fasteners (i.e., screws, nuts, bolts and washers) to be marked “from one or more of the following countries....” to indicate the country of origin of fasteners, where there were many varieties from many countries. Only the major source countries from which a particular repackager acquired his stock were required to be listed on the container label. It was also found that the list should begin with that country from which a distributor obtains the greatest percentage (by weight or by piece) of his stock. Customs also stated that it was not necessary to list all countries from which a particular repackager obtained only relatively small quantities of fasteners. Customs allowed this partial exemption to “eliminate the economic prohibitions of strict compliance but preserve the repackager’s obligation to advise the ultimate purchaser of the foreign origin of the repackaged fasteners.” In this case, while the samples submitted are packaged in small vials, only the outermost container in which the vials are packaged and received by opticians must be marked to indicate the country or countries of origin of the screws. Furthermore, only the major source countries from which Hilsinger obtains the screws must be listed and it would be appropriate to label the outermost container: “Made in China, Korea, Spain, Switzerland, or U.S.A.” (in order of the greatest percentage from which Hilsinger receives the screws). Additionally, your attention is directed to the certification requirements of 19 CFR 134.25. These certification requirements would be applicable if the screws are imported in bulk and repackaged into retail packages, or if opticians repackage the screws for individual sale to consumers. According to 19 CFR 134.25, the importer must certify to the port director on entry that, if the importer does the repacking, the new container will be marked to indicate the country of origin of the article, or if the article is to be sold to a subsequent purchaser or repacker, the importer will notify the purchaser or repacker of such marking requirements. HOLDING: Based on the facts submitted, foreign imported screws subjected to a epoxy coating process in the U.S. do not undergo a substantial transformation. Therefore, the outermost container in which the screws are packaged must be labeled with the country or countries of origin of the screws. However, only the major source countries from which Hilsinger obtains the screws must be listed in descending order by quantity, and the marking may be in the disjunctive. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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 Commercial Rulings Division