Request for classification and rate of duty; 19 U.S.C. 1516; 19 CFR 175.22(b); Country of origin of marking requirements for ceramic coffee mugs; C.S.D. 84-113, dated July 13, 1984

HQ H005163 December 12, 2008 CLA-2: OT:RR:CTF:TCM H005163 KSH CATEGORY: Marking Anthony Troia, Esq. Edmund Maciorowski 33 Bloomfield Hills Pkwy Suite 250 Bloomfield Hills, MI 48304 RE: Request for classification and rate of duty; 19 U.S.C. 1516; 19 CFR 175.22(b); Country of origin of marking requirements for ceramic coffee mugs; C.S.D. 84-113, dated July 13, 1984 Dear Mr. Troia: This document is in response to your request for classification and rate of duty, on behalf of your clients Marck & Asociates Inc. and Custom Deco, LLC (petitioners) challenging Customs Service Decision (C.S.D.) 84-113, dated July 13, 1984, concerning the country of origin marking requirements for ceramic coffee mugs. In reaching our determination herein, additional consideration was given to your supplemental submissions dated February 14, 2007 and October 16, 2008, as well as the substance of a conference held with members of my staff on July 29, 2008. FACTS: Under current practice, imported ceramic mugs may be marked with a paper adhesive label to indicate the mugs’ country of origin provided that the mugs will not be further processed in the United States in such a way that the paper label will be destroyed or obscured. If such further processing will be performed in the United States the mug must be more permanently marked by embossing or other acceptable method. You have requested through your petition that Customs and Border Protection (CBP) adopt the position that paper adhesive labels are not an acceptable method of marking the articles with its country of origin regardless of whether the ceramic mugs will undergo further processing in the United States which would destroy or obscure the adhesive label or not. Pursuant to section 516, Tariff Act of 1930, as amended (19 U.S.C. 1516) and Part 175, CBP Regulations (19 CFR Part 175), a domestic interested party may challenge certain decisions made by CBP regarding imported merchandise which is claimed to be similar to the class or kind of merchandise manufactured, produced or wholesaled by the domestic interested party. Petitioners are wholesalers of among other goods, ceramic mugs and qualify as domestic interested parties within the meaning of 19 U.S.C. 1516(a)(2). The Court of International Trade has recognized the rights of domestic parties to file a 19 U.S.C. 1516 petition to challenge a CBP country of origin determination. Norcal/Crosetti Foods, Inc. v. U.S. Customs Service, 15 Ct. Int'l Trade 60, 758 F. Supp. 729 (1991). In C.S.D. 84-113, CBP determined that paper adhesive labels are an acceptable method of marking ceramic mugs with their country of origin provided that the ceramic mugs would not undergo further processing in the United States which would destroy or obliterate the paper adhesive label. Specifically, CBP determined that an importer who performs decalcomania and kiln firing of an already glazed coffee mug is not the ultimate purchaser because the processing does not effect a substantial transformation of imported mug. See United States v. Gibson-Thomsen, 27 C.C.P.A. 267 (1940). Furthermore, CBP stated that a more permanent method of marking such as embossing is necessary to survive the decalcomania or kiln firing in the United States. ISSUE: Whether paper adhesive labels are an acceptable means of marking ceramic mugs with its country of origin as described above. 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 United States, or their containers, must be marked with the English name of the country of origin in a conspicuous place as legibly, indelibly and permanently as possible.  Further, this section provides in part that, "[t]he Secretary of the Treasury may by regulations . . . prescribe any reasonable method of marking." Id. § 1304(a)(1). The legislative history of § 1304(a)(1) indicates that "may" is to be construed as "shall," for purposes of the statute. Customs Admin. Bill: Hearings before the House Comm. on Ways and Means on H.R. 6738, 75th Cong., 1st Sess. 46, 49 (1937). The country of origin marking requirements and exceptions of 19 U.S.C. 1304 are implemented by Part 134, CBP Regulations (19 CFR Part 134). As provided in section 134.41, CBP Regulations (19 CFR 134.41), the country of origin marking is considered to be conspicuous if the ultimate purchaser in the U.S. is able to find the marking easily and read it without strain. That section further provides that the degree of permanence should be at least sufficient to insure that in any reasonably foreseeable circumstance, the marking shall remain on the article until it reaches the ultimate purchaser unless it is deliberately removed. As a general rule, marking requirements are best met by marking worked into the article at the time of manufacture. For example, it is suggested that the country of origin on metal articles be die sunk, molded in or etched. See 19 CFR 134.41. However, CBP normally permits any reasonable method of marking that will remain on the article during handling until it reaches the ultimate purchaser. This includes the use of paper stickers or pressure sensitive labels and string tags. See Headquarters Ruling Letter (HQ) 703500, dated March 10, 1990. If paper stickers or pressure sensitive labels are used, section 134.44, CBP Regulations (19 CFR 134.44), provides that they must be affixed in a conspicuous place and so securely that unless deliberately removed they will remain on the article while it is in storage or on display and until delivered to the ultimate purchaser. In your petition, you request that C.S.D. 84-113 be revoked and that CBP disallow paper adhesive labels for country of origin marking of coffee mugs regardless of whether the coffee mugs will be further processed in the United States or not. You state that paper adhesive labels violate the marking statute by allowing an unreasonable marking method which frustrates the purpose of the statute insofar as kiln firing of the mugs necessarily obliterates any temporary marking present at the time of importation. You maintain that it is impossible to identify and distinguish between mugs being kiln fired post importation thereby destroying the country of origin label. You proffer that over 40% of the domestic industry is importing coffee mugs which may be deficiently marked with paper stickers or no marking at all and approximately 40% of domestic decorators may be reselling mugs with deficient country of origin marking. We note that your submission contained photos of unidentifiable containers of ceramic mugs without country of origin labels and one photo of a container of mugs marked with adhesive labels. As previously noted, 19 CFR 134.41, states that the degree of permanence should be sufficient to insure that in any reasonably foreseeable circumstance the marking shall remain on the article until it reaches the ultimate purchaser unless it is deliberately removed. Consistent with this recitation, CBP determined in C.S.D. 84-113, that only ceramic coffee mugs which would not undergo further processing that would obliterate the label could be marked with paper adhesive labels. CBP has unequivocally stated, consistent with your position, that paper adhesive labels may not be used if further processing will occur by kiln firing or decalcomania. You do not contend that paper adhesive labels would not survive normal distribution if no further processing in the U.S. occurred. There is no evidence in your submission whether or not the unidentifiable unmarked mugs in the photos were intended for repacking and thus subject to continuing CBP supervisory control. Section 134.26(a) provides that if an article subject to country of origin marking is intended to be repacked after its release from CBP custody, or the port director having custody of the article has reason to believe that the article will be repacked after its release, the importer shall certify to the port director that: (1) if the importer does the repacking, he shall not obscure or conceal the country of origin marking appearing on the article, or else the new container shall be marked to indicate the country of origin of the article...; or (2) that if he does not repack the article he will give notice to subsequent purchasers or repackers of their obligations under section 19 U.S.C. §1304 and Part 134, CBP Regulations. The procedures set forth at 19 CFR 134.26 apply only to articles that are legally marked at the time of importation. See, for example, HQ 561269, dated February 29, 2000. In HQ 561269, certain unmarked firearm parts were imported into the United States in bulk, commingled with other parts, repackaged into sealed plastic containers and sold at retail in properly marked containers as spare parts. Where the outermost container of the imported gun parts to be repacked in the United States was correctly marked with country of origin information, the certification procedures of 19 CFR 134.26 were to be utilized; whereas, it was stated that the separate procedures of 19 CFR 134.34 were to be utilized when unmarked gun parts were imported in unmarked outer containers. Section 134.34, CBP Regulations, provides that an exception to marking may be authorized in the discretion of the district director provided that: the containers in which the articles are repacked will indicate the origin of the articles; the importer arranges for CBP supervision of the repacking or provides verification satisfactory to CBP that the repacking results in acceptable country of origin marking prior to liquidation; and that the liquidation is not deferred more than 60 days. Furthermore, articles not marked in accordance with 19 C.F.R. Part 134 are subject to additional duties. In particular, 19 CFR 134.2 provides the following: Articles not marked as required by this part shall be subject to additional duties of 10 percent of the final appraised value unless exported or destroyed under Customs supervision prior to liquidation of the entry, as provided in 19 U.S.C. 1304(f). The 10 percent additional duty is assessable for failure either to mark the article (or container) to indicate the English name of the country of origin of the article or to include words or symbols required to prevent deception or mistake. Assuming arguendo that the importers or decorators are willfully obliterating the paper adhesive label after importation, 19 U.S.C. 1304 allows for the imposition of criminal penalties. Specifically, 19 U.S.C. 1304(l) provides the following: (l) Penalties. Any person who, with intent to conceal the information given thereby or contained therein, defaces, destroys, removes, alters, covers, obscures, or obliterates any mark required under the provisions of this Act shall--   (1) upon conviction for the first violation of this subsection, be fined not more than $ 100,000, or imprisoned for not more than 1 year, or both; a (2) upon conviction for the second or any subsequent violation of this subsection, be fined not more than $ 250,000, or imprisoned for not more than 1 year, or both. Under the facts that have been presented herein, it has not been demonstrated that the existing statutory scheme and regulations are inadequate to enforce the existing requirements. C.S.D. 84-113 is an accurate interpretation of the aforementioned regulations and statutory requirements. HOLDING: Ceramic coffee mugs may be marked by paper adhesive labels provided that the ceramic coffee mugs will not undergo any further processing in the United States which would necessarily obliterate or obscure the country of origin marking. Ceramic coffee mugs which will undergo further processing in the United States are not substantially transformed and must be marked by a more permanent method such as embossing or engraving. EFFECT ON OTHER RULINGS: C.S.D. 84-113, dated July 13, 1984, is affirmed. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division