Country of origin marking of cigars made in Mexico from Ecuadorian tobacco

HQ H147080 April 12, 2011 CLA-2 OT:RR:CTF:TCM H147080 HvB CATEGORY: Marking; Country of Origin TARIFF NO.: N/A Caitlin Berry Heathcott Associates 17300 Chenal Parkway Suite 300 Little Rock, AR 72223 RE: Country of origin marking of cigars made in Mexico from Ecuadorian tobacco Dear Ms. Berry: This is in response to your request, dated December 22, 2010, requesting a binding ruling on the country of origin marking requirements for Buena Vista Tobacco Factory (“Buena Vista”) cigars, which are made from tobacco grown in Ecuador but are manufactured and processed in Mexico. In your ruling request, you provided color photocopies of the individual cigar label bands and the wooden box. You did not provide a sample proposed marking, as it would appear on the article or container. FACTS: The instant merchandise consists of cigars composed of bales of aged tobacco grown in Ecuador and then shipped to a Mexican factory, where the Ecuadorian tobacco leaves are deveined by hand and divided by the various shades of tobacco. You further indicated that: At the factory, the tobacco leaves are manually flattened and portioned in quantities to make the cigars into various shapes and sizes. Individuals blend the filler and binder leaves together by rolling them on a flat surface. The rolled tobacco is then placed into a manual press for approximately 30 minutes to help shape it into a cylindrical formation. After being removed from the press, the rolled leaves are held together with a natural glue-type substance that is also imported from Ecuador, forming a cigar. The rolled cigars are then cut to appropriate sizes and labels or bands are then applied to each cigar. The bands are printed in the United States and shipped to the factory in Mexico. Finally, the cigars are placed in boxes (boxes are manufactured in China and shipped to Mexico) and exported to the U.S. The cigars are sold to the ultimate purchaser both as individual retail units and in wooden containers (10 cigars per box). Your ruling request contains an image of a rectangular cigar box, with the Buena Vista Tobacco BTF Factory trademark placed on top of the box. “Geneva Switzerland” is written on a lower side panel of the box. You provided two images of the label as it would appear on the cigar band. In the center of the band, the label “Buena Vista Tobacco Factory BTF” is in black and silver and has an approximate diamond shape, but it has six sides; it is also outlined by decorative designs. Horizontal maroon, black and silver lines extend from the label on either side. Also on the band, outside the label, the word “Hand” is on one side with the word “Made” on the other side of the Buena Vista Tobacco Factory BTF label. The two images are identical, except that on one, “Edición Limitada 2008” is written underneath the label in large font, and “Reserva” is written across underneath, in large font, on the other image. ISSUES: What is the country of origin for the subject cigars? Does the proposed “Tobacco Grown in Ecuador; Assembled in Quintana Roo, Mexico” marking satisfy the requirements of 19 C.F.R part 134? (3) Must the Country of Origin marking appear on both the individual cigars and on the wooden container? 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 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 United States, 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, CBP Regulations (19 C.F.R. 134) implements the country of origin marking requirements of 19 U.S.C. §1304. You state that the cigars are procccessed in Mexico, which is a NAFTA country. The country of origin marking requirements for a "good of a NAFTA country" are determined in accordance with Annex 311 of the North American Free Trade Agreement (“NAFTA”) as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations. See also 19 C.F.R. 134.1(b). 19 C.F.R. § 102.11 sets forth the required hierarchy for determining the country of origin under the Marking Rules. Paragraph (a) of this section states that the 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 applicable requirements of these rules are satisfied. Sections 102.11(a)(1) and (a)(2) do not apply to the facts presented in this case because the ingredients are of Ecuadorian origin, but are produced in a Mexican factory. Accordingly, we look to section 102.11(a)(3).  Under section 102.11(a)(3), the Ecuadorian tobacco bales constitutes the “foreign material”. They are classified under heading 2401, HTSUS, which provides for “Unmanufactured tobacco (whether or not threshed or similiarly processed); tobacco refuse.” The finished product, cigars, is described in heading 2402, HTSUS, which provides for: “Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.” The applicable tariff shift rule found in section 102.20(n) provides as follows: HTSUS Tariff Shift and/or other requirements 2402-2403 ..... A change to heading 2402 through 2403 from any other heading, including another heading within that group. Accordingly, the Ecuadorian tobacco leaves are incorporated in such a manner as to satisfy the above tariff shift rule. Thus, Mexico is the country of origin. With respect to the proposed phrase “Tobacco grown in…” as it relates to the requirements of 19 C.F.R. 134, we note that 19 C.F.R. § 134.43(e) provides: Where an article is produced as a result of an assembly operation and the country of origin of such article is determined under this chapter to be the country in which the article was finally assembled, such article may be marked, as appropriate, in a manner such as the following: (1) Assembled in (country of final assembly); (2) Assembled in (country of final assembly) from components of (name of country or countries of origin of all components); or (3) Made in, or product of, (country of final assembly.) The U.S. Customs Court has previously stated that the word "assembly" in the context of a provision within the old Tariff Schedule of the United States is defined as a process which requires finished manufactured or fabricated components which are "joined" together to form an article. Clearly, "assembly" does not include the manufacture, production or fabrication of the essential parts to be used in the assembly process. See Zwicker Knitting Mills v. United States, 469 F. Supp. 727, 734 (Cust. Ct. 1979). Using these definitions as guides, we believe the marking “Assembled in Mexico” is inaccurate. We find that the cigar production process that occurs in Mexico is not an assembly operation because, based on the information that you have provided, the production is not merely incidental. Rather, the tobacco is substantially transformed into cigars at the Mexican factory where the leaves are sorted, deveined and divided, flattened, rolled, manually pressed, glued, and then finally cut to appropriate sizes. Similar to the glove fingertip “tipping” operation at issue in Zwicker Knitting Mills, these processes are “in fact, an indispensable completion or finishing” of the cigar. Ibid, at 732. Accordingly, we find that 19 C.FR. § 134.43(e) is not applicable in this instance. As such, the phrase “Assembly in Mexico” is not permitted. 19 C.F.R. § 134.46 is also applicable because you wish to include “Ecuador,” which is not the country of origin, in the wording of the marking. 19 C.F.R. § 134.46 provides that: In any case in which the words “United States,” or “American,” the letters “U.S.A.,” any variation of such words or letters, or the name of any city or location in the United States, or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appear on an imported article or its container, and those words, letters or names may mislead or deceive the ultimate purchaser as to the actual country of origin of the article, 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. Applying the regulation above, we find that the marking must contain the words “Made in Mexico” or “Product of Mexico” and that you may not utilize your proposed marking “Tobacco Grown in Ecuador; Assembled in Quintana Roo, Mexico.” The marking must clearly state that the article is “Made in…” or a “Product…” of Mexico. In your ruling request, you provided an image of a cigar box which contains Buena Vista BTF trademark on top and “Geneva Switzerland” on a lower panel. You did not provide a complete image of the cigar box and did not ask for advice as to this marking. However, the reference to Geneva, Switzerland on the cigar box is a non-origin reference that triggers the requirements of 19 C.F.R. § 134.46. As such, the country of origin must be marked within close proximity to the words “Geneva, Switzerland”, and preceded by the words “Made in”, “Product of” or words of similar meaning. We now address the third issue, whether the marking as determined above, must appear on both the individual cigar labels and the wooden containers. Cigars are a member of the “J-List” class, a list of articles that fall under the marking requirements of 19 U.S.C. § 1304(a). 19 C.F.R. § 134.33(a) also provides: However, in the case of any article described in this list which is imported in a container, the outermost container in which the article ordinarily reaches the ultimate purchaser is required to be marked to indicate the origin of the contents (emphasis added). We note that the requirements of 19 C.F.R. § 134.33(a) were found to be satisfied in New York Ruling Letter (NY) I82041, dated June 27, 2002, because the cigars subject to that ruling were sold from a display box such that the country of origin marking was visible to the ultimate consumer. Accordingly, the outermost container in which the article ordinarily will reach the ultimate consumer is the retail box of 10 cigars, and must be marked as discussed above. Thus, the individual cigars need not be marked. In the event that the cigars are to be sold individually only and not from the box, we direct your attention to 19 C.F.R. § 134.26, which pertains to articles that are repacked or manipulated after being released from Customs custody. HOLDING: Based on the information provided, the proposed “Tobacoo Grown in Ecuador; Assembled in Quintana Roo” marking does not satisfy the marking requirements at 19 C.F.R. Part 134. In the alternative, you may use the marking “Product of…” or “Made in Mexico; Tobacco Grown in Ecuador.” Provided the invididual cigars are to be sold to the ultimate purchasers while in the instant box, they are not required to be individually marked, per 19 C.F.R. § 134.33. 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 CBP officer handling the transaction. Sincerely, Ieva K. O’Rourke, Chief Tariff Classification and Marking Branch