Country of origin marking of a printed book; Section 301 Measures

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H323855 April 4, 2022 OT:RR:CTF:FTM H323855 TJS CATEGORY: Origin Mr. Joseph Wilburn 600 S. Cherry St., Ste 520 Glendale, CO 80246 Re: Country of origin marking of a printed book; Section 301 Measures Dear Mr. Wilburn: This is in response to your request for a binding ruling, dated February 21, 2022, on behalf of your client, Martingale Publishing, concerning the country of origin marking and the applicability of the Section 301 measures set forth in U.S. Note 20 to Subchapter III, Chapter 99, Harmonized Tariff Schedule of the United States (“HTSUS”), of a printed book. The National Commodity Specialist Division forwarded your request, along with additional information you provided, to this office for a decision. FACTS: The merchandise at issue is instructional paperback books on quilting. According to your request, there are five titles in the shipment: four titles have 80 pages, and one title has 144 pages. The trim size for all the books is 8-3/8” x 10-7/8”. The pages are printed and folded in Hong Kong and then transferred to a plant in China for binding and packing. The binding process involves combining the book cover with the content pages using a cover-binding machine and binding glue. Then, a guillotine machine trims the books to final size. The printed books as imported from China into the United States are classified under subheading 4901.99.00, HTSUS, which provides for “Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets.” ISSUES: What is the country of origin for marking purposes of the printed books? Are the books subject to Section 301 measures? LAW AND ANALYSIS: What is the country of origin for marking purposes of the printed books? 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 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, Customs and Border Protection Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b) defines “country of origin” as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation to render such other country the “country of origin” within the meaning of this part.” A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, and use, which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982). U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes substantial transformation determinations on a case-by-case basis. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article. See Nat’l Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). If the manufacturing or combining process is a minor one, which leaves the identity of the article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982), aff’d, 702 F. 2d 1022 (Fed. Cir. 1983). The Court of International Trade has indicated that “[f]or courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the article or components.” See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (citing Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121 (1996) and Nat’l Hand Tool Corp., 16 C.I.T. 311). Courts have also considered “the ‘essence’ of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing.” Id. (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-1098 (Ct. Int’l Trade 2000) and Uniroyal, Inc., 542 F. Supp. 1030). In Uniroyal, Inc., 542 F. Supp. at 1029-1030, the court determined that the shoe upper was “the very essence of the completed shoe” and that the attachment of the imported shoe uppers to an outer sole in the United States was a “minor manufacturing or combining process which leaves the identity of the upper intact,” therefore, the shoe upper was not substantially transformed in the United States. The court also noted that the minor assembly operation in the United States “require[d] only a small fraction of the time and cost involved in producing the uppers.” Id. at 1030. When making a substantial transformation determination for printed materials, CBP considers the value of the printed content with respect to the finished good. For example, Headquarters Ruling Letter (“HQ”) 731859, dated June 2, 1989, concerned a book that was printed with text and assembled in Canada and incorporated illustrations from Hong Kong. CBP found that the loose illustrations changed name, character, and use when combined with text and bound into a book. The ruling specifically noted that, whereas illustrations are used visually and have value from their beauty, books are read and viewed, and have value from their content. Thus, CBP concluded that the illustrations were substantially transformed into finished books in Canada where printing and assembly occurred. Where printing and assembly occurs in separate countries, CBP has consistently decided that gluing and cutting does not substantially transform the imported printed materials. HQ 557408, dated January 14, 1994, concerned the substantial transformation of bingo sheet booklets, made of U.S.-origin sheets, which were cut, collated, and glued into booklets in Mexico. The blank sheets were printed with bingo faces either in the United States or Mexico. When printing occurred in the United States, CBP determined the bingo sheets were not substantially transformed in Mexico because the sheets retained their essential character–that of bingo face sheets–throughout the assembly operations. Conversely, when the printing took place in Mexico, a substantial transformation occurred because the blank paper was a raw material with varied potential uses. In both scenarios, CBP concluded that the paper sheets were dedicated for use as bingo faces after the printing was completed. Similarly, in HQ 560155, dated April 10, 1997, CBP determined that trading cards printed in the United Kingdom were not substantially transformed in the United States where the cards were cut, glued, and packaged. The issue in this case is whether the operations in China substantially transform the printed pages from Hong Kong. The processing in China involves glue-binding the folded printed pages together with a cover and trimming the books. Consistent with the rulings cited above, we find that gluing and trimming are simple processes that leave the identity of the imported printed pages intact. The printed pages from Hong Kong have the same purpose as the finished books–to convey information. Consumers read the books, not for the covers, but for the content on the pages, which can be obtained with or without the binding. Like HQ 557408, printing the pages dedicates them for a particular use, in this case, as a resource on quilting. Since the text provides the value and substance, the printed pages impart the essence of the finished books. Based on the facts presented, we conclude that the books are products of Hong Kong, where the printing takes place. On July 14, 2020, the President issued Executive Order 13936, which explicitly suspended the application of section 201(a) of the United States-Hong Kong Policy Act of 1992, as amended (22 U.S.C. § 5721(a)), to the CBP marking statute found in 19 U.S.C. § 1304. See also “Country of Origin Marking of Products of Hong Kong,” 85 Fed. Reg. 48551 (Aug. 11, 2020). In accordance with the Executive Order, the country of origin marking of goods produced in Hong Kong to indicate that their origin is “Hong Kong,” pursuant to 19 U.S.C. § 1304, is no longer acceptable. Therefore, in the Federal Register Notice (85 Fed. Reg. 48551), CBP stated that goods produced in Hong Kong may no longer be marked to indicate “Hong Kong” and, instead, must be marked to indicate that their origin is “China.” Accordingly, the printed books subject to this ruling should be marked to indicate that their origin is China. (2) Are the books subject to Section 301 measures? The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 4901.99.00, HTSUS, unless specifically excluded, are subject to an additional 7.5% ad valorem rate of duty. When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis is applicable. In the case of Section 301 measures that are specific to products of China, goods that are produced in Hong Kong are not currently considered to be products of China. Since, as discussed above, the country of origin of the printed books is Hong Kong, Section 301 measures will not apply. HOLDING: Based on the information provided, the country of origin of the printed books is Hong Kong. However, pursuant to Executive Order 13936, the books must be marked as products of China. As the country of origin of the printed books is Hong Kong, Section 301 measures will not apply. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” 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 CBP officer handling the transaction. Sincerely, Yuliya A. Gulis, Chief Food, Textiles and Marking Branch