The country of origin of pencils manufactured in the Philippines containing materials made in China and the Philippines

N333392 June 28, 2023 OT:RR:NC:N4:462 CATEGORY: Origin Nithya Nagarajan Husch Blackwell LLP 1801 Pennsylvania Avenue NW, Suite 1000Washington, DC 20006 RE:  The country of origin of pencils manufactured in the Philippines containing materials made in China and the Philippines Dear Ms. Nagarajan: In your letter dated June 6, 2023, you requested a country of origin ruling on of pencils manufactured in the Philippines containing materials made in China and the Philippines. The pencils in question consist of three categories of pencils: #2 pencils, drawing pencils, and colored pencils. #2 Pencils “School Smart® #2 Pencils” are hexagonal and measure 7.5" x .25" with black 2.2 mm graphite lead. Pencils are unsharpened and pre-sharpened, made of basswood. Pencil barrels are painted all yellow for standard sets and are also offered in an assortment of colored barrels in red, blue, green, and yellow. Barrels are stamped with the School Smart mark and the number 2 in black. Pencils are tipped with a 0.59” silver ferrule and a 0.197” pink eraser. Yellow pencils are offered in sets of 12,19 and 144. Colored barrels are offered in sets of 144 and include an assortment of orange, red, yellow, green, and blue. “School Smart® Primary Pencils” are round and measure 7.5" x .344" with black 3.5 mm graphite lead. Pencils are unsharpened and made of basswood. Pencil barrels are painted all yellow and stamped with the School Smart mark in black. Pencils are tipped with a 0.75” silver ferrule and a 0.25” pink/blue striped eraser. This product is offered in packs of 12. “School Smart® Starter Pencils” are hexagonal and measure 7.5" x .40" with black 4.0 mm graphite lead. Pencils are unsharpened and made of basswood. Pencil barrels are painted all yellow and stamped with the School Smart mark in black. Pencils are tipped with a 0.75” silver ferrule and a 0.25” pink/blue striped eraser. The product is offered in packs of 12. Drawing Pencils “Sax® Graphite Drawing Pencils” are hexagonal and measure 7" x .25" with black 2.0 mm, 2.2 mm, 2.4 mm, or 3.0 mm graphite lead. Pencils are pre-sharpened and made of basswood. Each pencil is painted red on most of the barrel with a black painted end. The Sax mark and the words Graphite Pencil and the degree of lead hardness (6B, 4B, 2B, B, HB, or 2H) are stamped on the barrels in silver foil. Each pencil degree of hardness is offered individually in packs of 12, in an assorted set including one each of the six degrees, and a large, assorted pack of 144 containing 12 each of the six degrees. “School Smart® Colored Pencils” are hexagonal and measure 7” x 0.28” with a colored 3.3 mm wax/clay core. Pencils are pre-sharpened and made of basswood. Each pencil barrel is painted entirely in the color that corresponds to the core color. The School Smart mark is stamped on barrels in gold foil. Pencils are offered in sets of 12 and 24 with all unique colors. Large, assorted packs include either 18, 25, or 40 each of colors red, yellow, blue, green, orange, and black. The set of 144 also includes 18 each of white and purple. The set of 250 adds 25 each of light blue, violet, pink, and brown. The set of 480 adds 40 each of light blue, violet, pink, brown, light green, and white. Colored Pencils “School Smart® Multicultural Colored Pencils” are round and measure 7” x 0.28” with a colored 3.3 mm wax/clay core. Pencils are pre-sharpened and made of basswood. Each pencil barrel is painted entirely in the color that corresponds to the core color. The School Smart mark is stamped on barrels in gold foil. Offered in a set of 8 in colors cocoa, espresso, mahogany, chestnut, amber, caramel, pecan, and alabaster. In your letter, you explain that School Specialties purchases the pencils from its Philippine manufacturer who sources part of the materials from China (slate, graphite core colored core, ferrule, and eraser) and the remainder (paint, glue, and packing materials) within the Philippines. The production process is divided into four phases including: pencil construction, finishing, packaging, and quality control inspections, which occur throughout the production process. Pencil construction includes: grooving, sandwiching, and shaping the pencils. Pencil finishing involves: varnishing, heading, stamping, tipping, and sharpening. In your letter, you assert that all processing occurs at the manufacturer facility in the Philippines. Section 134.1(b) of the Customs Regulations (19 CFR 134.1(b)) provides that “‘Country of origin’ means 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 in order to render such other country the ‘country of origin’ within the meaning of this part.” Substantial transformation requires that "There must be a transformation; a new and different article must emerge, ‘having distinctive name, character, or use.’" See Anheuser-Busch Brewing Association v. United States, 207 U.S. 556, 28 S. Ct 204 (1908). The work performed in the Philippines on the various components that are made in China and shipped to the Philippines for manufacture into the completed pencils have effected a substantial transformation of those components and, therefore, the country of origin of the imported pencils is the Philippines. This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Sandra Sary at sandra.sary@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division