HQ 731484

October 3, 1988

MAR 2-05 CO:R:C:V 731484 LR

CATEGORY: Marking

Area Director of Customs

JFK Airport, Bldg. 178

Jamaica, New York 11430

Re: Application for Further Review of Protest No.

1001-8-004214

Dear Sir:

This protest was filed by N & B Jewelry Corp. (hereinafter

referred to as the importer), against your decision to issue

marking notices and demands for redelivery of jewelry covered by

CE\'s 915-0192995-3 and 915-0192775-9 which was not marked to

indicate the country of origin, as required by section 304,

Tariff Act of 1930, as amended (19 U.S.C. 1304).

FACTS:

On February 24, 1988, Customs issued a CF 4647, marking/

redelivery notice, to the importer for a shipment of gold chains

which were not marked to indicate their country of origin. Only

the shipping carton was marked. The unmarked sample retained by

Customs is a gold chain which appears to be ready for sale in

its imported condition. On March 3, 1988, the importer\'s broker

certified that the merchandise in question has been marked to

indicate the country of origin as required by 19 U.S.C. 1304.

A sample was submitted which showed that the jewelry had been

marked with the country of origin by means of a hang tag.

A CF 4647, marking/redelivery notice, was issued to the

importer on March 4, 1988, for another shipment of jewelry

consisting of gold chains and gold bangle bracelets which were

also not marked to indicate the country of origin. Again, only

the shipping carton was marked. On March 7, 1988, the broker

returned the notice to Customs and certified that the merchandise

has been marked to indicate the country of origin. Another

sample was submitted which showed that the jewelry had been

marked with the country of origin by means of a hang tag.

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On March 8, 1988, Customs conducted a marking examination

at the importer\'s premises and found that most of the jewelry in

question had already been sold and that the remaining jewelry had

not been marked with the country of origin. The record indicates

that the importer\'s vice president told Customs officials that

the company was in the process of ordering labels to mark future

shipments. The record further indicates that both the importer\'s

president and vice president informed Customs officials that they

thought that the shipments in question did not have to be marked

and could be freely sold in their imported unmarked condition.

By letter dated March 23, 1988, Customs notified the

importer that since the merchandise had not been marked with the

country of origin, redelivery was ordered as per the CF 4647\'s,

30 days from the date of each notice.

The gold rope chains are made in the Dominican Republic

from gold of U.S. origin. According to the importer, some of the

chains are imported in a blackened condition as a result of

oxidation and are cleaned after importation in a solution of

hydrogen peroxide and sodium cyanide which removes the oxidation,

other dirt and strips off ten percent of the gold. Some of the

chains are not imported in a blackened condition but purportedly

are cleaned after importation by soaking them in a solution of

ammonia and a special soap to remove dirt and grime which

accumulated during the work performed in the Dominican Republic.

The bangle bracelets, which are made in the Dominican Republic

from U.S. components, are allegedly cleaned after importation in

a \"special solution\" and may also be polished, buffed and washed.

The bangles are then sold to a buyer who chemically cleans,

polishes, buffs and washes the bangles before reselling them.

The importer is challenging the issuance of the marking/

redelivery notices on the basis that the jewelry was to be

processed in the manner set forth in 19 U.S.C. 1304(a)(3)(G) and

19 CFR 134.32(g) and therefore, was excepted from marking at the

time of importation. The importer claims that only the shipping

cartons were required to be marked with the country of origin.

The importer is also challenging the issuance of the

notices with respect to the bangle bracelets on the basis that

they are products of the U.S. and not subject to the requirements

of the marking statute.

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ISSUES:

Is the merchandise in question entitled to an exception

from marking pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR

134.32(g)?

Are the bangle bracelets considered products of the U.S.

and therefore not subject to the marking requirements of 19

U.S.C. 1304?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19

U.S.C. 1304), requires that every article of foreign origin

(or its container) imported into the U.S., subject to certain

specified exceptions, 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 U.S. the English name of the country of

origin of the article. The purpose of the marking statute is to

inform the ultimate purchaser of the country of origin so that he

can decide whether or not to purchase them.

MARKING EXCEPTION - ARTICLES PROCESSED IN THE U.S.

Pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g),

one of the general exceptions from the marking requirements is

for articles to be processed in the U.S. by the importer or

for his account otherwise than for the purpose of concealing

the origin of such articles, and in such manner that any mark

contemplated by law would necessarily be obliterated, destroyed,

or permanently concealed.

The importer claims that the jewelry qualifies for an

exception under the above provisions. First, it is noted that

due to the small clasp on the gold chains and the fragile nature

of the bangles, the jewelry cannot be marked legibly and cons-

picuously by die-stamping and that the only feasible method of

marking said items is by hang tags. Second, it is claimed that

the jewelry undergoes an extensive cleaning process in the U.S.;

and finally, that the hang tags would have to be removed during

this processing.

As explained more fully below, we are of the opinion

that the importer is not entitled to an exception from marking

pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g) because:

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a\) no claim for such an exception and no supporting evidence was

submitted to Customs at the time of entry or in response to the

marking/redelivery notices; b) despite the fact that the

importer\'s broker certified that the merchandise in question had

been marked after importation by means of a hang tag, the jewelry

was not so marked and was sold or was about to be sold in an

unmarked condition; and c) except for the chains which are

imported in a blackened condition and cleaned by the importer in

a solution of hydrogen peroxide and sodium cyanide to remove the

oxidation, a process which also removes 10 percent of the gold,

the jewelry was not processed by the importer within the meaning

of the statute.

a\) The instances in which an exception under 19 U.S.C.

1304(a)(3)(G) and 19 CFR 132.32(g) have been granted by Customs

have been limited. In the cases where the exception was applied,

Customs found that supporting statements of intended processing

to be performed by the importer or for his account was a con-

dition of entitlement to the statutory exception. See RM 363.2

W, dated January 25, 1967 and HQ 729434, dated May 23, 1986.

Although the importer now claims that the issuance of the CF

4647\'s was in error because the jewelry was not required to be

marked at the time of importation, the importer did not claim

any exception from marking or submit documentation supporting

the exception at the time of entry. After receipt of the marking

notices, the importer again did not raise the issue of a possible

exception from marking, but instead provided samples of the

jewelry, properly marked with the country of origin by means of

hang tags and certified (through its broker) that the articles

in question had been marked accordingly. Even at the time of

the marking examination by Customs officials at the importer\'s

premises to determine whether the shipments had been marked in

accordance with the certifications, the importer did not raise

the alleged processing.

Since the imported jewelry appeared to Customs to be

finished goods ready for sale in its imported condition without

further processing, and the importer claimed no exception from

marking and provided no evidence to support any exception from

marking, the issuance of the marking notices was proper. More-

over, by failing to raise the arguments that the jewelry was

excepted from marking because it was processed in the manner

set forth in 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g),

Customs did not have the opportunity to consider and verify

such claims.

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b\) More importantly, the importer is not entitled to an

exception from marking under 19 U.S.C. 1304(a)(3)(G) and 19 CFR

134.32(g) because the importer did not mark the jewelry after the

alleged processing in accordance with the submitted samples and

certification. In HQ 729434, supra, Customs ruled that articles

which otherwise satisfied the legal requirements were entitled

to an exception from marking under these provisions only if the

district director was satisfied that the finished articles would

be marked in a manner to indicate the country of origin to the

ultimate purchaser. In this case, notwithstanding the fact that

the importer submitted a sample chain and bracelet which were

properly marked with the country of origin by means of a hang

tag and the importer\'s broker certified that the merchandise in

question had been so marked, the marking examination conducted

at the importer\'s premises on March 8, 1988, to verify the

certifications, revealed that most of the jewelry had already

been sold without the requisite marking and that the remainder

of the jewelry was also unmarked and was about to be sold with-

out the requisite marking. Representatives of the company

admitted to Customs officials that they did not know that the

current shipments had to be marked and that they ordered new

labels for the purpose of marking future shipments with the

country of origin. Since the importer did not mark the jewelry

in question after the alleged processing, one of the conditions

for an exception from marking under 19 U.S.C. 1304(a)(3)(G) and

19 CFR 134.32(g) as interpreted by Customs, the importer was not

entitled to an exception from marking and issuance of the marking

notices and the demands for redelivery were proper.

c\) The statute requires that the articles entitled to the

marking exception are to be \"processed\" in the U.S. by the

importer or for the importer\'s account. In this case, we are of

the opinion that with the exception of the gold chains that are

imported in a blackened condition, the imported gold chains and

bangle bracelets are not processed within the meaning of the

statute. Since the term \"processed\" is not defined in the

statute, it must be given its ordinary meaning. While there are

no court cases that define the term \"processed\" in the context

of the marking exception, there are numerous cases in which the

ordinary dictionary meaning of this term has been discussed. For

example, in Mitchell v. Oregon Frozen Foods, Co., 264 F.2d 599,

601 (9th Cir. 1958), the court stated that \"process\" is defined

by the dictionary as to subject to some special process or

treatment, as in the course of manufacture. In Corn Products

Refining Co. v. FTC, 324 U.S. 726,744 (1945), the Supreme Court

in interpreting the provisions of the Clayton Act states, \"While

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the Act does not define the term processing, the conversion of

dextrose into candy would seem to conform to the current

understanding that processing is \"a mode of treatment of material

to be transformed or reduced to a different state or thing\"

(emphasis added).

In RM 363.2 W, one of the cases referred to above in which

Customs applied the exception under 19 U.S.C. 1304(a)(3)(G) and

19 CFR 134.32(g), the imported articles (nickel cadmium storage

battery components and battery parts) were subjected to the

following operations: assembly, installation of insulation,

placement into plastic containers and, in some cases, chemical

treatment. In HQ 729434, another decision in which the exception

was granted, the imported glass ornaments were processed by

cleaning, chrome plating and the addition of hooks and suction

cups. In both these case, the imported articles were clearly

subjected to a special process in the course of manufacture.

In the instant case, we disagree with the importer\'s

contention that the gold rope chains which are merely soaked in a

solution of ammonia and soap to remove dirt and the gold bangles

that are cleaned in a \"special solution\" and possibly polished,

buffed and washed, are \"processed\" within the meaning of the

statute. In our view, the mere cleaning and/or buffing of the

jewelry which has little, if any, effect on the appearance of

these items, does not constitute a special process in the course

of manufacture. We do not believe that Congress intended such

minor operations to warrant an exception from the marking

requirements. Moreover, the fact that the bangles are sold to a

buyer who chemically cleans and again polishes, buffs and washes

them (the same operations performed by the importer) before they

are resold, leads us to question the necessity or legitimacy of

the importer\'s operations. The language of the statute (i.e.

such article is to be processed in the U.S. by the importer or

for his account) precludes the operations performed by the

importer\'s buyer from being considered.

We agree with the importer\'s claim, however, that the gold

chains that are imported in a blackened condition are \"processed\"

in the U.S. within the meaning of the statute when cleaned in a

solution of hydrogen peroxide and sodium cyanide to remove the

oxidation and other dirt, a process which also strips off ten

percent of the gold. Since the removal of the oxidation has a

definite effect on the imported articles (it significantly

alters the appearance of the jewelry and it removes a signifi-

cant portion of the gold content), we believe that it qualifies

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as processing. Therefore, the importer would be entitled to a

marking exception on future entries of gold chains if it can be

established to Customs satisfaction that the chains are processed

in this manner and the other conditions are satisfied.

MARKING EXCEPTION - PRODUCTS OF THE U.S.

The importer alleges that even if the bangles were not

processed after importation, they still should not have to be

marked because they are products of the U.S. The importer argues

that notwithstanding section 10.12 (sic), Customs Regulations, 19

CFR 10.12 (sic), the bangles are not substantially transformed

abroad and therefore are not subject to the marking requirements.

Because the bangles were assembled in the Dominican

Republic from U.S. components, the bangles were entered under the

provisions of item 807.00, Tariff Schedules of the United States

(TSUS), which permits a reduced duty treatment for the value of

the components manufactured in the U.S. and assembled abroad.

Section 10.22, Customs Regulations (19 CFR 10.22), provides that

assembled article entitled to the item 807.00, TSUS, reduced duty

are considered products of the country of assembly for the

purpose of country of origin marking requirements of 19 U.S.C.

1304\.

The importer claims that notwithstanding 19 CFR 10.22, the

bangles should be considered U.S. articles which do not have to

be marked with the country of origin, since the only activity in

the Dominican Republic is assembly. It is argued that on its

face, 19 CFR 10.22 violates the rules of origin for all other

assembled articles as those rules have been established by the

courts and Customs.

Sections 10.12 through 10.23, Customs Regulations, set

forth definitions and interpretative regulations adopted by

Customs pertaining to the construction of item 807.00, TSUS

and related provisions of law. The regulations are promulgated

to inform the public of the constructions and interpretations

that Customs shall give to relevant statutory terms and to as-

sure the impartial and uniform assessment of duties upon

merchandise entered under the provision of item 807.00, TSUS.

Nothing in these regulations purports or is intended to restrict

the legal right of importers or others to a judicial review of

the matters contained therein. If the importer disagrees with

the interpretation of item 807.00, TSUS, as expressed in 19 CFR

10.22, the importer may challenge this interpretation in court.

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HOLDING:

The issuance of the marking/redelivery notices was proper

because the merchandise was not marked in accordance with the

provisions of 19 U.S.C. 1304: 1) the importer did not satisfy

the requirements for a marking exception under 19 U.S.C.

1304(a)(3)(G) and 19 CFR 134.32(g) and 2) the bangles are not

considered products of the U.S. for purposes of the statute.

In view of the foregoing, the protests should be denied.

A copy of this decision should be attached to the Form 19,

Notice of Action, to be sent to the importer.

Sincerely,

John A. Durant, Director

Commercial Rulings Division

CO:R:C:V:LRODBART:gcf 9/22/88