HQ 561025

October 21, 1998

MAR-05 RR:TC:SM 561025 BLS

CATEGORY: Marking

Port Director

610 S. Canal Street

Chicago, Illinois 60607-4523

RE: Country of origin marking of photographic film; substantial

transformation;

HRL 732842; HRL 733106; Superior Wire; National Hand Tool;

Ferrostaal

Dear Sir:

This is in reference to letters dated November 12, 1997 and

October 2, 1998, from Dorsey & Whitney LLP, on behalf of Imation

Corp. (\"Imation\"), concerning country of origin marking of

certain photographic film. The importer has advised that the

merchandise is currently being entered through your port and

through JFK Airport, New York.

FACTS:

Imation imports certain bulk color photographic print film

from its affiliate in Italy. This film, described commercially

as a \"jumbo,\" weighs about 2,000 pounds and is about 8,000 feet

in length. It is about five feet in width, four feet in diameter

and seven millimeters thick. The film is sent to Imation\'s plant

in Oklahoma for manufacturing operations leading to the

production of 110 and 135 color photographic print film. These

operations are described as follows:

Slitting

The jumbo is slit into 38 \"pancakes\" of a width of 35

millimeters or 83 pancakes of a width of 16 millimeters, each

pancake being four feet in diameter. The 35 millimeter width is

used to make what is called the 135 color photographic film. The

16 millimeter width is used to make what is called the 110 color

photographic film.

Perforating

Each pancake is perforated with perforations of an exact

size and spacing, for two reasons. First, the perforations

ensure the proper alignment of the film in the camera. Second,

the perforations allow the film to be advanced out of, and

rewound into, the cartridge during the picture-taking process.

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Cutting

The film is cut to the exact lengths required by the 110 and

135 film cartridges, respectively.

Latent Image Flashing

The film is subject to a series of exposing or \"flashing\"

operations, whereby a series of images is applied through

chemical changes caused by the application of different

wavelengths of light for differing periods. This processing is

required during the manufacturing process to image the following:

1\) a 31 bit barcode

2\) human readable film generation and speed

3\) frames numbers

4\) numbers identifying the emulsion coating used on

the film

5\) arrows used for the photo finisher\'s orientation

during processing

6\) dots/crosses of specific color to identify the

manufacturer and film generation

7\) frames for the 110 film

The importer states that the 31-bit barcode provides a means

to digitally designate the film manufacturer, film generation,

frame number, and film speed (ASA 100, 200, or 400). This

barcode is not visible until the exposed film is developed at the

photo finisher. The barcode is then read by an automatic printer

which sets the color balance based on the film manufacturer, film

generation, and film speed. Without this barcode, the proper

color balance on the finished prints could not be consistently

achieved.

In the manufacturing process, the latent images are produced

by flashing a high intensity light through a mask designed to

allow the film to be exposed to light for the desired image

configuration. The barcode mask uses a technology which allows

the mask to change image configurations up to 40 times for each

length of film in the

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finished cartridge.

Imation explains that by virtue of the light exposure, a

molecular change takes place within the film emulsion. The film

emulsion contains silver halide crystals, which consist of

positively charged ions and negatively charged halide ions, such

as bromide

or iodine. These ions are a form of molecule. When a light

quantum or photon is absorbed by the bromide ion, for example,

that ion loses an electron and thereby undergoes a molecular

change. This electron eventually combines with a silver ion and

reduces it to a neutral silver atom of metallic silver. For

frequently absorbed photons, this process is repeated until a

small but stable cluster of metallic silver atoms is formed in

the crystal, producing a latent image.

Manufacturing 110 Film Cartridge

In the case of the 110 film, the cartridge is made up of the

following five parts, the first three of which are wholly made in

the United States: a plastic body, a plastic cover, plastic

spool, backing paper, and the film. The plastic parts are

automatically fed to the transport fixture, which conveys the

parts to a darkroom for film loading and assembly.

The darkroom consists of spooling, heat-staking, cartridge-closing, and
ultrasonic-welding stations. The spooling station

winds the film and backing paper (for light protection) into a

scroll, which is transferred to the plastic body. Next, the

backing paper is heat-staked to the plastic spool, which is used

to advance the film in the camera. After heat-staking, the

plastic cover is automatically loaded onto the plastic body and

ultrasonically welded to complete the assembly. The 110 film

cartridge is now loaded and sealed.

Manufacturing 135 Film Cartridge

In the case of the 135 film, the cartridge is made up of, in

addition to the film, four parts, all of which are made in the

U.S. These include a metal cylinder, end caps, plastic spool,

and velvet strips. The cartridge is made from a section cut from

a U.S-printed metal sheet. An electrically readable encodement

of speed, exposure index, number of exposures, and recommended

exposure latitude is applied to the exterior of

the cartridge via a pattern of conductive or insulating areas.

The metal cylinder, end caps, plastic spool, and velvet strips

are automatically assembled and then conveyed to a darkroom for

film loading.

The darkroom consists of a spooler and film-preparing

equipment. The spooler inserts the film into the cartridge

assembly and mechanically attaches the film to the

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plastic spool. The film is then wound into the cartridge

assembly with a specified length of film extending from the

cartridge. The 135 film cartridge is now loaded and sealed.

Moisture Reduction

During the film emulsion coating process, 3.3% moisture

content by weight is incorporated into the chemical makeup of the

film emulsion. This is necessary in order to minimize the risk

of static discharges during the process of coating the film and

converting it to the cartridge film.

The residual moisture content of the film must then be

reduced from 3.3% to 2.5% after spooling in order to stabilize

the sensitometric properties of the film during its shelf life.

The emulsion layers of film that are not dried to 2.5% are

subject to drastic change, especially if used or stored for long

periods in temperatures above 80 degrees Fahrenheit. Excess heat

will cause a chemical reaction to occur between the emulsion

stabilizers and the excess moisture in the film. In this

chemical reaction, the stabilizers break down, form new

compounds, and no longer protect the film\'s performance

integrity. In particular, the photographs will be darker, and

both the contrast of colors and the speed will be adversely

affected. Film that has undergone this change can no longer

provide accurate color reproduction.

Defect Removal

As received from Italy, jumbos are about 3% defective on the

average, due to coating defects, base defects under the emulsion

layers, and other defects caused by handling or shipping

problems. Most defects are coating defects, and most coating

defects are linear defects.

Examples of linear defects are emulsion streaks, emulsion

side or backcoat scratches, and base or roller marks. Some

linear defects may run the entire length of the jumbo. Others,

however, may exist at one end of the jumbo or the other and will

disappear before the opposite end. Most linear defects are

continuous, while others are intermittent, repeating at some

interval dictated by the diameter of a roller in the base casting

alley or emulsion coating alley.

Accompanying each jumbo from Italy is a defect location

sheet, which is basically a map of all the defects that are known

by the Italian manufacturer to exist. Prior to slitting a jumbo,

the slitter operator will review the defect location sheet to

determine what special sampling and/or testing will be required

prior to slitting a jumbo.

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Once the location of the defect has been confirmed, it may

be removed at any one of three stages. The defect may be removed

from the jumbo if it runs from side to side. More typically, it

is removed from an individual pancake. In some cases, however,

the defect is not discovered and removed until the film is being

spooled from the pancake. In any event, identifying and removing

defects are necessary to insure the integrity of the film.

ISSUE:

Whether the processing of the bulk film in the U.S.

constitutes a substantial transformation, thereby excepting the

imported article from country of origin marking.

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 U.S. 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. 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.

Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements

the country of origin marking requirements and exceptions of 19

U.S.C. 1304. Section 134.35(a), Customs

Regulations (19 CFR 134.35(a)), applicable to goods of a non-NAFTA
country, provides that an article used in the U.S. in

manufacture which results in an article having a name, character,

or use differing from that of the imported article will be within

the principle of the decision of U.S. v. Gibson-Thomsen Co. Inc.,

27 C.C.P.A. 267 (C.A.D. 98) (1940). Under this principle, the

manufacturer or processor in the U.S. who substantially

transforms the imported article into an article with a new name,

character, or use will be considered the \"ultimate purchaser\" of

the imported article within the contemplation of section 304(a),

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

article shall be excepted from marking. The outermost containers

of the imported articles shall be marked in accord with this

part.

In Headquarters Ruling Letter (HRL) 732842 (February 23,

1990), Customs held that bulk color print photographic film, when

cut to width and length and inserted into

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cassettes was not substantially transformed. In addition, in HRL

733106 dated March 19, 1990, Customs reached the same conclusion

with regard to 35 mm photographic film which was cut and placed

in metal cassettes.

The importer believes that this case must be distinguished

from HRLs 732842 and 733106 as Imation\'s operations include not

only the operations described in those cases, but also additional

operations which entail significant physical and chemical

changes. The importer argues that this processing, particularly

the operations involving latent image flashing, moisture

reduction and defect removal, results in both physical and

chemical changes which alter the fundamental character of the

imported product and its use. As there is also a commercial

change in the name of the imported product, from \"jumbo\" to

\"pancake\" to \"film cartridge,\" Imation contends that the

processing in the U.S. constitutes a substantial transformation

of the bulk film product. In support of its position, the

importer believes that the subject processing satisfies the

standard for a substantial transformation as set forth by the

court in Superior Wire v. United States, 867 F.2d. 1409 (Fed.

Cir. 1989)

In Superior Wire, the Court of Appeals for the Federal

Circuit affirmed the determination of the Court of International

Trade (CIT) that drawing wire from wire rod was a minor rather

than substantial transformation, even though the physical

properties of the wire rod, and therefore its use, were affected

as a result of the processing. In that case, the wire that

emerged from the drawing process was stronger and rounder than

the wire rod. However, because these properties of the wire,

which affected the use to which it could be put, were

predetermined by the chemical content of the rod and the cooling

process used in its manufacture, the court found that wire drawn

from the rod was not a new and different product, but the last

stage in the processing of the same product. The court noted

that the \"end use of the wire rod is generally known before the

rolling stage and the specifications are frequently determined by

reference to the end product for which the drawing wire will be

used.\" Accordingly, the court found that the character of the

final product was predetermined and that the processing did not

result in a significant change in either character or use of the

imported material.

In reaching its decision, the court also stated the

following:

Here only the change in name is clearly met, and such a

change has rarely been dispositive. No transformation

from producers\' goods took place; no change from a

product suitable from many uses to one with more

limited uses took place; no complicated or expensive

processing occurred, and only relatively small value

was added. Overall, the court

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views the transformation from wire rod to wire to be

minor rather than substantial. Accordingly, the

country of origin of the wire must be considered Spain

rather than Canada.

By contrast with the facts in Superior Wire, the importer is

of the opinion that the processing at issue herein satisfies the

criteria used by the court in making its determination, and that

accordingly, the operations which take place in the U.S.

constitute a substantial transformation of the imported product.

Thus, it is argued that 1) there is a change in name; 2) the

imported product changes from a producer\'s good to a consumer\'s

good; 3) complicated and expensive processing occurs in the U.S.;

and 4) the amount of value added in the U.S. is substantial.

Imation concedes that in the instant case there is no change from

a product with many uses to one with limited uses.

In National Hand Tool v. United States, 16 CIT 308 (1992),

989 F.d. 1201 (1993), the Court of International Trade held that

imported hand tool components which were used to produce flex

sockets, speeder handles and flex handles were not substantially

transformed when further processed and assembled in the U.S. The

components were cold-formed or hot-forged into their final shape

prior to importation, except for speeder handle bars, which were

reshaped by a power press after importation. The grip of the

flex handles were also knurled in the U.S., by turning the grip

portion of the handle against a set of machine dies that formed a

cross-hatched diamond pattern. The articles were heat treated,

cleaned, electroplated, and marked with a trademark and size.

The imported parts were then assembled with other parts, which

required some skill and dexterity on the part of the workers.

The court stated that the determination of a substantial

transformation must be based on the totality of the evidence, and

applied a 3-pronged test utilizing name, character, and use, in

determining whether a substantial transformation had occurred.

The court found that the components were unchanged as to form

after processing in the U.S., that the use of the imported

articles was predetermined at the time of importation, and that

the name of the components also remained the same after entry

into the U.S. The court discounted plaintiff\'s argument that a

substantial transformation should be found based on the value of

the processing performed in the U.S., which plaintiff described

as significant, but decided the issue based solely on name,

character and use.

In Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542

F.Supp. 1026 (1982), the CIT found that the attachment of an

outsole to a shoe upper was a minor manufacturing or combining

process which left the identity of the shoe upper intact, and

that the

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completed upper was the very essence of the finished shoe. The

concept of the \"very essence\" of a product was also applied in

National Juice Products v. United States, 628 F. Supp. 978, 10

CIT 48 (CIT 1986), where the court determined that imported

frozen concentrated orange juice was not substantially

transformed in the U.S. when it was domestically processed into

retail orange juice products. The court agreed with Customs

that the orange juice concentrate \"imparts the essential

character to the juice and makes it orange juice\... thus, as in

Uniroyal, the imported product is the very essence of the retail

product.\" The court also found that the change in name from

\"concentrated orange juice for manufacturing\" to \"frozen

concentrated orange juice\" and \"orange juice from concentrate\" is

not significant to a finding of substantial transformation.

Instead, the court stated that these names \"merely refer to the

same product, orange juice, at different stages of production.\"

Id. at 989. See also Superior Wire, supra, where the court

stated that \"\[a\]lthough the steel and wire industries may have

different names for the same products, wire rod and wire may be

viewed as different stages of the same product.\" Id. at 867 F.d.

1414\. In this case, we view the name change from \"jumbo\" to

\"film cartridge\" as the same product at different stages of

production, and not evidence of a substantial transformation.

Accordingly, following the three-pronged test of name,

character and use, it is our opinion that the imported product is

the \"essence\" of the completed article, and thus does not undergo

a substantial transformation. While commercially identified as a

\"jumbo\" upon importation and when completed as \"cartridge film\"

or \"film cartridge,\" we do not find this fact significant as the

imported product is bulk color photographic print film with a

predetermined use which has the essential chemical properties of

the completed product. The chemical and physical changes which

occur in the U.S. do not change its character or its intended use

as photographic film. As in Superior Wire, supra, the imported

and finished articles may be viewed as different stages of the

same product.

Further, while Superior Wire treated the cost added, amount

of labor, and capital investment as a cross-check in substantial

transformation cases, the Court of International Trade has stated

in numerous cases that the name, character and use test is

entitled to continued adherence in view of its affirmance in

recent opinions by the appellate court, and to avoid \"ludicrous

results\" should generally be determinative of the country of

origin of imported articles. See Ferrostaal v. United States,

664 F. Supp. at 538; and National Hand Tool Corp., supra.

Therefore, as our determination is based on name, character and

use, we do not consider material to the issue of substantial

transformation the added value in the U.S. or other factors

unrelated to these determinants.

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HOLDING:

Bulk photographic color print film of Italian origin

imported into the U.S. for processing into film cartridges does

not undergo a substantial transformation. Therefore, the U.S.

processor is not considered the ultimate purchaser, and the

imported articles must be marked to indicate Italy as the country

of origin in accordance with 19 U.S.C. 1304 and the implementing

regulations. Customs officials at the port of

entry must be satisfied that such marking will be in compliance

with all statutory and regulatory requirements.

Please provide a copy of this decision to John Rehm, Esq.,

Dorsey & Whitney LLP, 1330 Connecticut Avenue, N.W., Washington,

D.C., 20036.

Sincerely,

John

Durant, Director

Commercial Rulings Division