CBP Says Cutting Paper Into Sticky Notes Not Substantial Change
The country of origin of sticky notes made from big rolls of paper that are cut in Taiwan is based on the origin of the rolls of paper, CBP said in a Feb. 18 ruling. The cutting of the paper and adding of glue is not considered to be a substantial transformation, the agency said. Staples requested its ruling through David Newman, a lawyer representing the company.
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The notes are made from “jumbo paper rolls from China, Japan, and Indonesia, depending on the color of the note,” CBP said. “In Taiwan, the paper rolls are loaded onto a giant apparatus, the paper is unspooled, and Taiwanese origin chemical primer and glue are applied to the back side of the paper. Chemical release coating of Taiwanese origin is applied to the front of the paper. The resulting product from this process is paper with an adhesive pattern. The paper is re-rolled and cut into large sheets. The resultant jumbo pads are jogged and collated into the page counts that apply to the finished product. The jumbo pads are then cut into smaller units by a large guillotine cutter, bundled, and wrapped with film of Taiwanese origin.”
Staples argued that the processing in Taiwan amounts to a substantial transformation and cited a previous ruling that said the processing of notebooks from paper rolls was a substantial change. According to Staples, “jumbo rolls of paper undergo treatment that 'fundamentally and permanently alter[s] the paper' and ... the glue performs 'the essential function' that is the reason consumers purchase the Sticky Notes,” CBP said. Staples also told CBP “that the change of tariff heading from heading 4802, Harmonized Tariff Schedule of the United States ('HTSUS') (jumbo rolls) to heading 4820, HTSUS (Sticky Notes) manifests a substantial transformation.” Since the majority of the sticky notes in the multi-packs are made with non-China-origin paper, Section 301 duties should not apply, Staples said.
CBP disagreed with Staples. The Taiwan operation was just “finishing,” CBP said. “The final product is essentially a smaller size paper with chemical release coating applied to the front and chemical primer and glue on the back that is not changed into a new separate and distinct article of commerce. While the glue applied to the back allows the paper to be stuck on a surface, the operation of gluing paper together at the top is essentially the same, and the paper still remains paper.”
As a result, “the origin of the jumbo paper roll dictates the origin of the Sticky Note,” it said. “In the case of a multi-pack produced from paper rolls from China, Indonesia and Japan, the countries of origin of the Sticky Note are China, Indonesia, and Japan, and the Sticky Notes from China will be subject to Section 301 duties.”