A method for processing heat transfer labels for quality assurance purposes that may be provided in the form of a roll, with defective heat transfer labels remaining included within the roll instead of being removed. A marking system may be used during or after production of the heat transfer labels in order to distinguish acceptable heat transfer labels from defective heat transfer labels to prevent the latter from being used in the manufacture of garments or other goods. A sensor eye may be disposed on the heat bonder used in the production process to detect the marks and automatically advance the roll to the next acceptable heat transfer label.