United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1993 HQ Rulings > HQ 0734688 - HQ 0734856 > HQ 0734750

Previous Ruling Next Ruling


HQ 734750

June 28, 1993

MAR-2-05 734750 ER

CATEGORY: MARKING

S. Richard Shostak, Esq.
Stein, Shostak, Shostak & O'Hara
Suite 1240
3580 Wilshire Blvd.
Los Angeles, California 90010-2597

RE: Country of Origin Marking Requirements for Computer Switch Housing Subassemblies; Substantial Transformation; Ultimate Purchaser; Assembly; 19 U.S.C. 1304(a)(3)(H); 19 CFR 134.32(h); 19 CFR 134.35.

Dear Mr. Shostak:

This is in response to your letter dated July 31, 1992, and your supplemental submissions dated March 18 and May 27, 1993, on behalf of your client, Maxi Switch, in which you request a ruling concerning the country of origin marking requirements for switch housing subassemblies for computer keyboards which are imported into the U.S. from Mexico and assembled into finished computer keyboards subsequent to importation.

FACTS:

Maxi Switch assembles switch housing subassemblies in Mexico from U.S. and foreign components, and imports them into the U.S. under subheading 9802.00.80 of the Harmonized Tariff Schedule ("HTS"). After importation, the switch housings are shipped to Maxi Switch's Tucson, Arizona plant where they are subjected to further assembly operations. In essence, these assembly operations consist of attaching the keywire brackets and keyrods to the switch housing by means of an adhesive; attaching the keycaps in the correct configuration; placing the printed circuit board ("PCB") into the switch housing and plugging the cable into the connector on the PCB; placing the enclosure top over the switch housing and securing it with six screws; affixing labels; testing and packaging.

Included in your submission was a flow chart describing the assembly operation and bills of materials identifying which subassemblies and components are foreign or domestic in origin. The value of the imported Mexican switch housing is $ , of which $ is non-dutiable as U.S. goods returned. Also of foreign origin are the button set valued at $ ; the Mexican PCB valued at $ ; the cable valued at $ and the Led Label valued at $ . The total value of the keyboard after assembly in the U.S. (without labor) is $ of which approximately $ is attributable to the foreign subassemblies. A sample keyboard (before U.S. assembly operations) was submitted with the ruling request.

ISSUE:

What are the country of origin marking requirements for switch housing subassemblies from Mexico which are subjected to further assembly operations subsequent to importation into the U.S.?

LAW AND ANALYSIS:

The marking statute, 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit in such a manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The primary purpose of the country of origin marking statute is to "mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, by 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, 302, C.A.D. 104 (1940).

The "ultimate purchaser" is defined generally as the last person in the U.S. who will receive the article in the form in which it was imported. 19 CFR 134.1(d). If an imported article will be used in domestic manufacture, the manufacturer may be the "ultimate purchaser" if he subjects the imported article to a process which results in a substantial transformation of the article. However, if the manufacturing process is a minor one which leaves the identity of the imported article intact, the consumer or user of the article, who obtains the article after the processing, will be regarded as the "ultimate purchaser." 19 CFR 134.1(d)(1) and (2).

For country of origin marking purposes, a substantial transformation of an imported article occurs when it is 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. Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article into the
different article will be considered the "ultimate purchaser" of the imported article, and the article shall be excepted from marking. However, the outermost containers of the imported articles must be marked. 19 CFR 134.35. The issue of whether a substantial transformation occurs is determined on a case-by- case basis.

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D.s 80-111, 85-25, 89-110, 89-118, 89-129, 90-51 and 90-97.

In your submission you request an exception to marking the switch housing subassemblies pursuant to section 134.32(h), Customs Regulations (19 CFR 134.32(h)). 19 U.S.C. 1304(a)(3)(H) and 19 CFR 134.32(h) authorize an exemption from marking where an ultimate purchaser, by reason of the character of the article or by reason of the circumstances of its importation, must necessarily know the country of origin of the article even though it is not marked to indicate its origin. To qualify for this exception, the importer must be the ultimate purchaser of the imported article. See, HQ 730243 (March 5, 1987). Therefore, in the instant case Customs must be satisfied that a substantial transformation has occurred pursuant to 19 CFR 134.35, thereby establishing that the manufacturer in the U.S., Maxi Switch, is the "ultimate purchaser" of the imported article.

At issue before the Court of International Trade in National Hand Tool Corp. v. U.S., Slip Op. 92-61 (CIT April 27, 1992), aff'd, No. 92-1407 (CAFC February 3, 1993) was whether certain imported hand tool components underwent a substantial transformation in the U.S. There, plaintiff imported hand tool components, most of which were either cold-formed or hot-forged into their final shape in Taiwan before importation into the U.S. Certain articles were heat-treated in the U.S. while others underwent heat treatment in Taiwan. (The heat treatment is a multi-stage operation in which the articles are heat treated, oil-quenched and tempered, strengthening the steel by carburization which increases the carbon content of the steel's surface.) In Taiwan or the U.S., after heat treatment, the components were cleaned by sand-blasting, tumbling and/or chemical vibration to prepare their surfaces for electroplating.

Subsequent to the post-importation processing, the components in National Hand Tool Corp. were assembled. The assembly operations were manual and required some skill and dexterity. The court found that the character of the articles remained unchanged after the heat treatment operations, the electroplating and the assembly and noted that, except for the speeder handle bars, the components retained their final shape formed in Taiwan. Additionally, the court noted that the use of the imported articles was predetermined at the time of importation. Accordingly, the court held that the imported articles did not undergo changes in name, character or use and therefore were not substantially transformed in the U.S. and the articles had to be marked with country of origin.

In HQ 734566 (June 25, 1992), Customs determined that the essential components of a water pump were not substantially transformed when assembled in the U.S. even though none of the imported parts were to be sold individually or as replacement parts. Generally the major components, notably the casting, were of foreign origin but on occasion were sourced in the U.S. Customs noted that the casting was the most costly and largest component used in the completed water pump and remained visible after assembly. Relying on the rationale followed in National Hand Tool, Customs ruled that the casting could not be considered to be substantially transformed when merely assembled with the other essential components. In so finding, Customs noted that "none of the essential components is substantially transformed when assembled in the U.S. Each essential component, including the casting, does not change in name, character or use as a result of the assembly." Additionally, at the time of importation, the use of the components was predetermined and the assembled components retained their original shape, form and no change in the components' microstructure or chemical composition resulted. Consequently, the components were not excepted from marking.

In HQ 734382 (February 19, 1992), Customs determined that wheels are not substantially transformed when they are assembled with other parts to make casters. Specifically, Customs found that the wheels did not lose their identity when assembled with the other parts; that the wheels were probably the most significant components of a completed caster and provided the essential character; the wheels were the dominant components enabling mobility; the buyers of casters were likely to be concerned about the wheels they would be buying; assembly of the caster did not change the characteristics of the wheel; and the wheels were clearly recognizable before and after assembly. Customs also noted that at the time of importation, the wheels are completely finished. Accordingly, the wheels were found not to be substantially transformed when combined with the other parts to form the finished caster and therefore had to be individually marked to indicate their country of origin. Because the wheels are combined with other articles before delivery to the ultimate purchaser, the wheel had to be marked in a manner which clearly showed that the origin indicated was that of the wheels alone (e.g. "Wheel Made in Taiwan").

The circumstances in this case are similar to those in the rulings and National Hand Tools case, described above, where no substantial transformation was found to result. The switch housing subassembly is the most costly component and is one of the most significant components of the keyboard imparting to the keyboard its overall shape and size. Its use is predetermined at the time of importation and it remains visible after assembly with the other components, retaining its original shape and form. Aside from the attachment of various components to the subassembly, no other processing is performed. Significantly, like the switch housing, one of the other most important components, the PCB, is also of Mexican origin. Additionally, almost all of the keyboard components are imported and only the less significant components are of U.S. origin.

The end result of the assembly operations performed by Maxi Switch is not a new and different article. The switch housing, in its condition after all processing performed by Maxi Switch is complete, is an article which retains its separate identity and remains clearly recognizable as a switch housing. Consequently, based on the totality of the evidence presented, we find that the switch housing is not substantially transformed by virtue of the operations performed after importation and accordingly that it must be marked with country of origin.

Because the switch housings are combined with other articles before delivery to the ultimate purchaser, the origin of the switch housing should be clearly designated by means of a marking such as "Switch Housing Made in Mexico", or words to similar effect. See 19 CFR 134.14.

HOLDING:

Switch housing subassemblies imported into the U.S. and assembled with other components into finished computer keyboards are not substantially transformed into new an different articles.

Accordingly, the provisions of 19 U.S.C. 1304(a)(3)(H) and 19 CFR 134.32(h) are not applicable and the switch housings are not excepted from country of origin marking.

Sincerely,

John Durant, Director
Commercial Rulings Division

Previous Ruling Next Ruling

See also: