HQ 0557410 - Applicability of duty allowance under HTSUS subheading 9802.00.80 to writing instruments (ball point pens); pressing; screwing; clamping; country of origin marking - United States International Trade Commision Rulings

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HQ 557410

October 20, 1993

CLA-2 CO:R:C:S 557410 MLR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Carlos R. Everling
President
Effanjay Pens, Inc.
21-09 Borden Avenue
Long Island City, New York 11101

RE: Applicability of duty allowance under HTSUS subheading 9802.00.80 to writing instruments (ball point pens); pressing; screwing; clamping; country of origin marking

Dear Mr. Everling:

This is in reference to your letter of June 11, 1993, requesting a ruling regarding the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to writing instruments (ball point pens), and their country of origin marking. Samples were submitted with your request.

FACTS:

Effanjay Pens, Inc., is a manufacturer of ball point pens. Effanjay plans to ship pen parts, all of which are manufactured in the U.S., to the Republic of Panama for assembly. It is stated that the four or five U.S.-origin pen components are not changed or transformed by the assembly process. In a telephone conversation with a member of my staff, you indicated that each pen basically consists of a barrel, refill, cap, clip, and in some instances a small metal band. You stated that the samples may be disassembled, and that these parts are the parts sent to the Republic of Panama. You stated that the assembly process will consist of screwing the refill into the barrel, clamping the clip onto the cap, pressing the small metal band over the barrel, and pressing the cap onto the barrel to complete the pen. It also appears from the samples that some of the pens consist of a barrel, a refill with a spring, and a cap with a clip. These pens are assembled by placing the refill with the spring into the barrel, and screwing the cap onto the barrel to complete the pen. Some of the clips are engraved with the letters "USA"; however, you stated that these letters will be removed.

Effanjay will imprint some of the pens with the names of its customers, a logo, or other message in the Republic of Panama, while some of the pens will be left blank so that the customer may imprint the pen himself. You indicated in a facsimile dated October 15, 1993, that the imprinting is done by a silk-screening method that costs 1/8 cent per pen, whereas the cost to assemble a pen is one cent.

After the assembly process, the pens are placed in individual cellophane bags for delivery to the customer. The pens are used by the customer as an advertising tool and are not sold on the open market. It is stated that the pens will be distributed to the donees in the cellophane bags. Effanjay plans to mark the cellophane bag containing each pen, whether imprinted or not, with the words "U.S. COMPONENTS ASSEMBLED IN PANAMA." It is stated that it is not feasible to place the marking on the pen barrel because this would interfere with the customer's message.

ISSUES:

I. Whether the writing instruments will qualify for the duty allowance under subheading 9802.00.80, HTSUS, when imported into the U.S.

II. What is the proper country of origin marking for the writing instruments?

LAW AND ANALYSIS:

I. Subheading 9802.00.80, HTSUS

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations {19 CFR 10.14(a)}, states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations {19 CFR 10.16(a)}, provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

The processes of screwing the refill into the barrel, clamping the clip onto the cap, pressing the small band over the barrel, and pressing the cap onto the barrel, or placing the refill into the barrel and screwing the cap onto the barrel, constitute acceptable assembly operations because they securely join solid components together as required by 19 CFR 10.16(a).

In regard to the pen barrels that will be imprinted with advertising information in Panama, in Headquarters Ruling Letter (HRL) 055814 dated December 9, 1980, we determined that printing an advertisement on certain specialty articles, including ball point pens, went beyond the alterations provision of item 806.20, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.50, HTSUS), and in conjunction with the assembly of these articles, constituted a non-assembly step. However, in C.S.D. 79-314, 13 Cust. Bull. 1468 (1979), Customs determined that printing which serves the purpose of "origin markings, trademark, polarity, color coding, part number identification, or instruction for use," would not preclude tariff treatment under item 807.00, TSUS (the predecessor provision of subheading 9802.00.80, HTSUS). "These, as well as similar markings, are not considered substantial or material in nature, ... and reasonably appear to be commercially and functionally related to the overall assembly process and the assembled article itself." Id. at 1469. In this case, we are inclined to follow C.S.D. 79-314 because it is considered to be of precedential value by being published in the Customs Bulletin, and because it particularly addressed the applicability of item 807.00, TSUS; whereas HRL 055814 mainly addressed the printing operation as it relates to item 806.20, TSUS. Consequently, because the cost of the silk-screening process is minor compared to the cost of assembling a pen, and because the advertising information is similar to those categories enumerated in C.S.D. 79-314, we find that the silk- screening operation is an incidental operation. Therefore, the pens are eligible for subheading 9802.00.80, HTSUS, treatment.

II. Country of Origin Marking

The marking statute, section 304, 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 in the U.S. 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. Section 134.1(d) defines an ultimate purchaser as generally the last person in the U.S., who will receive the article in the form in which it was imported. Section 134.1(d)(2) also indicates that if the imported article is distributed as a gift, the recipient is the "ultimate purchaser." In HRL 734202 dated November 12, 1991, it was held that the recipient of pens given away by businesses as promotions or advertisements would be considered the ultimate purchaser, not the importer. Therefore, the pens had to be marked permanently, legibly and conspicuously, to indicate their country of origin to their recipient. See Pabrini, Inc. v. United States, 630 F. Supp. 360 (CIT 1986). Furthermore, marking only the polybags in which the pens were imported with the country of origin was determined not to be acceptable unless the Customs officials at the port of entry were satisfied that the pens would remain in the unopened properly marked polybags until they reach their final recipient. Consequently, in this case, the person who receives the pen as a gift is the ultimate purchaser.

You indicated that it is not feasible to mark each pen because it would interfere with the customer's message. An article can be excepted from marking under 19 U.S.C. 1304(a)(3)(D) and 19 CFR 134.32(d), if the marking of a container of such article will reasonably indicate the origin of the article. You claim that the pens are intended to be distributed to the final recipients only in the cellophane bags. Therefore, if the pens are printed in Panama, putting the country of origin marking on the cellophane bags will only be acceptable if the Customs officials at the port of entry are satisfied that the pens will reach the ultimate purchaser, the final recipient, in these bags. If the pens are printed in the U.S., marking only the cellophane bags will not be acceptable because the pens will have to be removed from the bags before they reach the ultimate purchaser. However, an exception to 19 CFR 134.32(d) is authorized by 19 CFR 134.34 for imported articles which are to be repacked after release from Customs under the following conditions:

(1) The containers in which the articles are repacked will indicate the origin of the articles to an ultimate purchaser in the United States.

(2) The importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification, as may be necessary, by certification and the submission of a sample or otherwise, of the marking prior to the liquidation of the entry.

Therefore, if you intend to import the pens not properly marked at the time of importation and put them into the marked cellophane bags after importation before they reach the ultimate purchaser, you may do so only at the discretion of the district director at the port of entry subject to the above provisions. See HRL 735292 dated September 21, 1993.

In regard to the language "ASSEMBLED IN", it should be noted that Customs has previously determined that such words constitute sufficient country of origin marking under section 10.22, Customs Regulations (19 CFR 10.22), only for articles assembled in whole or in part of fabricated components, the product of the U.S. and entitled to an exemption of duty under subheading 9802.00.80, HTSUS. In such cases, the country of assembly is considered to be the country of origin and the words "Assembled in" are considered similar in meaning to the words "Made in" and "Product of." Therefore, since the pens are assembled in Panama and are eligible for the duty allowance under subheading 9802.00.80, HTSUS, the country of origin is Panama and the language "U.S. COMPONENTS ASSEMBLED IN PANAMA" is acceptable. See HRL 731507 dated October 17, 1989.

HOLDING:

I. On the basis of the information and samples submitted, we conclude that allowances in duty may be made under subheading 9802.00.80, HTSUS, for the cost or value of the U.S. fabricated components incorporated into the writing instruments upon their return to the U.S., provided the documentary requirements of 19 CFR 10.24 are satisfied.

II. Because the pens are being given away, under 19 CFR 134.1(d)(2) the ultimate purchaser of the pens is their recipient. Consequently, the pens or the cellophane bags in which the pens are distributed to the ultimate purchasers must be marked with "PANAMA", "ASSEMBLED IN PANAMA", or "U.S. COMPONENTS ASSEMBLED IN PANAMA."

Sincerely,

John Durant, Director

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