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HQ 561945





May 21, 2001

MAR-05 RR:TC:SM 561945 KKV

CATEGORY: MARKING

Mr. Charles S. Coster
Time/By Design
277 Mt. Auburn Street
Cambridge, MA 02138

RE: Country of origin marking for imported watches designed in the U.S. and manufactured abroad; identity of components which comprise the “movement” of a watch with a liquid crystal display

Dear Mr. Coster:

This is in regard to Headquarters Ruling Letter (HRL) 560202, that was issued to you on December 20, 1996, which addressed the country of origin marking of imported liquid crystal display (LCD) watches. We have reviewed this ruling in light of another matter currently before us on substantially similar merchandise and have determined that a portion of HRL 560202, supra, is incorrect with regard to the issue of the identity of the components that constitute the “watch movement.” Therefore, this ruling modifies HRL 560202 to the extent described below.

Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North America Free Trade Agreement Implementation Act (Pub.L. 103-182, 107 Stat. 2057), a notice was published on March 7, 2001, in Vol. 35, No. 10 of the CUSTOMS BULLETIN, proposing to modify HRL 560202 and to revoke the treatment pertaining to the country of origin marking of the liquid crystal display watches. No comments were received in response to this notice.

FACTS:

You indicate that Time/By Design plans to import liquid crystal display (LCD) watches into the United States that were designed in the United States.

Integrated circuits from Singapore and other watch components from Japan and Hong Kong are sent to China, where they are combined with other components from China and assembled into finished LCD watches and exported to Hong Kong for shipment to the U.S. You propose to mark the watches, “Designed in USA, Made in Singapore” stamped into the reverse side of the metal watch case.

ISSUE:

What are the components that comprise the “movement” of a watch with a liquid crystal display for country of origin marking purposes?

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 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. 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. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

We note that while additional U.S. Note 4, Chapter 91, HTSUS, contains special marking requirements for certain watches, they are not applicable to “[m]ovements with optoelectronic display only and cases designed for use therewith.” Because the watches at issue are specifically excepted from the special marking requirements set forth in additional U.S. Note 4, the articles must comply with the general marking requirements set forth in 19 U.S.C. 1304.

In the instant case, integrated circuits from Singapore and other watch components from Japan and Hong Kong are exported to China, where they are combined with additional components from China and assembled into finished watches. The finished watches are sent to Hong Kong for exportation to the U.S. It has long been Customs position that the origin of a watch or clock is the country of manufacture of the watch or clock movement. Although the addition of the hands, dial, case or watchband may add definition to the timepiece, it does not substantially change the character or use of the watch or clock movement, which is the essence of the watch or clock (See Headquarters Ruling Letter 735197, dated January 4, 1994.

Based upon the information provided, Customs determined in HRL 560202, dated December 20, 1995, that the integrated circuit is the component which functions as the watch movement for a watch with a liquid crystal display and held that where the integrated circuit was a product of Singapore, the statement “Designed in USA, Made in Singapore” met the special marking requirements of 19 CFR 134.46 and was acceptable for purposes of 19 U.S.C. 1304.

Upon review, however, we note that while the issue of the appropriate country of origin marking was discussed in some detail, the issue of the identity of the components which comprise the “movement” of a watch with a liquid crystal display was not addressed with particularity. Therefore, we revisit this issue here.

Note 3, Chapter 91 of the Harmonized Tariff Schedule of the United States (HTSUS) states:

For the purposes of this chapter, the expression "watch movements" means devices regulated by a balance wheel and hairspring, quartz crystal or any other system capable of determining intervals of time, with a display or a system to which a mechanical display can be incorporated. Such watch movements shall not exceed 12 mm in thickness and 50 mm in width, length or diameter. [Emphasis ours]

In general, an LCD watch consists of the following major components:
a) liquid crystal display (LCD) subassembly consisting of a liquid crystal device, elastomeric or conductive rubber connectors, and electroluminescent (EL) lamp polarizers;
electronic subassembly consisting of a printed circuit board (PCB), resistors, capacitors, piezoelectric quartz crystal, microprocessor integrated circuit, coils and an EL driver integrated circuit;
a plastic module frame into which the other pieces fit;
electrical switches and springs which enable the user to activate the merchandise functions described above; and
a battery, to supply electrical current to operate the article.

In an LCD watch, time division and regulation is accomplished by the quartz piezoelectric oscillator which, when placed in an electric field, vibrates (oscillates), thus creating the electrical impulse which is translated by the integrated electronic circuitry to operate the watch. When supplied with electrical power from the battery, the integrated circuit generates and controls the oscillation of the crystal in accordance with its stored instruction (program). As the oscillator vibrates, the pulses are sent to a microchip which counts the pulses and instructs the LCD to change the information displayed as “hours,” “minutes” and “seconds.” Accordingly, neither the integrated circuit nor the piezoelectric quartz crystal, acting alone, is a “system capable of determining intervals of time” within the meaning of Note 3. Therefore, upon reconsideration of the underlying facts, we are of the opinion that, to the extent that HRL 560202, supra, held that a “watch movement” of a LCD watch was the integrated circuit alone, that portion of the decision is incorrect. Instead, intervals of time may only be determined by the combination of components listed as the “electronic subassembly.” Although the LCD subassembly does not measure or determine intervals of time, but merely displays them, the language of Note 3 defines “watch movements” as “devices regulated by aquartz crystal or any other system capable of determining intervals of time, with a display” (emphasis added). Therefore, based upon the information provided, the components which comprise the “watch movement” of the subject LCD watch are those components listed as comprising both the electronic subassembly and the LCD subassembly: the printed circuit board (PCB), resistors, capacitors, piezoelectric quartz crystal, integrated circuit, transistor, coils and electroluminescent (EL) circuit driver, the liquid crystal device, elastomeric or conductive rubber connectors and electroluminescent lamp polarizers.

With regard to the watches at issue here, it is unclear whether, at the time of importation into China for final assembly, the integrated circuit has been assembled together with any other components. Based upon the above analysis, the country of origin of the subject watches is the country of origin in which the printed circuit board (PCB), resistors, capacitors, piezoelectric quartz crystal, integrated circuit, transistor, coils and electroluminescent (EL) circuit driver, the liquid crystal device, elastomeric or conductive rubber connectors and electroluminescent lamp polarizers are assembled together to form the “watch movement” and the finished articles must be marked accordingly.

HOLDING:

Pursuant to Note 3, Chapter 91, HTSUS, the components of an LCD watch which are “devices regulated by aquartz crystal or any other system capable of determining intervals of time, with a display” and thus, constitute the “watch movement” for the subject LCD watches are: the printed circuit board (PCB), resistors, capacitors, piezoelectric quartz crystal, integrated circuit, transistor, coils and electroluminescent (EL) circuit driver, the liquid crystal device, elastomeric or conductive rubber connectors and electroluminescent lamp polarizers.

HRL 560202, dated December 20, 1996, is modified accordingly.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant
Director
Commercial Rulings Division

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