HQ 0731538 - Country of Origin Marking of Automotive Batteries - United States International Trade Commision Rulings

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 > 1990 HQ Rulings > HQ 0731507 - HQ 0731864 > HQ 0731538

HQ 731538
August 16, 1988

MAR 2-05 CO:R:C:V 731538 LR

CATEGORY: MARKING

Michael R. Kershow, Esq.
Collier, Shannon, Rill & Scott
1055 Thomas Jefferson Street, NW.
Washington, D.C. 20007

RE: Country of Origin Marking of Automotive Batteries

Dear Mr. Kershow:

This is in response to your letter dated May 27, 1988, on behalf of the U.S. Battery Trade Council, requesting a ruling that automotive batteries imported in "dry charged" or "dry unformed" condition are not substantially transformed when they are filled with electrolyte and charged with electricity prior to sale in the United States.

FACTS:

You indicate that automotive batteries are being imported in "dry charged" or "dry unformed" ("duf") condition. In both cases, the battery is fully assembled, with all of its physical components (container, elements, connectors, cover, vent caps and terminals) intact. In both cases, the only remaining material input is the sulphuric acid electrolyte. In a dry charged battery, the battery will previously have been filled with electrolyte and fully charged in the country of manufacture. This filling and charging leads to "formation" of the lead plates contained in the battery elements; that is, the plates take on the alternating positive and negative charge needed to produce current. After formation has occurred, the acid will be removed from the battery prior to exportation. Just prior to retail sale in the U.S., the battery will be refilled and given a final "finishing" charge. Unlike the dry charged battery, a "duf" battery is shipped without first being temporarily filled with electrolyte and charged. These operations are performed after arrival in the U.S. by the importer or some subsequent distri- butor. According to your letter, in both cases the final finishing operations are delayed until after importation because of safety and freight cost considerations.

You indicate that the sequence of operations necessary to prepare a dry charged battery for retail sale include washing, decorating, filling with acid, and subjecting to a finishing charge and that these operations add 6-8 percent to the value of the assembled dry charged battery. The value added in finishing a dry unformed battery (through filling with acid, formation of the lead plates, "topping off" with acid, washing and decorating) is about 9-10 percent. In both cases, the addition of electrolyte and final charging do not add more than 3-4 percent to the value of the battery in its condition as imported.

ISSUE:

Are batteries imported in a dry charged or dry unformed condition and further processed in the U.S. by adding electrolyte and charging them with electricity, excepted from individual country of origin marking requirements?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that every article of foreign origin (or its container) imported into the U.S., subject to certain specified exceptions, shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or 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. "Ultimate purchaser" is defined in section 134.1, Customs Regulations (19 CFR 134.1), as "the last person in the U.S. who will receive the article in the form in which it was imported." The regulation further provides that if an imported article will be used in manufacture, the manufacturer may be the "ultimate purchaser" if he subjects the imported article to a process which results in a substantial transform- ation of the article. In such case, the imported article is excepted from individual marking pursuant to section 134.35, Customs Regulations (19 CFR 134.35), and only the outermost container is required to be marked. However, if the manufac- turing process is a minor one which leaves the identity of the imported article intact, 19 CFR 134.1 provides that the consumer or user of the article, who obtains the article after the processing, will be regarded as the "ultimate purchaser". In such case, the article itself is subject to marking.

In order for a substantial transformation to be found, an article having a new name, character, or use must emerge from the processing. See United States v. Gibson-Thomsen Co. Inc., 27 C.C.P.A. 267 (C.A.D. 98). Customs has not ruled specifically on whether the addition of electrolyte to a fully assembled battery and subjecting it to a charge constitutes a substantial transformation. In HQ 704711 (May 19, 1975), Customs ruled that the complete assembly of nickel cadmium battery components into finished batteries coupled with the addition of electrolyte results in a substantial transformation. See also HQ 728875, dated September 24, 1985. Customs has also determined that for purposes of item 807.00, Tariff Schedules of the United States (TSUS), that the charging and discharging of nickel cadmium batteries was incidental to the general assembly of the battery cells. See HQ 061953, dated March 28, 1989. (Operations con- sidered substantial or which significantly advance the components in value or condition while abroad are precluded from item 807.00 TSUS treatment).

Based on the facts presented in this case, we are of the opinion that the domestic processing described above does not significantly change the name, character or use of the imported article. Unlike the cases in which the battery components had to be manufactured into a complete battery before the electro- lyte solution was added, in this case, the imported article is a fully assembled battery with all its physical components intact. While adding electrolyte solution and charging the battery are certainly necessary steps before the battery is rendered functional, these steps do not produce a new and dif- ferent article. The imported article is referred to as a bat- tery (albeit unfinished), it looks like a finished battery, it has all the essential components of a finished battery and it is dedicated for use as a battery. Moreover, the fact that over 90 percent of the total cost is attributable to the foreign pro- cessing of the battery, supports the conclusion that the domestic processing is minor when compared to the foreign processing. Based on these considerations, we conclude that the domestic manufacturing process is a minor one which leaves the identity of the imported article intact. Therefore, the consumer or user of the battery, who obtains it after the domestic processing is regarded as the "ultimate purchaser."

HOLDING:

Automotive batteries imported in "dry charged" or "dry unformed" condition are not substantially transformed when they are filled with electrolyte and charged with electricity prior to sale in the U.S. Accordingly, the batteries must be individually marked to indicate the country of origin to the ultimate purchaser.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling