HQ 0731967 - Country of origin marking of communication devices and components imported pursuant to DOD procurement contracts - United States International Trade Commision Rulings

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HQ 731967

May 11, 1990

MAR-2-05 CO:R:C:V 731967 EAB

CATEGORY: MARKING

M.C. Hagerman, Subcontract Administrator
GTE Tactical Systems Division
GTE Government Systems Corporation
400 John Quincy Adams Road
Taunton, MA 02780-1069

RE: Country of origin marking of communication devices and components imported pursuant to DOD procurement contracts

Dear Mr. Hagerman:

This is in reply to your letters dated October 11, 1988, and December 14, 1989, regarding the country of origin marking requirements of items imported pursuant to U.S. military procurement contracts Nos. DAAB07-86-C-K022 and DAAB07-86-D-K023, both dated December 19, 1985. We regret the delay in responding.

FACTS:

Since 1985, your company has been under contract with the U.S. Army for the production and fielding of Mobile Subscriber Equipment (MSE) communication systems. The term of the Prime MSE Contract if all options are exercised by the Army is through 1993. Under the MSE Requirements Contract, GTE is obligated to provide spare parts, repairs and training for 15 years after final acceptance of the last equipment deliveries to the Army. The two contracts involve a significant amount of equipment imported from Army-approved subcontractors in Canada, France, Italy, Sweden and the United Kingdom. Under the terms of the MSE contracts, all subcontractors must be approved by the Army, and all foreign subcontractors are identified in the contract. Prior to the award of the contracts, GTE informed the Army of its proposed sources of supply including most of the foreign subcontractors that are now part of the MSE contract and the Government conducted pre-award surveys of many of the foreign subcontractors identified at this time. Both the Army and the Government, via the Defense Contract Administration Service, regularly monitor production activities at the various foreign subcontractors.

Pursuant to these procurement contracts, your company imports mobile radio assemblage and components from France; microwave radio units and components and telescopic radio masts from Sweden; radio antennae and line-of-sight radios from the United Kingdom; and, other line-of-sight radios from Canada. As imported, each item is fully manufactured. You match the items into the MSE communications systems for the Army.

As specifically required by contract, pursuant to the mandatory labelling requirements and methods set forth in MIL- STD-130G, Military Standard, Identification Marking of U.S. Military Property, the equipment is marked by means of a nameplate, bar code labels, or both. The nameplates or bar codes identify the item and manufacturer via an Army database. From this database, the manufacturer's country of origin can be identified. Where the particular components are too small to be marked directly, the packages usually contain the markings. All items imported prior to the date of the ruling request have been cleared through Customs marked in this manner.

You indicate that the Army is well aware of the country of origin of all imported MSE items and request an exception from marking under {134.32(h), Customs Regulations (19 CFR 134.32(h)).

ISSUE:

May foreign articles imported in accordance with U.S. military procurement contracts be excepted from individual country of origin marking pursuant to 19 CFR 134.32(h)?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304) and implemented in 19 CFR Part 134, provides that, unless excepted, every article of foreign origin (or its contain- er) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the arti- cle (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.

The ultimate purchaser is defined in 19 CFR 134.1(d) as "generally the last person in the U.S. who will receive the article in the form in which it was imported." Section 134.35, Customs Regulations (19 CFR 134.35) further provides that a manufacturer who converts or combines an imported article into a different article will be considered the ultimate purchaser of
the imported article so long as the manufacturing process substantially transforms the article into a new and different article, having a new name, character or use.

In this case, we find that your company does not substan- tially transform the imported articles. Essentially, you repack finished articles and match them with others to deliver a MSE communications system to your customer. In view of this, we find that the U.S. defense agency with which you have contracted is the ultimate purchaser of the foreign articles.

Articles described or meeting the specified conditions set forth in 19 CFR 134.32 are excepted from marking requirements. In particular, {134.32(h) provides an exception from marking for articles for which the ultimate purchaser must necessarily know the country of origin of the articles by reason of the circum- stances of their importation. Section 134.22(d)(1), Customs Regulations (19 CFR 134.22(d)(1)) excepts from marking the containers of articles excepted by reason of {134.32(h). Generally speaking, Customs requires that the importer be the ultimate purchaser of the imported article and have direct contact with the foreign supplier for 19 CFR 134.32(h) to apply. Rulings 730243 (March 5, 1987) and 731583 (May 31, 1989). In U.S. Wolfson Bros. Corp. v. United States, 52 Cust. Ct. 86, 91 (1964), the court cited with approval the following statement from "Exporting to the United States":

The clearest application of this [19 CFR
134.32(h)] exemption is when the contract between the ultimate purchaser in the [U.S.] and the supplier abroad insures that the order will be filled only with articles grown, manufactured, or produced in a named country.

In view of the fact that the procurement contracts 1) conform to the labelling requirements of MIL-STD-130G; 2) identify the foreign subcontractors supplying each type of item; and, 3) provide that your customer will regularly monitor the production activities of the foreign manufacturers, Customs finds that the ultimate purchaser necessarily knows the country of origin of each article, and, therefore, the articles are excepted from country of origin marking pursuant to 19 CFR 134.32(h). As a result, their containers are excepted from marking by reason of 19 CFR 134.22(d)(1).

HOLDING:

Articles and their containers imported by GTE pursuant to U.S. military procurement contracts Nos. DAAB07-86-C-K022 and DAAB07-86-D-K0023, both dated December 19, 1985, are excepted from marking under 19 CFR 134.32(h) and 19 CFR 134.22(d)(1).

Sincerely,

Marvin M. Amernick, Chief

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