HQ 0733690 - The country of origin of printed circuit boards; 19 CFR 134.35; substantial transformation - United States International Trade Commision Rulings

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HQ 733690

February 22, 1991

MAR-2-05 CO:R:C:V 733690 RSD

CATEGORY: MARKING

Mr. Stephen M. Stoeser
David K. Lindemuth Co., Inc.
P.O. Box 68552
Seattle, Washington 98168

RE: The country of origin of printed circuit boards; 19 CFR 134.35; substantial transformation

Dear Mr. Stoeser:

This is in response to your letter of July 23, 1990, requesting a country of origin ruling on behalf of your client, Trans Pacific Sales Corporation, for imported printed circuit boards.

FACTS:

Trans Pacific Sales Corporation (Trans Pacific) imports blank printed circuit boards from various manufacturers in Korea. Trans Pacific sells these printed circuit boards to its customers in the U.S., who populate the boards with various electronic components, and make them into motherboards and modems. Trans Pacific's customers also install the motherboards and modems into their product lines. The boards are manufactured to the specifications of Trans Pacific's customers, who provide specific art work to the Korean manufacturer which is screened into the blank board during manufacturing. The art work includes a corporate name, an Underwriters Laboratory listing number, a FCC identifier number, and the words "Made in the USA." The populated boards are not sold individually but as part of a finished electronic component such as a "computer power unit."

It takes about one hour to assemble the electronic components onto the blank board. The work is done by a skilled electronic assembler, who clips in and solders the electronic components onto the board. You point out that the value of the blank boards is about $3.00, while the value of the finished board can be $800 or more. You also indicate that it costs $O.57 per square inch to install the populated board into the finished unit. We also assume that boards are populated with many different components made in several different countries, but no specific information on this has been presented. In addition, you indicate that Trans Pacific's customers are aware that the blank boards are made in Korea because they provide the art work to the manufacturers in Korea. These customers would like to have the boards marked "Made in the USA," prior to importation. ISSUES:

Is placing the electronic components onto a blank printed circuit board and installing the populated boards into a larger system such as a computer power unit a substantial transformation?

Can the statement "Made In the USA" appear on the blank boards at the time of importation?

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

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked (see section 134.35, Customs Regulations).

In C.S.D. 85-25, September 24, 1984, Customs held that for purposes of the Generalized System of Preferences, the assembly of a large number of fabricated components onto a printed circuit board in a process involving considerable amount of time and skill results in a substantial transformation. In HQ 733159, July 23, 1990, a marking case, Customs held that the assembly of a large number of components, including a transformer, on a printed circuit board and incorporating the board into a telephone system resulted in a substantial transformation. Similarly in this case, Trans Pacific's customers are assembling various electronic components onto the blank boards. The completed circuit boards are then placed into larger systems such as computer power units. We find that the combination of populating the boards with various electronic components and then placing the populated boards into larger systems, such as computer power units, changes the name, character and use of the boards. The blank circuit boards have no function except to serve as a part for a completed circuit board with various electronic components mounted onto it, which in turn will go into a larger system. Insertion of the electronic components onto the blank board plus the assembly of the populated boards into a larger unit, changes the nature of the board and causes it to lose its separate identity. It is not until the assembly process, consisting of mounting a large number of electrical components on the board, that the board can be used as part of a larger system such as a computer power unit.

The assembly process also involves a considerable amount of skill and time. It takes about an hour of time to do the assembly and the work is done by a skilled electronic assembler. We also note that there is an extensive increase in value in the boards when they are completed. Therefore, we conclude that assembling the components onto the blank printed board and putting the populated boards into the larger systems such as computer power units constitute a substantial transformation and that pursuant to 19 CFR 134.35, Trans Pacific's customers who do the assembly process are the ultimate purchasers of the blank boards. Accordingly, so long as the blank boards are imported in a container which is properly marked to indicate the country of origin and Customs officials at the port of entry are satisfied that these containers will reach the ultimate purchasers unopened the individual blank boards do not have to be marked with the country of origin.

Although it is claimed the boards should be excepted from country of origin marking because the ultimate purchasers know the country of origin of the blank boards, not enough information has been presented to determine if the boards should be excepted from marking on this basis. For example, the ruling request is not clear on whether the ultimate purchasers furnish the art work for the boards directly to the Korean manufacturers or through Trans Pacific. Accordingly, the shipping cartons containing the blank boards reaching the ultimate purchasers must be marked with the country of origin of the blank boards. You also inquire as to whether the boards can be marked "Made in the USA" at time of entry. A "Made in the USA" marking would be misleading. The blank boards are not made in the USA, and therefore, it is not acceptable to mark the boards at time of importation as if they were made in the U.S. Moreover, approval of markings of "Made in the USA" is in the jurisdiction of the Federal Trade Commission and not the Customs Service. In order to get approval for marking the boards "Made in the USA," after they enter the U.S. and are fully assembled, you should contact the Federal Trade Commission.

HOLDING:

For purposes of 19 U.S.C. 1304,assembling the electronic components on a blank printed circuit board and placing the boards into a finished electronic component such as a computer power unit is a substantial transformation. Pursuant to 19 CFR 134.35, the blank boards do not have to be individually marked with the country of origin, as long as the boards are imported in containers that are properly marked with the country origin and Customs officials at the port of entry are satisfied that these containers will reach the ultimate purchasers unopened. However, the blank boards cannot be marked "Made in the USA" at time of importation. Approval of the marking "Made in the USA" after the boards are imported and assembled is within the jurisdiction of the Federal Trade Commission.

Sincerely,

John Durant, Director

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