HQ 0734223 - Country of origin marking of imported cooking grids incorporated into gas barbecue grills manufactured in the U.S.; substantial transformation; 19 CFR 134.35; United States v. Gibson-Thomsen Co.; Uniroyal, Inc., v. United States; HQ 728801; HQ 731432; HQ 734219 - United States International Trade Commision Rulings

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HQ 734223

December 2, 1991

MAR-2-05 CO:R:C:V 734223 AT

CATEGORY: MARKING

Mr. Bo Richardson, President
Music City Metals Inc.
601 Hagan Street
Nashville, Tennessee 37203

RE: Country of origin marking of imported cooking grids incorporated into gas barbecue grills manufactured in the U.S.; substantial transformation; 19 CFR 134.35; United States v. Gibson-Thomsen Co.; Uniroyal, Inc., v. United States; HQ 728801; HQ 731432; HQ 734219

Dear Mr. Richardson:

This is in response to your letter of June 17, 1991, requesting a country of origin ruling regarding imported cooking grids incorporated into gas barbecue grills manufactured in the U.S. A sample cast iron cooking grid, trade/consumer product literature and engineering bills of material indicating cost of each component of the grill were submitted for our review.

FACTS:

You state that your company imports cast iron cooking grids manufactured in Taiwan. After importation, the cooking grids are sold to Martin Industries to be incorporated and repackaged with partially assembled gas barbecue grills (Model Nos. D38GCPW, D47GCPW, G1000 and G2000) manufactured in the U.S. to be sold to retail stores. You also state that the cooking grids come to Martin packaged in a separate cardboard box with the exact quantity needed to make one grill (there are three or four pieces per grill depending upon the model). This package is placed in a carton along with other components of the grill that are either domestically purchased or fabricated by Martin Industries. Each grill model allows the ultimate purchaser to barbecue or broil food by adjusting the cooking grids to different levels. The cooking grid is conspicuously and permanently marked with the words "Made in Taiwan" on the side flap of the grill.

A cost breakdown of the barbecue grill unit's essential components (including packaging costs, labor costs and costs of minor accessories), shows that the cooking grids represents approximately 8 percent of the total cost of model D38GCPW and 9 percent of the total cost for model D47GCPW. No information was submitted with respect to models G1000 and G2000 but you indicate that they would be the same percentages as the other two models. You also claim that the "Made in Taiwan" marking placed on each cooking grid misleads the ultimate purchaser in believing that the entire barbecue grill is made in Taiwan when in fact, as indicated by the engineering bills of material, almost all of the parts including the main body portions (cast cooking body and stand) are manufactured in the U.S. You further claim that once the cooking grids are combined in the U.S. with the partially assembled barbecue grills they are substantially transformed, and therefore the individual grids are excepted from country of origin marking.

ISSUE:

Whether the imported cooking grids are substantially transformed when they are combined in the U.S. in the manner described above, and repackaged for distribution to retail stores?

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 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 Court of International Trade stated in Koru North America v. United States, 701 F.Supp. 229, 12 CIT (CIT 1988), that "In ascertaining what constitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297 at 302, C.A.D. 104 (1940), where the court stated that: "Congress intended 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."

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.35, Customs Regulations (19 CFR 134.35), states that the manufacturer or processor in the U.S. who converts or combines the imported article into a different article having a new name, character or use will be considered the ultimate purchaser of the imported article within the contemplation of 19 U.S.C. 1304 and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked.

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940), National Juice Products Association v. United States, 10 CIT 48, 628 F.Supp. 978 (CIT 1986), Koru North America v. United States, 12 CIT , 701 F.Supp. 229 (CIT 1988).

Two court cases have considered the issue of whether imported parts combined in the U.S. with domestic parts were substantially transformed for country of origin marking purposes. In the first case, Gibson-Thomsen, the court held that imported wood brush block and toothbrush handles which had bristles inserted into them in the U.S. lost their identity as such and became new articles having a new name, character and use. The second case involved imported shoe uppers which were combined with domestic soles in the U.S. The imported uppers were held in Uniroyal, Inc., v. U.S., 542 F.Supp. 1026, 3 CIT 220 (CIT 1982), to be the "essence of the completed shoe" and therefore, not substantially transformed.

In HQ 731432 (June 6, 1988), Customs set forth some factors to be considered in determining whether imported goods combined in the U.S. with domestic products were substantially transformed for country of origin marking purposes. The following six factors were considered:

1) whether the article is completely finished;

2) the extent of the manufacturing process of combining the imported article with the domestic article as compared with the manufacturing of the imported article;

3) whether the article is permanently attached to its counterparts;

4)the overall importance of the article to the finished product;

5) whether the article is functionally necessary to the operation of the finished article, or whether it is an accessory which retains its independent function; and

6) whether the article remains visible after the combining.

These factors are not exclusive and there may be other factors relevant to a particular case and no one factor is determinative. See, HQ 728801 (February 26, 1986).

In HQ 734219 (September 3, 1991), Customs applied these six factors and ruled that imported water pans and charcoal pans were not substantially transformed in the U.S. by combining them with other domestic and foreign components during a repackaging operation in the U.S. of smoker/grill units. Customs stated that the water pans and charcoal pans were completely finished articles when imported, there was no extensive manufacturing process involved in combining the pans with its other domestic and foreign counterparts and that placing the pans into a cardboard container a long with other domestic and foreign articles was a minor operation which was not complex, required no skill and was not time-consuming. Customs also stated that the pans where not permanently attached to the smoker/grill unit during the combining process nor where they permanently attached once assembly of the unit was completed by the consumer. Moreover, Customs stated that the pans were functionally necessary to the use of the smoker/grill unit in that the unit could not perform the essential operations of barbecuing, smoking, roasting or steaming without the pans.

Similarly, in this case, the cooking grids are not substantially transformed in the U.S. as a result of placing them in a box with partially assembled barbecue grill units during the repackaging operation in the U.S. Like the pans in HQ 734218, the cooking grids are completely finished articles when imported, there is no manufacturing performed (in fact, they are boxed separately from the other components), the repackaging operation is not complex, requires no skill and is not time consuming. The cooking grids are not attached to the grill at all at the time of sale and are not permanently attached to the barbecue grill once assembly of the unit is completed. Finally, the grids are an important part of the grill and are functionally necessary to the use of the finished barbecue grill in that the grill could not perform the essential operations of barbecuing or broiling without the grids. Accordingly, we find that the grids do not lose their separate identity when they are packaged with the other barbecue grill components and that Martin Industries would not be considered the ultimate purchaser of the imported cooking grids under 19 CFR 134.35.

Section 134.1(d), Customs Regulations (19 CFR 134.1(d)), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. The definition then gives examples of who might be the ultimate purchaser if the imported article is used in manufacture, if the imported article is sold at retail in its imported form and if an imported article is distributed as a gift. If an article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser. Since the imported cooking grids are not substantially transformed, they are not considered to undergo a change in their imported form. Therefore, the retail purchaser of the imported cooking grids is the ultimate purchaser and the grids must be individually marked with their country of origin. In addition, because the cooking grids will be repacked in the U.S. prior to sale to the ultimate purchaser the certification requirements of 19 CFR 134.26 apply.

However, if certain conditions are met, the district director may authorize an exception under 19 CFR 134.32(d) from marking the cooking grids at the time of importation provided the retail containers will indicate the country of origin of the grids. In this regard, 19 CFR 134.34(a) provides that:
an exception under section 134.32(d) may be authorized in the discretion of the district director for imported articles which are to be repacked after release from Customs custody under the following conditions:

(1) The container in which the articles are repacked will indicate the origin of the articles to an ultimate purchaser in the U.S.

(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 liquidation of the entry.

Whether or not the district director authorizes the above exception the retail box must satisfy the marking requirements provided in 19 CFR Part 134.

With respect to your claim that the marking "Made in Taiwan" which appears on each cooking grid misdirects the ultimate purchaser of the barbecue grill in believing that the entire grill is made in Taiwan, we suggest a marking such as "Grids Made in Taiwan" would sufficiently indicate to the ultimate
purchaser that only the cooking grids are made in Taiwan and not the entire grill. Customs has previously ruled that this type of marking is an acceptable country of origin marking under 19 U.S.C. 1304 and 19 CFR Part 134.

HOLDING

The imported cast iron cooking grids are not substantially transformed in the U.S. by combining them with partially assembled barbecue grills during a repackaging operation in the U.S. Therefore, the retail purchaser is the ultimate purchaser of the imported cooking grids and they must be marked to indicate their country of origin Taiwan. Because the grids will be repackaged in the U.S., the certification requirements set forth in 19 CFR 134.26 apply.

Sincerely,

John Durant, Director
Commercial Rulings Division

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