HQ 0734219 - Country of origin marking of imported water pans and charcoal pans incorporated into smoker/grill units manufactured in the U.S.; substantial transformation; 19 CFR 134.35; United States v. Gibson-Thomsen Co.; Uniroyal, Inc., v. United States; T.D. 91-7 (January 16, 1991; HQ 731432 (June 6, 1988); HQ 734046 (May 10, 1991) - United States International Trade Commision Rulings

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HQ 734219

September 3, 1991

MAR-2-05 CO:R:C:V 734219 AT

CATEGORY: MARKING

Alan R. Klestadt, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman 12 East 49th Street
New York, New York 10017

RE: Country of origin marking of imported water pans and charcoal pans incorporated into smoker/grill units manufactured in the U.S.; substantial transformation; 19 CFR 134.35; United States v. Gibson-Thomsen Co.; Uniroyal, Inc., v. United States; T.D. 91-7 (January 16, 1991; HQ 731432 (June 6, 1988); HQ 734046 (May 10, 1991)

Dear Mr. Klestadt:

This is in response to your letters of June 18, June 19, July 3 and August 9, 1991, on behalf of The Brinkmann Corporation (Brinkmann), requesting a prospective and binding country of origin ruling regarding imported water pans and charcoal pans incorporated into smoker/grill units manufactured in the U.S.

FACTS:

You state that Brinkmann imports water pans and charcoal pans manufactured in China to be incorporated into smoker/grill units predominantly manufactured in the U.S. Each smoker/grill unit allows the ultimate user to smoke, steam, barbecue or roast food depending upon the configuration of the water pan and charcoal pan. After importation, the water and charcoal pans are combined with 13 U.S. origin components and 2 other foreign components (15 1/2" grill and heat gauge) manufactured in Taiwan and repackaged into sealed cardboard containers. In addition to the above components, several minor accessories (e.g. instructions, recipe book, decals, etc.) are included in the box. These minor accessories along with packaging materials are of U.S. origin. A breakdown of the smoker/grill unit's essential components (excluding packaging costs, labor costs and costs of the minor accessories), shows that the water and charcoal pans represent approximately 19 percent of the total cost of the smoker/grill unit.
You state that because the imported water pans and charcoal pans are combined in the U.S. with other components to form an article (smoker/grill units) having a name, character and use different from that of the imported pans, the pans are entitled to an exemption from U.S. country of origin marking requirements pursuant to 19 U.S.C. 1304(a)(3)(H). You also state that although the subject pans are essential to the smoker/grill units, they are not the finished article's only essential parts in that the unit could not function without its shell or grills nor do the pans impart any shape or appearance to the smoker/grill units. Further, the pans condition as imported, are not readily identifiable as part of the finished article.

You claim that Brinkmann imports approximately $600,000 pans per year and of that amount approximately 99.5 percent are sold at retail as part of finished smoker/grill units. The remaining 0.5 percent of the pans are sold separately as replacement parts for which Brinkmann has instituted a program to mark these replacement pans with their country of origin before shipping them to the ultimate consumers.

A sample of the smoker/grill unit, repackaging container and assembly instructions were submitted for further examination.

Examination of the water pan and charcoal pan reveals that no country of origin marking exits on either pan. The repackaging container has a color illustration of the smoker/grill printed on the front panel. Also, on the back panel near the bottom the U.S. address of the Brinkmann Corporation is printed in the following manner "4215 McEwen Road/ Dallas, Texas 75234".

ISSUE:

Whether the imported water pans and charcoal pans 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. One of the factors considered by the court in reaching its conclusion was that the domestic bristles used were "by far the most valuable element." Also, the court looked at whether the imported article loses its identity as such when combined with other articles. In that case, the court concluded that wood handles were material to be used in the manufacture of toothbrushes and hairbrushes. The court was also concerned that when an imported article was combined with a domestic material, that the ultimate purchaser not be confused into thinking that the domestic article was made in a foreign country. Therefore, the court concluded that a mere material to be used in the manufacture of a new article having a new name, character and use and which, became an integral part of the new article would not be required to be marked.

In contrast to the imported handles in Gibson-Thomsen, the imported water pans and charcoal pans involved here cannot be considered to be "mere materials" used in the manufacture of the finished articles. To the contrary, the pans are important elements of the finished smoker/grill unit in that without the pans an ultimate purchaser would not be able to perform the general operations of barbecuing, smoking, roasting or steaming food in the unit, which is the essential purpose why this particular unit is purchased. Also, when the imported water pans and charcoal pans are combined with other domestic and foreign components making up the finished smoker/grill unit they do not lose their individual identity of that of being a water pan and charcoal pan. Therefore, since there is no change in the name, character or use of the imported water pans and charcoal pans once combined, there is no substantial transformation.

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. The court described the imported upper as "completed shoes except for an outersole." The shoe had already "obtained its ultimate shape, form and size." One process performed in the U.S., relasting, was characterized as "convenient, not necessary." The processes performed in the U.S. were significantly less costly and less time consuming than the foreign manufacturing process. The cost of the upper was significantly greater than the cost of the outsole. Further, the manufacture of the upper required at least five highly skilled operations. The court concluded that the attachment of the outsole was a minor manufacturing or combining process which leaves the identity of the upper intact. This case is like Uniroyal because the imported water pans and charcoal pans are not only important to the finished smoker/grill unit, but also the unit could not perform the critical functions of barbecuing, smoking, roasting and steaming without these pans making them essential to the unit's total performance. Further, even though the water pans and charcoal pans are completely obscured by the unit's dome, shell and grills, upon being assembled by the consumer, the pans are not permanently attached to the unit and their character still remains the same, as that of being a water pan and charcoal pan.
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 this case, the water pans and charcoal pans are completely finished articles when imported into the U.S. There is no extensive manufacturing process of combining the pans with its other domestic and foreign counterparts, besides simply placing the articles into a cardboard container during the repackaging operation. Placing the water pan and charcoal pan into a cardboard container a long with other domestic and foreign articles is a very minor operation which is not complex, requires no skill and is not time-consuming. The water pan and charcoal pan are not permanently attached to the smoker/grill unit during the combining process nor are they permanently attached once assembly of the unit is completed. There is no doubt that the imported water pans and charcoal pans are functionally necessary to the use of the finished smoker/grill unit. As stated above, the water pans and charcoal pans are important to the operation of the unit in that one could not perform the operations of barbecuing, smoking, roasting or steaming without the pans.

We disagree with your assertion that Customs holding in HQ 730066 (January 16, 1987), that a detachable cord set manufactured in Taiwan and imported into the U.S. together with an electric coffeemaker manufactured in Hong Kong was excepted from country of origin marking is applicable in this case. In the coffeemaker case, the cord set only represented 3 percent of the total cost of the unit. However, in this case, the information you submitted indicates that the cost of the two pans as compared to the total cost of the smoker/grill unit (excluding packaging costs, labor and minor accessories) represents approximately 19 percent of the total cost of the unit. This definitely is significant to the total value of the smoker/grill unit, unlike the detachable cord set. Therefore, we find that HQ 730066 is not applicable to this case. (See also, HQ 734046, May 10, 1991; base unit, headset, headset cord and telephone cord imported from different countries and packaged together in the U.S. as a telephone set were not substantially transformed and each had to be marked with its country of origin).

Based on our consideration of all these factors, we conclude that these imported water pans and charcoal pans are not substantially transformed in the U.S. as a result of combining them with other domestic and foreign components during a repackaging operation. Therefore, Brinkmann would not be considered the ultimate purchaser of the imported water pans and charcoal pans 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 water pans and charcoal pans are not substantially transformed, they are not considered to undergo a change in their imported form. Therefore, the retail purchaser of the imported pans is the ultimate purchaser and the water pans and charcoal pans must be individually marked with their country of origin. In addition, because the pans 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 pans at the time of importation. 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 requirements of 19 CFR 134.46. Examination of the cardboard box in which the water pans and charcoal pans are repackaged into reveals that the words "4215 McEwen Road/Dallas, Texas 75234" are printed on the back panel of the box. Section 134.46, Customs Regulations (19 CFR 134.46) requires that in any case in which the words "U.S.," or "American," the letters "U.S.A.," any variation of such words or letters, or the name of any city or locality other than the country or locality in which the article was manufactured or produced, appear on an imported article or its container, there shall appear, legibly and permanently, in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of", or other words of similar meaning (emphasis added). Therefore the marking on the box must satisfy the requirements of section 134.46 since the words "Dallas, Texas" appear on the back panel.

Although the scope of the ruling request and thus this ruling is limited to the marking requirements of the imported pans, based on a similar analysis it would appear that the other two foreign components, the grill and heat guage, would be subject to similar marking requirements.

HOLDING

The imported water pans and charcoal pans are not substantially transformed in the U.S. by combining them with other domestic and foreign components during a repackaging operation in the U.S. Therefore, the retail purchaser is the ultimate purchaser of the imported water pans and charcoal pans and they must be marked to indicate their country of origin, i.e., China.

Sincerely,

John Durant, Director
Commercial Rulings Division

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