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HQ 734440

March 30, 1992
MAR-2-05 CO:R:C:V 734440 KR

CATEGORY: MARKING

Mr. Steven B. Lehat
Sheldon & Mak
201 South Lake Avenue, Suite 800
Pasadena, CA 91101

RE: Country of origin marking of locking apparatus; keys; combining; substantial transformation

Dear Mr. Lehat:

This is in response to your letter dated November 22, 1991, requesting a country of origin ruling on behalf of your client, Hampton Products International, regarding a locking apparatus and keys which are imported from Taiwan which are to be combined with other pieces and casings for a "jaws lock" which are manufactured in the United States. A sample of a finished lock, the imported locking apparatus with keys, and a "mock-up" lock and keys with packaging were submitted for examination, and are being returned to you, as requested. This ruling will apply only to model numbers 400S, 400P, 500S, 500P, 550S, and 550P which use the same imported locking apparatus.

FACTS:

You state that Hampton Products intends to import one model of locking apparatus and keys for insertion into six different models of locks. (30 millimeter widths-models 400S and 400P, 400 millimeter widths-models 500S and 500P, and 45 millimeter widths- models 550S and 550P). You state that the only difference between the 400, 500, and 550 series models is the size of the lock, not the mechanism. The difference between the "S" and "P" models is the type of 'grip' or 'post' used in the jaw of the lock. You state that the imported brass lock apparatus contains an unfinished surface and is not suitable for retail sale. The brass lock apparatus is imported in boxes containing several apparatus and keys. Each apparatus is not individually marked, but the shipping box containing the lock apparatus and keys is labeled with the country of origin, Taiwan. The keys are not marked with the country of origin.

All the remaining parts of the lock are manufactured in the United States. The United States manufactured pieces include: an upper jaw, dow pin, lower jaw, jaw springs, allan assembly pin, outer case, and bottom plate. The lock is assembled and finished in the United States. You state that:

"[p]roduction of the Locks in the United States entails die casting, grinding, polishing, and anodizing the 'upper jaw;' die casting and anodizing the 'lower jaw;' extruding, cutting, milling, grinding, polishing, anodizing, and then black powder coating the 'case;' extruding, cutting, and drilling holes in the 'bottom plate;' and finally assembling the Lock by pressing the bottom plate into the case, grinding the edges thereof, and otherwise incorporating the remaining components into the finished Lock."

The packaging for the finished lock contains the lock, keys and a printed card inside a clear plastic blister pack. The back of the card lists instructions and a diagram of the parts and use of the lock. The back of the card also states that the lock has patents in the U.S. and Taiwan, and was "[m]anufactured for Cotter & Company Chicago, IL 60614 ... 100% Retailer Owned." It also contains the words "Made in USA". The cost of the imported lock apparatus is approximately 18% of the cost of model 400S, 19% of model 400P, 24% of model 500S, 25% of model 500P, 23% of model 550S, and 24% of model 550P.

The keys of one sample lock were imprinted with the word "Hampton" on one side with the other side of the key blank. The keys of the second sample inside the blister pack were imprinted with the words "CUSTOM MADE" and "Hampton" on one side of the key, and "CUSTOM MADE" and a four digit numeral on the other side. The keys enclosed with the sample imported lock apparatus were imprinted with "THE HIGH SECURITY" and "Gino" on each side of the keys.

ISSUE:

Whether the imported lock apparatus and keys are substantially transformed when they are combined in the United States in the manner described above, and packaged 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 1120 (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. Frielaender & 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, 628 F. Supp. 978, 10 CIT 48 (CIT 1986); Koru North America v. United States, 701 F. Supp. 229, 12 CIT 1120, (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. United States, 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 along 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.

In this situation, the lock apparatus is substantially transformed after entry into the U.S. The lock apparatus is only part of the internal working of the whole of the lock. The lock apparatus is permanently attached to the remaining pieces and is not visible once assembled. The lock apparatus is functionally necessary to the operation of the finished article, and not an accessory retaining its independent function. The predominant expense of the assembled lock is in the parts produced in the U.S. The imported piece is a generic mechanism which is inserted into remaining pieces which required extensive manufacturing and development, and which received patents in the U.S. and Taiwan.

Based on our consideration of all these factors, we conclude that the lock apparatus is substantially transformed in the U.S. as a result of combining it with the U.S. manufactured pieces. Accordingly, we find that Hampton Products is the ultimate purchaser of the lock apparatus 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, the purchaser at retail is the ultimate purchaser. Therefore, the box containing the the imported lock apparatus prior to assembly must continue to be marked with the country of origin of the lock apparatus, Taiwan. However, it is not necessary to mark the assembled lock with the country of origin of the imported lock apparatus.

We further find that the keys associated with the imported lock apparatus must be marked with the country of origin. Using the six factors above, the keys which are imported from Taiwan with the lock apparatus are a separate entity from the remaining assembled lock. The keys are carried separately, and have a separate and distinct function from the lock. The keys are an "accessory which retains its independent function." See HQ 731432 (June 6, 1988). We, therefore, find that Hampton Products would not be considered the ultimate purchaser of the imported keys under 19 CFR 134.35; and that the keys must be marked with their own country of origin. Further, since the keys are to be repacked in retail containers, Hampton Products will have to submit the proper certifications required under 19 CFR 134.26. Alternatively, Hampton Products may request an exception from the Customs district director under 19 CFR 134.34, if Hampton Products agrees to mark the packaging in a legible, indelible and permanent manner with the country of origin of the keys (e.g., "Keys Made in Taiwan").

The sample packaging contains the words, "Made in USA". This ruling does not address the issue of whether "Made in USA" may be marked on the packaging, or lock. The determination of marking an item as "Made in USA" is under the primary jurisdiction of the Federal Trade Commission and not this service. We, therefore, recommend that you contact the Federal Trade Commission, Division of Enforcement, located at 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20580, for any views concerning marking the lock with the "USA" symbol.

HOLDING:

The imported lock apparatus is substantially transformed in the U.S. by combining it with the U.S. manufactured remaining lock pieces as described supra. However, the imported keys are a separate entity and are not substantially transformed. Therefore, Hampton Products is the ultimate purchaser of the lock apparatus, but the retail purchaser is the ultimate purchaser of the keys. The lock apparatus is excepted from marking provided it is imported in a container which is properly marked to indicate its origin, and the district director is satisfied that Hampton Products will receive the lock apparatus in this container and that such apparatus will be used only in the manner described above and not otherwise sold. The keys must, therefore, be marked to indicate their country of origin, Taiwan. If the assembled locks will be repacked into a container which obsures the marking on the keys, the certification requirements of 19 CFR 134.26 are applicable.

Sincerely,

John Durant, Director

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