HQ 0734570 - Country of Origin Marking Requirements for Analog Pedometers, Electronic Pedometers, Digital Pedometers and Mini-Digital Pedometers; Assembly; FTC; 19 CFR 134.35. - United States International Trade Commision Rulings

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HQ 734570
January 27, 1993

MAR-2-05 CO:R:C:V 734570 ER

CATEGORY: MARKING

Albert F. Tellechea, Esq.
Ambrette & Tellechea, P.A.
850 SouthTrust Bank Building
134 West Central Boulevard
Orlando, Florida 32789

RE: Country of Origin Marking Requirements for Analog Pedometers, Electronic Pedometers, Digital Pedometers and Mini-Digital Pedometers; Assembly; FTC; 19 CFR 134.35.

Dear Mr. Tellechea:

This is in response to your letters dated October 2, and December 4, 1991, January 24, February 10 and March 25, 1992, on behalf of your client, K & R Instruments, Inc., in which you request a ruling regarding the country of origin marking requirements for certain analog pedometers, electronic pedometers, digital pedometers and mini-digital pedometers.

FACTS:

K & R Instruments, Inc. manufactures transportation, personal security, promotional and leisure products. The four types of products which are the subject of this ruling request are analog pedometers, digital pedometers, electronic pedometers and mini-digital pedometers. Confidential treatment has been requested and granted for details concerning the specific nature of the processing necessary to manufacture and assemble these products.

The completed articles are made from between approximately 25 to 35 imported and domestic components. Each imported component is subjected to one or more processes including drilling, arching, tapping, screwing, threading, riveting, sanding, deburring, cutting, calibrating, aligning, bending, twisting, balancing, welding and extensive testing and quality control. Various machines are necessary to perform the manufacturing and assembly operations including lathes, pneumatic and hand presses, orbital riveters, automatic tapping machines, vacuum pick-up electric screwdrivers, welding machines, test fixtures and walking and jogging testing machines, drill presses, pneumatic screwdrivers and autofeeding screwdrivers as well as simple hand tools.

Samples of the pedometers were submitted with the ruling request as well as detailed schematics of the manufacturing and assembly operations.

ISSUE:

Are imported components which are used to create analog pedometers, digital pedometers, electronic pedometers and mini- digital pedometers, substantially transformed by the manufacturing and assembly operations performed in the U.S. subsequent to importation?

LAW AND ANALYSIS:

The marking statute, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) 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 the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The primary purpose of the country of origin marking statute 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 CCPA 297, 302, C.A.D. 104 (1940).

The "ultimate purchaser" is defined generally as the last person in the U.S. who will receive the article in the form in which it was imported. 19 CFR 134.1(d). If an article is to be sold at retail in its imported form, the purchaser at retail is the "ultimate purchaser." 19 CFR 134.1(3).

The country of origin for marking purposes is defined at section 134.1(b), Customs Regulations (19 CFR 134.1(b)), to mean 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 Part 134. A substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. Koru North America v. United States, 12 CIT 1120, 701 F.Supp. 229 (1988). The question of when a substantial transformation occurs for marking purposes is a question of fact to be determined on a
case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022 (1983).

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D.s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.

In T.D. 67-172, 1 Cust.Bull. 366 (1967), we considered whether the domestic assembly of imported parts to make fishing rods and reels constituted a substantial transformation and found that it did not, stating that the assembly of all or substantially all of the components imported did not result in the manufacture of a new and different article. Accordingly, we stated that one of the parts, such as the main reel housing, should be marked to indicate the country of origin, so that the marking remains legible and conspicuous after the reels were assembled. See also, C.S.D. 80-111 (foreign fan components not substantially transformed by domestic, 20-step, assembly-line operations, as the identity of the foreign components was not lost or physically altered, no skilled labor or specialized equipment was required, and the assembly costs were relatively low.)

However, in HQ 712529 (March 27, 1980), imported plastic housings and faceplates were found to be substantially transformed when domestically assembled with other components to make depth sounders, thus, rendering the manufacturer the ultimate purchaser of the imported components within the meaning of 19 U.S.C. 1304(a). And, in HQ 734097 (November 25, 1991), Customs ruled that imported terminal video shells (computer terminal housings that contain video electronics, but no logic boards), were substantially transformed in the U.S. when they were processed by the installation of certain key components, such as terminal logic boards, to make them into dumb terminals for certain computer systems.

In this case, we find that the manufacturing and assembly operations to which imported components are subjected, are significant and result in a substantial transformation of the imported components. The processing performed on the 20 to 35 components (drilling, arching, tapping, screwing, threading, riveting, sanding, deburring, cutting, calibrating, aligning, bending, twisting, balancing, welding and extensive testing and quality control) results in the physical alteration of some of the components, requires significant attention to detail, the use of specialized equipment and the components lose their identity by becoming an integral part of a new article. Although no data was provided regarding the amount of time necessary to complete the manufacturing and assembly, it is apparent from the description of the operations performed that the amount of time required to complete these operations is considerable.

HOLDING:

The imported components lose their foreign identities as a result of the manufacturing and assembly operations which are performed subsequent to importation into the U.S. Said components are substantially transformed when they are processed by K & R Instruments, Inc. into analog, digital, mini-digital and electronic pedometers. In accordance with 19 CFR 134.35, K & R Instruments, Inc. is the ultimate purchaser of the imported components. Accordingly, the completed pedometers are excepted from country of origin marking, as are the individual imported components, so long as the cartons in which K & R Instruments, Inc. receives the imported components are properly marked with country of origin and Customs officials at the port of entry are satisfied that the components will be used by K & R Instruments, Inc. only in the manner set forth above. The Federal Trade Commission, ("FTC") should be contacted regarding the propriety of the use of the words "Made in USA" on the pedometers.

Sincerely,

John Durant, Director

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