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HQ 734966

October 18, 1993

MAR-2-05 CO:R:C:V 734966 KR

CATEGORY: MARKING

Mr. Frederick L. Ikenson
1621 New Hampshire Avenue, NW
Washington, D.C. 20009

RE: Country of origin marking of computer monitors; substantial transformation; 19 CFR 134.35.

Dear Mr. Ikenson:

This is in response to your request dated February 3, 1993, and supplemented by letter dated May 3, 1993, for a country of origin marking ruling on behalf of your client, Zenith Data Systems Corporation ("ZDS"), regarding video display terminals ("VDTs"), also called computer monitors. These VDTs are assembled in the U.S. on behalf of ZDS from parts imported from various countries, and it is your position that the assembled VDT is excepted from country of origin marking.

A related Ruling, HQ 734977 (April 2, 1993), was issued to ZDS as a final determination under Subpart B of Part 177, Customs Regulations (19 CFR 177.21 et seq.). That final determination concerned the country of origin for purposes of the Trade Agreements Act, 19 U.S.C. 2514 et seq., of certain computer monitors which were being offered to the U.S. Air Force in a procurement designated under Air Force Solicitation No. F01620- 91-A212, also referred to as "Desktop IV". As defined at 19 U.S.C. 2518(4)(B), an article which consists in whole or in part of materials from another (non-designated) country or instrumentality must have been substantially transformed in a designated country or instrumentality into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed in order to be considered a product of the latter country or instrumentality. The monitors in question were assembled in a "designated" country partly from materials produced in non- designated countries, and Customs determined that the monitors were substantially transformed in the designated country.

In the matter presently before us, the assembly process is the same as that designated as "Scenario I" in HQ 734977. Although there were three alternative assembly scenarios in the original ruling request, you are now requesting that we consider only Scenario I. The parts for assembly are imported from various countries. You believe that the assembly in the U.S. of the VDTs constitutes a substantial transformation of the foreign components.

FACTS:

The major components of the VDT are:

1. The imported integral tube component ("ITC"), which consists of a cathode ray tube ("CRT") with a mounted yoke attached;

2. The imported degaussing ring or shield which is mounted around the perimeter of the ITC face plate;

3. The imported plastic bezel or cabinet front piece to which the ITC and degaussing ring are attached;

4. The imported main printed circuit board ("PCB") or main chassis board, which is mounted on guide rails attached to the ITC assembly;

5. The imported video or CRT board which is mounted to the pin connectors of the cathode ray tube;

6. The imported plastic cabinet or case back which encloses all parts of the VDT and is mounted to the bezel; and

7. Various imported and U.S. cables, wires, connectors, wire ties, and miscellaneous hardware (fasteners), used to create all required electrical connections between the components and to physically integrate the components.

The U.S. Assembly Process

Prior to importation into the U.S., the foreign ITC is shipped to a third country where the degaussing ring and the plastic bezel are attached. The cabinet back is temporarily attached to the bezel for convenience of transport, and then shipped to the U.S. in packing to be reused when shipping to ZDS and its customers. The main chassis board and video board are connected to electronic components in a foreign country and, prior to shipment to the U.S., certain wires are attached to each to connect them together. The main chassis board and video board are packaged in plastic and shipped in bulk to the U.S. independently of the remaining parts of the VDT. The main chassis board and video board are connected to the VDT in the U.S.

You state that when the bezels and backs are attached for transport they are not "mated" to the attached pieces. The pieces are attached only temporarily for shipping purposes for protection of the parts. After arrival the parts are separated into inventory and are not predestined to be rejoined. From the inventoried components of the ITC, the main PCB, the video PCB and the cabinet components are integrated to assemble the VDT. You state that only after importation into the U.S. are the major components of the VDTs integrated into a single unit. The VDTs are tested, aligned and inspected in the U.S.

The VDT final assembly, testing, aligning, and inspecting involves [ ] separate stations involving [ ] multistage operations of [ ] distinct activities. You state that the different steps which take place after importation into the U.S. require a great deal of skill, time and precision to perform, including the use of highly specialized tools. In Scenario I, the production process requires approximately [ ] minutes per unit. Specialized training and skills are required. You state that over 50 percent of the active cycle time (other than burn- in and aging) are devoted to highly skilled electrical and electronic testing adjustment and alignment procedures using sophisticated and sensitive supporting equipment (often requiring frequent recalibration). These operations integrate the parts into a new article and impart to the article its functional characteristics. You state that while the assembly imparts the final form to the VDT, it is the complex and highly skilled adjustment and alignment procedures which provide the VDT with its requisite character and render it suitable for its intended use.

ISSUE:

Are the imported VDT components subject to marking as articles of foreign origin, or are the VDT components excepted from such marking by reason of processing in the U.S. which converts them into finished VDTs?

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. 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), provides 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, but the new article resulting from the U.S. processing or manufacturing is excepted from country of origin marking.

Section 134.1(b) defines "country of origin" as:

"the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 this part."

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. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90- 51, and C.S.D. 90-97.

In a prior case involving Zenith Electronics Corporation, HQ 555660 (September 18, 1990), Customs determined that, under a similar set of assembly operations, individual parts of computer monitors were substantially transformed for Generalized System of Preferences ("GSP") purposes.

The final assembly procedures involved attaching the lammed and yammed CRT/ITC assembly to the bezel or escutcheon of the monitor by means of a mounting band and brackets, installing the LED assembly and degaussing coil, and testing this advanced assembly. The escutcheon assembly was joined to the frame assembly and the unit underwent final testing. After the cabinet back was installed and the tilt/swivel base was attached, the computer monitor was ready for shipment into the U.S.

In HQ 734097 (November 25, 1991), Customs ruled that imported terminal video shells (computer terminal housings that contained 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 the terminal logic boards, to make them into dumb terminals for certain computer systems. The addition of the logic boards was determined to create a new article. Computer terminal housings containing video electronics but no logic boards were manufactured in Korea. In the U.S. four components, the terminal logic board, key switches, T-connector cables, and custom keyboards were installed into the empty shells and the video unit was aligned to receive new communication protocol transmissions. Even though no cost or skill data was submitted, Customs held that this installation amounted to a substantial transformation in the U.S. into a new article - a functional computer terminal. Of clear import in the decision and the cases cited therein, was that the assembly included essential components not attached prior to importation. See HRL 732170 infra. See HQ 734213 (February 20, 1992)(finding a substantial transformation when a computer monitor was changed into a touchscreen monitor because the touchscreen monitor had a different use than the plain computer monitor). See also HQ 734045 (October 8, 1991) (finding that the combining of sub-assemblies and other components of lap- top and notebook personal computers was a substantial transformation).

In other country of origin rulings addressing the substantial transformation of computer monitors and television chassis, Customs has treated televisions and computer monitors as comparable articles. See HQ 734097 (November 25, 1991). Thus we are to treat rulings regarding televisions as especially relevant to our consideration of these monitors. In HQ 711967 (March 17, 1980) Customs held that television sets which were assembled in Mexico with printed circuit boards, power transformers, yokes and tuners from Mexico and picture tubes, cabinets, and additional wiring from the U.S. must be marked with the country of origin as Mexico because the U.S. parts were substantially transformed by the processing performed in Mexico and all the components lost their individual identities to become integral parts of the new article.

In HQ 732170 (January 5, 1990), Customs ruled on the country of origin of a backless television cabinet containing a tuner, speaker and circuit board were imported into the U.S. where they were combined with a color picture tube, deflection yoke, electron beam bender and degausser coil, and a remote control unit assembled into the chassis. The U.S. technicians placed wire ties and attached the cabinet back, tested, aligned and packaged the televisions. Customs held the domestic operations substantially transformed the imported chassis and components.

Zenith's assembly of VDTs in the U.S. pursuant to Scenario I is detailed and requires many stations and steps. On the basis of the previous rulings on television receivers and computer monitors, cited supra, we find that the VDTs are substantially transformed by the assembly that occurs in the U.S.

HOLDING:

The video display terminals imported into the U.S. pursuant to Scenario I and assembled, adjusted and tested as discussed above, are substantially transformed in the U.S. Such video display terminals are excepted from country of origin marking pursuant to 19 CFR 134.35.

Sincerely,

John Durant, Director

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