HQ 0735097 - Country of origin marking requirements for cordless telephones; electronics; printed circuit boards; assembly; substantial transformation; HQ 557208 - United States International Trade Commision Rulings

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HQ 735097
September 7, 1993

MAR-2-05 CO:R:C:V 735097 RSD

CATEGORY: MARKING

Michael P. Maxwell, Esq.
10100 Santa Monica Boulevard
Suite 300
Los Angeles, California 90067

RE: Country of origin marking requirements for cordless telephones; electronics; printed circuit boards; assembly; substantial transformation; HQ 557208

Dear Mr. Maxwell:

This is in response to your letter dated April 7, 1993, on behalf of Kyushu Matsushita Electric Corporation of America regarding the marking requirements for cordless telephones imported from Mexico. These telephones were the subject of a ruling request submitted on March 24, 1993, concerning their GSP eligibility. In response to this request, the Special Classification Branch issued HQ 557208 on July 24, 1993.

FACTS:

Kyushu Matsushita Electric Corporation of America (AKME) produces cordless telephones (Model 3920) in Mexico from three printed circuit board ("PCB") subassemblies (a base unit circuit board, a base unit control board, and a handset main board), and various other components. In June, 1993, AKME started producing these three "stuffed" PCB subassemblies in Mexico by incorporating various components (diodes, resistors, etc.) onto bare printed circuit boards, all of which may be imported into Mexico from the U.S., Japan and other countries.

The base unit control board acts as a switching device and secondary circuit. It transmits the keypad functions which are essential to telephone operations such as dialing phone numbers; it also transmits commands such as "Mute", "Hold", etc. which are controlled from the base unit. The control board is produced in a 7 step process involving the incorporation of 74 parts.

The handset main board transmits and receives data between itself and the main board base unit, and it also transmits voice signals. The handset unit is dependent on battery power for its operation. It also contains a liquid crystal display (LCD), which indicates the number dialed from the keypad on the handset unit. The handset board is produced in a 12-step process involving the incorporation of 247 parts. The processes involved in making the PCB assemblies include one or more of the following operations: the insertion of jumper wires, axial parts, and radial parts into the boards, bond surface mounting (i.e. bonding chip capacitors, chip resistors, etc. into the boards); the insertion of various components into the boards by hand; flux and soldering operations, testing and adjustment operations, and the separation of the board into the proper dimensions.

These three "stuffed" PCB subassemblies are then used to produce cordless telephones in a separate 58-step process involving the incorporation of 95 parts. This process involves the preparation of the significant operation units of the base unit of the telephone (such as the speakers and microphones which are necessary to convert the voice transmission into electronic signals, and the antenna which transmits and receives the signal), and the hand set unit of the telephone. The speakers, microphones, and antenna are attached to the telephone housing by soldering, mechanical fasteners, or by other means. Various other parts are incorporated into the base unit including the main unit board; the control board, battery charging circuits, and other functional parts. The keypad is incorporated into the telephone housing. Lastly, the base unit is tested and inspected. Similarly, the hand set unit contains various components such as speakers soldered into the housing, and the buzzer.

ISSUE:

Should the imported cordless telephones be marked as products of Mexico?

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 its 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.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as 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 the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials.

In HQ 557208 (July 24, 1993), involving whether these same cordless telephones would be eligible for duty-free treatment under the GSP, Customs found that the insertion, bond surface mounting, flux and soldering, and testing and adjustment operations, substantially transformed the components imported into Mexico into PCB subassemblies. Customs also ruled that the assembly of the PCB subassemblies to create the finished cordless telephone resulted in a second transformation of the components. Therefore, the ruling concluded that the cordless telephones were products of Mexico. The facts of HQ 557208 are identical to this case. Accordingly, under 19 CFR 134.1(b), for the reasons articulated in HQ 557208, the country of origin of the cordless telephones for marking purposes is also Mexico. The cordless telephones must therefore be legibly, conspicuously, and permanently marked at the time of importation to indicate to their ultimate purchaser that their country of origin is Mexico.

HOLDING:

In accordance with the determination of HQ 557208, the country of origin of cordless telephone model 3920 is Mexico, and therefore it must be marked as a product of Mexico.

Sincerely,

John Durant, Director

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