United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1994 HQ Rulings > HQ 0733738 - HQ 0735139 > HQ 0735133

Previous Ruling Next Ruling



HQ 735133

May 5, 1994

MAR-2-05 CO:R:C:V 735133 RSD

CATEGORY: MARKING

Marianne P. Basham, Esq.
121 South Wilke Road
Arlington Heights, Illinois 60005

RE: Country of origin marking for padlocks with imported parts assembled in the United States; locks; assembly; substantial transformation; parts; container marking; using pressure sensitive tape; permanent; 19 CFR 134.35; 19 CFR 134.32(d); 19 CFR 134.32(g); HQ 733299

Dear Ms. Basham:

This is in response to your letter dated April 23, 1993, requesting a ruling concerning the country of origin marking requirements of imported components which are assembled in the United States to make a finished padlock. Letters dated May 27, 1993, and October 15, 1993, supplementing your request, have been received. Samples of the components and the finished lock were also submitted. We regret the delay in responding. You also request that your client's name, the lock manufacturer, and information regarding one of the manufacturing processes [plating] be kept confidential because if this information became public, it could injure your client's competitive position. Your client's name will not be disclosed in the ruling and all bracketed information regarding the manufacturing process will not be disclosed on copies of this ruling made available to the public. In a telephone conversation on April 28, 1994, with a member of my staff, you indicated that because of the issuance of proposed rules for determining the country of origin of imported merchandise, you do not want Customs to rule on the marking of the padlocks when there are multiple source countries for the lock components. Accordingly, this ruling is limited to facts as presented in your ruling request and subsequent submissions. If the facts change, an additional ruling regarding those changed facts may be necessary.

FACTS:

Your client [ ] will be producing several styles of padlocks made of steel or brass from imported parts and assemblies. Currently your client intends to import certain lock parts and assemblies manufactured by various firms located in Taiwan. The manufacturers of the parts and assemblies will vary depending on market conditions, quality and competitive pricing. The following sample parts of the lock were submitted: a) lock body, b) shackle, c) shackle spring, d) retainer, e) locking balls, f) cylinder, g) coverplate, h) assembled lock and keys. All of the parts of the lock will be of foreign origin except for the coverplate screw. For purposes of this ruling, it is assumed that all the parts, except for the U.S. coverplate screw are products of Taiwan. The coverplate screw will be manufactured and sourced in the United States.

The individual parts and assemblies will be purchased in bulk. You indicate that the imported parts will be subjected to further processing the United States which will result in a finished padlock. Our examination of the imported parts reveals that the post importation processing is minor. Although it is indicated that the parts will be subjected to some sizing by filing, and/or grinding, finishing of the cylinder by coding, cutting, and final assembly of the individual parts into the finished units, the samples of the imported parts seem to be almost completely finished. Therefore, any alternations that are performed appear to be minor in order to permit smooth operation of the parts. The processing is described as follows:

The first step in assembling the pad lock in the U.S. is to inspect and alter the shackle fit. The next step is to inspect and alter the retainer. After the retainer is inserted, the actuator tool is inserted and rotation action is enacted. The worker checks for smooth movement. If the movement is binding or restrictive, the retainer will be removed and will be altered by filing or milling, and the worker will reinstall the retainer.

The Z-body component is assembled by having the shackle spring installed and altered. The fitted shackle is inserted. The locking balls are greased and positioned. Then the altered retainer is inserted. An actuator tool is inserted and the lock is opened and closed for the testing of smooth operation of the complete locking mechanism. If the operation is not smooth, the product is rejected and inspected for needed alteration.

The machine operators will code the keys in accordance to customers' specifications. In doing this, the operator must set cutting blades to the proper code. The cylinder must also be coded. The technician will insert the blade tool into the cylinder and will rotate the cylinder 180 degrees. Then the technician will insert the proper code series of pins which match the code of the key pair. The cylinder is then rotated 90 degrees forward and returned to zero position and then rotated 90 degrees in reverse, checking for smooth operation in both directions.

The final assembly consists of installing the cylinder into the z-body. The cylinder cover plate is positioned and the cover plate nut is positioned. A screw is inserted and rotated into the nut to the prescribed torque. The shackle is closed and the padlock shackle is opened and closed numerous times for the inspection of the fully assembled padlock. The duplicate key is inserted and tested. If the padlock does not function smoothly, it will be disassembled and altered as needed in order to pass final inspection. In addition, certain customization options will be offered on the brass locks, which will be performed in the United States subsequent to importation. It is estimated that thirty to forty percent of the cost of the finished product is attributable to work performed in the United States. No information concerning the amount of time involved in making the lock has been presented.

The finished padlock will be sealed in a plastic bag and packed into a chipboard box with keys cut to code. The chipboard box will be sealed with pressure sensitive tape and marked "Assembled U.S.A." "Parts Taiwan". The padlock is intended to be sold to the ultimate purchaser at retail in the United States in this packed condition.

ISSUES:

Do the imported components used in making the padlocks have to be individually marked to indicate their country of origin?

Can the finished padlocks be marked "Assembled U.S.A. Parts Taiwan"?

Can the package in which the padlock is sold be marked instead of marking the lock itself?

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. Congressional intent in enacting 19 U.S.C. 1304 was "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." United States v. Friedlaender & Co. 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

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. In such circumstances, the imported article is excepted from marking. The outermost containers of the imported articles shall be marked. (See 19 CFR 134.35).

This case concerns the assembly of imported parts in the United States to make the finished padlocks. In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of the 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).

In C.S.D. 85-25, (HQ 071827), (September 25, 1984), Customs held that an assembly will not constitute a substantial transformation unless the operation is "complex and meaningful." Customs criteria for whether an operation is "complex and meaningful" depends on the nature of the operation, including the number of components assembled, number of different operations involved, and whether a significant period of time, skill, detail and quality control are necessary for the assembly operation. This criteria for determining whether a substantial transformation occurs is applied on a case-by-case basis. In C.S.D. 80-111, HQ 710564, (September 24, 1980), Customs considered whether the domestic manufacturing processes through which imported ceiling fan components become finished fans constituted a substantial transformation. In this ruling, it was stated that mere assembly of parts will not constitute a substantial transformation. We concluded that the assembly of the fan was not a substantial transformation because the processes were basically assembly line procedures which did not physically alter the components. Furthermore, we noted that the manufacturing processes were simple combining processes that did not require a great deal of skill.

Customs on several occasions has considered whether imported components used in making a locking apparatus were substantially transformed when they were combined with U.S. components. In HQ 734440 (March 30, 1992), Custom ruled that a lock apparatus was substantially transformed in the U.S. as a result of combining it with the U.S. manufactured pieces. We noted that the predominant expense of the assembled lock was in the parts produced in the U.S. The imported piece was a generic mechanism which was inserted into the remaining pieces which required extensive manufacturing and development.

In HQ 734629 (October 1, 1992), we ruled that a lock cylinder was not substantially transformed after entry into the U.S. The lock cylinder was not attached to the remaining pieces of the lock until after it was received by the installer. The lock cylinder did not lose its separate identity when combined with the remaining pieces. The cylinder remained visible even after assembly by the installer. The attachment process was a simple screw mount, that could be easily replaced by screwing it in or out.

In HQ 734227 (June 26, 1992), Customs found that chrome plated levers that were to be assembled with locksets did not lose their separate identity when they were combined with domestic locksets to form completed lever locksets. The levers were a significant component of the completed article and their assembly in no way changed the character of the levers. The levers were clearly recognizable both before and after the assembly. The lever was a separate component which had to be disassembled from the rest of the lockset prior to its installation.

In cases where Customs has determined that there was a substantial transformation of imported locked components that were assembled in the United States, there were usually significant U.S. components involved. This case differs from these prior rulings because the padlock, with the exception of a U.S. screw, is assembled from components made in one country, Taiwan. The question that must be resolved in this case is whether the assembly of these imported components is complex and meaningful enough to constitute a substantial transformation. Based on the description of the assembly process and an examination of the sample parts and finished lock, we conclude that the U.S. processing is not complex enough to constitute a substantial transformation. Rather, the production in the United States appears to be a simple manual assembly operation of basically finished parts. Most of the cost in making the finished lock is attributable to the operations performed in Taiwan and there is no indication that a great deal of time or significant skill level is involved in assembling the lock. Much of the work done in the United States involves testing the locks to see that they function properly. Accordingly, the imported parts are not substantially transformed, and the finished padlocks must be marked to indicate that their country of the origin is Taiwan.

Although the individual components for the padlocks are not substantially transformed by the assembly done in the United States, the individual components of locks can be excepted from marking under 19 CFR 134.32(g). Under 19 CFR 134.32(g) imported merchandise is excepted from marking if it will be processed in the U.S. by the importer or for his account other than for the purpose of concealing the origin of such article and in such manner that any country of origin marking would necessarily be obliterated, or destroyed, or permanently concealed. Many of the components are internal to the lock and will be concealed when lock is fully assembled. The ultimate purchaser of the lock will be unable see any marking on these parts. You also claim that the lock body and shackle could not be marked prior to importation into the U.S. without damaging these parts or driving up the costs significantly. Therefore, it makes little sense to require each individual part of the lock to be marked at the time of importation, and the individual lock parts are excepted from marking under 19 CFR 134.32(g). However, Customs has ruled that an article excepted from marking at the time of importation under 19 CFR 134.32(g) must be marked to indicate the country of origin after processing unless such processing constitutes a substantial transformation. The purpose of such a requirement is to ensure that the ultimate purchaser is advised of the country of origin. See HQ 734566 (June 25, 1992). Since the lock parts are not substantially transformed by their assembly in the United States, the finished lock must be marked to indicate that its country of origin is Taiwan.

Instead of marking the lock itself, your client wants to mark the box in which the lock is sold. Articles for which the marking of the containers will reasonably indicate the country of origin of the article can be excepted from country of origin marking under 19 U.S.C. 1304(a)(3)(D) and 19 CFR 134.32(d). Because the imported components for the lock will be taken out of the containers they are imported in and repacked into a new container after assembly, 19 CFR 134.34 is applicable. Section 134.34 Customs Regulations (19 CFR 134.34), provides that an exception may be authorized in the discretion of the district director under 19 CFR 134.32(d) for imported articles which are to be repacked after release from Customs custody under following conditions: (1) The containers 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 to secure 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. Accordingly, the padlock can be excepted from marking provided that the Customs officals at the port of importation are satisfied that the box in which the lock will be sold to the ultimate purchaser is properly marked to indicate the country of origin of the lock and the requirements of 19 CFR 134.34 are followed.

You first proposed to mark the padlocks and packaging "Assembled in U.S.A., Parts Taiwan" In a later submission, the proposed marking was modified to "Assembled in U.S.A. from parts made in Taiwan". In HQ 733299 (July 17, 1990) Customs ruled that the assembly of Japanese guitar parts in the United States was not a substantial transformation, but approved the marking "Assembled and Finished in U.S. from Parts Made in Japan", or words to similar effect which clearly indicated the Japanese origin of the parts. Accordingly, the proposed marking for the locks "Assembled in U.S.A from parts made in Taiwan" would be acceptable country of origin marking. However, the marking Assembled In U.S.A., Parts Taiwan is unacceptable because the words "made in" or a similar phrase was not included in the marking. See 19 CFR 134.46.

HOLDING:

The Taiwanese lock components are not substantially transformed by the processing done in the United States. The finished locks can be marked "Assembled in the U.S. from Parts Made in Taiwan" or a similar phrase. The individual components of the pad locks do not have to be marked if the finished lock is marked. The container, in which the finished lock is sold to the ultimate purchaser, can be marked to indicate the country of origin of the padlock provided that the district director at the port of entry is satisfied that the finished locks will be sold only in a properly marked container, and the other provisions of 19 CFR 134.34 are followed.

Sincerely,

John Durant, Director

Previous Ruling Next Ruling