HQ 0735242 - Country of origin marking of musical buttons; assembly. - United States International Trade Commision Rulings

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HQ 735242

July 6, 1994

MAR-2-05 CO:R:C:S 735242 RC

CATEGORY: MARKING

Ms. Catherine Pritchard
Expeditors International of Washington, Inc. P.O. Box 2568
South San Francisco, California 94083-2568

RE: Country of origin marking of musical buttons; assembly.

Dear Ms. Pritchard:

This is in response to your letter of May 24, 1993, requesting a ruling on the country of origin marking requirements for musical buttons imported into the U.S.

FACTS:

Your client, Institutional Financing Services Inc., will import musical buttons into the U.S. The buttons are manufactured in China. Their batteries are manufactured in Japan. After importation, the buttons will be sewn into teddy bears and sold at retail.

ISSUE:

Whether music buttons made in China and imported into the U.S. for sewing into teddy bears must be individually marked to indicate their country of origin.

LAW AND ANALYSIS:

The marking statute, section 304, 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 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 exceptions of 19 U.S.C. 1304.

Under 19 CFR 134.35, the manufacturer or processor in the U.S. who converts or combines an imported article into an article having a new name, character or use will be considered the
ultimate purchaser of the imported article within the scope of 19 U.S.C. 1304 and the article will be excepted from marking.

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). 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. 85-25 (September 25, 1984).

As provided in section 134.14, Customs Regulations (19 CFR 134.14):
when an imported article is of a kind which is usually combined with another article after importation but before delivery to an ultimate purchaser and the name indicating the country of origin of the article appears in a place on the article so that the name will be visible after such combining, the marking shall include, in addition to the name of the country of origin, words or symbols which shall clearly show that the origin indicated is that of the imported article only and not that of any other article with which the imported article may be combined after importation.

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). If domestic components attribute the essential character of the finished article, Customs will find that the imported components undergo a substantial transformation in the U.S. In HQ 712529 (March 27, 1980), imported plastic housings and face-plates 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). 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.

More germane to the instant case, Customs has ruled that the shell of a doll imparts its essential character and that stuffing a doll does not effect a substantial transformation. See HQ 733838 (February 7, 1991) See also HQ 722997 (August 30, 1983)(stuffing of figurines not a substantial transformation); HQ 734149 (November 25, 1991)(stuffing of santa dolls not a substantial transformation). Likewise, we find that the shell of a teddy bear imparts its essential character and sewing a musical button into the teddy bear does not effect a substantial transformation.

These Customs rulings address the complexity of the processing operations as well as the costs of the components. See HQ 555365 (September 7, 1990)(Customs found imported screws sold with U.S.-made junction boxes were not subject to marking because, in terms of cost, the screws constituted an insignificant part of the set, 2.3 percent of the total cost. Here, the complexity of the sewing operation and the cost of the musical button are minimal.

Here, we find that the musical buttons need not be individually marked to indicate their Chinese origin for the following reasons: (1) Sewing the musical buttons into the teddy bears is a minor operation; (2) the musical buttons are not finished products until they are attached to something else, i.e. teddy bears; (3) looking at the finished teddy bears, the musical buttons will not be visible; (4) the musical buttons lose their separate character and identity when sewn into the bears; (5) lastly, in terms of both cost and function, the musical buttons are not significant components of the finished teddy bears.

In sum, the musical buttons undergo a substantial transformation when sewn into the teddy bears. As such, the musical buttons do not remain products of China, but become products of the country where the teddy bears are manufactured. It is not necessary to indicate the country of origin of the musical buttons. It will only be necessary to mark the shipping containers of the musical buttons.

HOLDING:

Pursuant to 19 CFR 134.35, the musical buttons undergo a substantial transformation when they are sewn into the teddy bears. As such, only the shipping containers of the imported musical buttons are required to be marked to indicate "China" as the country of origin. The finished teddy bears need not indicate the country of origin of the musical buttons.

Sincerely,

John Durant, Director

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