HQ 558760 - Country of origin marking; NAFTA; Article 509; laser printer; 19 CFR 134.46; - United States International Trade Commision Rulings

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HQ 558760

January 13, 1995

MAR-2-05 CO:R:C:S 558760 WAS

CATEGORY: MARKING

Mr. Stephen R. Handy
Digital Equipment Corporation
50 Nagog Park
Acton, MA 01720-3499

RE: Country of origin marking; NAFTA; Article 509; laser printer; 19 CFR 134.46;

Dear Mr. Handy:

This is in response to your letter dated September 2, 1994, concerning the country of origin marking of laser printers assembled either in the U.S. or Canada with print engines of Japanese origin and controller boards of Canadian origin. FACTS:

You state that Japanese-origin printer engines will be imported into a NAFTA country, either the U.S. or Canada. Once in the NAFTA country, a Canadian-produced controller board will be installed into each printer engine to create a finished laser printer. Toner cartridges, starter kits, and manuals will be added to the printers before they are packaged for retail sale.

In a letter to you dated September 16, 1994 (Headquarters Ruling Letter (HRL) 957017), Customs determined that the finished laser printers, containing Japanese printer engines, were not eligible for preferential tariff treatment under the NAFTA.

You have asked us to determine whether it is appropriate to mark the laser printer's container with the words "Assembled in the U.S." or "Assembled in Canada" (depending upon the actual site of assembly).
ISSUE:

What are the country of origin marking requirements for the laser printers?

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.

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. U.S. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), the court held 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 the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked (see, section 134.35, Customs Regulations).

The first issue that must be addressed is who is the ultimate purchaser of the imported Japanese-origin printer engines which are to be assembled with controller boards in the U.S. to produce laser printers. 19 CFR 134.1(d)(1) states that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article.
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 Linen 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, 89-110, 89-129, 90-51; see also C.S.D. 85-25, which held that the process of incorporating a large number of fabricated component parts onto a printed circuit board subassembly constituted a processing sufficiently complex to result in the subassembly being considered a substantially transformed constituent material of the final article (matrix printer) for purposes of the Generalized System of Preferences

In the present case, based on the above-referenced C.S.D.'s, we are of the opinion that the assembly of the Japanese print engine with the Canadian controller board involves a simple assembly of two finished components, and therefore, does not result in a substantial transformation. The final assembly does not appear to significantly effect the character of the Japanese print engine or the Canadian controller board so as to cause these articles to lose their separate identities. The print engine as imported into the U.S. is dedicated to use as a laser printer and clearly cannot be put to any other use. The fact that the laser printer cannot function until the controller board is installed does not mean that there has been a change of use. Accordingly, it is our determination that the assembly of the print engine and controller board does not result in a substantial transformation of these articles into a new and different article with a new name, character or use. Therefore, the print engine and controller board must be marked to indicate their countries of origin. It is acceptable to indicate that the final assembly of the laser printer is performed in the U.S., provided that the requirements of 19 CFR 134.46 are satisfied, i.e., that the country of origin marking is in close proximity to the U.S. reference, is in at least a comparable size, and is preceded by "made in," "product of," or other words of similar meaning.

If the laser printer is being assembled in Canada, prior to being imported into the U.S., then the NAFTA Marking Rules are applicable to determine the country of origin of the laser printer. The country of origin marking requirements for a "good of a NAFTA country" are determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in T.D. 94-4 (adding a new Part 102, Customs Regulations). The marking requirements for these goods are set forth in T.D. 94-1 (interim amendments to various provisions of Part 134, Customs Regulations).

Section 134.45(a)(2) of the interim regulations, provides that "a good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish. Section 134.1(g) of the interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.

Part 102 of the interim regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied."

Pursuant to section 102.11(a)(3) of the interim rules, the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Section 102.20 of the interim rules, sets forth the specific tariff classification changes and/or other operations, which are specifically required in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. In the instant case, as the laser printers are classified in subheading 8471.92.39, HTSUS, the change in tariff classification must be made in accordance with section 102.20(p), Section XVI: Chapters 84 through 85, subheading 8471.92, HTSUS, of the interim regulations, which states in part that:

A change to subheading 8471.92 through 8472.90 from any other subheading, except when resulting from a simple assembly.

Therefore, each foreign material incorporated in the laser printer must come from a different subheading than 8471.92, HTSUS. In the instant case, since the Japanese printer engines are classifiable under subheading 8471.92, HTSUS, the specified change in tariff classification does not occur. Therefore, the country of origin of the good cannot be determined on the basis of section 102.11(a)(3) of the interim Marking Rules.

Section 102.16 of the interim Marking Rules does not apply since the good is not imported into Canada or the United States in an unassembled or disassembled form and is not classified as an assembled good pursuant to General Rule of Interpretation 2(a) of the HTSUS.

Therefore, section 102.11(b) is the next rule that must be applied in the Marking Rules of origin hierarchy. Section 102.11(b) states as follows:

Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good, or

(2) If the materials that imparts the essential character of the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided under the Appendix to part 181 of the Customs Regulations.

In our opinion, the single material that imparts the essential character of the laser printer is the printer engine. Since the printer engine is a product of Japan, the country of origin of the laser printer is Japan pursuant to section 102.11(b) of the interim Marking Rules.

Section 102.19, Customs Regulations (19 CFR 102.19) does not apply. This provision states that:

Notwithstanding any provision of these rules other than section 102.11(a) or (b) or section 102.14, if a good originates under Chapter Four of the NAFTA, and the country of origin of that good is not determined to be a single NAFTA country under section 102.11(a) or (b), the country of origin of the good is the last NAFTA country in which the good underwent production other than minor processing. . .

In the instant case, as we have already determined in HRL 957017 that the good does not originate under Chapter Four of the NAFTA, the country of origin of the good for purposes of marking cannot be either the U.S. or Canada.

Therefore, the proposed country of origin marking "Assembled in the U.S." or "Assembled in Canada" is not acceptable. The laser printers or their containers must be marked to indicate Japan as their country of origin. If, however, any reference is made to the processing performed in either the U.S. or Canada, the requirements of 19 CFR 134.46 are triggered. Section 134.46 provides that when the name of any city or locality in the U.S., or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced, appears on the imported article or its container, there shall appear, legibly and permanently, in close proximity to such words, letters, or name, and in at least a comparable size, the name of the country of origin preceded by "Made in", "Product of", or other words of similar meaning. The purpose of this section is to prevent the possibility of misleading or deceiving the ultimate purchaser as to the origin of the imported article.

HOLDING:

Based on the information provided, we are of the opinion that, under the first scenario, the assembly of the Japanese-origin print engine and Canadian-origin controller board into a laser printer in the U.S. does not result in a substantial transformation of these articles into a new and different article of commerce, having a new name, character or use. Therefore, the print engine and controller board must be marked to indicate their countries of origin when imported into the U.S. It is acceptable to indicate that the final assembly of the laser printer will be performed in the U.S., provided that the requirements of 19 CFR 134.46 are satisfied, i.e., that the country of origin marking is in close proximity to the U.S. reference, is in at least a comparable size, and is preceded by "Made in," "Product of," or other words of similar meaning.

Under the second scenario, where the laser printers are being assembled in Canada from Japanese-origin printer engines and Canadian-origin controller boards, the country of origin is Japan, and the printers (or their container) must be so marked. If the phrase "Assembled in Canada" appears on the printer or its container, the requirements of 19 CFR 134.46, as described above, must be satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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