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HQ 559036




August 7, 1995

MAR 2-05 CO:R:C:V 559036 AT

CATEGORY: MARKING

Charles Routh, Esq.
Garvey, Schubert & Baker
1191 Second Avenue, Eighteenth Floor
Second & Seneca Building
Seattle, Washington 98101-2939

RE: Country of origin marking requirements for imported fishing rods assembled in China; substantial transformation; 19 CFR 134.1(b); C.S.D. 93-13; HQ 734214

Dear Mr. Routh:

This is in response to your letter dated February 15, 1995, on behalf of Shakespeare Company ("Shakespeare") requesting a ruling regarding the country of origin marking requirements for fishing rods (without reels) imported from China.

FACTS:

You state that Shakespeare intends to import fishing rods from China. The fishing rods (without reels) are assembled in China from component parts manufactured in different countries. The fishing rod components consist of a U.S. made fiberglass rod blank (measuring from 5 1/2 feet to 9 feet in length depending on the style), Korean or Japanese guide lines, and a handle and reel seat manufactured in various countries outside China.

In China, the parts are assembled together into the finished fishing rods. The line guide components are thread wrapped onto the rod, the thread is epoxy encapsulated, in some cases ferrules are fitted so that rods may be broken down into parts, and the handle and reel seat is assembled and affixed onto the rod. You state that Shakespeare intends to move the assembly of the handle and reel seat to Hong Kong at some future date. You also state that the cost of the component parts represents between approximately 80 to 85 percent of the total cost of the finished fishing rod (30 to 40 percent assigned to the U.S. made rod blank), with the remaining cost attributable to the assembly operation done in China.

You contend that the fishing component parts are not substantially transformed as a result of the assembly operation performed in China, and thus the country of origin of the finished fishing rods imported into the U.S., is not China. Rather, you assert that the imported fishing rods should be individually marked to indicate the country of origin of each of its component parts.

ISSUE:

What are the country of origin marking requirements for fishing rods imported from China that are assembled in China from various component parts in the manner described above?

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).

The "ultimate purchaser" is defined generally as the last person in the U.S. who will receive the article in the form in which it was imported. Section 134.41(d)(3), Customs Regulations (19 CFR 134.1(d)(3)) provides that "if an article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser. In this case, the ultimate purchaser of the imported fishing rods is the person who purchases the rods in the U.S. at retail. Substantial Transformation

The country of origin for marking purposes is defined at section 134.1(b), Customs Regulations (19 CFR 134.1(b)), 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 Part 134. A substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. Koru North America v. United States, 12 CIT 1120, 701 F.Supp. 229 (1988). In determining whether there is a substantial transformation of an article, each case must be decided on its own particular facts. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022

In determining whether the assembly 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.s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.

Customs has previously considered the issue of whether the assembly of finished fishing rods from foreign components results in a substantial transformation of the component parts. In C.S.D. 93-13 (May 26, 1992), Customs considered whether the assembly of fishing rods in China from component parts made in China, Taiwan and Korea constituted a substantial transformation and found that it did not, stating that the assembly of the component parts into the finished fishing rod did not result in the manufacture of a new and different article. Also, in HQ 734214 (November 18, 1991), Customs ruled that fishing rods imported from China that were assembled in China from component parts of Korean origin were not substantially transformed as a result of the assembly operation and the country of origin of the imported fishing rods was Korea, where the component parts were made.

Similarly, in this case, we find that the component parts are not substantially transformed as a result of the assembly operation performed in China. As in C.S.D. 93-13, the assembly of the U.S. origin rod blanks, the Korean or Japanese fishing guides, the foreign handles and foreign reel seats of Non-Chinese origin, into finished fishing rods does not result in the manufacture of a new and different article. Also, it appears that the assembly operation is simple--requiring only the operations of gluing, tying/binding and epoxy encapsulation-- which in our opinion are only finishing operations which do not constitute a substantial transformation. The name and use of each component does not change as a result of the assembly operation. Although each component part becomes an essential part of the finished fishing rod, each component is still referred to as a rod, fishing guide, handle and reel seat after assembly. The use of the component parts is predetermined at the time of importation into China. Each component is intended to be utilized in the production of a finished fishing rod. Although one predetermined use does not preclude the finding of a substantial transformation (See, Torrington Co., v. United States, 764 F.2d 1563, (1985)), whether an article is substantially transformed must be based on the totality of the evidence. In this case, we find that, based on the totality of the evidence, the foreign component parts are not substantially transformed in China as a result of the assembly operation.

19 CFR 10.22 Country of Origin Marking Implications

It should be noted that pursuant to section 10.22, Customs Regulations (19 CFR 10.22), articles assembled abroad in whole or in part from U.S. components and entered under a partial duty exemption under subheading 9802.00.80, HTSUS, are considered products of the country of asembly for purposes of 19 U.S.C. 1304, whether or not the assembly constitutes a substantial transformation. In this case, since a U.S. component (fiberglass rod) is exported to China to be assembled with other components into the finished fishing rod, it appears that the finished fishing rods would be eligible for the partial duty exemption under 9802.00.80, HTSUS. Thus, pursuant to 19 CFR 10.22, the country of origin of the finished fishing rods for country of origin marking purposes is China, the country of assembly. Marking the finished rods with the phrase "Assembled in China" would be an acceptable country of origin marking for the finished fishing rods.

We note, however, that Customs has issued a notice of proposed rulemaking to remove 19 CFR 10.22 in conjunction with the amendments of the interim Customs Regulations, published in the "Federal Register" on January 3, 1993, as TD 94-4. The notice of proposed rulemaking of "Rules for Determining the Country of Origin of a Good for Purposes of Annex 311 of the North American Free Trade Agreement; Rules of Origin Applicable to Imported Merchandise" was published on May 5, 1995, in the "Federal Register," 60 Fed. Reg. 22312. The notice in the "federal Register" indicated that, but for the application of 19 CFR 10.22, the country of origin of an article eligible for entry under subheading 9802.00.80, HTSUS, may not necessarily be the country where it was assembled if the interim Part 102, Customs Regulations, or substantial transformation test is followed. Accordingly the May 5, 1995, "Federal Register" notice proposes to remove 19 CFR 10.22. The comment period for the May 5, 1995, notice expired on July 19, 1995. If the proposal to repeal 19 CFR 10.22 is adopted as a final rule, Customs may adopt new regulations which prescribe the circumstances for the general use of the words "Assembled in" as a country of origin indicator.

In the interim period, however, Customs will continue to apply 19 CFR 10.22 to determine the country of origin of imported articles eligible under subheading 9802.00.80, HTSUS, for country of origin marking purposes.

HOLDING:

Various component parts, consisting of U.S. origin fishing rod blanks, Korean or Japanese fishing guides, foreign handles and foreign reel seats of Non-Chinese origin, which are assembled into finished fishing rods in the manner described above are not substantially transformed as a result of the Chinese assembly operation. However, pursuant to 19 CFR 10.22, the country of origin of the finished fishing rods, for marking purposes, is China, the country of assembly. Accordingly, the finished fishing rods must be individually marked to indicate China, as the country of origin of the finished fishing rods. Marking the finished fishing rods with the phrase "Assembled in China" is an acceptable country of origin marking for the finished fishing rods.

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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