HQ 734045 - Country of origin marking for lap top and notebook personal computers, substantial transformation, 19 CFR 134.35 - United States International Trade Commision Rulings

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HQ 734045

October 8, 1991

MAR-2-05 CO:R:C:V 734045 RSD

CATEGORY: MARKING

William J. Mahoney, Esq.
Rode & Qualey
295 Madison Avenue
New York, N.Y. 10017

RE: Country of origin marking for lap top and notebook personal computers, substantial transformation, 19 CFR 134.35

Dear Mr. Mahoney:

This is in response to your letter dated February 12, 1991, on behalf of your client, Wong Industrial (Holdings) Limited (Wong), and its subsidiaries, requesting a binding ruling on the country of origin for tariff and marking purposes for certain imported lap top and notebook personal computers. You request that all information pertaining to the specific manufacturing operations and the sequence of such operations be granted confidential treatment. We have agreed to grant your request and have deleted all the information on how the computers are manufactured. Accompanying the submission was a flow chart outlining the steps involved in the manufacture of the computers. We have also received supplemental submissions dated February 25, 1991, and June 27, 1991. A meeting was held regarding your ruling request on June 12, 1991, at Customs Headquarters with you, a representative from Wong, and officials from the Customs Service.

FACTS:

The facts on how the personal computers are manufactured are set forth in your submissions.

ISSUE:

Does the manufacture of the lap top and notebook computers in Hong Kong substantially transform the individual components that are used in making the computers? 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. (See 19 CFR 134.35).

In a series rulings Customs has determined that the complete assembly of electronic components into a completed printed circuit board was a substantial transformation. See HQ 734021 May 21, 1991. In C.S.D. 85-25, 19 Cust Bull 844 (1985) (HRL 071827, September 24, 1987) Customs held that for purposes of the Generalized System of Preferences, the assembly of a large number of fabricated components onto a printed circuit in a process involving considerable amount of time and skill results in a substantial transformation. In that case in excess of 50 discrete fabricated components (e.g. resistors, capacitors, diodes, integrated circuits, sockets, and connectors) were substantially transformed. Customs determined that the assembly of the printed circuit board involved a large number of components and a significant period of time as well as skill attention to detail, and quality control.

In the present case, sub-assemblies and various components are being combined into a finished lap top personal computer. The question that arises is whether the combining of these sub-assemblies and other components through the manufacturing processes employed by Wong in Hong Kong would substantially transform these items into a new article of commerce.

In HQ 711967, March 17, 1980, Customs indicated that the assembly of printed circuit boards, power transformers, yokes, tuners, from Korea, and picture tubes, cabinets, and additional wiring that from the U.S., to make a television set in Mexico was a substantial transformation. In that decision, we noted that these individual components lose their separate identity and become part of a new article - television sets. We also stated that process of assembling the Korean-made components with U.S.-made components to make television sets does require technical skill.

Similarly in this case, we find that in combining the sub-assemblies and other components in the manufacture of the computers, Wong is creating a new article of commerce that is separate and distinct from its individual components that compose it. In other words, each part when combined together to make the computer, loses its separate identity, acquires new attributes, and becomes part of the new article of commerce, the personal lap top computer. We also find that these computers are single articles not merely a collection of components. The individual components are permanently attached to each other and function together as a single unit. Wong's processing results in an article that has a new name, that of a personal lap top or notebook computer. It also has a new character that is visibly different than any of the individual components. The article has a new use in that it can process and display information. We also note that these components and the subassemblies are combined together in the series of complicated operations in Hong Kong. It appears that the operations involved in producing the computer take a considerable amount time and skill. Among the complicated operations performed by Wong in Hong Kong is the assembly of the motherboards. As indicated above, Customs has ruled that the assembly of motherboards generally substantial transforms the individual components contained on the motherboards. The assembly of the motherboards is only one of several complex operations involved in making a finished lap top computer. Assembling the separate sub-assemblies together to make the finished computer must be performed in a number of discrete steps which require a great deal of care and attention to detail.

We also find it significant that although there are number of highly important components and sub-assemblies, no one component furnishes the dominant character of the finishedarticle. In addition, we note that a significant number of the components found in the finished product were manufactured entirely in Hong Kong.

HOLDING:

The various components used in the production of the subject lap top and notebook computers are substantially transformed by the processing operations performed in Hong Kong. Therefore, the country of origin of the personal computers described above for tariff and marking purposes is Hong Kong.

Sincerely,

John Durant, Director

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