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NY 817300




January 11, 1996

MAR-2-84:RR:NC:1:103 817300

CATEGORY: MARKING

Mr. Alan R. Klestadt
Mr. Scott A. Cohn
Grunfeld, Desiderio, Lebowitz & Silverman 245 Park Ave.
New York, NY 10167-0002

RE: Country of origin marking of parts of plastic injection molding machines

Dear Mr. Klestadt and Mr. Cohn:

In your letter dated December 8, 1995 on behalf of Engel Machinery, Inc. you requested a marking ruling.

Engel Machinery, Inc. (hereinafter Engel) manufactures plastic injection molding (PIM) machines at a plant in York, PA. These molding machines range in size from 600 tons to 4000 tons, take from 1 - 3 months to produce and test, and cost between $400,000 and $2,500,000. The components used by Engel to make the PIM machines are either imported from various foreign countries, purchased domestically, or fabricated by Engel, with the source of the necessary parts varying from one machine to the next.

The production of PIM machines by Engel involves both manufacturing and assembly operations. For some components Engel purchases materials from foreign and/or domestic sources and fabricates the materials into parts. Some components, again sourced from foreign and/or domestic firms, are purchased partially fabricated and thus require Engel to perform either minor fabrication or substantial machining prior to assembly. Finally, other foreign and/or domestic components are purchased in a fabricated state and merely require assembly into a PIM machine.

The fabrication and assembly processes performed by Engel are complex. Rather than utilizing an assembly line, the manufacturing processes performed by Engel involve the concurrent machining and fabrication of major PIM machine components at various "shops" within the Engel facility. The major fabrication and assembly processes performed by Engel include:

1) Precision machining of components, such as platens, injection housings, and machine bases, including drilling holes;

2) Sheet metal fabrication of, for example, safety gates, catwalks, and electronic control housings;

3) Cutting and welding of steel beams and plates to form bases and oil tanks;

4) Cutting, bending, welding and fitting of hydraulic and water pipes;

5) Precision assembly of components and subassemblies to the machine's base, as well as installation of hydraulic systems, power systems, and electronic controls; and

6) Testing.

With your inquiry you submitted a listing of components, and their origin, which are used by Engel in the manufacture of PIM machines:

DESCRIPTION ORIGIN

Injection System
Hopper U.S.
Barrel, barrel heads U.S.
Heatbands U.S.
Screw U.S. or Foreign
Screw drive motor Foreign
Gears U.S.
Screw drive assembly Foreign
Injection housing Foreign
Injection cylinder Foreign
Injection carriage U.S.
Steel base U.S.
Clamp System
Platens (stationary and mobile) U.S. or Foreign Tie bars/rods U.S. or Foreign
Tie bar/nut retainers (housing) U.S. or Foreign Toggles Foreign
Toggle guide U.S.
Steel base U.S.
Gear motor for safety gate U.S.
Way sheets for platen track Foreign
Hydraulic System
Oil tank U.S.
Lubrication system U.S.
Pumps U.S. or Foreign
Pump motor assemblies U.S. or Foreign
Manifolds, valves U.S. or Foreign
Filter system U.S. or Foreign
Hydraulic tubing Foreign
Pipes, tubes, hoses U.S. or Foreign
Oil exchangers/coolers U.S.
Lubrication lines Not specified
Electrical System
Computer monitors Foreign
Circuit boards/cards Foreign
Control panel components Foreign
Metal cabinetry U.S.
Transformers Foreign
Transducers U.S. or Foreign
Wires, electric lines U.S.
Other
Metal step plates/catwalks U.S.
Safety gates/windows U.S.
Frames for safety gates U.S.
Assorted gauges, controls, etc. U.S. or Foreign Fasteners, bolts, screws, etc. U.S. or Foreign Seals, gaskets U.S. or Foreign
Vibration couplings Foreign
Piston rods U.S. or Foreign
Robotics U.S. or Foreign
Leveling mounts U.S. or Foreign

You have further indicated the robotics, if purchased from a foreign source, may be of Canadian origin.

You have requested that we issue a ruling confirming the following:

A. That all foreign parts imported by Engel and used to manufacture PIM machines in the United States are exempt from country of origin marking required by Sec. 304, Tariff Act of 1930, as amended (19 USC 1304), since Engel is the ultimate purchaser in accordance with 19 CFR 134.35(a).

B. That foreign parts imported by Engel and sold by Engel to their customers as spare parts are also exempt from country of origin marking requirements based upon Engel's certification of repackaging in accordance with 19 CFR 134.34(d).

C. That the import containers for the parts described in A and B above are also exempt from country of origin marking requirements in accordance with 19 CFR 134.22(e)(1).

Sec. 304, Tariff Act of 1930, as amended, provides that, unless excepted, every article of foreign origin (or its container) imported into the United States 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 United States 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 USC 1304.

19 CFR 134.1(d) defines the term "ultimate purchaser":

Ultimate purchaser. The "ultimate purchaser" is generally the last person in the United States who will receive the article in the form in which it was imported; however, for a good of a NAFTA country, the "ultimate purchaser" is the last person in the United States who purchases the good in the form in which it was imported. It is not feasible to state who will be the "ultimate purchaser" in every circumstance. The following examples may be helpful: (1) 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, even though the process may not result in a new or different article, or for a good of a NAFTA country, a process which results in one of the changes prescribed in the NAFTA Marking Rules as effecting a change in the article's country of origin.

In regard to claim A, you have stated that Engel is entitled to the requested marking exemption based on the fact that, in each instance, a substantial transformation occurs such that Engel should be considered the ultimate purchaser of the parts. In support of this position, you have stated that the imported parts are commercially known as "platens", "pump-motors", "toggles", etc., and they become known as a PIM machine only after the manufacturing and assembly operations performed in the United States by Engel. You have further argued that the individual parts are incapable of performing a molding operation, and do not take on the character of a PIM machine until machined and combined by Engel. You have pointed out that the manufacturing and assembly operations performed by Engel are substantial, taking from one to three months, during which a significant number of parts are fabricated, machined, or otherwise processed. Finally, you have indicated that these processes are complex, requiring skilled technicians, and that the value of U.S. labor and material costs is a significant portion of the finished PIM. Regarding the component which may originate in Canada, you have stated that this article meets the NAFTA origin requirement of a tariff shift.

In this particular case, we agree the foreign parts (other than the Canadian robotics) used by Engel to manufacture PIM machines in the U.S. undergo a substantial transformation based upon the fact that Engel performs substantial manufacturing and assembly operations on them which result in a new and different article of commerce. Thus Engel is the ultimate purchaser of these parts. In order for Engel to be considered the ultimate purchaser of the Canadian robotics, which are a good of a NAFTA country, the robotics must undergo a tariff shift in accordance with the NAFTA marking rules. The PIM machines manufactured by Engel are classifiable in subheading 8477.10.8090, Harmonized Tariff Schedule of the United States, which provides for other injection-molding machines of a type used for processing thermoplastics. 19 CFR 102.20, which encompasses the NAFTA Rules of Origin, specifies that, for articles of subheadings 8477.10 through 8477.80, the rule is a change to one of these subheadings from any other subheading, including another subheading within this group. The robotics do not constitute a PIM machine, nor do they constitute an unfinished PIM machine having the essential character of a PIM machine. Thus they are not classifiable in subheadings 8477.10 through 8477.80, and therefore the manufacturing and assembly actions performed by Engel would result in the requisite tariff shift. Accordingly, Engel is the ultimate purchaser of the Canadian robotics as well. Thus, per 19 CFR 134.35 and 19 CFR 134.1(d), Engel is the ultimate purchaser of all of these parts.

19 CFR 134.32(h) provides that articles for which the ultimate purchaser must necessarily know, or in the case of a good of a NAFTA country, must reasonably know, the country of origin by reason of the circumstances of their importation or by reason of the character of the articles even though they are not marked to indicate their origin are exempt from the country of origin marking regulations. You have stated that packing lists and/or invoices to Engel from foreign suppliers will clearly identify the country of origin of each imported article, and thus Engel will be aware of the precise country of origin of each foreign made part. Accordingly, those foreign parts used by Engel in the manufacture and assembly of PIM machines in the United States need not be individually marked with their country of origin.

19 CFR 143.22 sets out general rules for marking of containers or holders. 19 CFR 134.22(e)(1) states that containers or holders of imported articles are not required to be marked if they are containers or holders of articles within the exceptions set forth in paragraph (f), (g), or (h) in Sec. 134.32, or they are containers of a good of a NAFTA country within the exceptions set forth in paragraph (e), (f), (g), (h), (i), (p) or (q) of Sec. 134.32. Accordingly, since the containers will hold parts which are themselves exempt from marking in accordance with 19 CFR 134.32(h), the containers or holders of foreign parts used by Engel in the manufacture and assembly of PIM machines also need not be marked to indicate the country of origin of the parts they contain.

In regard to claim B, you have stated the spare parts are kept in Engel's parts inventory and are repackaged and sent to an Engel customer when the customer orders replacement parts. The containers in which these parts are repackaged will have the country of origin of the part clearly, conspicuously and legibly stamped on the outside of the new package. Shipping invoices and/or packing lists included with the repackaged parts will also show the country of origin of each part. In addition, a blanket certification of repacking will be filed with each port of entry in accordance with 19 CFR 134.34. You have also stated that Engel maintains spare parts in a separate inventory so that their origin can be identified prior to shipment to a customer. You thus believe these spare parts are exempt from marking under the authority of 19 CFR 134.32(d), which states that a general exception to the marking requirements exists for articles for which the marking of the containers will reasonably indicate the origin of the articles.

19 CFR 134.34 indicates that a country of origin marking exception under sec. 134.32(d) may be authorized in the discretion of the district director for imported articles which are to be repacked after release from Customs custody under the following conditions: (1) The containers in which the articles are repacked will indicate the origin of the articles to an ultimate purchaser in the United States; and (2) The importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification, as may be necessary, by certification and the submission of a sample or otherwise, of the marking prior to the liquidation of the entry. So long as the district director is satisfied that the imported spare parts will be repacked into packaging that is properly marked with the country of origin and that the ultimate purchasers will receive the merchandise in these properly marked packages, the spare parts may be excepted from individual country of origin marking pursuant to 19 CFR 134.32(d) and 19 CFR 134.34.

In regard to claim C, you have stated that, currently, all the import containers (e.g., crates, boxes, pallets) for parts feature a printed statement indicating that the components are from the country or countries listed on the statement, which is prominently displayed in a firmly-affixed self-adhesive clear plastic pouch attached to each container. A sample statement might read "Contents Product of: Austria, Japan, and China." As stated above, a country of origin marking exception is permissible for import containers for parts used by Engel in manufacturing and assembling PIM machines in accordance with 19 CFR 134.22(e)(1). You also claim a marking exemption is warranted for the containers in which the spare parts are imported under the authority of 19 CFR 134.32(h) and 19 CFR 134.22(e)(1). Should Customs conclude that your claim is not warranted, you have requested us to rule that Engel's current marking practice for containers is acceptable.

Since the spare parts are not substantially transformed by Engel, but simply repacked and sold, Engel's customers, rather than Engel, are the ultimate purchasers of the spare parts. Accordingly, as Engel is not the ultimate purchaser of the spare parts, the spare parts are not exempt from marking pursuant to 19 CFR 134.32(h). Instead, the authority for waiving the marking on the individual spare parts is 19 CFR 134.32(d). 19 CFR 134.22 does not authorize an exception to the rule that a container or holder must be marked with the country of origin of the merchandise it contains when the merchandise itself is exempt from marking pursuant to 19 CFR 134.32(d). Accordingly, for spare parts sold by Engel to its customers, the outermost container or holder must be marked to indicate the country of origin of the spare parts (19 CFR 134.22(a) noted). We find the current practice utilized by Engel of placing a statement indicating the country of origin of the spare parts in a firmly-affixed self-adhesive clear plastic pouch attached to each container is an acceptable method of marking.

This ruling is being issued under the provisions of Section 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Alan Horowitz at 212-466-5494.

Sincerely,

Roger J. Silvestri
Director

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