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HQ 560115




March 7, 1997

MAR-2-05 RR:TC:SM 560115 MLR

CATEGORY: MARKING

Robert L. Eisen, Esq.
Karen Bysiewicz, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036-7703

RE: Country of Origin Marking for Ugly Stik fishing rods; component parts; substantial transformation; multiple countries of origin

Dear Mr. Eisen and Ms. Bysiewicz:

This is in reference to your letters of October 4, November 20, 1996, and January 22, 1997, requesting a ruling on behalf of The Shakespeare Company ("Shakespeare"), concerning the country of origin marking for Ugly Stik fishing rods ("fishing rods"). A meeting was held at the Office of Regulations & Rulings on January 14, 1997, and a sample was submitted at that time.

FACTS:

It is stated that Shakespeare imports fishing rods from the People's Republic of China (China), and that the fishing rods are assembled in China from component parts manufactured in various countries. The main components are stated to be as follows: (1) a U.S.-made fiberglass rod blank, measuring 5 « feet to 9 feet in length depending on the style; (2) line guides, made in Japan or Korea; and (3) a handle and reel seat made in various countries outside China. The main assembly operations are stated to consist of: (1) thread wrapping the line guide components onto the rod, (2) epoxy encapsulating the thread, (3) fitting ferrules on some styles so that the rods may be broken into parts, and (4) affixing the handle and reel seat onto the rod.

ISSUE:

What is the country of origin of the fishing rod for marking purposes?

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. 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. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940). Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and 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. For country of origin marking purposes, a substantial transformation of an imported article occurs when it is used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. See 19 CFR 134.35.

In Headquarters Ruling Letter 559036, issued to Shakespeare on August 7, 1995, Customs concluded that analogous assembly operations performed in China did not result in a substantial transformation of the component parts of the fishing rods. Customs determined that U.S.-made blanks, and foreign fishing lines, handles, and reel seats assembled into fishing rods in China did not create a new and different article of commerce, and that the name and use of the component parts did not change as a result of the assembly process. Additionally, the assembly process was not found to be exceedingly complex. However, since the fishing rods, made with U.S.-made blanks, were eligible for the partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), pursuant to 19 CFR 10.22 the country of origin of the fishing rods for marking purposes was "China". By T.D. 96-48 (61 FR 28932, June 6, 1996), we note that 19 CFR 10.22 has been removed.

HRL 559036 referred to HRL 734214 dated November 18, 1991, where Customs held that fishing rods "(without reels)" assembled in China from Korean-origin fishing rods, foregrips, reel seats, butt grips, and line guides were not substantially transformed and the country of origin of the imported fishing rods was Korea, where the component parts were made. HRL 559036 also referred to C.S.D. 93-13 (May 26, 1992), where Customs considered the assembly of fishing rods in China from semi-finished Taiwanese rods and reel seats, Korean line guides, and Japanese paint In C.S.D. 93-13, it was held that the assembly process did not result in the manufacture of a new and different article. Accordingly, in C.S.D. 93-13, it was determined that the imported fishing rods should be marked to indicate the country of origin of each of its component parts. However, it was also determined that in order for the marking to be conspicuous, it was acceptable to mark the fishing rod in a single centrally-located place denoting both the country where the article was assembled and the actual countries of origin from which the component parts were derived. Additionally, the central marking did not have to specify the component's particular country of origin. Therefore, the marking "Assembled in China from Components Manufactured in Taiwan, Korea, and China" was acceptable. We also note that by T.D. 96-48, 19 CFR 134.43(e) was modified, which makes the term "Assembled in" an acceptable country of origin indicator, such that the marking allowed in C.S.D. 93-13 is no longer acceptable.

C.S.D. 93-13 also cited T.D. 67-173, 1 Cust. Bull. 366 (1967):

In T.D. 67-173 ... we considered whether the domestic assembly of fishing rod parts, imported from only one foreign country, constituted a substantial transformation and found that it did not, stating that the assembly of all or substantially all of the components imported did not result in the manufacture of a new and different article. Accordingly, we stated that one of the parts, such as the main reel housing, should be marked to indicate the country of origin, so that the marking remains legible and conspicuous after the reels were assembled. This determination was followed in [HRL] 734214... As no material differences exist between the present case and these earlier cases, we adhere to the position that the assembly of fishing rod components do not substantially transform the component parts.

However, it appears that T.D. 67-173 actually considered the assembly of two separate articles: (1) fishing rods and (2) fishing reels. In regard to fishing rods, T.D. 67-173 stated that for "fishing rods, complete except for handles ... imported and permanently attached to handles made in the United States[,] the Bureau is of the opinion that a manufacturer who produces fishing rods in such manner may be considered the ultimate purchaser of the imported rod parts." Therefore, marking the end of the rod part which was to be attached to the handle was sufficient as it would remain visible until it reached the manufacturer. In regard to fishing reels, T.D. 67-173 stated that for "fishing reels imported in an unassembled or partially assembled condition and assembled in the United States ... one of the parts, such as the main reel housing, should be marked to indicate the country of origin...."

In this case, you state that the fishing rod imported into the U.S. is classifiable under General Rule of Interpretation 1, Harmonized Tariff Schedule of the United States. Accordingly, you claim that as the article is a fishing rod and not its minor parts, the fishing rod as a whole should be considered for country of origin marking purposes. In this instance, you claim that since the fishing rod is made with a U.S.-origin rod blank, the finished fishing rod is not subject to the marking requirements of 19 U.S.C. 1304, as the article is a product of the U.S. exported and returned and exempt from marking pursuant to 19 CFR 134.32(m), especially in light of the removal of 19 CFR 10.22.

As support that the fishing rod should not be subject to the marking requirements, you cite C.S.D. 79-443 (January 25, 1979), where Customs considered knives produced in the U.S. and exported to Japan where the handles were exchanged with Japanese handles. Upon return to the U.S., it was held that because the processing and addition of the handles in Japan did not result in a substantial transformation, the knives remained articles of the U.S. and, therefore, were not subject to the marking requirements of 19 U.S.C. 1304. You note that in C.S.D. 79-443, Customs did not require the knife handle to be marked with its own country of origin.

You also cite HRL 729519 dated May 18, 1988, where Customs ruled that imported wine coolers were exempt from country of origin marking. A flavor base of U.S. origin was sent to Canada, where it was mixed with water (and in some cases sugar) of Canadian origin. Customs held that no substantial transformation occurred in Canada, and that upon return to the U.S. the wine coolers were treated as U.S. products exported and returned and exempt from marking pursuant to 19 CFR 134.32(m).

Additionally, you contend that there are numerous instances where Customs has not required articles to be marked with the country of origin of their minor foreign components. For example, you state that Customs has consistently held that the country of origin of a clock or watch is the country of manufacture of the watch or clock movement. Furthermore, you state that Customs has not required that the individual components of the watch or clock, such as the dial or hands, be marked with their individual countries of origin. See HRL 735158 dated December 17, 1993, which held that the country of origin of a table clock was the country of manufacture of the clock movement because the movement constituted the "guts" of the watch or clock. In this case, as in HRL 735158, you contend that the rod blank is the "guts" of the completed fishing rod since the rod blank gives the completed fishing rod its shape and dimensions, determines its durability and its flexibility, and dictates how well and in what manner the rod will function. See also HRL 560202 dated December 20, 1996, where Customs held that integrated circuits from Singapore and watch components from Japan and Hong Kong, combined with other Chinese components in China into finished LCD watches, had to be marked "Singapore" as Customs has long held that the origin of a watch or clock is the country of manufacture of the watch or clock movement.

Additionally, you cite HRL 733199 dated July 19, 1990, where Customs considered paint brushes manufactured in the Philippines from bristle heads and metal ferrules imported from China and brush handles made in the Philippines. Based upon Uniroyal, Inc. v. United States, 542 F. Supp. 1026, (CIT 1982), where it was determined that imported uppers were the essence of a completed shoe, Customs determined that the operations in the Philippines did not result in a substantial transformation, but held that the country of origin of the paint brush was the country where the bristles were made. It was stated that the imported bristles were the very essence of the finished product, and that the essential qualities of a paint brush are the type, diameter and qualities of the bristles. You also note that Customs did not require the origin of the handle to be marked to indicate its own country of origin, although its origin differed from the country of origin of the bristles. See also HRL 733804 dated November 9, 1990, which held that the assembly of an Italian-origin broom head onto a handle in the U.S. did not result in a substantial transformation and the country of origin of the broom head was the country of origin for the completed broom whether it was assembled with a foreign or U.S.-made handle.

We note that The Encyclopedia Americana, Volume 11 at 324 (Int'l Ed. 1980) indicates that fishing tackle consists of a rod, a line, a reel and a hook or lure. In C.S.D. 93-13, HRL 734214, and HRL 559036 it appears that the article considered was only a rod without a reel, but that T.D. 67-173 considered a rod as well as a reel. Accordingly, since T.D. 67-173 actually determined that the ultimate purchaser of a practically complete rod without a handle was the manufacturer of the finished rod, rather than being extended, T.D. 67-173 was effectively overruled by C.S.D. 93-13 and later rulings in which it was concluded that rod components do not undergo a substantial transformation by being assembled into a finished rod.

Similarly, in this case, we do not find that China is the last country where the fishing rod imported into the U.S. underwent a substantial transformation. Rather, it is our opinion that the fishing rod's characteristics are primarily imparted at the time of manufacture in the U.S., as the rod blank is exported from the U.S. in the length, diameter, and flexibility of the finished rod. Accordingly, consistent with HRL 735158 (country of origin of clock was country of manufacture of clock movement) and C.S.D. 79-443 (knife remained product of the U.S. after handle was replaced in Japan), we find that the essential character of the finished rod is imparted by the rod blank. Since the country of origin of the rod blank is the U.S., the country of origin of the finished rod imported into the U.S. is the U.S.

This finding is consistent with Uniroyal, where the court considered whether the addition of an outsole in the U.S. to imported uppers lasted in Indonesia effected a substantial transformation of the uppers. The court concluded that a substantial transformation of the upper had not occurred since the attachment of the outsole to the upper was a minor manufacturing or combining process which left the identity of the upper intact. The upper was described as a substantially complete shoe and the manufacturing process taking place in the U.S. required only a small fraction of the time and cost involved in producing the upper. Furthermore, in Uniroyal, the court determined that the completed upper was the very essence of the completed shoe.

The concept of the "very essence" of a product was again applied by the court in National Juice Products v. United States, 628 F. Supp. 978 (CIT 1986), where the court addressed each of the factors -- name, character and use -- in finding that no substantial transformation occurred in the production of retail orange juice products from manufacturing concentrate. The court found that the change in name from "concentrated orange juice for manufacturing" to "frozen concentrated orange juice" and "orange juice from concentrate" was not significant to a finding of substantial transformation. Instead, the court stated that these names "merely refer to the same product, orange juice, at different stages of production." Id. at 989.

The court agreed with Customs that the imported manufacturing concentrate "imparts the essential character to the juice and makes it orange juice. . . [and thus], as in Uniroyal, the imported product is the very essence of the retail product." The court found that the retail product in this case was essentially the juice concentrate derived in substantial part from foreign grown, harvested, and processed oranges. Although the addition of the water, orange essences, and oils to the orange juice concentrate made it suitable for retail sale, according to the court, this did not change the fundamental character or use of the product; it was still essentially the product of the juice of oranges.

As in Uniroyal and National Juice, it is our opinion that the rod blank imparts the essential character to the finished rod. However, unlike National Juice which required the finished juice to be marked with the countries from which the juice concentrate was derived, in this case, as in Uniroyal, there is only one component which imparts the essential character of the finished article. Therefore, since the one essential component of the fishing rod is the rod blank, and the rod blank is of U.S.-origin the finished fishing rod will not be required to be marked pursuant to 19 U.S.C. 1304.

HOLDING:

Based upon the information provided, as the rod blank is the essence of the finished fishing rod, it is our opinion that it is not substantially transformed as a result of the assembly operations performed in China. Therefore, as the rod blank is of U.S. origin, the country of origin of the finished fishing rod will be the U.S., and, therefore, the finished fishing rod will not required to be marked with a country of origin pursuant to 19 CFR 134.32(m).

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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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