HQ 560433 - Country of origin marking of imported audio/video receivers; substantial transformation; ultimate purchaser; complex assembly; Uniroyal, Inc. v. United States; Texas Instruments, Inc. v. United States; HRL 711967; HRL 732170; HRL 734045 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1998 HQ Rulings > HQ 560135 - HQ 560470 > HQ 560433

Previous Ruling Next Ruling
HQ 560433

September 19, 1997

MAR-2-05 RR:TC:SM 560433 DEC

CATEGORY: MARKING

Susan Kohn Ross, Esq.
Ross & Associates, P.C.
5777 West Century Blvd. - Suite 520
Los Angeles, California 90045-5659

RE: Country of origin marking of imported audio/video receivers; substantial transformation; ultimate purchaser; complex assembly; Uniroyal, Inc. v. United States; Texas Instruments, Inc. v. United States; HRL 711967; HRL 732170; HRL 734045

Dear Ms. Ross:

This is in response to your letter of April 23, 1997, requesting a country of origin ruling on behalf of Sherwood America regarding certain imported audio/video receivers.

FACTS:

The audio/video receivers at issue will be produced in the United Kingdom using components from South Korea, Japan, the United Kingdom, and the United States. The major subassemblies used in the production process include the following: (1) transformers, (2) frame left, (3) back chassis, (4) frame right, (5) assembly power, (6) Assembly P.C.B. Main Board, (7) assembly tuner board, (8) assembly speaker board, (9) assembly remote volume board, (10) assembly input board, (11) assembly heat sink, (12) chassis front, (13) assembly front panel, (14) bottom cover, (15) front panel aluminum, (16) commander parts.

You have summarized the assembly procedure which will include the following operations. First, imported components will be inspected against the invoice and packing list. Next, the imported components will be inspected in accordance with industry standards which includes electronic and mechanical testing, specification measurement and visual inspection. The third step involves the production phase of the audio/video receivers. The production line involves numerous skilled workers all of whom have had considerable training. The bill of material submitted with your ruling request details numerous components and hundreds of raw materials that are used to produce the finished stereo receivers.

The finished stereo receivers will have a four channel amplifier, full featured remote control system, and Dolby Pro Logic Surround Sound. In addition, the stereo receivers will have inputs/outputs for a telephone, cassette deck, compact disk player, camcorder, and television. You state that the Sherwood Newcastle receivers which are the subject of this ruling request are hand crafted, hand assembled, and hand tuned. The receivers are then imported into the U.S.

ISSUE:

Are the subassemblies and components substantially transformed in the United Kingdom as a result of their being used in the production of audio/video receivers?

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 occurs when an article is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. On the other hand, if the manufacturing or combining process is merely a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).

In making the determination in this case, we must rely upon the judicial and administrative precedents that have considered the issue of substantial transformation. As stated in your submission, the major subassemblies, consisting of (1) transformers, (2) frame left, (3) back chassis, (4) frame right, (5) assembly power, (6) Assembly P.C.B. Main Board, (7) assembly tuner board, (8) assembly speaker board, (9) assembly remote volume board, (10) assembly input board, (11) assembly heat sink, (12) chassis front, (13) assembly front panel, (14) bottom cover, (15) front panel aluminum, (16) commander parts, will be imported into Newcastle, United Kingdom, where the audio/video receivers will be produced. Thus, the critical issue that must be addressed in determining the country of origin of the audio/video receivers is whether the foreign components are substantially transformed as a result of the operations performed in the United Kingdom. That is, does the name, character or use of the foreign components change as a result of the processing and assembly operations performed to manufacture the audio/video receivers in the United Kingdom. Customs has previously considered the issue of whether the processing and assembly of electronic components into a finished article results in a substantial transformation of the individual components.

In Headquarters Ruling Letter (HRL) 711967, dated March 17, 1980, Customs held that television sets which were assembled in Mexico with printed circuit boards, power transformers, yokes and tuners from Korea and picture tubes, cabinets, and additional wiring from the U.S. were products of Mexico for country of origin marking purposes. The U.S. and Korean parts were substantially transformed by the processing performed in Mexico and all the components lost their individual identities to become integral parts of the new article.

In HRL 732170, dated January 5, 1990, Customs held that a backless television cabinet containing a tuner, speaker and circuit board imported in the U.S., was substantially transformed there when assembled with a domestic color picture tube, deflection yoke, electron beam bender and degaussed coil, and a remote control into a finished television receiver. Customs stated that the imported components lost their individual identities as a result of the assembly operation in that they became integral parts of a new article--a television.

In HRL 734045, dated October 8, 1991, Customs held that foreign subassemblies and other components imported into Hong Kong which were processed and assembled with other domestic components to make laptop and notebook personal computers were substantially transformed as a result of the Hong Kong operations. Customs stated that the subassemblies and other components when combined together to make the computer lose their separate identity, acquire new attributes, and become part of a new article of commerce--the personal computer. Customs also stated that the Hong Kong processing results in an article that has a new name, that of a personal computer, a new character that is visibly different than any of the individual components, and a new use in that it can process and display information.

Based on the circumstances of this case and consistent with the Customs rulings cited above, we find that the components imported into Newcastle that are used in the manufacture of the audio/video receivers in the manner described above are substantially transformed as a result of the operations performed. The name, character, and use of the foreign components and subassemblies change as a result of the processing and assembly operations performed in the United Kingdom. Like the foreign subassemblies in HRL 734045, the components and subassemblies lose their separate identity and become an integral part of the finished audio/video receiver as a result of the manufacturing operations. The character of the foreign components is changed as a result of the processing and assembly operations performed, in that the finished article, an audio/video receiver, is visibly different than any of the individual foreign components, and it acquires a new use in that it can receive and process audio and video signals.

HOLDING:

The components and subassemblies used in the production of audio/video receivers as described above undergo a change in name, character, and use. The articles lose their individual identity and become a part of a new and different article, a finished audio/video receiver. As a result, the components and subassemblies are substantially transformed into a product of the United Kingdom, and the imported receiver must be marked accordingly.

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

Previous Ruling Next Ruling