HQ 560763 - Country of origin marking of automobile steering joint assemblies; replacement parts; repacking; HRL 733241;19 CFR 134.26; 19 CFR 134.35 - United States International Trade Commision Rulings

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HQ 560763

December 17,
1997

MAR-05 RR:TC:SM 560763 BLS

CATEGORY: MARKING

Francis J. Sailer, Esq.
Jeffrey B. Denning, Esq.
Dickstein Shapiro Morin & Oshinsky
2101 L Street, N.W.
Washington, D.C. 20037-1526

RE: Country of origin marking of automobile steering joint assemblies; replacement parts; repacking; HRL 733241;19 CFR 134.26; 19 CFR 134.35

Gentlemen:

This is in reference to your letter dated November 25, 1997, requesting a ruling concerning the country of origin marking requirements for certain automobile steering joint assemblies.

FACTS:

NASTECH intends to import automobile steering joint assemblies ("joint assemblies"). These joint assemblies are components of complete steering columns and will be sold primarily to one or more domestic original equipment manufacturers ("OEMs").

The joint assembly is located in the interior of the automobile under the dashboard. Once installed, the joint assembly is totally obscured from view. The function of this component is to connect the steering shaft to the rack-and-pinion unit of the automobile, and to transmit torque from the steering wheel to the rack, thus steering the automobile.

The joint assemblies will be imported from Japan. When imported they will be shipped on skids, with each skid holding 24 cartons and each carton containing five complete joint assemblies. At the time of importation, each carton will be marked "Made in Japan."

Pursuant to NASTECH's quality assurance procedures, some of the cartons will be opened for inspection. These packages will be either resealed, or repacked, as discussed below, when used by the OEMs for warranty service requirements.

NASTECH will sell the assemblies to OEMs for further assembly into complete steering columns and installation in the manufacture of new automobiles. When used in this manner, the joint assemblies will remain in the original five-pack carton. The OEM will also provide the joint assemblies to authorized dealers for the purpose of fulfilling warranty requirements on consumer-owned automobiles. NASTECH believes that all warranty service requirement joint assemblies will be installed exclusively by dealer-certified mechanics. When the components are used in this manner, NASTECH anticipates that the OEMs will prefer to purchase joint assemblies in quantities of less than five units, although there may be instances where an OEM will purchase the parts in the original five-pack carton.

If sold in quantities of less than five units, NASTECH will be required to break up the five-item cartons in its inventory and repack single joint assemblies in individual boxes. Under these circumstances, NASTECH states that it will adopt procedures which utilize standardized boxes carrying the NASTECH company name address and logo. All such individual boxes will be labeled "Made in Japan." NASTECH believes that the marking will conform to the requirements of 19 U.S.C. 1304 and 19 CFR Part 134. When the OEM elects to purchase the assemblies in the original five-pack carton, the OEM will repack the units in individual cartons.

When sold to OEMs for installation in the manufacture of a new automobile, NASTECH believes that the ultimate purchaser of the joint assemblies is the OEM, and that the joint assembly is excepted from individual country of origin marking. NASTECH believes that in such case only the outer container of the joint assembly is required to be marked. NASTECH is also of the opinion that the same result extends to the joint assemblies when installed in consumer-owned automobiles pursuant to warranty service work, and that only the box in which the component reaches the automobile dealer need be marked.

ISSUE:

What are the marking requirements for the imported steering assemblies?

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." See 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 exceptions to 19 U.S.C. 1304.

Section 134.35, Customs Regulations (19 CFR 134.35), provides that a manufacturer who converts or combines an imported article into a different article will be considered the ultimate purchaser of the imported article, and the article will be excepted from country of origin marking. Only the outermost container will be required to be marked. For this provision to apply, the conversion or combining must constitute a substantial transformation within the principle of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98).

A substantial transformation occurs when an article loses its separate identity and becomes a new article having a new name, character or use. See National Juice Products Association v. United States, 10 CIT 48, 628 F. Supp. 978 (CIT 1986) and Koru North America v. United States, 12 CIT 48, 701 F. Supp. 229 (CIT 1988).

Installation in New Automobiles

In Headquarters Ruling Letter (HRL) 732999 (January 25, 1990), Customs determined that a U.S. manufacturer who assembled imported automotive door hinge parts and then incorporated the finished hinges into a vehicle was the ultimate purchaser of the imported hinge parts. In that case, we found the articles were substantially transformed as a result of the combining operations in which they lost their separate identities. Thus, the imported parts were excepted from individual country of origin marking, provided that Customs officials at the port of entry were satisfied that the articles would be used only in the manufacture of finished door hinges and vehicles, and not otherwise sold. (See also HRL 731076 (November 1, 1988), cited in HRL 732999, where we held that automobile subassemblies lost their separate identity and became a new article of commerce when assembled in the manufacture of an automobile; and HRL 733578 (August 27, 1990), where Customs found that imported electrical outlet boxes lost their separate identities and were substantially transformed when used in the manufacture of mobile homes and recreational vehicles.)

Similarly, we find in the instant case that the joint assemblies lose their identities and are substantially transformed when combined with other components in the
manufacture of an automobile. As a result, the ultimate purchaser of the joint assemblies will be the OEM. Therefore, pursuant to 19 CFR 134.35, when sold to an OEM to be used in the manufacture of an automobile, the joint assembly is excepted from individual marking and only the outermost container of the imported article must be marked.

Installation as Replacement Parts

In Headquarters Ruling Letter (HRL) 733241 (August 27, 1990), various imported automotive parts were sold as replacement parts and installed in consumers' vehicles by a mechanic. The parts were received by the installer packaged in sealed cardboard boxes and were properly marked with their country of origin.

In that case, we found that the replacement parts were imported in a completely finished condition and did not undergo a substantial transformation when installed in the vehicle as there was no change in name, character or use, and the installation of these parts was not deemed to be particularly complex or time-consuming. Therefore, we found that the consumer who brought his or her car into the garage for installation of the replacement part was considered the ultimate purchaser of such part.

However, while in HRL 733241 we found that the ultimate purchaser of the replacement parts was the consumer, and that the parts did not usually reach the consumer in their container, we stated the following:

Although the imported auto parts which do not generally reach the ultimate purchaser in their box are not technically entitled to the
19 U.S.C. 1304(a)(3)(D) exception [which excepts from marking articles for which the marking of the container reasonably indicates the country of origin of the article], this case presents a unique situation because often the consumer, who is the ultimate purchaser, has the mechanic install the parts. The parts are not visible once installed into the car and the consumer either never sees the actual part or sees it only after it is no longer functional and has been removed from the car. Since the intent of the marking statute............ is to enable consumers to make informed buying choices, in this case, marking the sealed box in a legible and conspicuous manner is the best way in which to inform the consumer of the country of origin of the part. If the consumer is concerned about the country of origin, he or she can ask to see the box before purchasing the part and requesting the installation. Because each part is imported in its own sealed box which identifies the part number, we conclude that the part will remain in the box until installation. Therefore, marking the
country of origin of the imported auto part in a permanent, conspicuous and legible manner on the sealed box in which the auto part is contained satisfies the requirements of 19 U.S.C. 1304 and 19 CFR Part 134.

(It is noted that in HRL 731506 (May 1, 1990), we found that the consumer who purchases replacement automotive glass is the ultimate purchaser and not the installer, and that accordingly the glass is required to be marked with its country of origin. HRL 731506 was affirmed by HRL 733604 (February 15, 1991), and reproduced in HRL 734092 (April 1, 1991). However, as distinguished from HRL 733241, HRL 731506 involved a replacement part, automotive glass, which is always visible to the ultimate purchaser upon installation.)

In the instant case, when sold to the OEM for warranty service requirements, the joint assembly is similarly a replacement part and will be installed by the automobile dealer in a location in the vehicle which will be obscured from the ordinary view of the ultimate purchaser. NASTECH will transfer the part either individually boxed if it does the repacking, or in packs of five if the OEM elects to repack. NASTECH states that the article will be in a properly marked sealed container when transferred to the OEM, and that it also expects compliance with the requirements of 19 U.S.C. 1304 when the repacking is done by the OEM. Therefore, if desired, the owner of the automobile may observe the box in which the part was delivered to the automobile dealer to determine the country of origin of the joint assembly.

We find that these facts are analogous to the situation set forth in HRL 733241. Therefore, provided the joint assembly will remain properly identified in the sealed container until installation, marking the country of origin of the joint assembly on the repacked box in a permanent, legible and conspicuous manner will satisfy the general requirements of 19 U.S.C. 1304 and 19 CFR Part 134.

Repacking - 19 CFR 134.26

Section 134.26, Customs Regulations (19 CFR 134.26) provides that if imported articles are intended to be repacked in retail containers after release from Customs custody, the importer must certify to the port director that: (1) if the importer does the repacking, he shall not obscure any existing country of origin marking, or if the articles are not marked, the new containers shall be marked to indicate the origin of the articles; or (2) if the article is to be sold or transferred to a subsequent purchaser or repacker, the importer shall notify that party in writing at the time of sale or transfer that any repacking of the article must comply with country of origin marking requirements.

NASTECH states that pursuant to 19 CFR 134.26, it will certify to the port director that if repacked while in its possession, the new individual containers in which the joint assemblies will be repacked will be marked in accordance with the requirements of 19 U.S.C. 1304 and 19 CFR Part 134. NASTECH will further certify that it will notify a subsequent purchaser or repacker at the time of the sale or transfer of the marking requirements. A sample of the marking certification to be used is included as
Attachment 1 to the submission.

Additionally, in accordance with 19 CFR 134.26, NASTECH will routinely advise the OEM in writing at the time of all purchases of joint assemblies in the original five-pack cartons for warranty service requirements that repacked items must be packed in properly marked containers. Included as Attachment 2 of the submission is the text of a notice NASTECH proposes to place on each invoice involving sales of joint assemblies which the company believes may be repackaged by the customer.

We find that the proposed certification and notification satisfy the requirements of 19 CFR 134.26.

HOLDING:

1) Joint assemblies sold to OEMs lose their identities and are substantially transformed when combined with other components in the manufacture of an automobile. Accordingly, the ultimate purchaser of the joint assemblies is the OEM. Therefore, pursuant to 19 CFR 134.35, the joint assembly is excepted from marking and only the outermost container of the imported article is required to be marked.

2) The ultimate purchasers of joint assemblies sold to OEMs for warranty service requirements as replacement parts in existing automobiles are the owners of the existing automobiles. As these parts when installed by the automobile dealer are obscured from ordinary view of the ultimate consumer, the requirements of 19 U.S.C. 1304 and 19 CFR Part 134 are satisfied by marking the container which the joint assembly is packed prior to installation in a permanent, legible and conspicuous manner

3) As the joint assemblies will be repacked when sold to the OEMs as replacement parts, they are subject to the requirements of 19 CFR 134.26. The proposed certification to the port director and notification to the OEM satisfy the requirements of this provision.

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
Commercial

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