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HQ 561409





May 30, 2000

MAR-05 RR:CR:SM 561409 BLS

CATEGORY: MARKING

Port Director
U.S. Customs Service
797 South Zaragosa
El Paso, TX 79907

RE: Internal Advice Request No. 16/99; country of origin marking of personal computers; outermost container; 19 CFR 102.17; NAFTA; Article 509

Dear Mr. Kerven:

This is in reference to the memorandum of the Acting Port Director dated May 19, 1999, forwarding an internal advice request on behalf of Aii Technology Inc. (“Aii”), concerning the country of origin marking of a personal computer system.

FACTS:

Aii imports computer processing units, assembled in Mexico from basic assemblies and components. Packaged with the computers in the same outer carton are compatible components, which function to complete the personal computer system when set up after import. These components, which originate from countries other than Mexico, include a mouse, keyboard, microphone and speakers. A monitor or other output unit is not included with the system. As imported, the various components are marked with their respective countries of origin. Typically, the keyboard is made in Thailand, and the mouse and other components are made in China, but sourcing of the components could change, in which case the components will still each be marked with their respective actual country of origin.

ISSUE:

What are the country of origin marking requirements for the imported computer system?

LAW AND ANALYSIS:

Classification

In order to determine the country of origin marking requirements for the imported computer system, we must first determine the classification of the merchandise.

In NY B85213 dated April 23, 1997, Customs considered the classification of a multimedia data processing system shipped in one carton without a monitor. In that case, Customs found that the system met the criteria for a retail set. See GRI 3(b), Harmonized Tariff Schedule of the United States (HTSUS). We also stated the following:
the multimedia processor system has the essential character of a digital processing machine, and also meets the definition of a retail set. Classification of this multimedia automatic data processing machine, which includes the processor, input and storage components, and the additional components, such as the remote control, speakers, microphone, and cables, would thus fall under HTS number 8471.50.80.

In arriving at this conclusion, Customs found that “consideration [of the merchandise] as a ‘system’ under subheading 8471.49, would be precluded since it is missing at least one output unit as covered under Legal Note 5(B) to Chapter 84 HTS.” We note further that Subheading Note 1 to Chapter 84 states as follows:

For the purposes of subheading 8471.49, the term “systems” means automatic data processing machines whose units satisfy the conditions laid down in note 5(B) to Chapter 84 and which comprise at least a central processing unit, one input unit (for example, a keyboard or a scanner), and one output unit (for example, a visual display or a printer).

Accordingly, in the instant case, we find that the personal computer components imported into the U.S. and packaged for retail sale directly to the consumer are considered a set pursuant to GRI 3(b), HTSUS. The set has the essential character of a digital processing machine and is classifiable under subheading 8471.50, HTSUS, as “Automatic data processing machines and units thereofDigital processing units other than those of subheading 8471.41 and 8471.49, whether or not containing in the same housing one or two of the following types of units: storage units, input units, output units.”

Country of Origin Marking

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. 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) of the 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 United States. 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 this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.

Section 134.1(j) of the regulations provides that the "NAFTA Marking Rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the regulations defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA Marking Rules set out at 19 CFR Part 102 of the regulations.

Section 102.11 of the regulations sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11(a) provides that the country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

"Foreign material" is defined in section 102.1(e) as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced."

In this case, the first applicable rule is section 102.11(a)(3) of the regulations. Under this rule, the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Section 102.20 of the rules sets forth the specific tariff classification changes and/or operations which are required in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. As noted, the imported unit is classifiable under subheading 8471.50, HTSUS.

The applicable change in tariff classification set out in section 102.20(p), Section XVI, Chapters 84 through 85, 8471.10-8471.50 of the regulations provides:

8470.10-8471.50.... A change to subheading 8470.10 through 8471.50 from any other subheading outside that group, except from heading 8473; or a change to subheading 8470.10 through 8471.50 from any other subheading within that group or from heading 8473, provided that the change is not the result of a simple assembly.

The keyboard and mouse are classifiable under subheading 8471.60, HTSUS, “Input or output units, whether or not containing storage units in the same housing.” The microphone and speakers are classifiable under HTSUS subheading 8518, “Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures.” Accordingly, there is a tariff shift of the foreign (non-Mexican) components.

However, section 102.17 of the regulations provides that "[a] foreign material shall not be considered to have undergone the applicable change in tariff classification set out in 102.20, or satisfy the other applicable requirements of that section by reason of.. :

(c) Simple packing, repacking or retail packaging without more than minor processing....

Accordingly, as the “foreign” (non-Mexican) mouse, keyboard, microphone and speakers are merely packaged with the computer, section 102.11(a) cannot be used to determine the origin of the imported good. Therefore, we must ascertain whether section 102.11(b) of the hierarchical rules may be used to determine the country of origin marking requirements of the imported article. Section 102.11(b) provides in pertinent part that where the country of origin cannot be determined under section 102.11(a), and the good is not specifically designated as a set pursuant to the Harmonized System nor classified as a set under General Rule of Interpretation 3, the country of origin of the article is "the country or countries of origin of the single material that imparts the essential character of the good... ."

In this case, as the imported components are classified as a set under GRI 3(b), HTSUS, section 102.11(b) is not applicable in determining the country of origin of the imported article. Therefore, we must proceed to section 102.11(c), the next rule in the hierarchal order, which provides as follows:
where the country of origin cannot be determined under paragraph (a) or (b) and the good is specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or
composite good pursuant to General Rule of Interpretation 3, the
country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the good.

All of the components of the set which merit equal consideration must be considered. In this case, the computer, keyboard, mouse, speakers and microphone merit equal consideration in determining the essential character of the set. Therefore, the country of origin of the set is the countries of origin of these components, i.e., Mexico, Thailand and China.

The record indicates that these components are individually marked with their appropriate countries of origin. However, Aii believes that the outer container need not reflect the countries of origin of the various components within the set, but instead may be marked “Assembled in (country of final assembly) from imported components.” Headquarters Ruling Letter (HRL) 560782 dated January 23, 1998, is cited in support of this position.

With respect to whether the outer carton must be marked with the country of origin of its contents, section 134.24(d), Customs Regulations (19 CFR 134.24(d)), provides, in part, that disposable containers or holders of imported merchandise which are sold without normally being opened by the ultimate purchaser, shall be marked to indicate the country of origin of their contents. However, if the container is normally opened by the ultimate purchaser prior to purchase, only the article need be marked. Based upon the facts presented in this case (and our experience with these goods), we are assuming that the computer components are sold to the ultimate purchaser in a sealed container which is normally not opened prior to purchase. Therefore, the outer carton must be marked with the origin of its contents.

In regard to Aii’s proposal to mark the carton “Assembled in Mexico from imported components,” based upon the decision in HRL 560782, we believe that the facts in this case are clearly distinguishable from those in HRL 560782. The facts upon which the decision in that case was based were that the major components of a desk-top computer were imported into Canada from various countries and assembled into a finished computer. The components underwent a tariff shift pursuant to the specific rule for the imported good set out in 19 CFR 102.20, and thus, the country of origin of the entire assembled good was Canada. However, as the individual components were marked with their country of origin prior to assembly (not Canada), Customs held that the retail container must clearly indicate Canada as the country of origin of the assembled product. Further, so as not to mislead the ultimate purchaser as to the actual origin of the product, we stated that the container must make reference to the fact that the individual components were not of Canadian origin, so that the ultimate purchaser would not be misled as to the actual country of origin of the imported article. The marking “Assembled in (country of final assembly) from imported components” was considered to be an acceptable marking.

In the instant case, the components imported into Mexico do not change origin as a result of being packaged with the computer. Therefore, the carton in which the computer system is contained must be marked to inform the ultimate purchaser of the countries of origin of its contents. The proposed marking “Assembled in Mexico (country of final assembly) from imported components” is not acceptable, as the countries of origin of certain of the components are not identified and thus the requirements of 19 U.S.C. §1304 and 19 CFR Part 134 are not met.

HOLDING:

Components of a desktop computer system imported into Mexico and packaged with the system will not undergo the applicable change in tariff classification set out in 102.20. See 19 CFR 102.17. Pursuant to 19 CFR 102.11(c), the country of origin of the imported computer system will be the countries of origin of the various components that merit equal consideration for determining the essential character of the imported system, i.e., the computer, speakers, microphone, keyboard and mouse.

As the ultimate purchaser in the U.S. will receive the computer system in a container, this carton must be marked to inform the ultimate purchaser of the countries of origin of its contents. The proposed marking “Assembled in Mexico (country of final assembly) from imported components” is not acceptable, as the countries of origin of all the components are not identified and thus the requirements of 19 U.S.C. §1304 and 19 CFR Part 134 are not met.

This decision should be mailed by your office to the internal advice requester no later than sixty days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel and to the public on the Customs Home Page on the World Wide Web at www.customs.ustreas.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,
John Durant, Director
Commercial Rulings Division


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