HQ 562115 - Country of origin marking of integrated circuits - United States International Trade Commision Rulings

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HQ 562115

July 6, 2001

MAR-05 RR:CR:SM 562115 BLS

CATEGORY: MARKING

Port Director
U.S. Customs Service
300 South Ferry Street
Terminal Island, CA 90731

RE: Country of origin marking of integrated circuits

Dear Sir:

This is in reference to letters dated May 1 and 14th, 2001, and a fax dated May 25, 2001, filed by KPMG, LLP, on behalf of Vitesse Manufacturing and Development (“Vitesse”), requesting a ruling concerning the country of origin marking of certain integrated circuits.

FACTS:

Vitesse is a provider of semiconductor components and equipment as well as a supplier and designer of communications integrated circuit chips for manufacture of core, access, enterprise, and metropolitan area network equipment, and storage area network equipment.

Vitesse operates two production facilities, one in Camarillo, California and the second in Colorado Springs, Colorado. The Camarillo facility fabricates four-inch wafers, while the Colorado Springs facility is responsible for fabricating six-inch wafers.

After the wafers have been probed, the wafers may be sent to one of several Asia Pacific and/or European countries for further manufacturing processes where the products are assembled by means of cutting the wafers into chips, mounting individual chips by eutectic or epoxy mechanisms to the lead frames, bonding the circuits by gold and aluminum wires to the lead frames, and encapsulating the lead frames. Upon completion of the assembly process, the products are tested, packaged and shipped to the U.S. on specialty trays, tubes, reel containers, or other inner packaging to the ultimate purchasers, which will be companies such as telecommunications providers who further incorporate the semiconductors into completed telecommunications components.

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Vitesse proposes that it be permitted to cease marking individual chips, tubes, reels, trays and the like with the specific country of origin and be allowed to mark only the outer packaging/boxes with an all inclusive country of origin marking as follows:

Made in one or more of the following countries: Philippines, Korea, Taiwan, Hong Kong, Singapore, Japan, or France.

In addition, Vitesse intends to issue commercial invoices to its customers with the same all-inclusive country of origin statement. At the request of the customer, Vitesse will be able to determine the exact country of origin based on a bar code found on each chip, and advise the client of the specific country of origin for the specific product purchased.

ISSUE:

Whether the integrated circuits may be excepted from the individual marking requirements and whether it is acceptable to mark only the outermost containers with a disjunctive multiple country of origin marking.

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 United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or 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. 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., 27 C.C.P.A. 297, 302 (1940). Part 134 of the Customs Regulations implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

For purposes of this ruling, we will assume that the assembly process performed abroad results in a substantial transformation and that accordingly, the country of origin will be the country where the various components are assembled to produce the integrated circuits. See, for example, Headquarters Ruling Letters (HRLs) 732357 dated May 21, 1990 and 560753 dated February 10, 1998. We will also assume that the ultimate purchaser will be the telecommunications companies or other entities which 3
will receive the articles in the import packaging and substantially transform the imported chips into new and different products.

Pursuant to 19 U.S.C. §1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR §134.32(d)), an exception from individual marking is applicable where the marking of the container of an imported article will reasonably indicate the origin of the article. This exception is normally applied in cases where the article is imported in a properly marked container and the ultimate purchaser in the U.S. will receive it in its original marked container. Accordingly, provided the ultimate purchaser receives the imported chips in a sealed container properly marked with the country of origin, 19 CFR §134.32(d) will be applicable and the individual chips will not require country of origin marking.

Customs policy is that in most circumstances, it is not acceptable for purposes of 19 U.S.C. 1304 to mark an article with the legend "Product of ____ or ____". In C.S.D. 89-111 certain effervescent enzymatic cleaner tablets from either West Germany or the U.S. were packaged into retail containers. While Customs acknowledged that the seller could avoid expense by using the disjunctive marking, "Tablets Made in West Germany or the United States", Customs held that fully accurate marking would not amount to an economic prohibition, and, therefore, required the package to be marked with only the actual country of origin. Otherwise, the disjunctive marking would do no more than indicate the possibility that the tablets may be of foreign origin. (It was also noted that since only one foreign source was involved, West Germany, and the packages would contain either tablets from the U.S. or West Germany, only one label was necessary to satisfy the country of origin marking requirements. When the tablets were of U.S. origin, no country of origin marking was necessary.)

However, in T.D. 75-187, Customs allowed a disjunctive listing of multiple countries of origin when the articles (semiconductor devices, including transistors, diodes, and integrated circuits) were commingled for a bona fide reason, and subsequently repackaged for sale to an ultimate purchaser. This determination was based on the situation where a manufacturer would commingle many devices of the same type from various countries during the testing and symbolization marking process. This method of marking was permitted because when devices are commingled for bona fide reasons it becomes difficult for Customs to enforce the normal requirement that each imported article be marked with its actual country of origin. See also C.S.D. 84-56, where Customs allowed fasteners to be marked "from one or more of the following countries...." to indicate the country of origin of fasteners, where there were many varieties from many countries. The major source countries were required to be indicated.

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In Headquarters Ruling Letter (HRL) 734101, dated July 9, 1991, Customs allowed toys sold inside plastic eggs in a vending machine to be individually marked with the actual country of origin, but since this was not visible, to have the machine marked "The Toys Contained In This Machine Are Marked With The Country Of Origin, And May Be Made In One Or More Of The Following Countries: Hong Kong Taiwan China". See also HRL 558755 dated January 18, 1995, where we allowed a marking which listed possible countries of origin for articles which were individually marked and commingled. In that case, the marking also indicated that the articles were individually marked.

In HRL 735482 dated April 4, 1995, the issue was whether the country of origin marking on boxes of fasteners could list alternative countries as the possible country of origin where the fasteners were not commingled. Customs disallowed any alternative form of marking noting that the fasteners themselves were not individually marked with their country of origin (as in HRL 734101), nor were the fasteners commingled. As the importer actually knew the country of origin of the fasteners it was placing in each box, Customs rejected the request to allow a list of alternative countries of origin on the boxes of fasteners. See also HRL 561225 dated April 9, 1999 (listing multiple potential countries of origin when two or more types of spare parts for machinery from different countries are packaged together is not acceptable, as the importer will know the country of origin of each item and the ultimate purchaser must be made aware of the country of origin of each part received).

In this case, assuming the exception under 19 CFR 134.32(d) applies, Vitesse will not be marking the chips themselves with their country of origin nor will the articles be commingled. Vitesse will actually know the country of origin of the imported articles packaged for resale to the U.S. Therefore, we find no justification for allowing a marking which identifies alternative, possible countries of origin. Rather, the containers must be marked indicating the actual country of origin of the articles contained therein.

HOLDING:

1) Provided the ultimate purchaser receives the imported articles in a container properly marked with the country of origin, 19 CFR §134.32(d) will be applicable and the individual chips will not require country of origin marking.

2) The country of origin marking on the import packaging may not list the countries in the disjunctive, but must indicate the actual country of origin of the imported articles.

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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

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