HQ 562308 - Country of origin marking of integrated circuits; disjunctive marking - United States International Trade Commision Rulings

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HQ 562308

September 6, 2002

MAR-05 RR:CR:SM 562308 KSG

CATEGORY: MARKING

Arash Raminfar
KPMG, LLP
1901 Avenue of the Stars
Suite 200
Los Angeles, California 90067-6004

RE: Country of origin marking of integrated circuits; disjunctive marking

Dear Mr. Raminfar:

This is in reference to your letter dated November 27, 2001, on behalf of Vitesse Manufacturing and Development (“Vitesse”), requesting reconsideration of a binding 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.

This case involves integrated circuits ("ICs") that are assembled in one of several Asia Pacific and/or European countries 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 undergo a testing operation which involves the extraction of the merchandise from its packaging. Approximately 5% of the testing is performed abroad while the balance of the testing occurs at Vitesse’s Camarillo, Calif. facility. As imported into the U.S., the ICs are packaged on specialty trays, tubes, reel containers, or other similar packaging which, in turn, are packed inside shipping boxes.

You indicate that after the testing is performed in the U.S., the chips are repackaged into new plastic wrapping and shipped to Vitesse’s customers in the U.S. in the same shipping boxes in which they were imported. These customers are companies such as telecommunications providers that further incorporate the semiconductors into completed telecommunications components. You indicate that in preparing various customers’ orders, ICs from various assemblers and countries typically are commingled in the shipping boxes.

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 outermost shipping boxes (both as imported and as shipped to Vitesse’s customers in the U.S.) pursuant to T.D. 75-187 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 Headquarters Ruling Letter ("HRL") 562115, dated July 6, 2001, Customs ruled that the ICs imported by Vitesse and repackaged in the U.S. could not be marked with a disjunctive marking as there was no commingling of articles from different countries.

However, Customs personnel visited Vitesse’s Camarillo facility on December 4, 2001, and, as a result of information obtained during that visit, found that commingling of imported ICs from different foreign assemblers and different countries takes place in the facility during the testing and repackaging operations.

ISSUE:

Under the circumstances set forth above, whether it is acceptable to mark only the outermost containers of the imported ICs 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 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.

In HRL 562115, Customs based its holding (that the disjunctive marking provided for in T.D. 75-187 did not apply to that case) on the facts presented, which did not indicate that the chips are commingled in the U.S. The holding in HRL 562115 is correct based on the facts as set forth in that ruling. However, based on additional information received in connection with your request for reconsideration of HRL 562115, we are satisfied that the ICs in question are commingled due to the need to break the lots down into smaller lots for testing and subsequent repackaging.

Therefore, we find that the outermost container of the IC's may be marked with the disjunctive marking described above.

HOLDING:

Based on the additional information received, Customs finds that it is acceptable to mark only the outermost shipping boxes containing imported ICs (both at the time of importation and when shipped to Vitesse’s customers in the U.S.) with the above-described disjunctive multiple country of origin marking.

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,

Myles B. Harmon, Acting Director

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