HQ 562385 - Country of origin; Thin Film Transistor (TFT); Liquid Crystal Display (LCD); TFT/LCD module; PCB; flat panel display computer monitor; marking; outermost container; ultimate purchaser; substantial transformation; Hitachi; Japan; China; HRL 560427; 19 CFR 134.1(a); 134.32(d). - United States International Trade Commision Rulings

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HQ 562385

May 14, 2002

CLA-02 RR:CR:sm 562385 tjm

CATEGORY: CLASSIFICATION

Mr. Hideki Tsutsumiguchi
Vice President
Hitachi Electronic Devices (USA) Inc.
6200 The Corners Parkway
Suite 300
Norcross GA 30092

RE: Country of origin; Thin Film Transistor (TFT); Liquid Crystal Display (LCD); TFT/LCD module; PCB; flat panel display computer monitor; marking; outermost container; ultimate purchaser; substantial transformation; Hitachi; Japan; China; HRL 560427; 19 CFR 134.1(a); 134.32(d).

Dear Mr. Tsutsumiguchi:

This is in reply to your letter, dated April 8, 2002. In that letter, you requested a ruling on the country of origin marking requirements for TFT- LCD modules assembled in China of Japanese components and imported into the United States to be used to make notebook computer monitors and flat panel desktop computer monitors. Our response follows.

FACTS:

Hitachi will produce finished thin film transistor (TFT)/liquid crystal display (LCD) modules that will be imported into the United States. The two products at issue are: 1) TFT/LCD modules for use with notebook computers; and 2) a Super IPS (In Plane Switching) TFT-LCD module to make flat panel desktop computer monitors.

You state that both the TFT module and the Super IPS TFT-LCD module are constructed from the same basic and major components, which include:
major Components of tft-LCD Module
PCB Unit
TFT LCD Cell
Metal Frame
Back Light Unit (assembled in China from Japanese parts) Plastic mold for back light unit

The production process in China includes the following:

The Back Light Unit, using a Cold Flourescent Lamp (CFL), which illuminates the screen is assembled in China from Japanese components (sometimes the plastic mold for the back light unit is made in China); The PCB unit, TFT-LCD Cell and the metal frame (which are all made in Japan) are assembled; Cover Tape and Aluminum tape are used to secure the PCB unit; 4. The TFT-LCD module is completed.

The Back Light Unit is assembled in China. The process includes first adding a reflection sheet to a plastic mold case, the latter sometimes also made in China. Then, the Cold Fluorescent Lamp (CFL) unit, which is made by assembling bushing rubber, the CFL, CFL connector and CFL cable, is affixed to the reflection sheet with a doubled sided adhesive tape. A light guide is also attached to the CFL unit. Then, a diffuser sheet is attached to the top of the light guide. A lens film is then affixed on the diffuser sheet. Another lens film is attached and lastly, a diffuser sheet is placed on top of the lens film.

You state that although the Japanese-origin TFT-LCD Cell is the primary component, the Japanese components are substantially transformed in China when they are assembled into a TFT-LCD module in China. You contend that the components, which include the PCB, Back Light Unit (with CFL), tape, frame, cables, and the TFT-LCD Cell, when assembled result in a different commercial article, that is, a completed TFT-LCD module ready for use to manufacture notebook computer monitors or flat panel desktop computer monitors.

A representative of your company stated by telephone on April 24, 2002, that after importation of the finished TFT-LCD modules into the U.S., your company stores them in a warehouse as part of your company’s inventory. When a customer orders the modules, they are shipped to the customer. Your representative stated that because the imported articles are highly sensitive and fragile, your company does not normally repackage the imported articles. Your company’s customers then incorporate the TFT-LCD modules into a monitor when manufacturing their final computer product. In other words, the modules are not ready to be used as monitors when imported into the U.S. because they lack components such as the frame, power supply, driver, et cetera and must be further processed in the United States.

ISSUE:

What are the country of origin marking requirements for finished TFT-LCD modules assembled in China from Japanese components and imported into the United States to be used for manufacturing notebook computer monitors and flat panel desktop computer monitors?

LAW AND ANALYSIS:

Country of Origin Marking Requirements

As you are aware, 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 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. 19 CFR part 134 implements the country of origin marking requirements of 19 U.S.C. § 1304.

Section 134.1(d), Customs Regulations (19 CFR § 134.1(d)), provides that the “ultimate purchaser” is generally the last person in the United States who will receive the article in the form in which it was imported. 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 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 the 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. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

Section 134.35(a), Customs Regulations (19 C.F.R. § 134.35(a)), provides that the manufacturer or processor in the U.S. who converts or combines the imported article into a different article having a new name, character or use will be considered the ultimate purchaser of the imported article within the contemplation of 19 U.S.C. § 1304(a), and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with this part.

Also, 19 C.F.R. § 134.1(d)(1) states that if an imported article will be used in manufacture, the manufacturer may be the “ultimate purchaser” if he subjects the imported article to a process which results in a substantial transformation of the article, even though the process may not result in a new or different article. See also 19 C.F.R. § 134.32(d), which provides for exceptions to marking of imported articles for which the marking of the containers will reasonably indicate the origin of the articles.

B. Substantial Transformation

An article that consists in whole or in part of materials from more than one country is a product of the last country in which it has been substantially transformed into a new and different article of commerce with a name, character, and use distinct from that of the article or articles from which it was so transformed. See United States v. Gibson-Thomsen, 27 C.C.P.A. 267 (1940); Uniroyal Inc. v. United States, 542 F. Supp. 1026 (Ct. Int’l Trade 1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983); Koru North America v. U.S., 701 F. Supp. 229 (Ct. Int’l Trade 1988); National Juice Products Ass’n v. United States, 628 F. Supp 978 (Ct. Int’l Trade 1986); Coastal States Marketing Inc. v. United States, 646 F. Supp 255 (Ct. Int’l Trade 1986), aff’d, 818 F.2d 860 (Fed. Cir. 1987); Ferrostaal Metals Corp. v. United States, 664 F. Supp 535 (Ct. Int’l Trade 1987).

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. U.S., 6 CIT 204, 573 F. Supp. 1149 (1983), aff’d, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.C. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. The issue of whether a substantial transformation occurs is determined on a case-by-case basis.

Based on the facts provided, it is our opinion that the assembly of various components used in producing the TFT/LCD module in China, including the Back Light Unit which is made in China from approximately 12 components, effects a substantial transformation of the individual components. The individual components, most of which are made in Japan, lose their identity and become integral part of the new article – TFT/LCD module. The assembly operations are also not minimal or simple. Thus, the TFT/LCD module as imported into the United States qualifies as a product of China and therefore should be marked as such.

C. Marking Exceptions

Additionally, Customs has addressed the issue of substantial transformation with respect to the production of computer monitors. In Headquarters Ruling Letter (HRL) 560427, dated August 21, 1997; HRL 734966, dated October 18, 1993; HRL 734213, dated February 20, 1992; and HRL 734097, dated November 25, 1991, Customs consistently determined that the assembly of the various components used to produce a computer monitor resulted in a substantial transformation of the component parts.

In HRL 560427, the LCD module was made in Japan and imported into the U.S. The LCD module was then combined with nine other U.S. components to manufacture the final Flat Panel TFT/LCD monitor for personal computers. Customs ruled that the Japanese-origin LCD module was substantially transformed in the U.S. when incorporated into the monitor in the U.S. Similarly, in the instant case, the TFT/LCD module made in China will be incorporated in the United States into flat panel desktop computer monitors and notebook computer monitors manufactured by your customers.

In the instant case, unlike the case in 560247, the importer is not the manufacturer or the processor. However, subject to the terms of 19 C.F.R. § 134.35(a) and 19 C.F.R. § 134.1(d)(1), your company’s customers, who use the imported TFT/LCD modules to produce the flat panel desktop computer monitors and notebook computer monitors in the United States would be considered the ultimate purchasers. Therefore, as in HRL 560247, the imported article in the instant case qualifies for the marking exception provided in 19 C.F.R. § 134.35(a) and 19 C.F.R. § 134.32(d). Consequently, the country of origin marking requirements may be met in the instant case by having the imported articles’ containers (i.e. boxes or other containers that hold the modules) marked with the country of origin, assuming that those containers also reach your customers.

HOLDING:

For the foregoing reasons and based on the facts provided, the TFT/LCD modules are products of China and therefore should be so marked. However, because the TFT/LCD modules will be used by your customers to manufacture flat panel desktop computer monitors and notebook computer monitors in the United States, your customers are the ultimate purchasers. Therefore, the marking requirements may be met by marking the containers of the imported articles with their country of origin, assuming that your customers receive the articles in those containers.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are 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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