NY M87019 - The country of origin for marking purposes of certain semiconductor devices and their inner cartons and outer shipping cartons - United States International Trade Commision Rulings

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NY M87019

September 28, 2006

MAR-2 RR:NC:1:109 M87019

CATEGORY: MARKING

Ms. Amy J. Johannesen
Cerny Associates, P.C.
Attorneys at Law
24 Smith Street
Building 2, Suite 102
Pawling, New York 12564

RE: The country of origin for marking purposes of certain semiconductor devices and their inner cartons and outer shipping cartons

Dear Ms. Johannesen:

This is in response to your letter dated September 13, 2006 requesting a ruling, on behalf of your client NEC Electronics America, Inc. (“The Company”), on the acceptable country of origin marking for certain semiconductor devices and their inner cartons and outer shipping containers, when imported into the United States. A marked sample of the inner cartons, outer carton shipping labels, and photocopies of country of origin labels was submitted with your letter for review and these samples are being returned to you as per your request.

According to your letter, NEC Electronics America, Inc. intends to import semiconductor devices from a number of countries, including Japan, Korea, Singapore, and Malaysia. You letter further states that the semiconductor devices are integrated circuits and microprocessors, which are specific types of integrated circuits, and discrete devices such as transistors and diodes. With respect to the integrated circuits, you have elaborated as to how their inner cartons, outer shipping cartons, and shipping labels will be marked upon importation into the United States. However, you did not address the same for the transistors and diodes. Therefore, this ruling will pertain to the country of origin marking for the integrated circuits only.

Your submission claims that the imported integrated circuits range in size from approximately 1/8 square inch to approximately 2 square inches. And, in many instances the semiconductors (integrated circuits) are too small to mark individually with their country of origin. These semiconductors are imported in plastic trays, tubes or reels that protect the semiconductors from static electricity and which in turn may be contained in sealed antistatic bags that also protect them from moisture. The trays, tubes, or reels (and, in some cases, bags) are contained in sealed cardboard inner cartons featuring a label containing country of origin marking. One or more sealed inner cartons are placed within an outer shipping carton that also is labeled with country of origin.

These semiconductors are primarily sold (more than 80% of sales) to Original Equipment Manufacturers (OEMs) that use the semiconductor devices to manufacture a variety of products. These OEMs, to which NEC Electronics America, Inc. sells the majority of its semiconductors, generally know the country of origin of the semiconductors that they purchase from NEC Electronics America, Inc. because they discuss and approve specific production plants for their internal quality control purposes.

The semiconductors that are purchased by the OEMs are either sold in their sealed outer shipping cartons as imported, or for some smaller quantity orders, they will be sold in their sealed inner cartons. Generally, NEC Electronics America, Inc. does not sell in smaller quantities than the inner shipping cartons; however in those instances where a quantity smaller than that may be required, NEC Electronics America, Inc. may split the shipment into smaller shipping cartons, which feature labels identical to the original regarding all information with the exception of quantity. Therefore, these products reach the ultimate purchaser OEMs in their sealed inner cartons, or in any instance when repacking occurs, in properly labeled sealed repacked cartons. Prior to leaving NEC Electronics America Inc.’s warehouse, each outer shipping carton is also labeled with a repacking label that clearly instructs their customers that they must preserve the country of origin should they repack any articles purchased from them. (The repacking label was furnished as Enclosure A and reads as follows: “NOTICE TO SUBSEQUENT PURCHASER OR REPACKER: These articles may be imported. The requirements of 19 U.S.C. 1304 and 19 CFR part 134 provide that the articles in their containers must 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 an ultimate purchaser in the United States, the English name of the country of origin of the article. NEC50080-LBL”.)

In a small percentage of instances (under 20% of sales), products may be sold to distributors, some of which may not sell primarily to OEMs. As with products sold directly to OEMs by NEC Electronics America, Inc. each inner carton and outer shipping carton sent to a distributor is sealed and properly marked with country of origin. Each outer shipping carton sent to a distributor is also marked with a repacking statement, which requires that should the semiconductors be repacked in any way, the new packaging must include clear labeling that indicates the country of origin of the products as in Enclosure A.

Samples of inner cartons, outer carton shipping labels, and photocopies of country of origin labels were furnished. Each sample was marked as an Enclosure. The Enclosures range from A through E and are described below, with the exception of Enclosure A, which was described above.

Enclosure B is a sample of an inner carton designed to carry integrated circuits packed in trays. The country of origin is clearly marked on the shipping label as “Assembled in Singapore from wafers of China” (In that case the integrated circuits were assembled in Singapore and the wafers were diffused in China.)

Enclosure C is a sample of an inner “pizza box” carton designed to carry integrated circuits packed in reels, marked with a standard label. The country of origin is clearly marked on the shipping label as “Made in Japan” (In that case the integrated circuits were assembled in Japan and the wafers were diffused in Japan.)

Enclosure D is a photocopy of an outer carton shipping labels, used on shipments into the United States. (The photocopy marked Enclosure D states “Assembled in Singapore from wafers of Japan.”)

Enclosure E consists of samples of 3 large and 2 small labels used by NEC Electronics America Inc.’s warehouse when shipping products out of the warehouse. The larger labels are used to mark the outer shipping cartons. (One of the large labels is marked “Made in Korea”, the other “Made in Japan”, and the other “Made in Singapore.” Each of these large labels also bears the address of NEC Electronics America, Inc. in Rancho Dominguez, CA in a smaller font size and in close proximity to the integrated circuit’s country of origin.) The smaller labels are used to mark inner cartons in instances where less than a full outer shipping carton is sent to a customer. (One of the small labels is marked “Made in Japan from wafers of Japan” and the other is marked “Made in Singapore from wafers in China.”)

You have not provided an explanation of the assembly process. However, for purposes of this ruling, as stated in part in Headquarters Ruling Letter (HRL) HQ 562115, this office will assume that the assembly process performed abroad resulted in a substantial transformation and that accordingly, the country of origin will be the country where the wafers underwent an assembly process that produced integrated circuits.

This office notes that in C.S.D. 80-227, dated February 13, 1980, and in Headquarters Ruling Letter (HRL) 732357, dated May 21, 1990, United States Customs found that the assembly of integrated circuit (semiconductor) wafers into integrated circuit packages result in a substantial transformation. Thus, the finished integrated circuits are considered to be a product of the country in which such processing occurs. Based upon the assumption that the substantial transformation of the merchandise subject to this ruling, from wafer to integrated circuit, occurred in Japan, Korea, Singapore, or Malaysia, the country of origin for the semiconductors (integrated circuits) is Japan, Korea, Singapore, or Malaysia, depending on where the assembly occurred.

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 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.

As provided in section 134.41(b), Customs Regulations (19 CFR 134.41(b)), the country of origin marking is considered conspicuous if the ultimate purchaser in the United States is able to find the marking easily and read it without strain.

With regard to the permanency of a marking, section 134.41(a), Customs Regulations (19 CFR 134.41(a)), provides that as a general rule marking requirements are best met by marking worked into the article at the time of manufacture. For example, it is suggested that the country of origin on metal articles be die sunk, molded in, or etched. However, section 134.44, Customs Regulations (19 CFR 134.44), generally provides that any marking that is sufficiently permanent so that it will remain on the article until it reaches the ultimate purchaser unless deliberately removed is acceptable.

You state in your letter that more than 80% of these semiconductors are primarily sold to Original Equipment Manufacturers (OEMs) who use the semiconductor devices to manufacture a variety of products. These OEMs, to which NEC Electronics America, Inc. sells the majority of its semiconductors, generally know the country of origin of the semiconductors that they purchase from NEC Electronics America, Inc. because they discuss and approve specific production plants for their internal quality control purposes. You also state that less than 20% of these semiconductors may be sold to distributors, some of which may not sell primarily to OEMs. In either case, the semiconductor’s inner cartons and outer shipping cartons are sealed and properly marked with country of origin. Each outer shipping carton sent to a distributor is also marked with a repacking statement, which requires that should the semiconductors be repacked in any way, the new packaging must include clear labeling that indicates the country of origin of the products as stated in Enclosure A above. And, in instances where less than a full outer shipping carton is sent to a customer the smaller labels are used to mark the inner cartons to indicate the country of origin, as it applies to each particular shipment, in a manner such as “Made in Japan from wafers of Japan”, “Made in Singapore from wafers in China”, etc.

With respect to marking just the inner cartons and the outer shipping cartons and not the semiconductors themselves, your letter explains that the in many instances the semiconductors (integrated circuits) are too small to mark individually with their country of origin because they range from approximately 1/8 square inch to approximately 2 square inches in size. For that reason, you are requesting that the individual semiconductors be exempt from marking.

While the semiconductors themselves, at the time of importation, will not be marked with their country of origin, they will be in trays, tubes, or reels (and, in some cases, bags), which are contained in sealed inner cartons with an affixed label bearing a legible, indelible, and permanent country of origin marking. One or more sealed inner cartons are placed within an outer shipping carton, which also has an affixed label bearing a legible, indelible, and permanent country of origin marking.

Section 134.32(d) of the Customs Federal Regulations’ general exceptions to marking requirements provides for:

“Articles for which the marking of the containers will reasonably indicate the origin of the articles.”

Based on the facts presented, the semiconductors (integrated circuits) may be excepted from marking pursuant to 19 CFR 134.32(d) and only the inner and outer shipping container in which the devices are packed must be marked legibly, indelibly, and permanently at the time of importation so as to identify the country of origin of its contents to the ultimate purchaser. Your letter demonstrated that at the time of importation into the United States the inner cartons and outer shipping cartons would be properly marked with the country of origin and any carton into which the articles might be repackaged would bear a label satisfying the marking requirements (Reference is made to Enclosure A.)

Your letter proposed that the outer shipping cartons and some of the inner cartons would bear a label stating “Made in Japan, “Made in Korea”, “Made in Singapore”, or “Made in Malaysia”, depending on where the substantial transformation took place. In accordance with CFR 134.34.32(d) marking requirements, this is an acceptable country of origin marking. In other instances, some of the inner cartons will bear a label stating “Assembled in _________ from wafers of _________”, depending on where the wafers originated and where the substantial transformation took place. In accordance with CFR 134.43(e) this is also an acceptable country of origin marking. (Reference is made to Headquarters Ruling Letter (HRL) HQ 968034.) Therefore, either method of marking would be acceptable.

Enclosure E refers to samples of small and larger labels used by NEC Electronics America, Inc.’s U.S. warehouse when shipping products out to their U.S. customers. The larger labels bear the address of the U.S warehouse in Rancho Dominguez, CA, the smaller labels do not. The country of origin is in close proximity and in a larger font size than the U.S. address. In accordance with CR 134.46 this method of marking meets the country of origin marking requirements because the country of origin is in close proximity and in a comparable size to the U.S. address so as to not deceive the ultimate purchaser as to the country of origin. In this instance, the country of origin is not only in close proximity to the U.S. address, but it is also more prominent because of the larger font size. In accordance with CFR 134.46 this method of marking is acceptable. (Reference is made to Headquarters Ruling Letter (HRL) HQ 560753.)

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Linda M. Hackett at 646-733-3015.

Sincerely,

Robert B. Swierupski
Director,

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