HQ W56282~1 - Country of Origin of Marking of Printed Circuit Board (PCB) Assemblies; Substantial Transformation; 19 CFR 134.35(a) - United States International Trade Commision Rulings

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HQ W562827

November 5, 2003

MAR-05 RR:CR:SM W562827 NL

CATEGORY: MARKING

Michael P. Gurdak, Esq.
Jones Day
51 Louisiana Avenue, N.W.
Washington, D.C. 20001-2113

RE: Country of Origin of Marking of Printed Circuit Board (PCB) Assemblies; Substantial Transformation; 19 CFR 134.35(a)

Dear Mr. Gurdak:

This is in reply to your letter dated August 6, 2003 on behalf of Lexicon, Inc. (Lexicon), d/b/a/ Harman Specialty Group, a division of Harman International Industries concerning the country of origin marking requirements for certain printed circuit board (PCB) assemblies imported by Lexicon for use in manufacturing digital controllers. You seek a ruling that the PCB assemblies are substantially transformed after importation into the U.S., such that Lexicon is the ultimate purchaser of the PCB assemblies and such that country of origin marking need not appear on the PCB assemblies when incorporated into digital controllers.

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

FACTS:

Printed circuit boards assembled in China are imported by Lexicon for use in manufacturing MC-8 and MC-8B digital controllers, which Lexicon describes as high end audio/video components. The PCB assemblies are as follows:

Memory Board Assembly
Standby Board Assembly
SW/LED Board Assembly
Video Board Assembly
Main Board Assembly
DSP Board Assembly
Decoder Board Assembly
XLR Board Assembly

The submission indicates that production of the digital controllers is a multi-step assembly, testing and packaging process. The finished controllers comprise, in addition to the PCB assemblies, a number of other components such as metal chassis parts, an outer housing, and a fluorescent display. The submission notes that each PCB assembly has no function except to serve as a single component for a finished digital controller. Photographs of the PCB assemblies and digital controllers were submitted with your request.

ISSUE:

Do the assembly operations result in a substantial transformation of the Chinese-origin PCB assemblies such that Lexicon, the assembler in the U.S., may be considered the ultimate purchaser in the U.S. of the assemblies?

LAW AND ANALYSIS:

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. 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. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940).

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), 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 U.S. 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 the marking laws and regulations.

For country of origin marking purposes, a substantial transformation occurs when an article is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. On the other hand, if the manufacturing or combining process is merely a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).

Pursuant to section 134.35(a), Customs Regulations (19 C.F.R. §134.35(a)), an imported article that is substantially transformed in the U.S. is excepted from individual country of origin marking and only the outermost containers of the imported articles must be marked with the country of origin. An article is substantially transformed if it is “so processed in the U.S. that it loses its identity in a tariff sense and becomes an integral part of a new article having a new name, character and use.” U.S. v. Gibson-Thomsen Company, Inc., 27 CCPA 267 (1940).

It is contended that the circumstances set forth are comparable to the case of certain audio/video receivers considered by this office in Headquarters Ruling Letter (HQ) 560433 (September 19, 1997). In that letter ruling it was concluded that sixteen foreign subassemblies, including five PCBs, were substantially transformed when assembled in another country to produce audio/video receivers. It is your position that the imported PCBs likewise undergo a substantial transformation when assembled in the U.S. to make digital controllers, such that, within the meaning of 19 CFR 134.35(a), Lexicon is the ultimate purchaser in the U.S. of the PCBs. Further, you seek approval for Lexicon, as the ultimate purchaser, to remove country of origin markings from the PCBs that are used in assembly of the digital controllers.

This office agrees with your contention that the determination in HQ 560433 may be applied in the instant case. The digital controller is able to accept, amplify, modify and output a an audio/video signal, operations that no single PCB assembly can perform at importation. The digital controller can also accept and process user inputs, as well as communicate with external audio/video devices also operations that no single PCB can perform at importation. The PCB assemblies undergo a substantial transformation by reason of assembly in the U.S. into digital controllers. Lexicon is the ultimate purchaser in the U.S. of the PCB assemblies. As the ultimate purchaser, Lexicon is not required to maintain markings that appear on the PCB assemblies at the time of importation.

HOLDING:

The operations described in the submission result in a substantial transformation of the printed circuit board assemblies for purposes of Part 134, Customs Regulations, and in particular, within the meaning of 19 CFR 134.35(a).

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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, Director,

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