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HQ W968244

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October 2, 2006

CLA-2 RR:CTF:TCM 968244 KBR

CATEGORY: MARKING

Fusae Nara
Pillsbury Winthrop Shaw Pittman, LLP
1540 Broadway
New York, NY 10036-4039

RE: Country of Origin; Microcontroller Unit

Dear Ms. Nara:

This is in reference to your letter on behalf of Sharp Microelectronics of the Americas, Division of Sharp Electronics Corporation, dated May 5, 2006, to the Bureau of Customs and Border Protection (“CBP”), Office of Regulations and Rulings, in which you requested a binding ruling concerning the country of origin marking of Blue Streak® Microcontroller Units, Part number SM79525C000A0. You provided samples for our review.

FACTS:

The articles involved are Blue Streak® microcontroller units (“MCUs”) in die form. The MCUs come in 16 and 32 bit models. The MCUs are developed from wafers that are fabricated in Taiwan using a photolithographic semiconductor process. Each wafer contains hundreds of dies on it. The wafers are shipped to the United States or Korea for testing to identify good dies. The wafers are then shipped to the Philippines to undergo back grinding and dicing.

The back grinding process involves cleaning the wafer, placing a surface lamination on the wafer to protect it from mechanical damage and contamination (i.e., applying a protective tape over the wafer), thinning the wafer using grinding wheels to the required thinness, and removing the lamination. The back grinding is performed by a machine which is programmed for spindle speed, spindle coolant water temperature and flow rate, deionized water temperature, initial and final wafer thickness, and feed speeds.

The dicing process involves mounting the wafer and wafer frame onto dicing tape and cutting the wafer with a wafer saw to create individual dies. The good dies are then cleaned and dried by air blowing. The dicing tape is removed by machine. The bad dies are discarded. The good dies are placed in plastic “waffle” frames to contain them during shipping. In the U.S., the dies are sold to manufacturers who will attach them to printed circuit boards by “wire-bonding” and encapsulate the dies to create individual integrated circuits.

ISSUES:

Are the MCUs substantially transformed by the back grinding and dicing operations performed in the Philippines?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930 (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 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. Friedlander & Co., 27 C.C.P.A. 297 at 302 (1940).

Part 134, CBP Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. §1304. Section 134.1(b), CBP 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 United States. 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. The case of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940), provides that an article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed and, as a result, the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See, 19 CFR 134.35(a).

However, 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). The instant MCUs undergo minor processing in the Philippines. The grinding and dicing operations are simple operations that do not change the name, character or use of the article. In C.S.D. 80-227 (1980), CBP found that semiconductor chips which had die and lead wires attached and underwent encapsulation were substantially transformed into an integrated circuit. In a case issued to Sharp Microelectronics Corporation, HQ 732357 (May 21, 1990), CBP similarly found a substantial transformation when silicon wafers were cut into integrated circuit-size pieces and were then mounted to a lead frame, gold and aluminum wires were attached to the circuit and the lead frame, and then the lead frame and circuit were encapsulated. In these cases the wafers were not only cut to size as in the case in the instant ruling request, but were also embedded into the lead frame and wires were attached and the article was encapsulated, thus adapting it and making it useful as an integrated circuit. See also HQ 560753 (February 10, 1998), NY C80261 (October 17, 1997), NY M82158 (April 27, 2006).

In a similar situation involving circuit boards, CBP explained what it considered to determine whether there was a substantial transformation in HQ 733690 (February 22, 1991):

The blank circuit boards have no function except to serve as a part for a completed circuit board with various electronic components mounted onto it, which in turn will go into a larger system. Insertion of the electronic components onto the blank board plus assembly of the populated boards into a larger unit, changes the nature of the board and causes it to lose its separate identity. It is not until the assembly process, consisting of mounting a large number of electrical components on the board, that the board can be used as part of a larger system such as a computer power unit.

The assembly process also involves a considerable amount of skill and time. It takes about an hour of time to do the assembly and the work is done by a skilled electronic assembler.

We also note that there is an extensive increase in value in the boards when they are completed.

See also HQ 734021 (May 21, 1991).

In the instant case, the dicing and grinding of the wafer does not change the essence of the die or purpose for which the die was created. The processing in the Philippines merely separates individual dies and thins the material. Compared to the rulings cited above which found a substantial transformation, the instant processing does not provide any kind of mounting or embedding operation. The grinding operation is done automatically by machine. There is no evidence of an extensive increase in value by merely cutting the wafer into individual dies and grinding. Therefore, the cutting and grinding performed in the Philippines will not substantially transform the article.

Further, CBP has found that testing of an article does not substantially transform it. HQ 734518 (June 28, 1993). Therefore, the testing operations performed on the wafers in the U.S. or Korea does not convey country of origin. The country of origin of the MCUs is where the wafer was fabricated, Taiwan, and the finished MCUs must be marked accordingly.

HOLDING:

In accordance with the above discussion, the MCUs are not substantially transformed by the testing performed in the United States or Korea, or the dicing or back grinding operations performed in the Philippines. The country of origin of the MCUs is the country where the wafer was fabricated, Taiwan, and the finished MCUs must be marked with the country of origin accordingly.

Sincerely,

Gail A. Hamill, Chief
Tariff Classification and Marking Branch

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