MAR 2-05 CO:R:C:V 559036 AT
Charles Routh, Esq.
Garvey, Schubert & Baker
1191 Second Avenue, Eighteenth Floor
Second & Seneca Building
Seattle, Washington 98101-2939
RE: Country of origin marking requirements for imported
fishing rods assembled in China; substantial
transformation; 19 CFR 134.1(b); C.S.D. 93-13;
HQ 734214
Dear Mr. Routh:
This is in response to your letter dated February 15, 1995,
on behalf of Shakespeare Company ("Shakespeare") requesting a
ruling regarding the country of origin marking requirements for
fishing rods (without reels) imported from China.
FACTS:
You state that Shakespeare intends to import fishing rods
from China. The fishing rods (without reels) are assembled in
China from component parts manufactured in different countries.
The fishing rod components consist of a U.S. made fiberglass rod
blank (measuring from 5 1/2 feet to 9 feet in length depending on
the style), Korean or Japanese guide lines, and a handle and reel
seat manufactured in various countries outside China.
In China, the parts are assembled together into the finished
fishing rods. The line guide components are thread wrapped onto
the rod, the thread is epoxy encapsulated, in some cases ferrules
are fitted so that rods may be broken down into parts, and the
handle and reel seat is assembled and affixed onto the rod. You
state that Shakespeare intends to move the assembly of the handle
and reel seat to Hong Kong at some future date. You also state that the cost of the component parts represents between
approximately 80 to 85 percent of the total cost of the finished
fishing rod (30 to 40 percent assigned to the U.S. made rod
blank), with the remaining cost attributable to the assembly
operation done in China.
You contend that the fishing component parts are not
substantially transformed as a result of the assembly operation
performed in China, and thus the country of origin of the
finished fishing rods imported into the U.S., is not China.
Rather, you assert that the imported fishing rods should be
individually marked to indicate the country of origin of each of
its component parts.
ISSUE:
What are the country of origin marking requirements for
fishing rods imported from China that are assembled in China from
various component parts in the manner described above?
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 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. 27
C.C.P.A. 297 at 302; C.A.D. 104 (1940).
The "ultimate purchaser" is defined generally as the last
person in the U.S. who will receive the article in the form in
which it was imported. Section 134.41(d)(3), Customs Regulations
(19 CFR 134.1(d)(3)) provides that "if an article is to be sold
at retail in its imported form, the purchaser at retail is the
ultimate purchaser. In this case, the ultimate purchaser of the
imported fishing rods is the person who purchases the rods in the
U.S. at retail. Substantial Transformation
The country of origin for marking purposes is defined at
section 134.1(b), Customs Regulations (19 CFR 134.1(b)), 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 Part 134. A substantial
transformation occurs when articles lose their identity and
become new articles having a new name, character, or use. Koru
North America v. United States, 12 CIT 1120, 701 F.Supp. 229
(1988). In determining whether there is a substantial
transformation of an article, each case must be decided on its
own particular facts. Uniroyal Inc. v. United States, 3 CIT 220,
542 F.Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022
(1983)
In determining whether the assembly 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. United States, 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.D.s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.
Customs has previously considered the issue of whether the
assembly of finished fishing rods from foreign components results
in a substantial transformation of the component parts. In
C.S.D. 93-13 (May 26, 1992), Customs considered whether the
assembly of fishing rods in China from component parts made in
China, Taiwan and Korea constituted a substantial transformation
and found that it did not, stating that the assembly of the
component parts into the finished fishing rod did not result in
the manufacture of a new and different article. Also, in HQ
734214 (November 18, 1991), Customs ruled that fishing rods
imported from China that were assembled in China from component
parts of Korean origin were not substantially transformed as a
result of the assembly operation and the country of origin of the
imported fishing rods was Korea, where the component parts were
made.
Similarly, in this case, we find that the component parts
are not substantially transformed as a result of the assembly
operation performed in China. As in C.S.D. 93-13, the assembly
of the U.S. origin rod blanks, the Korean or Japanese fishing
guides, the foreign handles and foreign reel seats of Non-Chinese
origin, into finished fishing rods does not result in the
manufacture of a new and different article. Also, it appears
that the assembly operation is simple--requiring only the
operations of gluing, tying/binding and epoxy encapsulation--
which in our opinion are only finishing operations which do not
constitute a substantial transformation. The name and use of
each component does not change as a result of the assembly
operation. Although each component part becomes an essential
part of the finished fishing rod, each component is still
referred to as a rod, fishing guide, handle and reel seat after
assembly. The use of the component parts is predetermined at the
time of importation into China. Each component is intended to be
utilized in the production of a finished fishing rod. Although
one predetermined use does not preclude the finding of a
substantial transformation (See, Torrington Co., v. United
States, 764 F.2d 1563, (1985)), whether an article is
substantially transformed must be based on the totality of the
evidence. In this case, we find that, based on the totality of
the evidence, the foreign component parts are not substantially
transformed in China as a result of the assembly operation.
19 CFR 10.22 Country of Origin Marking Implications
It should be noted that pursuant to section 10.22, Customs
Regulations (19 CFR 10.22), articles assembled abroad in whole or
in part from U.S. components and entered under a partial duty
exemption under subheading 9802.00.80, HTSUS, are considered
products of the country of asembly for purposes of 19 U.S.C.
1304, whether or not the assembly constitutes a substantial
transformation. In this case, since a U.S. component (fiberglass
rod) is exported to China to be assembled with other components
into the finished fishing rod, it appears that the finished
fishing rods would be eligible for the partial duty exemption
under 9802.00.80, HTSUS. Thus, pursuant to 19 CFR 10.22, the
country of origin of the finished fishing rods for country of
origin marking purposes is China, the country of assembly.
Marking the finished rods with the phrase "Assembled in China"
would be an acceptable country of origin marking for the finished
fishing rods.
We note, however, that Customs has issued a notice of
proposed rulemaking to remove 19 CFR 10.22 in conjunction with
the amendments of the interim Customs Regulations, published in
the "Federal Register" on January 3, 1993, as TD 94-4. The
notice of proposed rulemaking of "Rules for Determining the
Country of Origin of a Good for Purposes of Annex 311 of the
North American Free Trade Agreement; Rules of Origin Applicable
to Imported Merchandise" was published on May 5, 1995, in the
"Federal Register," 60 Fed. Reg. 22312. The notice in the
"federal Register" indicated that, but for the application of 19
CFR 10.22, the country of origin of an article eligible for entry
under subheading 9802.00.80, HTSUS, may not necessarily be the
country where it was assembled if the interim Part 102, Customs
Regulations, or substantial transformation test is followed. Accordingly the May 5, 1995, "Federal Register" notice proposes
to remove 19 CFR 10.22. The comment period for the May 5, 1995,
notice expired on July 19, 1995. If the proposal to repeal 19
CFR 10.22 is adopted as a final rule, Customs may adopt new
regulations which prescribe the circumstances for the general use
of the words "Assembled in" as a country of origin indicator.
In the interim period, however, Customs will continue to
apply 19 CFR 10.22 to determine the country of origin of imported
articles eligible under subheading 9802.00.80, HTSUS, for country
of origin marking purposes.
HOLDING:
Various component parts, consisting of U.S. origin fishing
rod blanks, Korean or Japanese fishing guides, foreign handles
and foreign reel seats of Non-Chinese origin, which are assembled
into finished fishing rods in the manner described above are not
substantially transformed as a result of the Chinese assembly
operation. However, pursuant to 19 CFR 10.22, the country of
origin of the finished fishing rods, for marking purposes, is
China, the country of assembly. Accordingly, the finished
fishing rods must be individually marked to indicate China, as
the country of origin of the finished fishing rods. Marking the
finished fishing rods with the phrase "Assembled in China" is an
acceptable country of origin marking for the finished fishing
rods.
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,
John Durant, Director
Commercial Rulings Division