MAR-2-05 R:C:S 559067 DEC
Mr. J. Kevin Horgan
deKieffer, Dibble & Horgan
Suite 900
915 Fifteenth Street, N.W.
Washington, D.C. 20005
RE: Country of origin marking of cordless telephone sets; substantial transformation;
HRL 734560; HRL 734363; T.D. 91-7
Dear Mr. Horgan:
This is in response to your letter dated March 3, 1995, on behalf of your client, Thomson Consumer Electronics, Incorporated (TCE), in which you request a ruling regarding the country of origin marking requirements for certain cordless telephone sets.
FACTS:
TCE imports cordless telephone sets produced in China, Malaysia, and the Phillippines. You submitted samples of the two telephone units that are the subject of this ruling in the boxes that will reach the ultimate purchaser in the United States. You state that Model 2-9615 is a cordless telephone that includes an extra recharge cradle with a recharging cord incorporated into the cradle and that Model 2-9635 is a cordless telephone which features a speakerphone in the base unit. You provided the following information with respect to the cost, origin, and marking of each component as imported.
Component Cost Origin Marking
Model 2-9615
Base Unit $10.614 Malaysia Made in Malaysia
Handset $12.084 Malaysia None
Recharge Cradle $01.451 Malaysia Made in Malaysia
Power Cord $01.520 China Made in China
Telephone Line $00.197 Malaysia None
Manuals $00.163 Malaysia Printed in Malaysia
Packing $00.513 Made in Malaysia
Model 2-9635
Base Unit $20.938 Malaysia Made in Malaysia
Handset $12.724 Malaysia None
Telephone Line $00.185 Malaysia None
Manuals $00.202 Malaysia Printed in Malaysia
Packing $00.810 Made in Malaysia
The power cords and the telephone lines may be sourced in one or more Asian countries, including Malaysia, China, the Philippines, Indonesia, Korea, Singapore, and Hong Kong. Each telephone set will be packed in Malaysia prior to exportation in an individual box that will reach the retail customer. These boxes will be packed with other individually boxed telephone sets in a carton for shipment to retailers. The individual boxes and the cartons will be marked "Made in Malaysia". You state that TCE does not sell any of the components of the cordless telephone sets individually and the handset cannot be used without the base unit. In addition, the retail consumers of the telephone sets do not ordinarily open the individual consumer box prior to purchasing the item
ISSUE:
What is the proper country of origin marking of the imported telephone sets described above?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that 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 container) will permit, in such manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the 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 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." The primary purpose of the country of origin marking statute 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, 302, C.A.D. 104 (1940).
Neither the statute nor Part 134 of the Customs Regulations contain any special requirements regarding the marking of sets, mixtures or composite goods. In the absence of any special requirements, the general country of origin marking rule applies which requires that every article that is imported into the United States must be marked to indicate its country of origin as determined by where the article underwent its last substantial transformation. A substantial transformation occurs when articles lose their identity and become new articles having a new name, character, or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940); Koru North America v. United States, 12 CIT 1120, 701 F. Supp. 229 (1988). The question of when a substantial transformation occurs for marking purposes is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, aff'd, 1 Fed. Cir. 21, 702 F.2d 1022 (1983).
The operations performed to package the various components to form the telephone sets are extremely simple. Hence, no substantial transformation of the non-Malaysian components can be said to occur by virtue of the gathering of the components and placing them in the cartons in Malaysia for retail sale. Accordingly, the country of origin of each component should be identified. See Headquarters Ruling Letter (HRL) 734560, dated July 20, 1992. In that ruling, which involved facts substantially similar to those in this case, Customs stated that the telephone components at issue may be excepted from individual country of origin marking pursuant to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR 134.32(d)), so long as the customs officials at the port of entry are satisfied that the ultimate purchaser, the retail buyer, receives the set in the carton which is correctly and conspicuously marked with country of origin. Customs approved the following two markings on the carton:
(1) Telephone base made in (name of country); Handset made in (name of
country); Transformer made in (name of country); Line Cord made in
(name of country), or similar language; or
(2) Telephone base made in (name of country); Handset made in (name of
country); other component parts made in (names of countries). [This
marking was approved provided that when grouping together the
countries of origin of the remaining component parts, the actual countries
of origin of the components must be identified; designating two or more
countries in the alternative (either/or) is not satisfactory.]
Alternatively, Customs stated that the importer could mark each component with its country of origin instead of adopting the marking approaches discussed above, and opt not to exercise the 19 CFR 134.32(d) exception for the telephone sets (also
discussed above). If this approach is used, Customs emphasized that, without exception, each and every component would have to be marked with country of origin. By marking each component, we indicated that it would remain clear to the consumer that only the marked component, and not telephone set as a whole, originates from the country designated on any one component.
In your submission, you cited HRL 734363, dated February 18, 1992, in which Customs addressed the issue of whether a country of origin marking for a modem that is produced in the United States, but contained a foreign-made transformer and telephone cable was properly marked if the origin of the two foreign articles (the transformer and telephone cable) was not indicated on the sealed container. The importer sought approval of a marking which stated "Transformer and telephone cable of foreign origin are individually marked with specific country of origin."
In that case, both the transformer and the telephone cable were individually marked with their country of origin. The ultimate purchaser was not able to see the country of origin markings prior to purchase because the items were sold in a sealed container which did not indicate the country of origin of these items. Customs decided that because the transformer and the telephone cable represent a very small part of the cost of the modem kits, they were of relatively minor significance, and there were difficulties associated with marking the containers with the country of origin of the cable and transformer because the country of origin of the transformer and cable would vary. Therefore, in accordance with the "common sense" approach to marking articulated in T.D. 91-7, Customs concluded that it was not necessary to mark the containers to indicate the country of origin of the transformer and the telephone cable, provided the container referenced the fact that these articles were of foreign origin and informed the consumer that the articles at issue were individually marked with their specific country of origin.
Customs would have no objection to the marking of the specific articles of foreign origin as was deemed acceptable in the modem case.
HOLDING:
Telephone components packed together as a set are not substantially transformed by virtue of being packaged as a unit for sale as a telephone set. Consequently, the countries of origin of each component must be identified as described above.
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