MAR-2-05 RR:TC:SM 560433 DEC
Susan Kohn Ross, Esq.
Ross & Associates, P.C.
5777 West Century Blvd. - Suite 520
Los Angeles, California 90045-5659
RE: Country of origin marking of imported audio/video receivers;
substantial transformation; ultimate purchaser; complex
assembly; Uniroyal, Inc. v. United States; Texas
Instruments, Inc. v. United States; HRL 711967; HRL 732170;
HRL 734045
Dear Ms. Ross:
This is in response to your letter of April 23, 1997,
requesting a country of origin ruling on behalf of Sherwood
America regarding certain imported audio/video receivers.
FACTS:
The audio/video receivers at issue will be produced in the
United Kingdom using components from South Korea, Japan, the
United Kingdom, and the United States. The major subassemblies
used in the production process include the following: (1)
transformers, (2) frame left, (3) back chassis, (4) frame right,
(5) assembly power, (6) Assembly P.C.B. Main Board, (7) assembly
tuner board, (8) assembly speaker board, (9) assembly remote
volume board, (10) assembly input board, (11) assembly heat sink,
(12) chassis front, (13) assembly front panel, (14) bottom cover,
(15) front panel aluminum, (16) commander parts.
You have summarized the assembly procedure which will
include the following operations. First, imported components
will be inspected against the invoice and packing list. Next,
the imported components will be inspected in accordance with
industry standards which includes electronic and mechanical
testing, specification measurement and visual inspection. The
third step involves the production phase of the audio/video
receivers. The production line involves numerous skilled workers
all of
whom have had considerable training. The bill of material
submitted with your ruling request details numerous components
and hundreds of raw materials that are used to produce the
finished stereo receivers.
The finished stereo receivers will have a four channel
amplifier, full featured remote control system, and Dolby Pro
Logic Surround Sound. In addition, the stereo receivers will
have inputs/outputs for a telephone, cassette deck, compact disk
player, camcorder, and television. You state that the Sherwood
Newcastle receivers which are the subject of this ruling request
are hand crafted, hand assembled, and hand tuned. The receivers
are then imported into the U.S.
ISSUE:
Are the subassemblies and components substantially
transformed in the United Kingdom as a result of their being used
in the production of audio/video receivers?
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).
In making the determination in this case, we must rely upon
the judicial and administrative precedents that have considered
the issue of substantial transformation. As stated in your
submission, the major subassemblies, consisting of (1)
transformers, (2) frame left, (3) back chassis, (4) frame right,
(5) assembly power, (6) Assembly P.C.B. Main Board, (7) assembly
tuner board, (8) assembly speaker board, (9) assembly remote
volume board, (10) assembly input board, (11) assembly heat sink,
(12) chassis front, (13) assembly front panel, (14) bottom cover,
(15) front panel aluminum, (16) commander parts, will be imported
into Newcastle, United Kingdom, where the audio/video receivers
will be produced. Thus, the critical issue that must be
addressed in determining the country of origin of the audio/video
receivers is whether the foreign components are substantially
transformed as a result of the operations performed in the United
Kingdom. That is, does the name, character or use of the foreign
components change as a result of the processing and assembly
operations performed to manufacture the audio/video receivers in
the United Kingdom. Customs has previously considered the issue
of whether the processing and assembly of electronic components
into a finished article results in a substantial transformation
of the individual components.
In Headquarters Ruling Letter (HRL) 711967, dated March 17,
1980, Customs held that television sets which were assembled in
Mexico with printed circuit boards, power transformers, yokes and
tuners from Korea and picture tubes, cabinets, and additional
wiring from the U.S. were products of Mexico for country of
origin marking purposes. The U.S. and Korean parts were
substantially transformed by the processing performed in Mexico
and all the components lost their individual identities to become
integral parts of the new article.
In HRL 732170, dated January 5, 1990, Customs held that a
backless television cabinet containing a tuner, speaker and
circuit board imported in the U.S., was
substantially transformed there when assembled with a domestic
color picture tube, deflection yoke, electron beam bender and
degaussed coil, and a remote control into a finished television
receiver. Customs stated that the imported components lost their
individual identities as a result of the assembly operation in
that they became integral parts of a new article--a television.
In HRL 734045, dated October 8, 1991, Customs held that
foreign subassemblies and other components imported into Hong
Kong which were processed and assembled with other domestic
components to make laptop and notebook personal computers were
substantially transformed as a result of the Hong Kong
operations. Customs stated that the subassemblies and other
components when combined together to make the computer lose their
separate identity, acquire new attributes, and become part of a
new article of commerce--the personal computer. Customs also
stated that the Hong Kong processing results in an article that
has a new name, that of a personal computer, a new character that
is visibly different than any of the individual components, and a
new use in that it can process and display information.
Based on the circumstances of this case and consistent with
the Customs rulings cited above, we find that the components
imported into Newcastle that are used in the manufacture of the
audio/video receivers in the manner described above are
substantially transformed as a result of the operations
performed. The name, character, and use of the foreign
components and subassemblies change as a result of the processing
and assembly operations performed in the United Kingdom. Like
the foreign subassemblies in HRL 734045, the components and
subassemblies lose their separate identity and become an integral
part of the finished audio/video receiver as a result of the
manufacturing operations. The character of the foreign
components is changed as a result of the processing and assembly
operations performed, in that the finished article, an
audio/video receiver, is visibly different than any of the
individual foreign components, and it acquires a new use in that
it can receive and process audio and video signals.
HOLDING:
The components and subassemblies used in the production of
audio/video receivers as described above undergo a change in
name, character, and use. The articles lose their individual
identity and become a part of a new and different article, a
finished audio/video receiver. As a result, the components and
subassemblies are substantially transformed into a product of the
United Kingdom, and the imported receiver must be marked
accordingly.
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,
John Durant, Director
Tariff Classification Appeals
Division