MAR 2-05 CO:R:C:V 732018 pmh
Mr. James G. Meagley
Phillips, Lytle, Hitchcock, Blaine & Huber
3400 Marine Midland Center
Buffalo, N.Y. 14203
RE: Country of origin marking requirements for flexible magnetic
recording disks
Dear Mr. Meagley:
This is in response to your December 20, 1988 letter,
requesting a ruling on the country of origin marking requirements
for flexible magnetic recording disks. We regret the delay in
responding to your request.
FACTS:
Your client imports from Mexico various models of microdisk
and minidisk products. These products are used generally to
record and store digital computer information for access by
floppy disk drive. Each product consists of essentially two
parts: an unrecorded flexible magnetic recording disk (with or
without special coating) and a protective plastic shell
(microdisk) or protective vinyl jacket (minidisk). The magnetic
recording disks without special coating are manufactured by the
importer in the U.S. and abroad. The magnetic recording disks
with special coating are manufactured by the importer only in the
U.S. In Mexico, all the disks are assembled to either a hub
(microdisk) or hub ring (minidisk) and then assembled into either
a protective plastic shell (microdisk) or protective vinyl jacket
(minidisk). Each magnetic recording disk without special coating
also undergoes a "burnishing" process in Mexico. You state that
"burnishing" is essentially a minor polishing operation.
Finally, each microdisk and minidisk product undergoes a final
certification, inspection and packaging. The packaging consists
of either a ten-pack retail carton or a bulk container (200/1000
units).
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According to your letter, less than half of the products
imported from Mexico enter in bulk form and are sold to U.S.
computer equipment and software companies who record computer
programs onto each product before selling it. These U.S.
purchasers may resell a small percentage of the bulk product
without any such recording. The importer has estmated that such
sales represent a very small amount of its total bulk sales of
all microdisk and minidisk products. The remainder of the
products imported from Mexico are packed in lots of ten in shrink
wrapped retail cartons (with five or ten retail cartons being
placed into one bulk container for shipping purposes).
Each bulk container and each shrink wrapped ten-pack retail
carton is presently marked "Assembled in Mexico." In addition,
you state that the importer is aware of the requirements of
section 134.46, Customs Regulations (19 CFR 134.46), and has
marked the retail cartons in compliance with that regulation. In
that regard, we note that the three sample retail cartons
submitted for examination bear the names of locations other than
the country of origin. The locations of the importer's plants
(both domestic and abroad) appear on the minidisk retail carton
and the name and domestic address of the importer's parent
corporation appear on the microdisk retail carton. The country
of origin marking on each retail carton is on the same side and
within a couple of inches of the names of the other locations.
It is the importer's position that the minidisk and
microdisk products in this case are eligible for entry under
subheading 9802.00.80, Harmonized Tariff Schedule of the United
States (which replaced item 807.00, Tariff Schedules of the
United States). The importer asserts that in the condition as
currently imported into the U.S., each microdisk and minidisk
product contains at least one component of U.S. origin which is
eligible for entry under subheading 9802.00.80, HTSUS. Exhibits
attached to your letter support that at least one component in
each of the sample microdisk and minidisk products is of U.S.
origin. The importer makes a distinction between those products
that are entered under subheading 9802.00.80, HTSUS, and those
that are not. For the merchandise entered under subheading
9802.00.80, HTSUS, the importer suggests the following markings:
a) "U.S. Disk, Assembled in Mexico with U.S. and other
foreign components," or
b) "U.S. Disk, other U.S. and foreign components, Assembled
in Mexico."
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For the merchandise not entered under subheading 9802.00.80,
HTSUS, the importer suggests the following country of origin
markings:
a) "Disk Made in USA, Finished in Mexico;"
b) "Disk Made in USA, Assembled in Mexico;"
c) "U.S. Disk, Finished in Mexico;" or
d) "U.S. Disk, Assembled in Mexico."
ISSUES:
Whether the subject minidisk and microdisk products are
eligible for the partial duty exemption in subheading 9802.00.80,
HTSUS.
Whether the proposed country of origin markings for the
minidisk and microdisk products satisfy the applicable country of
origin marking requirements with regard to the bulk packaging and
the retail carton.
LAW AND ANALYSIS:
As you are aware, the HTSUS replaced the Tariff Schedules of
the United States (TSUS), on January 1, 1989. Item 807.00, TSUS,
was carried over into the HTSUS without change as subheading
9802.00.80. This provision applies to articles assembled abroad
in whole or in part of fabricated components, the product of the
U.S., with no operations performed thereon except the attachment
of the components to form the imported merchandise and operations
incidental thereto. An article classified under subheading
9802.00.80, HTSUS, is subject to duty upon the full appraised
value of the imported article, less the cost or value of such
products of the U.S.
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operations performed abroad may
consist of any method used to join or fit together solid
components such as force fitting, gluing, etc. In Mattel Inc. v.
the United States, C.A.D. 1248, 67 CCPA 74 (1980), the packaging
of domestic phonograph records in envelopes was held to be a
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qualified assembly under item 807.00, TSUS. Citing that
decision, Customs has held that the permanent joining of the
jacket with the disk and hub ring is an acceptable assembly
operation within the purview of the statute and 19 CFR 10.16(a).
(See HQ 544161, dated May 2, 1989.)
Based upon the facts provided, we find that the subject
minidisk and microdisk products undergo an acceptable assembly
operation (i.e., the permanent joining of the disk with the hub
or hub ring and the vinyl jacket or plastic shell). Since each
of these products contains at least one U.S. component, these
products are eligible for entry under subheading 9802.00.80,
HTSUS. (The component disks without special coating are not
eligible for duty exemption under subheading 9802.00.80, HTSUS
due to the fact that they undergo a burnishing process in Mexico.
Customs has held that such processing is not incidental to
assembly. See 19 CFR 10.16 and HQ 555238, issued March 8, 1989.)
With regard to the country of origin marking of these
products, section 304 of the Tariff Act of 1930, as amended (19
U.S.C. 1304), requires, subject to certain specified exceptions,
that all articles of foreign origin imported into the U.S. shall
be marked to indicate the country of origin to the ultimate
purchaser in the U.S. Although the country of origin of a
product is generally determined on the basis of where the last
substantial transformation occurs, there is an exception to the
general rule set forth in section 10.22, Customs Regulations (19
CFR 10.22), for articles which are entitled to an exemption from
duty under subheading 9802.00.80, HTSUS. 19 CFR 10.22 provides
that assembled articles entitled to the exemption are considered
products of the country of assembly for purposes of 19 U.S.C.
1304, whether or not the assembly operation constitutes a
substantial transformation. Since the minidisk and microdisk
products in this case are eligible for entry under subheading
9802.00.80, HTSUS, 19 CFR 10.22, applies and the country of
origin of the minidisk and microdisk products is Mexico, the
country of assembly. Furthermore, section 10.22 is triggered by
the "eligibility" of goods for entry under subheading 9802.00.80,
HTSUS, not whether or not the goods were actually entered under
that provision. Therefore, since all the subject goods are
eligible for entry, the same marking requirements apply for the
goods that are entered under subheading 9802.0080, HTSUS, as for
those goods that are not.
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In addition, it is noted that Customs has previously
determined that the words "Assembled in" constitute sufficient
country of origin marking for articles subject to 19 CFR 10.22.
(See HQ 731507, issued October 17, 1989.) Therefore, since the
minidisk and microdisk products are assembled in Mexico and are
eligible for duty exemption under subheading 9802.00.80, HTSUS,
the country of origin is Mexico and the language "Assembled in"
is acceptable. However, the words "Finished in" are not
acceptable as it is our opinion that they are not words of
similar meaning to the words "Made in" and "Product of."
With regard to the markings you have proposed for these
products, it is our opinion that the language "Assembled in
Mexico" should be foremost in the marking, since Mexico is the
country of origin. It is acceptable for you to reference the
origin of the components, but this should appear after the name
of the country of origin (e.g., "Assembled in Mexico from U.S.
and other foreign components"). Furthermore, we find that it is
misleading to reference only the U.S. origin of the disks.
Therefore, if you do reference the U.S. origin of the disks you
should also reference the foreign origin of the other components
(e.g., "Assembled in Mexico from U.S. Disk and other foreign
components").
Retail Cartons
You have stated that more than half of the products imported
from Mexico are packed in lots of ten in shrink wrapped retail
cartons intended for retail sale in the U.S. Marking these
cartons in lieu of marking the individual products is acceptable.
Pursuant to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d),
Customs Regulations (19 CFR 134.32(d)), an exception from
individual marking is applicable where the marking of a container
of such article will reasonably indicate the origin of the
article. In addition, we note that the sample retail cartons
submitted for our examination, bear the names of locations other
than the country of origin and that, therefore the requirements
of section 134.46, Customs Regulations (19 CFR 134.46), are
triggered. As you are aware, 19 CFR 134.46, requires that the
name of the country of origin preceded by "Made in," "Product
of," or other words of similar meaning shall appear legibly and
permanently, and in close proximity to such words and in at least
a comparable size. As noted above, Customs has determined that
the words "Assembled in," are similar in meaning to the words
"Made in" and "Product of." In addition, the country of origin
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appears on the same side and in close proximity to the names of
the other locations and in larger lettering. Consequently, it is
our opinion that the marking on the retail cartons is in
compliance with 19 CFR 134.46.
Bulk Containers
With regard to the country of origin marking on the bulk
containers, you have stated that the magnetic recording disks are
not individually marked and that the words "Assembled in Mexico"
appear only on the outermost container. As noted above, pursuant
to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs
Regulations (19 CFR 134.32(d)), an exception from individual
marking is applicable where the marking of a container of such
article will reasonably indicate the origin of the article. This
exception is normally applied in cases where the article is
imported in a properly marked container and Customs officials at
the port of entry are satisfied that the ultimate purchaser will
receive it in the original unopened marked container. Section
134.35, Customs Regulations (19 CFR 134.35), provides that if the
imported article will be used in manufacture, the manufacturer
may be the ultimate purchaser if he subjects the imported article
to a process which results in a substantial transformation of the
article. In this case we consider the ultimate purchaser to be
the U.S. computer software companies that transpose computer
programs onto the products. Such a process substantially
transforms the microdisk and minidisk products from a media
usable for recording purposes into a specific computer program.
Therefore, so long as the microdisk and minidisk products are
imported in properly marked containers and Customs officials at
the port of entry are satisfied that the U.S. computer software
company will receive them in the original unopened marked
containers, the products are excepted from individual marking and
it is sufficient to mark the outermost bulk container only. See
19 CFR 134.32(d).
You have further stated that of the total bulk product sold
to U.S. software companies, a very small amount is resold with no
recorded computer programming. Although a marking exemption
under 19 U.S.C. 1304(a)(3)(D) may be allowed, we remind you that
Customs has generally limited this exception to two types of
situations: (1) where the importer is the ultimate purchaser
(either because the importer substantially transforms the article
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into a product of the U.S. or because the importer uses the
article himself and the shipping container indicates the country
of origin; and (2) where the ultimate purchaser (other than the
importer) will in all foreseeable circumstances receive the
imported article in its original unopened marked container. In
this case, you have not provided any information concerning how
the products that are sold without computer programming by the
U.S. software companies, are packaged and sold. Therefore,
Customs cannot be sure that the ultimate purchaser, in all
foreseeable circumstances, will receive the disks in properly
marked containers. Consequently, because it is impossible to
know which product of the total bulk import will be resold by the
computer software company without programming, technically the
bulk import does not qualify for this exemption. However,
because the amount being resold without programming is very
small, Customs can allow the exemption provided the importer
submits written certification to Customs at the port of entry,
that the products to be resold without programming will be
repacked in containers properly marked to indicate the country of
origin, and the importer notifies Customs if the amount of bulk
imports sold by computer software companies without programming
exceeds the amount indicated in your certification. If the
importer is unable to do this, the total bulk product cannot
receive this exemption. Therefore, we suggest you contact the
Customs office at the port of entry and submit for their
examination and approval written certification regarding the
marked containers in which those products will be resold.
HOLDING:
On the basis of the information submitted, it is our opinion
that the minidisk and microdisk products are eligible for entry
under subheading 9802.00.80, HTSUS. Accordingly, 19 CFR 10.22
applies and Mexico, the country of assembly, is the country of
origin for marking purposes. The marking "Assembled in Mexico"
as exhibited on the retail cartons is in compliance with 19
U.S.C. 1304 and 19 CFR 134.46. If the U.S. origin of the disk is
referenced, then the foreign origin of the other components
should be referenced, as well. For the bulk product being
imported for sale to U.S. software companies, it is acceptable to
mark the outermost container only, in those instances where the
product will be substantially transformed by the transposition of
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specific programs onto the microdisk and minidisk products. For
that percentage of the bulk product that is not substantially
transformed and is repackaged and resold by the U.S. software
companies, written certification must be provided to Customs, as
described above, regarding the repackaging of this product.
Sincerely,
John Durant, Director
Commercial Rulings Division