MAR 2-05 CO:R:C:V 732201 pmh
Ms. Laurie M. Baird
Johnson Electric Norh America, Inc.
1300 Post Road
Fairfield, CT 06430
RE: Country of origin marking requirements for imported motors to
be used in the manufacture of various electrical articles
Dear Ms. Baird:
This is in response to your letter of March 1, 1989,
requesting a ruling on the country of origin marking requirements
for imported electric motors which will be sold to various U.S.
manufacturers to be used in the manufacture of electrical
articles such as household appliances, pumps, and powered hand
tools.
FACTS:
According to your letter, Johnson Electric North America,
Inc. (JENA) supplies finished electric motors to customers on a
made-to-order basis. JENA forwards purchase orders for the
motors to Johnson Electric Industrial Manufactory, Limited (JE
Hong Kong), a related corporation in Hong Kong. JE Hong Kong
purchases some finished components and raw materials from various
third country venders. JE Hong Kong fabricates the raw materials
into additional finished components necessary to make a motor and
subsequently ships all the components (purchased and fabricated)
to its facility in the Peoples Republic of China (PRC). In the
PRC the components are constructed into the three major sub-
assemblies of an electric motor: the end cap, the housing and the
armature. The sub-assembly operations generally consist of
mounting bushings/bearings, magnets and retainer springs onto the
motor housings; mounting bushings/bearings and terminals onto the
endcaps; and mounting commutators, motor laminations and winding
magnet wire onto motor shafts to form armatures. The sub-
assemblies are then assembled into finished motors and
subsequently shipped back to JE Hong Kong for a final quality
control audit, packaging and exportation. Finally, the packaged
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motors are shipped from JE Hong Kong directly to the importer's
U.S. customers, i.e., manufacturers of electrical articles.
In a September 11, 1989 letter, you stated that the sub-
assembly and final assembly operations performed in the PRC
represent 80-90% of the total labor necessary to manufacture a
motor. In addition, you stated that your facilities in the PRC
are duplicated in Hong Kong and that occasionally the sub-
assembly and final assembly operations are performed in Hong
Kong. You have requested a determination as to the country of
origin of the imported motors. In addition, you request that the
individual motors be excepted from the country of origin marking
requirements on the ground that the ultimate purchaser in the
U.S. is the manufacturer and must necessarily know the country of
origin of the motors by reason of the circumstances of the
importation, i.e., because the motors are made-to-order.
In a telephone call with a member of my staff, you confirmed
that the electric motors are imported in bulk cartons of
approximately 100 motors each, that each carton will be marked
with the country of origin and that the motors will remain in the
cartons until they reach your customer, the U.S. manufacturer.
Issues:
What is the country of origin, for marking purposes, of
motors that are sub-assembled and assembled in the PRC from
components fabricated in Hong Kong and elsewhere.
Whether imported motors, made-to-order for U.S.
manufacturers, who use the motors in the manufacture of
electrical articles, may be excepted from the country of origin
marking requirements.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides, in general, that all articles of foreign origin
imported into the U.S., or their containers, shall be legibly and
conspicuously marked to indicate the country of origin to an
ultimate purchaser in the U.S. Part 134, Customs Regulations (19
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CFR Part 134), implements the country of origin marking
requirements and exceptions of 19 U.S.C. 1304. Section 134.1,
Customs Regulations (19 CFR 134.1) 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 this part.
With regard to the first issue, we are of the opinion that
the motors are products of the PRC. As noted in your September
11, 1989 letter, it is in the PRC that 80-90% of the labor is
performed and where the motors become finished products. The
necessary components for each motor are merely amassed in Hong
Kong, but it is in the PRC where these components are so
assembled that they attain the commercial identity of a motor.
Likewise, in those instances where the sub-assembly and final
assembly operations are performed in Hong Kong, Hong Kong would
be the country of origin of the finished motors.
With regard to the second issue, we find that the imported
motors are excepted from individual country of origin marking.
The country of origin marking requirements have been effected for
the benefit of the ultimate purchaser in the U.S. "Ultimate
purchaser" is defined in section 134.1, Customs Regulations (19
CFR 134.1), as "the last person in the U.S. who will receive the
article in the form in which it was imported." If an 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 such case, the imported article is excepted from
individual marking pursuant to section 134.35, Customs
Regulations (19 CFR 134.35), and only the outermost container is
required to be marked.
In defining what constitutes a substantial transformation,
Customs has held that a new and different article of commerce
having a new name, character and use must emerge from the
processing. See United States v. Gibson-Thomsen Co. Inc., 27
C.C.P.A. 267, C.A.D. 98 (1940). In ruling 709570, issued
November 24, 1978, Customs addressed a situation similar to the
one at hand. In that case, Customs held that a domestic
manufacturing process which included enclosing an imported
electric motor in U.S.-made metal housing and adding the other
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essential components to form an abrasive belt machine,
constituted a substantial transformation. Customs reasoned that
the housing was an essential component of the belt machine and
that its addition to the electric motor, along with the other
lesser components, substantially transformed all the separate
components into a single new article of commerce. Customs noted
that the imported motors were excepted from individual marking
based on the fact that the metal housing, which gave the final
product its commercial identity, and the other components were
products of the U.S.
Likewise, in this case, the imported motors will be used in
the manufacture of various elecrical articles, such as household
appliances, pumps and powered tools. As in our previous ruling,
we find that the imported motors will lose their commercial
identity through such processing and that new articles of
commerce will result with a different name, character and use.
Therefore, provided the principal and distinctive component of
these new articles (i.e., in most cases, the housing) are
products of the U.S., the imported motors are substantially
transformed within the meaning of the Gibson-Thomsen case and
become products of the U.S. Accordingly, we find that the U.S.
manufacturer is the ultimate purchaser and the motors may be
excepted from individual marking pursuant to 19 CFR 134.35. The
outermost container in which the motors are imported must be
properly marked with the country of origin and Customs officials
at the port of entry must be satisfied that the motors will
remain in such containers until they reach the U.S. manufacturer.
In addition, we note your assertion that the imported motors
should be excepted from individual marking pursuant to section
134.32(h), Customs Regulations (134.32(h)), i.e., that the U.S.
manufacturers must necessarily know the country of origin of the
motors by reason of the circumstances of their importation.
However, we do not find that this has been sufficiently evidenced
by the submitted information.
HOLDING:
For purposes of the country of origin marking requirements,
the motors described in this case are products the country in
which they undergo the sub-assembly and final assembly process,
and should be marked accordingly.
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However, as the motors are subjected to a manufacturing process
in the U.S. which substantially transforms them into new and
different articles of commerce, we find that the U.S.
manufacturer is the ultimate purchaser and that the motors may be
excepted from individual marking. Pursuant to 19 CFR 134.35, the
outermost containers in which the motors are imported must be
properly marked with the country of origin.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch