MAR-2-05 CO:R:C:V 732940 EAB
John E. Wall, President
Eastern Auto Parts Co., Inc.
P.O. Box 2925
Panama City, FL 32402
Re: Country of origin marking of motor vehicle parts and
components of motor vehicle parts
Dear Mr. Wall:
This is in further reply to your letter dated November 30,
1989, in which you request a ruling on the country of origin
marking requirements of certain automotive parts and components.
As we requested, you have provided us with further cost and
assembly information by letter dated April 6, 1990.
This ruling is prospective only, and the findings and
holdings herein are not applicable to any current or past
importation of articles that are the subject of this ruling and
to which you are or have been a party.
FACTS:
Your company imports for sale fully assembled water pumps
and brake calipers, and components of water pumps and brake
calipers, which your company then assembles and sells. In your
letter dated November 30, 1989, you state that the water pump
components which you assemble are a casting, impeller, gasket,
hub and bearing. From the drawing that you submitted at that
time, it appears that in the majority of instances, only the
water pump casting is imported; however, certain water pumps
require foreign castings, hubs and impellers. In your letter
dated April 6, 1990, it appears that only domestic impellers and
hubs are used; that in all cases, the mounting gasket is foreign,
and in all but one case, the casting is foreign. In your
November 30, 1989 letter, you state that the brake caliper
components which you import and assemble are a casting, piston,
boot, bleeder screw and o-rings; however, in your April 6, 1990
letter, in all cases you state that the only imported part is the
casting.
In view of the discrepancies between your two submissions,
we are basing our ruling on the information in your April 6, 1990
letter, relating to sources and costs of components to specific
catalogue items. Water pump #18-208 contains barely 5% foreign
components (mounting gasket; one component of six); water pump
#18-281 contains nearly 50% foreign components (mounting gasket
and casting; two components of seven); water pump #18-307 con-
tains almost 33% foreign components (mounting gasket and casting;
two components of eight); water pump #18-338, nearly 50% (mount-
ing gasket and casting; two components of seven); water pump #18-
360, slightly more than 50% (mounting gasket and casting; two
components of six); and water pump #18-365, nearly 50% (mounting
gasket and casting; two components of eight). All water pumps
are made with a U.S. impeller. Brake calipers ##17-421, 17-351
and 17-2103 contain nearly 50% foreign components (one of
fourteen components), and brake caliper #17-588 contains almost
67% foreign components (one of six components). The only
foreign component of each brake caliper is the casting.
The assembly of the water pump initially involves random
checking of a given lot for casting quality, machining quality
and finish. Parts, i.e. bearings, seals, hubs, impellers, back
plates, gaskets and tubing, are randomly checked by your quality
control personnel. Following this, tooling is designed and
built, then tested for accuracy. A housing is heat treated, then
sent forward for assembly. The assembly procedure involves the
combining of the bearing, housing, seal, hub, impeller,
backplate, gasket and tubes. Following assembly, a completed
water pump is subjected to a 100% vacuum test. A final quality
control check precedes delivery to your shipping department,
where each pump is boxed with "any miscellaneous parts required
by the related drawings and sent to the customer," your letter
dated April 6, 1990.
The assembly of the brake caliper initially involves random
checking of a given lot for casting quality, machining quality
and finish. A satisfactory casting is cleaned and treated with a
rust "preservative" [we assume you mean "preventative"]. The
assembly procedure involves the combining of the washer, seal,
piston, piston boot, actuator bolt, compression spring, o-rings,
bleeder screw, casting, nylon washer, screw boot and nut.
Following assembly, a completed brake caliper is subjected to a
pressure test. A final quality control check precedes delivery
to your shipping department, where each brake caliper is packed
and sent to the customer.
You state that you have notified all of your vendors of the
marking requirements, and that all of your purchase orders
include a marking requirement, which you alternatively list as:
a) die casting the article; b) indelible ink stamping upon the
article; c) marking the box containing the article; or, d)
placing a sticker on the plastic bag containing the article.
ISSUES:
What are the country of origin marking requirements of
imported water pumps and brake calipers; imported parts of water
pumps and brake calipers; and, water pumps and brake calipers
assembled by the importer, from imported and domestic parts?
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 (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 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. 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 the product, if such marking should
influence his will." United States v. Friedlaender & Co., 27 CCPA
297 (1940); National Juice Products Association v. United States,
10 CIT 48 (1986). Part 134, Customs Regulations (19 CFR Part
134), implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304.
With respect to the brake calipers and water pumps which are
imported fully assembled, you propose to mark either the product
itself by die casting or by stamping with indelible ink. With
respect to those pieces which are packed in a box, you propose to
mark the exterior of the box. Pieces packaged in a plastic bag
will be marked by means of a sticker affixed to the plastic bag.
Assuming the country of origin marking on the water pumps
and brake calipers which are imported fully assembled is legible
and conspicuous, marking by means of die stamping or indelible
ink is acceptable. In this regard, 19 CFR 134.41(a) states that,
as a general rule, marking requirements are best met by marking
worked into the article at the time of manufacture. For example,
it is suggested that the country of origin on metal articles be
die sunk, molded in or etched.
The imported articles may be excepted from individual
marking if the requirements of 19 U.S.C. 1304(a)(3)(D) and 19
CFR 134.32(d) are satisfied. Under these provisions, an article
may be excepted from marking if the marking of the container of
such article will reasonably indicate the origin of the article.
You have not furnished enough information to determine whether
the imported water pump and brake calipers are excepted from
individual marking under this provision. Customs has limited
this exception generally to two situations: where either the
importer is the ultimate purchaser of the imported article, and
the shipping container indicates the country of origin; or the
ultimate purchaser not the importer will in all foreseeable
circumstances receive the imported article in its original
unopened marked container. As provided in Customs Service
Decision 90-17, if Customs is not convinced that the ultimate
purchaser will receive the imported article in its original
unopened marked container in all foreseeable circumstances, no
exception from individual marking will be granted under 19 U.S.C.
1304(a)(3)(D) and 19 CFR 134.32(d). If an article is excepted,
marking of the box by printing is acceptable. If paper stickers
or pressure sensitive labels are used, 19 CFR 134.44(b) provides
that they must be affixed in a conspicuous place and so securely
that unless deliberately removed they will remain on the article,
or its container, while it is in storage or on display and until
it is delivered to the ultimate purchaser.
The country of origin marking requirements of water pumps
and brake calipers that are assembled by your company in the U.S.
from imported and domestic parts depend upon whether your
company is the ultimate purchaser.
As provided in 19 CFR 134.1(d), the ultimate purchaser is
generally the last person in the U.S. who will receive the
article in the form in which it was imported. As an example, 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 circumstances the imported article is excepted
from marking provided the outermost container is marked. See 19
CFR 134.35 and 19 CFR 134.32(d).
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 CCPA 267 (1940);
National Juice Products Association v. United States, 10 CIT 48;
Koru North America v. United States, 12 CIT ____, 701 F.Supp. 229
(CIT 1988).
The issue involved in this case is whether the imported
components which are combined with U.S. made components to form a
water pump or brake caliper are substantially transformed into a
new article having a new name, character or use. Two court cases
have considered the issue of whether imported parts combined in
the U.S. with domestic parts were substantially transformed for
country of origin marking purposes. In the first case, Gibson-
Thomsen, supra, the court held that imported wood brush block and
toothbrush handles which had bristles inserted into them in the
U.S. lost their identity as such and became new articles having a
new name, character and use. One of the factors considered by
the court in reaching its conclusion was that the bristles used
were "by far the most valuable element." Also, the court looked
at whether the imported article loses its identity as such when
combined with other articles. In that case, the court concluded
that wood handles were mere materials to be used in the manufac-
ture of toothbrushes and hairbrushes. The court was also con-
cerned that when an imported article was combined with a domes-
tic material, that the ultimate purchaser not be confused into
thinking that the domestic article was made in a foreign coun-
try. Therefore, the court concluded that a mere material to be
used in the manufacture of a new article having a new name,
character and use and which, became an integral part of the new
article would not be required to be marked.
The second case involved imported shoe uppers which were
combined with domestic soles in the U.S. The imported uppers
were held in Uniroyal, Inc. v. United States, 3 CIT 220 (1982),
to be the "essence of the completed shoe" and therefore, not
substantially transformed. The court described the imported
uppers as "complete shoes except for an outsole." The shoe had
already "obtained its ultimate shape, form and size." One
process, relasting, performed in the U.S., was characterized as
"convenient, not necessary." The processes performed in the U.S.
were significantly less costly and less time consuming than the
foreign manufacturing process. The cost of the upper was signi-
ficantly greater than the cost of the outsole. Further, the
manufacture of the upper required at least five highly skilled
operations. The court concluded that the attachment of the
outsole was a minor manufacturing or combining process which
leaves the identity of the upper intact."
There is also a ruling in which Customs set forth some
factors to be considered in determining whether imported goods
combined in the U.S. with domestic products were substantially
transformed for country of origin marking purposes. In HQ 732057
(April 16, 1990), Customs considered whether or not a circular
knife blade lost its separate identity when assembled into a
rotary cutting instrument. In reaching the conclusion that the
knife blade did not lose its separate identity when it was
combined with a domestic article, Customs considered six factors:
1) whether the article is completely finished;
2) the extent of the manufacturing process of combining the
article with its counterparts as compared with the manufac-
turing of the subject article;
3) whether the article is permanently attached to its
counterparts;
4) the overall importance of the article to the finished
product;
5) whether the article is functionally necessary to the
operation of the finished article, or whether it is an
accessory which retains its independent function; and,
6) whether the article remains visible after the combining.
These factors are not exclusive and there may be other
factors relevant to a particular case and no one factor is
determinative. See HQ 728801 (February 26, 1986).
Water Pump
The water pump assemblies which are the subject of this case
are comprised of 6-8 components including a casting, bearing,
impeller, hub, seal, mounting gasket and in some cases, a spacer,
tubes or plugs. The casting and the bearing are the two most
costly components; together they comprise approximately 60-80% of
the total materials costs. (Generally, the casting is somewhat
more costly than the bearing. In one case, the bearing is the
most expensive component). Based on the cost figures, the
impeller, hub and seal are also significant components. In one
case, the hub is more costly than the bearing. One of the water
pumps in question is comprised solely of U.S. components except
for an inexpensive Canadian gasket. The other models utilize a
casting made in Taiwan in addition to the Canadian gasket. All
of the remaining components are made in the U.S.
After careful consideration of the cases discussed above we
conclude that the U.S. processing substantially transforms the
imported castings and gaskets. Clearly, in the case of the
imported Canadian gasket which is combined with all U.S.
components to form a water pump a substantial transformation
occurs. At the time of importation, the imported components can
hardly be considered a water pump. Although those models which
also include a Taiwanese casting present a closer question, we
conclude that they too are substantially transformed. Although
the casting is generally the most costly component and is clearly
an essential component of a water pump, other costly components
are added which are also essential to the functioning of the
water pump. The imported casting cannot be characterized as a
water pump without the other essential components added in the
U.S. In particular, we note that the purpose of a pump is to
transport a fluid from one point to another; this cannot be done
without the impeller. The addition of the impeller along with
bearing, hub and seal is essential to create a functional article
of commerce. Unlike the imported shoe uppers in the Uniroyal
case which were the essence of the completed shoes, the imported
casting by itself is not the essence of the completed water pump;
nor does it impart the ultimate shape, form and size to the
completed product as the shoe upper did.
Applying the six factors enumerated in HQ 732057 supports
this conclusion. On the one hand, the casting is an important
component which remains visible after assembly and the assembly
process does not appear to be very complex. However, the casting
is only one of several important components, it is permanently
attached to the remaining components, and it is functionally
necessary to the operation of the finished article and is not
merely an accessory which retains its independent function. The
fact that several important U.S. components, one of which is
approximately the same cost as the casting, and another which
imparts the essential function of a water pump, are added in
order to produce the water pump persuades us that a substantial
transformation occurs.
Brake Caliper
The brake calipers are comprised of numerous components.
According to your submission, three of the models are comprised
of fourteen components; one is comprised of six. By far, the two
most costly components are the casting and the piston. The only
foreign component of each brake caliper is the casting. Although
the casting comprises between approximately 40-66% of the cost of
materials, the other major component, the U.S. piston, is added
in the U.S. (In all but one of the models, the piston is
slightly more costly than the casting.) While the imported
castings are essential components of the finished brake caliper,
the piston, which necessarily provides the stopping mechanism, is
equally important. Without the piston, the article cannot be
characterized as a brake caliper.
The reasoning applied to the water pump casting is
applicable here. We find that the cleansing and rust-proofing of
the imported casting coupled with the assembly of the casting
with the U.S. piston and numerous additional U.S. parts substan-
tially transforms the imported casting into an integral component
of a brake caliper.
HOLDING:
Imported water pumps and brake calipers may not be excepted
from individual country of origin marking pursuant to 19 CFR
134.32(d) unless Customs is convinced that the imported articles
will reach the ultimate purchaser in their original unopened
marked containers bearing a legible, permanent and indelible
country of origin marking.
Your company that uses the imported castings and gaskets in
the manufacture of water pumps, and imported castings which are
to be used in the manufacture of brake calipers as describe above
is the ultimate purchaser. Therefore, these articles are
excepted from individual country of origin marking pursuant to 19
CFR 134.35 and 19 CFR 134.32(d), provided: (1) the containers in
which they are imported are properly marked to indicate the
county of origin of the articles; (2) Customs officers at the
port of entry are convinced that the imported articles will reach
the ultimate purchaser in their original unopened marked
containers; and (3) the articles will be used only in the
manufacture of water pumps and brake calipers, respectively, as
described above and not otherwise sold. Statements to this
effect must be submitted for each entry for which this exception
applies.
Sincerely,
Marvin M. Amernick, Chief
Value, Special Programs and
Admissibility Branch
cc: Port Director of Customs
Panama City, FL
The Honorable Earl Hutto, Member of Congress
Associate Commissioner, Congressional and Public Affairs