MAR-2-05 CO:R:C:V 734256 RSD

Bruce Shulman, Esq.
Stein, Shostak, Shostak & Ohara
1620 L Street, N.W.
Washington, D.C. 20036-5605

RE: Country of origin marking for golf clubs with foreign shafts, heads and domestic grips, simple assembly, combining; 19 CFR 134.35, 19 CFR 134.14; U.S. v. Gibson-Thomsen Co., Inc.

Dear Mr. Shulman:

This is in reference to your letter dated July 15, 1991, requesting a ruling on behalf of your client, Daiwa Corporation (Daiwa), concerning the country of origin marking requirements for golf clubs with imported components. On October 29, 1991, a meeting was held at Customs Headquarters with you, another attorney in your firm, Richard Shostak, and members of my staff to discuss this case. We have received your supplemental submission dated December 9, 1991, and a sample of the finished golf club and the unassembled components.

FACTS:

Daiwa manufactures golf clubs at its facility in Garden Grove, California. While some of the golf clubs are manufactured entirely from components of U.S. origin, most of the clubs contain one or more foreign components. Daiwa imports foreign golf club heads and shafts into the U.S. where they are manufactured into finished golf clubs by using U.S. labor and adding some U.S. made grips. The golf club heads will be manufactured in either Japan or Taiwan and the shafts will be made in Japan.

The manufacture of the golf clubs involves inserting the shafts into the golf club heads. The manufacturing process involves inspection of the components, some grinding, cutting and sanding to ensure that the components fit together properly. The shaft and head are then glued together. The third component of the golf club is the grips. The grips are placed on the clubs by a grip inserting machine. Double coated tape is applied to the top of the shaft and the grip is slid on the shaft. Care is taken to make sure all the components are aligned properly to make the finished club. We note that the sample components head, shaft, and grip as imported are basically finished and ready for the assembly into a finished golf club. The head has a hole on the top of it for the insertion of the shaft. You state that none of these components will ever be sold separately and that Daiwa always combines them to make the finished golf club.

You also note that all of the golf club components will be imported in separate shipments and will be combined after importation. It is also your contention that the manufacturing process and facts of this case are very similar to the facts involved in the case of U.S. v. Gibson-Thompson Co., Inc. 27 CCPA 267, C.A.D. 98 (1940), thereby entitling Daiwa to a marking exception.

ISSUE:

Does the combining of a foreign made golf club head and shaft with a U.S. made grip in the U.S. constitute a substantial transformation within the meaning of 19 CFR 134.35?

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 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. 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the 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. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed. (See 19 CFR 134.35). In such circumstances, the imported article is excepted from marking. The outermost containers of the imported articles shall be marked.

Customs ruled in ORR 824-70, (August 24, 1970), that a manufacturer who purchased imported golf club heads, either finished or unfinished, and assembled them with shafts and grips of U.S. origin into finished golf clubs, was the ultimate purchaser of the imported golf club heads. The ruling directed that if the Regional Commissioner of Customs was satisfied that the imported golf club heads were to be used by an original equipment manufacturer, the golf club head were excepted from individual marking. In HQ 728213, (July 3, 1985), Customs reiterated this position. In HQ 724901, (April 9, 1984), Customs advised that the ultimate purchaser of imported golf club grips to be used in the manufacture of golf clubs was the golf club manufacturer. Customs stated that golf club grips which are imported by golf club manufacturers in the U.S. are substantially transformed into a new and different article of commerce (i.e. golf clubs).

In HQ 733185, (April 11, 1990), Customs reiterated the position that golf club grips imported by golf club manufacturers or intended to be sold to golf club manufacturers would be excepted from individual marking. However, Customs also found that imported golf club grips that were to be used in the repair or replacement of grips on completed clubs that already had been purchased or received by the consumer must be individually marked. Customs reasoned that the mere fitting of a replacement grip onto a golf club shaft is a simple assembly not constituting a substantial transformation.

This case is different from our previous rulings on golf clubs in that foreign shafts are being combined with foreign heads and domestic grips to make the finished clubs. The combining of the heads, shafts, and grips is an assembly of nearly finished components.

In C.S.D. 85-25, (HQ 071827), (September 25, 1984), Customs held that an assembly will not constitute a substantial transformation unless the operation is "complex and meaningful." Customs criteria for whether an operation is "complex and meaningful" depends on the nature of the operation, including the number of components assembled, number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. This criteria for determining whether a substantial transformation occurs is applied on a case-by-case basis. In C.S.D. 80-111, (HQ 710564), (September 24, 1980), Customs considered whether the domestic manufacturing processes through which imported ceiling fan components become finished fans constituted a substantial transformation. In this ruling, it was stated that mere assembly of parts will not constitute a substantial transformation. We concluded that the assembly of the fan was not a substantial transformation because the processes were basically assembly line procedures which did not physically alter the components. Furthermore, we noted that manufacturing processes were mere combining processes that were not complex or required a great deal of skill.

Similarly, in this case, despite claims to the contrary, we believe that the making of the golf club is a simple assembly process of basically finished parts. We note that there is a hole on the top of the head so no drilling is necessary. The combining of the head and shaft is a relatively simple operation which does not take a great deal of time and skill and not a complex assembly. Basically, all that is needed to make the finished club is to insert the shaft into the head and to glue them together.

This case is distinguishable from our previous rulings on golf clubs in that both head and shaft (the two major components of a golf club) are foreign while in our prior rulings at least one of these parts was U.S. made. Although U.S. made grips are added to the golf clubs, the grips are much less significant components as compared with the heads and shafts and their insertion onto the golf clubs is fairly simple. In other words, we find because the most important components are foreign and the assembly process is very simple there is no substantial transformation of the shafts and heads.

We disagree with your assertion that the origin of the various components used in a U.S. assembly operation is not relevant in determining whether a substantial transformation results. Especially, in cases where the manufacturing operation is performed in the U.S., we have considered the origin of the components used a relevant factor and the addition of significant U.S. components as a significant indicia of a substantial transformation. For example in HQ 730069, (December 23, 1986), a substantial transformation of imported jack components was found based in large part on the fact that significant domestic components were added in the U.S. See also HQ 734259, (April 13, 1992), (imported baler housing substantially transformed when combined with essential U.S. components to make high density hydraulic balers) and HQ 709570, (November 24, 1978), (imported electric motor substantially transformed when combined in the U.S. with abrasive belt machine consisting of all domestic components; however, no substantial transformation if an essential component of the abrasive belt machine was foreign). Although Daiwa concedes that no substantial transformation would occur if the heads and shafts were imported together, it maintains that this is not the case here because they are imported separately and Customs must base its marking determination on merchandise in its imported condition. This position would permit importers to evade the country of origin marking law by allowing an exception from the marking if an article is to be assembled in the U.S. and the components are imported in different shipments, even in cases where the assembly was very simple. It would defeat the purpose of the marking law of informing the ultimate purchaser in the U.S. of the country of origin of merchandise of foreign origin. Principles which may be applicable to other Customs matters, such as classification, do not always apply to country of origin marking cases because they have different purposes. An imported article will remain an article of foreign origin unless it is substantially transformed in the U.S. To determine if an article is substantially transformed in the U.S. which would except the article from marking under 19 CFR 134.35, it is necessary both to look at an article as it is imported and the processed article. Pertinent to the issue is the various foreign components that are used in the manufacturing process; regardless of when these other components were imported. If the processing in the U.S. does not change the name, character, or use of an article, it will not be substantially transformed and the article must be marked to indicate its country of origin no matter how it was imported. In this case because the heads and shafts are not substantially transformed, they are not excepted from marking under 19 CFR 134.35, even if they are imported in different shipments.

Similarly, we find that your contention that the holding in Gibson-Thomsen v. United States, supra, requires a finding that the head and shafts are substantially transformed in U.S. is without merit. This case is clearly distinguishable from the Gibson-Thomsen case because in that case, which concerned the manufacturing of brushes in the U.S., the imported items in question, the brush handles were not finished and required further manufacturing. The processing of the foreign brush handles, involved drilling holes and embedding them with wire to hold the bristles which changed their character. No such work is done in this case. Rather, both major components, the heads and shafts are imported in a finished condition. They are completed articles which do not lose their separate identity when they are combined. The manufacture of the golf clubs results from a simple assembly of already finished components which does not result in a substantial transformation.

You indicate that the heads are made in Taiwan and Japan and that the shafts are all made in Japan. Because the heads and shafts are not substantially transformed in the U.S., the country of origin of each these components must appear. If the head and shaft are made in two different countries, each component must be separately marked to indicate its own country of origin with markings such as "Shaft Made in Japan" and "Head Made in Taiwan." If the head and the shaft are both made in Japan, marking of one of the components is sufficient.

HOLDING:

The combining of a foreign golf club head with a foreign golf club shaft and a U.S. made grip to make a finished golf club is not a substantial transformation. Thus the head and the shaft must be marked with their country of origin as indicated above.

Sincerely,

John Durant, Director
Commercial Rulings Division