MAR-2-05 CO:R:C:V 734966 KR
Mr. Frederick L. Ikenson
1621 New Hampshire Avenue, NW
Washington, D.C. 20009
RE: Country of origin marking of computer monitors; substantial
transformation; 19 CFR 134.35.
Dear Mr. Ikenson:
This is in response to your request dated February 3, 1993,
and supplemented by letter dated May 3, 1993, for a country of
origin marking ruling on behalf of your client, Zenith Data
Systems Corporation ("ZDS"), regarding video display terminals
("VDTs"), also called computer monitors. These VDTs are
assembled in the U.S. on behalf of ZDS from parts imported from
various countries, and it is your position that the assembled VDT
is excepted from country of origin marking.
A related Ruling, HQ 734977 (April 2, 1993), was issued to
ZDS as a final determination under Subpart B of Part 177, Customs
Regulations (19 CFR 177.21 et seq.). That final determination
concerned the country of origin for purposes of the Trade
Agreements Act, 19 U.S.C. 2514 et seq., of certain computer
monitors which were being offered to the U.S. Air Force in a
procurement designated under Air Force Solicitation No. F01620-
91-A212, also referred to as "Desktop IV". As defined at 19
U.S.C. 2518(4)(B), an article which consists in whole or in part
of materials from another (non-designated) country or
instrumentality must have been substantially transformed in a
designated country or instrumentality into a new and different
article of commerce with a name, character, or use distinct from
that of the article or articles from which it was so transformed
in order to be considered a product of the latter country or
instrumentality. The monitors in question were assembled in a
"designated" country partly from materials produced in non-
designated countries, and Customs determined that the monitors
were substantially transformed in the designated country.
In the matter presently before us, the assembly process is
the same as that designated as "Scenario I" in HQ 734977.
Although there were three alternative assembly scenarios in the
original ruling request, you are now requesting that we consider
only Scenario I. The parts for assembly are imported from
various countries. You believe that the assembly in the U.S. of
the VDTs constitutes a substantial transformation of the foreign
components.
FACTS:
The major components of the VDT are:
1. The imported integral tube component ("ITC"), which
consists of a cathode ray tube ("CRT") with a mounted yoke
attached;
2. The imported degaussing ring or shield which is mounted
around the perimeter of the ITC face plate;
3. The imported plastic bezel or cabinet front piece to
which the ITC and degaussing ring are attached;
4. The imported main printed circuit board ("PCB") or main
chassis board, which is mounted on guide rails attached to the
ITC assembly;
5. The imported video or CRT board which is mounted to the
pin connectors of the cathode ray tube;
6. The imported plastic cabinet or case back which encloses
all parts of the VDT and is mounted to the bezel; and
7. Various imported and U.S. cables, wires, connectors,
wire ties, and miscellaneous hardware (fasteners), used to create
all required electrical connections between the components and to
physically integrate the components.
The U.S. Assembly Process
Prior to importation into the U.S., the foreign ITC is
shipped to a third country where the degaussing ring and the
plastic bezel are attached. The cabinet back is temporarily
attached to the bezel for convenience of transport, and then
shipped to the U.S. in packing to be reused when shipping to ZDS
and its customers. The main chassis board and video board are
connected to electronic components in a foreign country and,
prior to shipment to the U.S., certain wires are attached to each
to connect them together. The main chassis board and video board
are packaged in plastic and shipped in bulk to the U.S.
independently of the remaining parts of the VDT. The main
chassis board and video board are connected to the VDT in the
U.S.
You state that when the bezels and backs are attached for
transport they are not "mated" to the attached pieces. The
pieces are attached only temporarily for shipping purposes for
protection of the parts. After arrival the parts are separated
into inventory and are not predestined to be rejoined. From the
inventoried components of the ITC, the main PCB, the video PCB
and the cabinet components are integrated to assemble the VDT.
You state that only after importation into the U.S. are the major
components of the VDTs integrated into a single unit. The VDTs
are tested, aligned and inspected in the U.S.
The VDT final assembly, testing, aligning, and inspecting
involves [ ] separate stations involving [ ] multistage
operations of [ ] distinct activities. You state that the
different steps which take place after importation into the U.S.
require a great deal of skill, time and precision to perform,
including the use of highly specialized tools. In Scenario I,
the production process requires approximately [ ] minutes per
unit. Specialized training and skills are required. You state
that over 50 percent of the active cycle time (other than burn-
in and aging) are devoted to highly skilled electrical and
electronic testing adjustment and alignment procedures using
sophisticated and sensitive supporting equipment (often requiring
frequent recalibration). These operations integrate the parts
into a new article and impart to the article its functional
characteristics. You state that while the assembly imparts the
final form to the VDT, it is the complex and highly skilled
adjustment and alignment procedures which provide the VDT with
its requisite character and render it suitable for its intended
use.
ISSUE:
Are the imported VDT components subject to marking as
articles of foreign origin, or are the VDT components excepted
from such marking by reason of processing in the U.S. which
converts them into finished VDTs?
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 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 Court of
International Trade stated in Koru North America v. United
States, 701 F. Supp. 229, 12 CIT 1120 (CIT 1988), that "in
ascertaining what constitutes the country of origin under the
marking statute, a court must look at the sense in which the term
is used in the statute, giving reference to the purpose of the
particular legislation involved." The purpose of the marking
statute is outlined in United States v. Friedlaender & Co., 27
CCPA 297 at 302, C.A.D. 104 (1940), where the court stated that:
"Congress intended 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."
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. Section 134.35, Customs Regulations (19 CFR
134.35), provides that the manufacturer or processor in the U.S.
who converts or combines the imported article into a different
article having a new name, character or use will be considered
the ultimate purchaser of the imported article within the
contemplation of 19 U.S.C. 1304 and the article shall be
excepted from marking. The outermost containers of the imported
articles shall be marked, but the new article resulting from the
U.S. processing or manufacturing is excepted from country of
origin marking.
Section 134.1(b) defines "country of origin" as:
"the country of manufacture, production, or growth of
any article of foreign origin entering the United
States. 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."
In determining whether the combining of parts or materials
constitutes a substantial transformation, the issue is the extent
of operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linens
v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff'd, 2
Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which
are minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation. See C.S.D.
80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-
51, and C.S.D. 90-97.
In a prior case involving Zenith Electronics Corporation, HQ
555660 (September 18, 1990), Customs determined that, under a
similar set of assembly operations, individual parts of computer
monitors were substantially transformed for Generalized System of
Preferences ("GSP") purposes.
The final assembly procedures involved attaching the lammed
and yammed CRT/ITC assembly to the bezel or escutcheon of the
monitor by means of a mounting band and brackets, installing the
LED assembly and degaussing coil, and testing this advanced
assembly. The escutcheon assembly was joined to the frame
assembly and the unit underwent final testing. After the cabinet
back was installed and the tilt/swivel base was attached, the
computer monitor was ready for shipment into the U.S.
In HQ 734097 (November 25, 1991), Customs ruled that
imported terminal video shells (computer terminal housings that
contained video electronics, but no logic boards) were
substantially transformed in the U.S. when they were processed by
the installation of certain key components, such as the terminal
logic boards, to make them into dumb terminals for certain
computer systems. The addition of the logic boards was
determined to create a new article. Computer terminal housings
containing video electronics but no logic boards were
manufactured in Korea. In the U.S. four components, the terminal
logic board, key switches, T-connector cables, and custom
keyboards were installed into the empty shells and the video unit
was aligned to receive new communication protocol transmissions.
Even though no cost or skill data was submitted, Customs held
that this installation amounted to a substantial transformation
in the U.S. into a new article - a functional computer terminal.
Of clear import in the decision and the cases cited therein, was
that the assembly included essential components not attached
prior to importation. See HRL 732170 infra. See HQ 734213
(February 20, 1992)(finding a substantial transformation when a
computer monitor was changed into a touchscreen monitor because
the touchscreen monitor had a different use than the plain
computer monitor). See also HQ 734045 (October 8, 1991) (finding
that the combining of sub-assemblies and other components of lap-
top and notebook personal computers was a substantial
transformation).
In other country of origin rulings addressing the
substantial transformation of computer monitors and television
chassis, Customs has treated televisions and computer monitors as
comparable articles. See HQ 734097 (November 25, 1991). Thus we
are to treat rulings regarding televisions as especially relevant
to our consideration of these monitors. In HQ 711967 (March 17,
1980) Customs held that television sets which were assembled in
Mexico with printed circuit boards, power transformers, yokes and
tuners from Mexico and picture tubes, cabinets, and additional
wiring from the U.S. must be marked with the country of origin as
Mexico because the U.S. 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 HQ 732170 (January 5, 1990), Customs ruled on the country
of origin of a backless television cabinet containing a tuner,
speaker and circuit board were imported into the U.S. where they
were combined with a color picture tube, deflection yoke,
electron beam bender and degausser coil, and a remote control
unit assembled into the chassis. The U.S. technicians placed
wire ties and attached the cabinet back, tested, aligned and
packaged the televisions. Customs held the domestic operations
substantially transformed the imported chassis and components.
Zenith's assembly of VDTs in the U.S. pursuant to Scenario I
is detailed and requires many stations and steps. On the basis
of the previous rulings on television receivers and computer
monitors, cited supra, we find that the VDTs are substantially
transformed by the assembly that occurs in the U.S.
HOLDING:
The video display terminals imported into the U.S. pursuant
to Scenario I and assembled, adjusted and tested as discussed
above, are substantially transformed in the U.S. Such video
display terminals are excepted from country of origin marking
pursuant to 19 CFR 134.35.
Sincerely,
John Durant, Director
Commercial Rulings Division