MAR 2-05 CO:R:C:V 735470 AT
Mr. Joshua Zuber
Zuber & Company Inc.
1556 Commonwealth Ave.
Boston, Mass. 02135
RE: Country of origin marking requirements for imported
sword parts further processed in the U.S.; substantial
transformation; ultimate purchaser; 19 CFR 134.35; T.D. 74-
12(3); C.S.D. 91-17; C.S.D. 92-34
Dear Mr. Zuber:
This is in response to your letter dated December 23, 1993,
concerning the country of origin marking requirements for sword
parts imported from Taiwan that are to be further processed in
the U.S. into finished swords. Samples of the imported sword
parts and finished sword, and additional information detailing
the U.S. operations were submitted on July 26, 1994, and received
by this office on July 27, 1994. We regret the delay in
responding.
FACTS:
You state that Zuber intends to import unassembled sword
parts which are made in Taiwan, into the United States. Once
imported, Zuber further processes and assembles the parts into
finished swords. The U.S. processing consists of the following
operations:
1. Inspect Taiwan parts for manufacturing defects.
2. Pre-fit sword parts to blade and scabbard.
3. Buff and polish sword parts and blade.
4. Gold plating all scabbard mounts, hilt parts and
grip wire. All items must be cleaned, copper
plated, and nickel plated prior to gold plating.
5. Final assembly of all parts into the finished sword.
6. Final inspection for proper fit, correctness of
assembly and quality.
You also state that the cost of the imported sword parts as
compared to the total manufacturing cost of the finished sword is
approximately 47 percent.
You contend that the imported sword parts are substantially
transformed as a result of the U.S. processing and, thus, the
finished swords are of U.S. origin. You also inquire as to
whether it is acceptable to mark the finished swords "Assembled
in the USA From Parts Made in Taiwan".
ISSUE:
1. What are the country of origin marking requirements for
imported sword parts which are to be used in the production of
finished swords in the U.S. in the manner described above?
2. Whether it is acceptable to mark the finished swords
with the phrase "Assembled in the USA From Parts Made in Taiwan"?
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
evidentpurpose 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).
The country of origin marking requirements for the imported
sword parts that are to be further processed and assembled by
Zuber in the U.S. depends upon whether Zuber is the ultimate
purchaser of the imported parts.
The "ultimate purchaser" is defined generally as the last
person in the U.S. who will receive the article in the form in
which it was imported. See, 19 CFR 134.1(d). If an imported
article will be used in domestic manufacture, the manufacturer
may be the "ultimate purchaser" if he or she subjects the
imported article to a process which results in a substantial
transformation of the article. However, if the manufacturing
process is a minor one which leaves the identity of the imported
article intact, the consumer or user of the article, who obtains
the article after the processing, will be regarded as the
"ultimate purchaser." 19 CFR 134.1(d)(1) and (2).
For country of origin marking purposes, a substantial
transformation occurs when an article loses its identity and
becomes a new article 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 (1986). Under
this principle, the manufacturer or processor in the U.S. who
converts or combines the imported article into a different
article will be considered the "ultimate purchaser" of the
imported article, and the article shall be excepted from marking.
However, the outermost container of the imported article must be
marked (See, 19 CFR 134.35). Whether a substantial
transformation occurs is determined on a case-by-case basis.
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 Linen 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.'s 80-111, 89-110, 89-129, 90-51.
The issue involved in this case is whether the imported
sword parts which are processed as described above in the U.S. to
form a finished sword are substantially transformed into a new
article having a new name, character or use. You contend that the imported parts are substantially
transformed by Zuber as a result of the U.S. processing, making
Zuber the ultimate purchaser. Therefore, the imported parts
would be excepted from marking, provided the outermost container
which reaches the ultimate purchaser is marked with the country
of origin "China". We disagree.
In National Hand Tool Corp., v. United States, Slip Op. 92-
61 (April 27, 1992), aff'd, 989 F.2d 1201 (1993), the Court of
International Trade held that imported hand tool components which
were used to produce flex sockets, speeder handles and flex
handles were not substantially transformed when further processed
and assembled in the U.S. One of the factors considered by the
court in reaching its conclusion was that the name of the
imported components did not change as a result of the U.S.
processing and assembling operations. The court found that the
name of each article imported had the same name in the completed
tool. In support of this conclusion, the court cited the
following example:
"For example, when the lug or "G-head", component of a
flex handle imported from Taiwan (Ex. E) was shown,
plaintiff's witness called it a "G-head." When the
government counsel asked the name of the part where the
lug component is attached to a completed flex handle
(Ex. J.), the witness also called it a "G-head."
The court also considered whether the use of the imported
components changed as a result of the processing and assembling
operations performed in the U.S. In finding that the use of the
imported components did not change, the court stated that the use
of the imported articles was predetermined at the time of
importation due to the fact that each component was intended to
be incorporated in a particular finished mechanics' hand tool.
Although the court recognized the fact that only one
predetermined use of imported articles does not preclude the
finding of substantial transformation (See, Torrington Co., v.
United States, 764 F.2d. 1563 (1985)), it went on to say that the
determination of substantial transformation must be based on the
totality of the evidence.
Similarly, based on the totality of the evidence in this
case, we find that none of the imported sword parts of the
completed sword are substantially transformed when they are
further processed and assembled in the U.S., as the U.S.
operations do not change the name, character or use of the
imported parts. Examination of the imported components reveals that they are
all substantially finished articles. No further processing needs
to be performed to the individual parts in the U.S., except
plating, polishing, buffing and assembly which Customs has ruled
in similar circumstances to be minor finishing operations which
do not constitute a substantial transformation. See, T.D. 74-
12(3), November 1, 1973 (the heat treating, grinding, vibrating,
buffing, polishing, plating and assembly of imported socket
wrench components into a finished socket wrench were considered
to be minor finishing operations which did not constitute a
substantial transformation within the meaning of 19 CFR 134.35).
See also, C.S.D. 91-7, September 7, 1990 (imported jewelry
subjected to gold and silver electroplating in the U.S. after
importation does not constitute a substantial transformation
within the meaning of 19 CFR 134.35).
Like the hand tool components in National Hand Tool, the
imported components in this case (blade, handle, scabbard and
hilt) have the same name after assembly. Although each component
becomes an essential part of a completed sword, each component is
still referred to as a blade, handle, scabbard and hilt after
assembly. Thus, none of the components would change in name as a
result of the U.S. operations.
What is critical in ascertaining whether a substantial
transformation has occurred is whether, based on the totality of
the evidence, there has been a change in the character or use of
the imported article after the U.S. processing.
Likewise, as in National Hand Tool, the use of an imported
sword blade, scabbard, handle and hilt is predetermined at the
time of importation. Each component is intended to be utilized
in the manufacture of a finished sword. Clearly, these
components do not change in character as a result of the assembly
operation. The overall shape, form as well as size of the
finished sword is essentially the same as the imported
unassembled sword parts. None of these features of the finished
sword have changed as a result of the U.S. processing. After
being assembled, the imported parts retain their original shape
and form. There is no change in the microstructure or chemical
composition as a result of the U.S. processing. See, Ferrostaal
Metals Corp., v. United States, 11 CIT 470, 664 F.Supp. 535
(1987). In addition, there is no indication that the assembly
operation is complex as all the imported sword parts are fully
manufactured when imported so that simple assembly of the sword
is possible. Accordingly, the imported sword parts are not substantially
transformed when they are used to produce finished swords in the
U.S. Therefore, Zuber is not the ultimate purchaser of the
imported sword parts. Rather, the ultimate purchaser is the
person(s) who purchases the finished sword in the U.S., and the
imported parts must be conspicuously, legibly and permanently
marked to indicate the country of origin "Taiwan" to such
person(s).
In the alternative, the importer may seek approval of local
Customs officials for a repacking operation conducted under
Customs supervision as provided under 19 CFR 134.34. Section
134.34, Customs Regulations (19 CFR 134.34), provides that an
exception may be authorized in the discretion of the district
director under 19 CFR 134.32(d) for imported articles which are
to be repacked after release from Customs custody under the
following conditions: (1) the containers in which the articles
are repacked will indicate the origin of the articles to an
ultimate purchaser in the U.S.; and (2) the importer arranges for
supervision of the marking of the containers by Customs officers
at the importer's expense or secures such verification, as may be
necessary by certification and the submission of a sample or
otherwise, of the marking prior to the liquidation of the entry.
If approval is granted by the district director under 19 CFR
134.34, it would be acceptable to mark the finished article (or
its container) with a single, centrally-located, country of
origin marking that denotes the foreign casting as well as the
U.S. components.
We find that the proposed marking "Assembled in the USA From
Parts Made in Taiwan" is not an acceptable country of origin
marking for the finished swords in that the marking does not give
a clear indication of a single country of origin "Taiwan" of the
finished sword which is required under 19 U.S.C. 1304 and 19 CFR
Part 134. However, the phrase "Made in Taiwan, Assembled in the
U.S." would be an acceptable country of origin marking for the
finished swords since it clearly indicates that "Taiwan" is the
country of origin of the finished sword.
HOLDING:
Imported sword parts which are used by Zuber to manufacture
finished swords in the U.S. in the manner described above, are
not substantially transformed as a result of the U.S. operations.
Thus, Zuber is not the ultimate purchaser of the imported sword parts and the parts must be individually marked with their
country of origin "Taiwan", unless the district director at the
port of entry approves marking after importation pursuant to 19
CFR 134.34.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division