MAR-05 RR:CR:SM 561412 BLS
John M. Peterson, Esq.
Neville, Peterson & Williams
80 Broad Street
New York, New York 10004
RE: Country of origin marking of refurbished photoreceptor cartridges; reconsideration of HRL 560768; 19 CFR 102.11(d)(3)
Dear Mr. Peterson:
This is in reference to your letter dated June 9, 1999, on behalf of Xerox Corporation ("Xerox"), requesting that Customs reconsider its decision in Headquarters Ruling Letter (HRL) 560768 dated May 26, 1998, concerning the country of origin marking requirements of certain photoreceptor cartridges imported from Canada.
FACTS:
The imported cartridges, which are used with automatic data processing (ADP) laser printers, will be produced in Canada primarily from new parts of Canadian and U.S. origin. However, some of the components used in the manufacture of the cartridges are salvaged from spent toner cartridges.
The general process by which parts are salvaged from spent toner cartridges is summarized as follows:
The Canadian manufacturer, MKG Cartridges, Inc., purchases spent toner cartridges from a variety of sources, primarily from brokers who deal in such merchandise. These cartridges were originally manufactured by Hewlett-Packard Company, at various locations throughout the world. The cartridges, when received at the MKG facility, are not in packages, and they do not indicate any reliable notations of their origin. Some of the spent cartridges received have origin notations on certain components, but MKG is unable to determine whether these reference the origin of the entire cartridge (i.e., the country where the cartridge is assembled), or simply the origin of a component on which the marking appears.
In their condition as received at the MKG facility, the spent cartridges are incapable of functioning for their intended use. MKG completely disassembles the spent
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cartridges, in an effort to salvage any re-usable components. The photoreceptor drum is discarded in nearly 100% of all cases. Other key components which contribute to the functionality of photoreceptor cartridges such as magnetic rollers, corona wires and cleaner/wiper blades, are discarded in all, or nearly all cases. It is stated that during the tear-down process in Canada, no effort is made to preserve the essential identity of the exported spent cartridges. Rather, any salvageable parts removed from the spent cartridges are brought to a parts inventory, where they are commingled with new parts of the same type.
After the salvage operation has been performed, MKG then begins assembling the imported cartridges in Canada from new and used components. The assembly operations in Canada include not only manufacturing assembly operations, but also quality-control testing, particularly of any parts which have been salvaged from spent cartridges. The specific disassembly and assembly operations are described as follows:
A) Disassembly
1. removal of covers,
2. removal of corona wires,
3. removal of springs,
4. release of springs,
5. removal of plastic pins,
6. separation of developer units from waste hoppers,
7. removal of metal axle from gear housing,
8. removal of photoreceptor drum,
9. removal of metal wiper blade,
10. vacuum cleaning of waste hopper to remove toner chemicals therefrom,
11. inspection of toner auger (agitator) paddle and white gears,
12. cleaning of wiper blade,
13. inspection of wiper blade,
14. if wiper blade is suitable for reuse, dipping wiper blade in cleaning solution,
15. cleaning of wiper blade removed from solution,
16. inspection of wiper blade,
17. reinstallation of blade on clean waste hopper,
18. inspection of developer housing,
19. vacuum removal of toner chemicals from housing,
20. removal and inspection of magnetic roller, and
21. adjustment of tolerances and sealing of developer unit.
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B) Assembly
1. cleaning of mag roller (mag rollers will be replaced in virtually all cases),
2. filling of toner hopper with a new supply of electrostatic toner chemical,
3. checking for leakage in refilled cartridges,
4. affixing traceability label on cartridge,
5. cleaning of corona wire in ultrasonic bath,
6. drying of corona wire and installation in a clean container,
7. installation of new photoreceptor drum (100 percent replacement part),
8. installation of metal axle into cartridge housing,
9. installation of corona wire (many of which will be new replacement parts),
10. application of toner chemical on magnetic roller,
11. assembly of finished developer unit to waste hopper,
12. reinstallation of cartridge cover on housing,
13. testing of cartridge and completion of ?traceability card, and
14. sealing and labeling of refurbished cartridges.
After the cartridges have been assembled, they are tested and packed for shipment to the United States.
Xerox states that about 15% of the cost of the imported cartridges is represented by parts salvaged from old cartridges. It is further stated that the salvaged parts consist primarily of plastic housing components, which contain no moving components, which do not contribute to the mechanical or electrostatic functioning of the cartridges, and which have relatively low value.
In HRL 560768, Customs held that the country of origin of the refurbished cartridges is the country of origin of the used cartridges, the country of origin of the single material that imparts the essential character to the good. We also found that since direct physical identification of the origin of the refurbished cartridges may not be practical, the country of origin of these cartridges may be determined on the basis of an inventory management method provided under the appendix to 19 CFR Part 181.
In requesting reconsideration, Xerox questions Customs legal analysis and also clarifies the facts upon which Customs determination was based.
ISSUE:
What are the marking requirements for the imported cartridges?
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LAW AND ANALYSIS:
The marking statute, section 304, 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 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. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
Section 134.1(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 this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. (Emphasis added.)
Section 134.1(j), Customs Regulations (19 CFR 134.1(j)), provides that the NAFTA Marking Rules are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. A ?good of a NAFTA country is defined in 19 CFR 134.1(g) as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA Marking Rules set out at 19 CFR Part 102.
Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. Paragraph (a) of this section states that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable
requirements of these rules are satisfied.
As the imported good in this case is neither wholly obtained or produced nor
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produced exclusively from domestic (Canadian) materials, we must first apply 19 CFR 102.11(a)(3). The finished cartridges are classifiable under subheading 8473.30.30, HTSUS. The applicable change in tariff classification for heading 8473 is set out in section 102.20(o), Section XVI, Chapters 84 through 85, which provides:
8473 ... A change to heading 8473 from any other heading, except from heading 8414, 8501, 8504, 8534, 8541, or 8542 when resulting from a simple assembly.
Xerox claims that as several components of non-Canadian origin which are assembled into the imported cartridges are classifiable under heading 8473 (i.e.,
machine dedicated plastic cartridge housings), the requisite tariff shift will not be
satisfied. In its analysis, Xerox considers the foreign components salvaged from the disassembled cartridge (e.g., plastic housing cartridges) as the “foreign material” for purposes of 19 CFR 102.11(a)(3).
HRL 560768
In HRL 560768, we concurred with Xerox that the requisite tariff shift did not occur, but differed as to what constitutes the “foreign material” for purposes of 19 CFR 102.11(a)(3). We stated the following:
However, the material that is imported into Canada (i.e., the foreign material) is not component parts of cartridges, but complete (albeit used) cartridges. Therefore, the question presented is whether this foreign material undergoes a change in tariff classification or other requirement set out in section 102.20 for the good. In this regard, a comparison between the used cartridges imported into Canada and the refurbished cartridges exported from Canada must be made. Based upon this comparison, it is clear that the requisite tariff shift will not occur.
We also cited 19 CFR 102.17, which provides that:
A foreign material shall not be considered to have undergone the applicable change in tariff classification set out in section 102.20 ... or to have met any other applicable requirements of those sections merely by reason of ... (b) dismantling or disassembly.
As we determined that 19 CFR 102.11(a)(3) was not applicable for determining the country of origin of the imported cartridges, we next applied 19 CFR 102.11(b) of the
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hierarchial rules. This section provides as follows:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:
(1) Is the country or countries of origin of the single material that imparts the essential character of the good, or
If the material that imparts the essential character to the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may
be determined on the basis of an inventory management method provided under the appendix to part 181 of this chapter.
When determining the essential character of a good under 19 CFR 102.11, 19 CFR
102.18(b)(1) provides that only domestic and foreign materials that are classified in a
tariff provision from which a change is not allowed under the 102.20 specific rule or other requirements applicable to the good shall be taken into consideration. Section
102.18(b)(1)(iii), Customs Regulations (19 CFR 102.18(b)(1)(iii)), provides that if there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed, then that material will represent the single material that imparts the essential character to the good under 19 CFR 102.11.
In HRL 560768, Xerox claimed that it was impossible to find that any single component of the imported toner cartridges imparted the essential character, and that each cartridge contained several components of roughly coequal importance in the function of the article. The components of equal importance were stated to be the photoreceptor, toner, developing unit, and housing. In response, we stated as follows:
However, as stated earlier, the foreign material under the facts of this case is the imported complete cartridges, not the components of such cartridges, extracted as a result of the disassembly operation. Thus, there is only one material, the imported cartridge, that does not undergo any change in tariff classification as a result of the tear down. Accordingly, pursuant to section 102.18(b)(iii), we find that the imported cartridge is the single material that imparts the essential character to the refurbished good.
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Xerox believes that Customs erred in finding that the spent cartridges are the single foreign material incorporated in the imported good. It points out that the actual components that are incorporated in the imported cartridge are usually plastic parts, such as housing components, which do not contribute to the essential character of the
good and do not add significant value. Xerox states that the components which contribute to the mechanical function of the cartridges, such as photoreceptors, mag rollers, and cleaner/wiper blades are replaced in virtually all cases. As noted, above, Xerox also states that only about 15% of the cost of the imported cartridges is
represented by parts salvaged from old cartridges.
Customs believes that its position set forth in HRL 560768 as to what constitutes foreign material under 19 CFR 102.11(a)(3) is supported by the regulatory scheme under Part 102. In this regard, we note that 19 CFR 102.17 refers to a “Foreign material” which shall not be considered to have undergone the applicable change in classification by reason of dismantling or disassembly. The term "Foreign material" is specifically defined under 19 CFR 102.1(e) as "a material whose country of origin is not the same country as the country in which the good is produced." Section 102.11(a)(3) refers to a "....foreign material incorporated in that good ..... " As the term “foreign material” has the same meaning under 19 CFR 102.1(e), 102.11(a)(3), and 102.17, it is Customs position that the “foreign material” referred to in 19 CFR 102.11(a)(3) which is incorporated in the good must also be the unassembled material imported into Canada, and not its component parts as disassembled. The language of 19 CFR 102.17 clearly identifies the unassembled article as the "Foreign material," and not the parts salvaged therefrom.
However, while Xerox differs with Customs determination as to what constitutes “foreign material,” it states that it lacks reliable information concerning the origin of either the spent cartridges or of the components salvaged from those cartridges. In this regard, Xerox states that origin cannot be determined through physical inspection of the cartridge nor does it have reliable sources from which it can determine the origin of the cartridges. Thus, Xerox believes that 19 CFR 102.11(b) is inapplicable, as an inventory management method must depend upon accurate and reliable information as to origin, which is lacking in this case. We note that Customs determination in HRL 560768 that 19 CFR 102.11(b) was applicable was based on an understanding of the facts that the country of origin of the used cartridges could be determined.
Accordingly, based on the lack of identifiable physical markings and reliable data as to origin, we find that 19 CFR 102.11(b) cannot be used to determine the country of origin of the cartridges. Further, 19 CFR 102.11(c) cannot be used as the cartridges are not specifically described in the Harmonized System as a set or mixture, or
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classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3.
Therefore, the next step in the hierarchal scheme is section 102.11(d), which provides as follows:
(d) Where the country of origin of a good cannot be determined
under paragraph (a), (b) or (c) of this section, the country of origin of
the good shall be determined as follows:
If the good was produced only as a result of minor processing,
the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good;
(2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of origin of the good is the country of origin of those parts; or
(3) If the country of origin of the good cannot be determined under
paragraph (d)(1) or (d)(2) of this section, the country of origin of the
good is the last country in which the good underwent production.
"Minor processing" is defined in section 102.1(m) as including, in part, the mere dilution with water or another substance, cleaning, application of preservative or decorative coatings, trimming, filing, or cutting off of small amounts of excess materials, unloading, reloading, putting up in measured doses, packing, repacking, testing, marking, sorting, or grading, ornamental or finishing operations incidental to textile good production. "Simple assembly" is defined in section 102.1(o) as "the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing.
We find that the operations performed in Canada, as described, supra, constitute more than "minor processing" and exceed a "simple assembly." Accordingly, 19 CFR 102(d)(1) and 102(d)(2) are inapplicable. We conclude that pursuant to 19 CFR 102.11(d)(3), the country of origin of the good is Canada, the last country in which the good underwent production prior to entering the U.S. ("Production" is defined under 19
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CFR 102.1(n) and includes "...manufacturing, processing or assembling a good".)
HOLDING:
Based on the information provided:
(1) For purposes of determining whether there is a change in tariff classification,
pursuant to the applicable rule under 19 CFR 102.20, the "foreign material" incorporated in a refurbished photoreceptor cartridge is considered to be the "spent" cartridge imported into Canada, and not its component parts resulting from disassembly of the spent cartridge.
(2) Pursuant to 19 CFR 102.11(d)(3), the country of origin of the refurbished cartridge is Canada, the last country in which the good underwent production prior to entering the U.S.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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