MAR-2-05 RR:CR:SM 563286 DCC
Ms. Susan Kohn Ross
Rodriguez O’Donnell Ross
Fuerst Gonzalez & Williams, P.C.
5777 W. Century Blvd.
Suite 1500
Los Angeles, CA 90045-5659
RE: Country of Origin Marking for Golf Clubs
Dear Ms. Ross:
This is in response to your letters dated May 19, and August 8, 2005, requesting a binding ruling on behalf of Taylor Made Golf Company, Inc. (“Taylor”) regarding the country of origin marking for imported golf clubs.
FACTS:
The subject merchandise is golf clubs assembled in the United States from imported and domestically sourced components. In particular, the heads will be produced in Country A; the shafts will be produced in Country A, Country B, or the United States; and the grips will be produced in Country A or Country C. The ferrules and weights may be sourced from the United States. Below is a description of the U.S. processing operations:
The imported metal or graphite hollow shafts are cut at each end to produce shafts with standard lengths.
The ends of the shafts are ground using various types of machines to smooth any spots that are rough as a result of the cutting operation. The head end of the shaft is inserted into a ferrule, a metal ring holding the pieces together that prevents the shaft from splitting. The club specifications determine the correct tip grind (club end) and ferrule setting.
For some golf club models, the head may be subject to the addition of epoxy to change the head to a specified range; hot melting which captures any excess weld material; inserting a plug to close off an opening and provide a reservoir for the bonding agent; and pin stamping.
The head is bonded to the shaft by inserting an adhesive into a socket in the head. The shaft is inserted into the socket and the head and shaft are aligned by hand.
The adhesive is cured by heating the socket and the bond is tested for pull strength.
The grip is affixed to the club. This step involves wrapping the shaft with tape, inserting the shaft into the grip, and ensuring that the grip is properly aligned.
A certain percentage of the clubs are audited for length, swing weight, alignment of the grip.
The ferrule is ground to smooth to create a smooth transition from shaft to head.
The assembled club is placed on a swing weight machine that analyzes the distribution of weight between the head and shaft. Based on this analysis, weighted cartridges are added to an opening in the club head.
For customized clubs, the angle of the head to the shaft, face of the club, or both, may be adjusted according to customer specifications.
The clubs are cleaned, polished, and inspected for cosmetic appearance before packaging.
ISSUE:
Whether imported golf club heads, shafts, and grips undergo a substantial transformation in the United States when made into finished golf clubs for country of origin marking purposes.
Whether imported golf club heads and grips undergo a substantial transformation in the United States when made into finished golf clubs with U.S.-made shafts for country of origin marking purposes.
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 United States 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 United States 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.
Part 134, Customs and Border Protection Regulations (“CBP”) (19 C.F.R. Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. 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. In addition, section 134.35, CBP Regulations (19 C.F.R. 134.35), implements the holding in United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940). That regulations provides that an article used in the United States in manufacture that results in an article having a name, character, or use differing from that of the imported article will be considered substantially transformed, and therefore the U.S. manufacturer or processor who converts or combines the imported article into the different article will be considered the ultimate purchaser of the imported article within the contemplation of 19 U.S.C. § 1304(a).
In National Hand Tool v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993), the court determined that certain hand tool components used to make flex sockets, speeder handles, and flex handles were not substantially transformed within the United States. The components were cold-formed or hot-forged into their final shape prior to importation, with the exception of speeder handle bars, which were reshaped by a power press after importation, and the grips of the flex handles which were knurled in the United States. After entry, the imported items were heat treated to strengthen the components, sand-blasted to clean the components, and electroplated to better enable the components to resist rust and corrosion. In making this determination, the court noted that the processing which occurred within the United States did not alter the name of the imported components, the character of the parts remained substantially unchanged upon the completion of such processing, and the intended use of the articles was predetermined at the time of importation. Although the court recognized that a predetermined use for imported articles does not preclude a finding of substantial transformation, the court noted that each component was intended to be incorporated in a particular finished mechanic’s hand tool.
Moreover, National Hand Tool dismissed as a basis for a substantial transformation the value of the processing, stating that the substantial transformation test utilizing name, character and use criteria should generally be conclusive in country of origin marking determinations, and that such a finding must be based on the totality of the evidence.
You claim that the imported golf club components undergo a substantial transformation when used to form finished golf clubs so that these components are no longer a product of the country in which they were produced for Customs marking purposes. You state that the 12-step process is complicated and requires some art in addition to skill. You note that the U.S. workers have significant skills and receive specialized training ranging from 15 minutes to two days for each step in the assembly process. You argue the U.S. production operations require rigorous quality control, specialized equipment, and computers, and that the clubs are the result of precise engineering and calibration.
CBP has issued numerous rulings regarding the country of origin marking requirements for golf clubs. These rulings have consistently held that when both of the major components (i.e., the golf club heads and shafts) are imported into the United States there is no substantial transformation as a result of the U.S. processes. When either the head or the shaft is produced in the United States, however, we have held that the non-U.S. component undergoes a substantial transformation as a result of the U.S. assembly operations.
For example, Headquarters Ruling Letter (“HRL”) 562901, dated November 6, 2003, reviewed the marking requirements for golf clubs when the heads and shafts were imported from Country A or Taiwan and the grips were made in the United States. That ruling held that there was no substantial transformation as a result of assembling the foreign heads and shafts with the U.S.-made grips. We reached a similar conclusion in HRL 734256, dated July 1, 1992, when imported heads and shafts were assembled together with a U.S.-made grip. In HRL 734256 we noted that, “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.”
When one of the two major components (the golf club head or shaft) is made in the United States, however, we have held that there is a substantial transformation of the foreign major component. See HRL 735792, dated June 8, 1994 (finding foreign golf club heads were substantially transformed when combined in the United States with U.S.-made shafts, and U.S. or foreign grips to produce finished golf clubs).
In 563082, dated September 30, 2004, we reviewed the country of origin marking requirements for golf club grips. That case involved multiple stages of production in Thailand and China. During the first production stage, the grip’s “underlisting,” or rubber underbody of the grip, was manufactured in Thailand. In order to produce the underlisting, EPDM rubber and natural rubber were cured in sulfur and various ingredients were mixed, blended and masticated in a mill. Thereafter, a cut was made into a “feed strip” from the mill as injection feed stock and the producer injection molded the finished rubber underbody. The formed underlisting was then shipped to China. In China, the outer grip material, which was produced in Taiwan, was cut length-wise to create strips. The cut strips were then skived and tapered, and the edges were embossed and logos were painted on the material. During the final stage of production in China a wooden dowel was inserted into the underlisting to allow the grip material to be affixed to the underlisting with even pressure. The strips of material were affixed to the underlisting with an adhesive in a spiral fashion beginning at the cap of the underlisting and finishing at the club head end. We determined that because the underlistings imparted the essential character of the finished grips and that the processing in China did not result in a substantial transformation of the underlistings, the country of origin of the finished grips was Thailand.
In HRL 560115, dated March 7, 1997, we considered the country of origin marking requirement for fishing rods that were assembled to completion in China from U.S.-origin fiberglass rod blanks, Japanese- or Korean-origin line guides, and handles and reel seats produced outside of China. The main operations in that case involved: (1) thread wrapping the line guide components onto the rod, (2) epoxy encapsulating the thread, (3) fitting ferrules on some styles so that the rods could be broken into parts, and (4) affixing the handle and reel seat onto the rod. In finding that the country of origin of the finished rods was the United States, we noted that “the fishing rod’s characteristics are primarily imparted at the time of manufacture in the U.S., as the rod blank is exported from the U.S. in the length, diameter, and flexibility of the finished rod.” In other words, we determined that the “essential character” of the finished rod was imparted by the rod blank and that a substantial transformation had not occurred as a result of the processing in China.
Although we agree that, “simply attaching the head to the shaft and the grip to the shaft without doing so properly does not a Taylor Made golf club make,” the foreign heads and shafts as imported have been processed to the point where their future use is predetermined. Although the U.S. processing operations are required to create a finished product, and are of a certain complexity requiring technical skill, they do not change the essential character of the imported head and shaft, which at this stage of production have the characteristics of a golf club but have not achieved full functionality. See National Hand Tool.
Consistent with our previous rulings, and the holding in National Hand Tool, and based on the totality of the circumstances we find that when imported heads and grips, and U.S.-made shafts are used to make finished golf clubs, the U.S. operations will result in a substantial transformation of the foreign heads. Pursuant to 19 C.F.R. § 134.35(a), when foreign components processed in the United States into golf clubs undergo a substantial transformation, the U.S. manufacturer is considered to be the “ultimate purchaser,” and the finished article is excepted from marking. Therefore, for golf clubs made with U.S.-made shafts, only the outermost containers of the imported foreign components need be marked with the country of origin.
In this case, when shafts made in Country A or Country B and heads made in Country A are used to produce finished golf clubs in the United States, the U.S. processing will not result in a substantial transformation of the imported components regardless of the origin of the grip. Therefore, these clubs must be marked to indicate the origin of the major components. For example, “Head made in Country A, Shaft made in Country B.” CBP would not object to marking the finished golf clubs, “Head made in Country A, Shaft made in Country B, Assembled in the United States.” See HRL 562901, and HRL 560527, dated September 12, 1997.
You ask whether CBP would accept a marking that merely indicates the finished golf club contains imported components or that states more than one possible country for each component such as “Made From Imported Components,” or “Shafts made in Country A, Country B, or the United States; Heads Made in Country A.”
CBP has previously disallowed country of markings that indicate alternative possible countries since such markings do not indicate clearly the actual country of origin as required by 19 U.S.C. 1304. See HRL 560776, dated May 4, 1999 (use of a marking listing multiple possible countries of origin on blister cards for home electronics accessories not acceptable for country of origin marking). Consequently, the proposed country markings—which indicate components are foreign or that the shafts are made in Country A, Country B, or the United States—are unacceptable because they do not clearly identify the country of origin of the finished good.
HOLDING:
Based on the information provided, when imported heads and grips, and U.S.-made shafts are used to make finished golf clubs, the U.S. operations will result in a substantial transformation of the foreign heads and grips. Therefore, the imported heads and grips will be excepted from the country of origin marking requirements of 19 U.S.C. § 1304, and no country of origin marking is necessary on the finished golf club to be sold in the United States. However, the outermost container in which the imported golf club heads and grips are imported must be marked with the respective country of origin. When the golf club heads, shafts and grips are imported, the U.S. operations will not result in a substantial transformation of the foreign components, and the country of origin of these components must be indicated on the finished golf club or its container.
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 CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch