MAR-2-05 CO:R:C:V 732897 KG
District Director
U.S. Customs Service
Dallas / Fort Worth International Airport
P.O. Box 619050
Dallas, Texas 75261
RE: Country of origin marking of automobile air conditioner kits
Dear Sir:
This is in reference to protest number 5501-8-000244 dated
July 14, 1988, and the application for further review filed on
behalf of Uriman, Inc., the importer, against the decision of the
district director to assess marking duties in connection with
entries of automobile air conditioner kits.
FACTS:
This protest involves nine shipments of automobile air
conditioner kits imported from Korea which are designed to be
installed in Hyundai automobiles. The importer sells the units
to Specific Climate Systems who resells them to Hyundai
dealerships. The kits are available for retail purchase directly
from a Hyundai dealership for self-installation or can be
purchased and installed by the Hyundai dealership. The kits
contain several major parts such as the compressor that are made
in Japan, several parts made in the U.S. and numerous parts made
in Korea.
The shipments in question involved kits made up of parts
from Korea, Japan and the U.S. which were packaged in boxes
marked "Made in Korea". The entries for the nine shipments were
made from October 20, 1987, to December 28, 1987. On November 6,
1987, entries two, three and four were made and the importer had
discussions with Customs officials at the Dallas port about
granting a marking waiver for the entries based on 19 CFR
134.32(h). A second marking/redelivery notice for the nine
shipments was issued on January 20, 1988. However, the importer
was unable to mark or redeliver the nine shipments because they
had already been sold. Since January 20, 1988, the importer has
continued to make entries for these kits but the boxes are marked
"Made in Korea with compressor-dryer- fan motor-actuator Made in
Japan, hoses Made in U.S.A."
ISSUE:
Whether the imported air conditioner kits should be subject
to marking duties.
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 (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 134.1(b), Customs Regulations (19 CFR 134.1(b)),
defines the 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 with the meaning
of 19 CFR Part 134. Therefore, pursuant to 19 CFR 134.1(b), each
piece within a kit retains its own country of origin which must
be marked if it is of foreign origin unless the packaging of the
pieces together effects a substantial transformation.
A substantial transformation occurs when articles lose their
identity and become new articles having a new name, character or
use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270
(1940), National Juice Products Association v. United States, 10
CIT ___, 628 F.Supp. 978 (CIT 1986), Koru North America v. United
States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988). Customs held in
HQ 732498 (October 3, 1989), that merely packaging parts of a kit
together does not constitute a substantial transformation. The
parts involved in this protest were merely packaged together and
are not substantially transformed into a new article of commerce
having a new name, character or use. Therefore, the individual
parts retain their individual countries of origin. The Japanese
and U.S. made parts contained in the kit are not considered
products of Korea and should not have been imported in boxes
marked "Made in Korea".
In this instance, the Customs officials erroneously
thought that the imported kits were entitled to a marking
exception under section 134.32(h), Customs Regulations (19 CFR
134.32(h)), and that if the kits were entitled to this exception,
that they could be marked as entered. This general exception to
the marking requirements is based on 19 U.S.C. 1304(a)(3)(H)
where an ultimate purchaser, by reason of the character of the
article or by reason of the circumstances of its importation,
must necessarily know the country of origin of the article even
though it is not marked to indicate its origin. In ruling 730243
(March 5, 1987), Customs required that the importer must be the
ultimate purchaser of the imported article and have direct
contact with the foreign supplier to qualify for the 19 U.S.C.
1304 (a)(3)(H) exemption. In fact, the kits were not entitled to
the 19 CFR 134.32(h) exception regardless of whether the
dealerships or retail purchasers were the ultimate purchaser
because the importer, Uriman, sold the kits to Specific Climate
Systems and was therefore not the ultimate purchaser of the kits.
Since the importer was not the ultimate purchaser of the kits but
merely a middleman, the kits were never entitled to the 19 CFR
134.32(h) exception. Further, even if the kits were excepted
from marking in accordance with 19 CFR 134.32(h), the exception
is inapplicable pursuant to section 134.36(b), Customs
Regulations (19 CFR 134.36(b)), because the container could
mislead a purchaser to believe that the parts were made in Korea,
when in fact, some of the major components were made in Japan.
Containers bearing misleading marking which imply that an article
was made or produced in a country other than the actual country
of origin are not entitled to a marking exception pursuant to 19
CFR 134.36(b).
At the meeting with the importer in 1987, the Customs
officials led the importer to believe that the imported kits
might be entitled to a marking exception and that if so, the kits
would not have to be remarked. Relying on those statements, the
importer did not remark the goods and sold the kits to Hyundai
dealerships. They also brought in five more shipments which were
marked the same way in reliance on Custom's position. Articles
found not legally marked may be properly marked pursuant to
section 134.51, Customs Regulations (19 CFR 134.51), after
Customs has notified the importer that the goods are not properly
marked. In this instance, because the importer relied on
statements by Customs officials that the kits were entitled to a
marking exception if the kits were only sold to Hyundai
dealerships, they incorrectly believed that they did not need to
correct the markings. Without further addressing the merits of
the importers actions, because the importer reasonably relied on
statements by Customs officials to their detriment, the marking
duties should be cancelled.
HOLDING:
Based on the above considerations, you are advised to grant
the protest.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch