MAR-2-05 CO:R:C:V 733299 NL
District Director
U.S. Customs Service
909 First Avenue
Seattle, WA 98174
RE: Country of Origin Marking for Guitar Kits to be Assembled in
the U.S.
Dear Sir:
In response to a request from the importer, Gibson Guitar
Company (Gibson), Bozeman, Montana, we have reviewed the
determination of the Seattle District that the country of origin
marking of certain guitar kits imported from Japan is not in
conformity with the requirements of section 304 of the Tariff Act
of 1930, as amended (19 U.S.C. 1304). This decision is issued as
an internal advice.
FACTS:
The article in question is a wood-bodied acoustic steel-
stringed guitar which upon assembly Gibson will market as its
"Blueridge" line. The body and neck of the guitar are imported
from Japan. In its imported condition the wood body of the
guitar has been sanded to some degree, and extensively inlaid
around the edges and sound hole. The top and sides of the neck
are also inlaid. The body and neck are precut in order to fit
together; it is evident that little or no cutting is required to
make them fit together cleanly. The neck is fitted with frets,
and holes have been cut to receive the tuning gears.
After importation, Gibson employees sand the neck and body;
fit and glue the neck to the body; apply the plastic heel cap;
sand the whitewood; apply color and oven dry; scrape, sand,
handrub, buff and generally finish the surface; drill the string
holes; install the nut and tuners; install the strings and
saddle; drill the hole for the end pin; make final adjustments;
and install the truss rod cover. It is estimated that this
assembly requires approximately 8.5 hours per instrument. The
steps associated with assembly require a little over two hours to
complete, while the surface finishing requires slightly more than
six hours. It is further estimated that the Japanese
manufacturing time required to produce the imported body and neck
is one third of the total manufacturing time. No data has been
submitted as to relative costs or value added.
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The Seattle District has issued a marking notice pursuant to
19 U.S.C. 1304 directing Gibson to mark the guitar as a product
of Japan. Pending resolution of the matter no additional
enforcement action has been taken.
ISSUE:
Whether, for purposes of 19 U.S.C. 1304, the imported guitar
components are substantially transformed in the U.S. so that they
are excepted from country of origin marking.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires that, unless excepted, every article of foreign
origin (or its container) must be legibly, permanently, and
conspicuously marked to indicate the English name of its country
of origin to the ultimate purchaser in the U.S. The purpose of
this provision is to require the identification of the country of
origin "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, 302, C.A.D.
104 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. The term "country of origin" is defined in 19 CFR
134.1(b) as the country of manufacture, production, or growth of
an article. 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". As
provided in 19 CFR 134.35, a substantial transformation is said
to occur when, within the principle of the case of U.S. v.
Gibson-Thomsen Co. Inc., 27 C.C.P.A. 267, C.A.D. 98 (1940), an
article is combined or converted by manufacture such that a new
article emerges with a different name, character, or use. A
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 for purposes of
the country of origin marking requirements. An article which is
substantially transformed after importation into the U.S. is
excepted from individual marking and only the outermost container
in which it is imported is required to be marked.
In this matter, having reviewed Gibson's submission and
having examined samples of the guitar parts as imported and the
finished guitar after U.S. processing, it is our opinion that the
processing does not effect a substantial transformation. As in
National Juice Products Ass'n v. United States, 628 F. Supp. 978
(C.I.T. 1986), (imported orange juice concentrate is not
substantially transformed by reconstitution in the U.S.) the
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processing in the U.S. does not change the name, character, or
use of the imported article, nor does it change the article's
essential character. As to name, the only change resulting from
the processing is that the guitar is assembled rather than
unassembled. In character and use the article remains
essentially a guitar before and after importation.
In HQ 706040 (August 3, 1976), Customs ruled that an
electric guitar, imported with the neck and body disassembled,
was not substantially transformed by assembly and stringing after
importation. Customs characterized this U.S. processing as "a
relatively minor operation which neither substantially changes
the character and use of the guitar parts, nor renders your
company the ultimate purchaser of the guitar parts under section
134.35 of the Customs Regulations." The assembled electric
guitars were required to be marked with their Korean country of
origin.
By contrast, Customs found in HQ 709098 (February 2, 1979),
that imported components of a saxophone were substantially
transformed by processing after importation which included
substantial cutting, trimming, assembly, mounting, and adjusting
of key, tube, and mouthpiece components. The U.S. manufacturer
added 33 subassemblies and approximately 120 individual pieces to
the saxophone body to form the finished instrument. This
processing was performed at work stations on a production line,
with each operator specializing in a fixed number and type of
operations. In the case of the Gibson guitar, the operations are
obviously far simpler, and involve fitting precut pieces together
and adding a few minor components. There does not appear to be
any significant cutting, shaping, or machining of the components.
This is confirmed by the relatively short time (a little over two
hours) required to complete the assembly exclusive of finishing.
A finding of substantial transformation was also reached in
HQ 714639 (April 7, 1981), with respect to violins, violas,
cellos and basses. The importer assembled stringed instruments
from foreign components. The value of the foreign components was
roughly equal to the value of the U.S.- origin parts and U.S.
direct and indirect labor costs. A review of the submission for
this ruling shows, notably, that the assembly process included
milling, routing, planing, sanding, drilling, reaming, sawing,
and shaping, in addition to finishing. This kind of physical
change in the imported components, involving cutting, shaping,
bending, and the like, would be required in the case of the
Gibson guitar to result in a finding of substantial
transformation.
We have also considered the extensive finishing of the
surface of the instrument which is undertaken by Gibson.
Refinishing alone accounts for more than 70% of the time expended
in completing the Gibson instrument. In general, it is unlikely
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that any change in the surface finish of an article would be
regarded by Customs as sufficient to change its essential
character so as to result in a substantial transformation. For
example, previous Customs rulings have held that polishing and
grinding of a semifinished aluminum bowl (C.S.D. 89-130), and
glazing and painting of pottery and ceramics (C.S.D. 89-121) do
not result in substantial transformations. The case of Carlson
Furniture Industries Inc. v. United States, 65 Cust. Ct. 474,
C.D. 4126 (1970), concerned unfinished parts of furniture, but it
is noteworthy that the Customs Court's finding of substantial
transformation was based upon the cutting, gluing, fitting,
upholstering, and other manufacturing operations undertaken by
the importer which the court considered more than mere assembly.
While finishing is important to the functioning of the
guitar, i.e., a proper finish is necessary to produce the
desired sound characteristics, it is our view that such
finishing is only one of a number of production steps which
contribute to the instrument's performance. Of at least equal
and probably greater importance are the type of wood used, the
seasoning of the wood, and the manner in which the box is
constructed. Under the circumstances, we regard the finishing in
the U.S. as merely one of several steps which, together,
contribute to the desired sound, but which by itself or even in
conjunction with the other assembly steps does not change the
essential character of the instrument.
In addition to the foregoing principles of substantial
transformation, tariff classification principles indicate that
when major components of an article are imported for U.S.
assembly, the imported components are classified under the
provision for finished articles. Specifically, in C.I.E. 1975/64
(October 7, 1964), Customs ruled that incomplete hollow body
guitars, consisting at the time of importation of basic drums and
necks and finished after importation, would be classified as
"other stringed instruments" in item 725.06, Tariff Schedules of
the United States (TSUS). Customs applied General Headnote
10(h), TSUS, which provided that "unless the context requires
otherwise, a tariff description for an article covers such
article, whether assembled or not assembled, and whether finished
or not finished."
Under the Harmonized Tariff Schedule of the United States
(HTSUS), the successor to the TSUS, a similar General Rule of
Interpretation, 2(a), directs that a reference to an article in
a heading shall be taken to refer to the article incomplete or
unfinished, provided that, as entered, the incomplete or
unfinished article has the essential character of the complete or
finished article. The Gibson guitar components at issue have
been classified under Heading 9202.9040.000, HTSUS, the provision
for guitars valued at over $100. As applied here, the
classification principles reinforce the finding that the guitar
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components as imported constitute the essence of the instrument;
no significant change, for tariff purposes, is brought about by
assembly and finishing.
We conclude that the assembly of the Gibson guitar from
major components which are imported does not result in a
substantial transformation. The physical change is minor, and
results in no change in the essential character of the guitar.
The time involved in completing the assembly is not substantial,
and the complexity of the operations and levels of skill required
are modest. We note that the imported components are precut in
order to fit together easily. We have not been provided with
any data as to the value added to the guitar in the U.S., but it
does not appear, in light of these other factors, that such data
would change the conclusion reached here.
Accordingly, the ultimate purchaser of the imported guitar
parts is not Gibson but the retail purchaser of the assembled
guitar. Therefore the assembled guitar must be marked to clearly
indicate to that ultimate purchaser its Japanese origin. In
this case, the assembled guitar could be marked "Assembled and
Finished in U.S. from Parts Made in Japan", or words to similar
effect which clearly indicate the Japanese origin of the parts.
HOLDING:
Imported guitar necks and bodies are not substantially
transformed by assembly and finishing in the U.S., and must be
marked so as to indicate their country of origin to ultimate
purchasers in the U.S.
Sincerely,
Harvey B. Fox
Director, Office of
Regulations and Rulings