MAR-2-0-5 CO:R:C:V 734021 RSD
Richard H. Abbey, Esq.
Mudge, Rose, Guthrie, Alexander & Ferdon
2121 K Street, N.W.
Washington, D.C. 20037
RE: Country of origin marking of components used to make a
printed circuit board, substantial transformation, electronic
components, 19 CFR 134.35
Dear Mr. Abbey:
This is in response to your request for a ruling on the
country of origin marking requirements for components used in
making a printed circuit board. You have also requested that we
rule that the printed circuit board may be marked "Made in the
U.S.A." In addition, you have asked that certain information
contained in the ruling request be given confidential treatment.
This information is in brackets and will not be included in the
copies of the ruling made available to the public. A video tape
demonstrating the processes involved in producing the printed
circuit boards was submitted.
FACTS:
Toshiba America Information Systems, Inc. (Toshiba) is
planning to manufacture printed circuit boards in the U.S. The
printed circuit boards will be assembled from imported
components, some of which are imported by Toshiba and some of
which are imported and processed by other importers and sold to
Toshiba. The printed circuit boards are commercially known as
the T1200XE, and will be made from 210 components consisting
primarily of integrated circuits, transistors, diodes, resistors,
capacitors, connectors, transformers, and boards. Approximately
92% of the components (by value) are completely foreign made.
The balance of the components are foreign made, but are processed
in the U.S.
The manufacture of the printed circuit boards is a multi-
step process. The first step is that a solder powder and flux in
a paste are squeegeed over a four layer glass epoxy board, and
through a metal mask in a process similar to silk screening. The
printed pattern consists of over 1800 deposits of very critical
shapes located to an accuracy of plus or minus of { } of an
inch. Next, the large components, such as quad flat packs and
small outline packages, are mounted. These components are
selected, positioned, and mounted in a solder paste pattern by a
computer-controlled mounter. These components are then soldered
into the printed circuit board in an oven which uses heated air
to reflow the solder paste at a stabilized temperature of { }
degrees Fahrenheit. After the large components are soldered, the
printed circuit boards are turned over for the mounting of the
small chip components. A small dot of adhesive is applied at
the locations where each chip component will be mounted. After
the adhesive has been applied, the small chip components are
mounted by a machine, which is preprogrammed to mount the correct
components to within plus or minus { } of an inch, using a
computer controlled vision system. This is followed by quality
control, consisting of a visual check of the component alignment,
in which any misaligned chips are skillfully adjusted. When the
operator is satisfied with the alignment of the chip components,
the printed circuit boards are started through the adhesive
curing oven. Both ultraviolet and infrared light sources are
used to cure the adhesive. The curing process is to ensure that
the heavier components soldered to the other side of the board do
not move or fall off.
All of the line processes and automatic equipment used in
the assembly line are monitored and controlled by a foreman from
a computer terminal. The terminal is linked to a central host
computer which has stored programming information for each
printed circuit board type to be assembled. This information is
used to control the part sequencing and mounting programs of the
various machines. After this step, a small number of leaded
components are inserted manually. The next process is called
wave soldering. In this process, the partially completed printed
circuit board is placed on a conveyor and carried over a flux and
then across two waves of molten solder. The chip components
which are secured by the adhesive to the bottom of the board are
submerged in the wave. Related components which are manually
inserted in the top side are also soldered. Pre-heating is
performed on the board as it moves toward the solder waves.
There are two waves to ensure good solderability. The first wave
is turbulent to provide complete coverage. The final wave is
smooth to provide a consistent solder deposit.
After soldering, the leads of the manually inserted
components are trimmed. Highly skilled operators inspect and
touch up the soldering of the chip components on the bottom side
of the printed circuit board. Once all soldering has been
visually inspected and touched up, the printed circuit board is
thoroughly cleaned to remove all traces of the soldering flux.
The printed circuit boards are then put through a quality control
check. The final components that are not compatible with the
cleaning process are installed. Finally, the printed circuit
boards are tested on a functional tester. This test takes
approximately { } minutes.
The cost to Toshiba of a finished printed circuit board is
, consisting of in material costs and in labor and overhead
costs. The cost of assembly amounts to of the total cost of the
printed circuit board.
ISSUES:
Are the components of the printed circuit boards
substantially transformed when they are assembled into completed
printed circuit boards?
Can the completed printed circuit boards be marked "Made In
the U.S.A.?"
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 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." United States v. Friedlaender & Co. 27
C.C.P.A. 297 at 302; C.A.D. 104 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and the 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 the marking laws and
regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27
C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in
manufacture which results in an article having a name, character
or use differing from that of the constituent article will be
considered substantially transformed and that the manufacturer
or processor will be considered the ultimate purchaser of the
constituent materials. In such circumstances, the imported
article is excepted from marking and only the outermost container
is required to be marked (see section 134.35, Customs
Regulations).
In C.S.D. 85-25, September 24, 1984, Customs held that for
purposes of the Generalized System of Preferences, the assembly
of a large number of fabricated components onto a printed circuit
board in a process involving considerable amount of time and
skill results in a substantial transformation. In HQ 733159,
July 23, 1990, a marking case, Customs held that the assembly of
a large number of components, including a transformer, on a
printed circuit board and incorporating the board into a
telephone system resulted in a substantial transformation.
Recently, we ruled in HQ 733690, February 22, 1991, that blank
boards were substantially transformed by assembling various
electronic components onto the blank boards and placing the
completed circuit boards into larger systems such as computer
power units. We noted that the blank circuit boards have no
function except to serve as a part for a completed circuit board
with various electronic components mounted onto it, which in turn
will go into a larger system. Insertion of the electronic
components onto the blank board, plus the assembly of the
populated boards into a larger unit changes the nature of the
board and caused it to lose its separate identity.
We note that the assembly process in this case is quite
complex and involves a considerable amount of skill and time.
The assembly also involves a large number of different
components and a significant number of distinct skilled
operations. We also note that there is an extensive increase in
value when the printed circuit boards are completed. Through the
assembly processes, the separate components of the printed
circuit boards acquire new attributes. The completed printed
circuit boards have a name, character, and use differing from
that of the individual components. Consequently, a new article
of commerce is created. Therefore, we conclude that of the
assembly of the components into the completed printed circuit
boards constitutes a substantial transformation and that pursuant
to 19 CFR 134.35, Toshiba is the ultimate purchaser of the
components used to make the boards. Accordingly, so long as the
components are imported in a container which is properly marked
to indicate the country of origin and Customs officials at the
port of entry are satisfied that these containers will reach the
ultimate purchaser unopened, the individual components do not
have to be marked with their country of origin.
You also inquire as to whether the boards can be marked
"Made in the U.S.A." Approval of markings of "Made in the
U.S.A." is within the jurisdiction of the Federal Trade
Commission and not the Customs Service. In order to get approval
for marking the boards "Made in the U.S.A.," you should contact
the Federal Trade Commission, Division of Enforcement, 6th &
Pennsylvania Avenue, N.W., Washington D.C. 20508.
HOLDING:
For purposes of 19 U.S.C. 1304, assembling the electronic
components into a completed printed circuit board is a
substantial transformation. Pursuant to 19 CFR 134.35, the
individual components do not have to be individually marked with
the country of origin, as long as they are imported in
containers that are properly marked with the country origin and
Customs officials at the port of entry are satisfied that these
containers will reach the ultimate purchasers unopened.
However, Customs cannot authorize that the completed boards may
be marked "Made in the U.S.A." Approval of the marking "Made in
the U.S.A.," after the printed circuit boards are assembled, is
within the jurisdiction of the Federal Trade Commission.
Sincerely,
John Durant, Director
Commercial Rulings Division