MAR-2-05 CO:R:C:V 734219 AT
Alan R. Klestadt, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, New York 10017
RE: Country of origin marking of imported water pans and
charcoal pans incorporated into smoker/grill units
manufactured in the U.S.; substantial transformation;
19 CFR 134.35; United States v. Gibson-Thomsen Co.;
Uniroyal, Inc., v. United States; T.D. 91-7 (January
16, 1991; HQ 731432 (June 6, 1988); HQ 734046
(May 10, 1991)
Dear Mr. Klestadt:
This is in response to your letters of June 18, June 19,
July 3 and August 9, 1991, on behalf of The Brinkmann Corporation
(Brinkmann), requesting a prospective and binding country of
origin ruling regarding imported water pans and charcoal pans
incorporated into smoker/grill units manufactured in the U.S.
FACTS:
You state that Brinkmann imports water pans and charcoal
pans manufactured in China to be incorporated into smoker/grill
units predominantly manufactured in the U.S. Each smoker/grill
unit allows the ultimate user to smoke, steam, barbecue or roast
food depending upon the configuration of the water pan and
charcoal pan. After importation, the water and charcoal pans are
combined with 13 U.S. origin components and 2 other foreign
components (15 1/2" grill and heat gauge) manufactured in Taiwan
and repackaged into sealed cardboard containers. In addition to
the above components, several minor accessories (e.g.
instructions, recipe book, decals, etc.) are included in the box.
These minor accessories along with packaging materials are of
U.S. origin. A breakdown of the smoker/grill unit's essential
components (excluding packaging costs, labor costs and costs of
the minor accessories), shows that the water and charcoal pans
represent approximately 19 percent of the total cost of the
smoker/grill unit.
You state that because the imported water pans and charcoal
pans are combined in the U.S. with other components to form an
article (smoker/grill units) having a name, character and use
different from that of the imported pans, the pans are entitled
to an exemption from U.S. country of origin marking requirements
pursuant to 19 U.S.C. 1304(a)(3)(H). You also state that
although the subject pans are essential to the smoker/grill
units, they are not the finished article's only essential parts
in that the unit could not function without its shell or grills
nor do the pans impart any shape or appearance to the
smoker/grill units. Further, the pans condition as imported, are
not readily identifiable as part of the finished article.
You claim that Brinkmann imports approximately $600,000 pans
per year and of that amount approximately 99.5 percent are sold
at retail as part of finished smoker/grill units. The remaining
0.5 percent of the pans are sold separately as replacement parts
for which Brinkmann has instituted a program to mark these
replacement pans with their country of origin before shipping
them to the ultimate consumers.
A sample of the smoker/grill unit, repackaging container and
assembly instructions were submitted for further examination.
Examination of the water pan and charcoal pan reveals that
no country of origin marking exits on either pan. The
repackaging container has a color illustration of the
smoker/grill printed on the front panel. Also, on the back panel
near the bottom the U.S. address of the Brinkmann Corporation is
printed in the following manner "4215 McEwen Road/ Dallas, Texas
75234".
ISSUE:
Whether the imported water pans and charcoal pans are
substantially transformed when they are combined in the U.S. in
the manner described above, and repackaged for distribution to
retail stores?
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 134.35, Customs Regulations (19 CFR
134.35), states that the manufacturer or processor in the U.S.
who converts or combines the imported article into a different
article having a new name, character or use will be considered
the ultimate purchaser of the imported article within the
contemplation of 19 U.S.C. 1304 and the article shall be excepted
from marking. The outermost containers of the imported articles
shall be marked.
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 48, 628 F.Supp. 978 (CIT 1986), Koru North America v. United
States, 12 CIT , 701 F.Supp. 229 (CIT 1988).
Two court cases have considered the issue of whether
imported parts combined in the U.S. with domestic parts were
substantially transformed for country of origin marking purposes.
In the first case, Gibson-Thomsen, the court held that imported
wood brush block and toothbrush handles which had bristles
inserted into them in the U.S. lost their identity as such and
became new articles having a new name, character and use. One of
the factors considered by the court in reaching its conclusion
was that the domestic bristles used were "by far the most
valuable element." Also, the court looked at whether the
imported article loses its identity as such when combined with
other articles. In that case, the court concluded that wood
handles were material to be used in the manufacture of
toothbrushes and hairbrushes. The court was also concerned that
when an imported article was combined with a domestic material,
that the ultimate purchaser not be confused into thinking that
the domestic article was made in a foreign country. Therefore,
the court concluded that a mere material to be used in the
manufacture of a new article having a new name, character and use
and which, became an integral part of the new article would not
be required to be marked.
In contrast to the imported handles in Gibson-Thomsen, the
imported water pans and charcoal pans involved here cannot be
considered to be "mere materials" used in the manufacture of the
finished articles. To the contrary, the pans are important
elements of the finished smoker/grill unit in that without the
pans an ultimate purchaser would not be able to perform the
general operations of barbecuing, smoking, roasting or steaming
food in the unit, which is the essential purpose why this
particular unit is purchased. Also, when the imported water
pans and charcoal pans are combined with other domestic and
foreign components making up the finished smoker/grill unit they
do not lose their individual identity of that of being a water
pan and charcoal pan. Therefore, since there is no change in the
name, character or use of the imported water pans and charcoal
pans once combined, there is no substantial transformation.
The second case involved imported shoe uppers which were
combined with domestic soles in the U.S. The imported uppers
were held in Uniroyal, Inc., v. U.S., 542 F.Supp. 1026, 3 CIT 220
(CIT 1982), to be the "essence of the completed shoe" and
therefore, not substantially transformed. The court described
the imported upper as "completed shoes except for an outersole."
The shoe had already "obtained its ultimate shape, form and
size." One process performed in the U.S., relasting, was
characterized as "convenient, not necessary." The processes
performed in the U.S. were significantly less costly and less
time consuming than the foreign manufacturing process. The cost
of the upper was significantly greater than the cost of the
outsole. Further, the manufacture of the upper required at
least five highly skilled operations. The court concluded that
the attachment of the outsole was a minor manufacturing or
combining process which leaves the identity of the upper intact.
This case is like Uniroyal because the imported water pans and
charcoal pans are not only important to the finished smoker/grill
unit, but also the unit could not perform the critical functions
of barbecuing, smoking, roasting and steaming without these pans
making them essential to the unit's total performance. Further,
even though the water pans and charcoal pans are completely
obscured by the unit's dome, shell and grills, upon being
assembled by the consumer, the pans are not permanently attached
to the unit and their character still remains the same, as that
of being a water pan and charcoal pan.
In HQ 731432 (June 6, 1988), Customs set forth some factors
to be considered in determining whether imported goods combined
in the U.S. with domestic products were substantially transformed
for country of origin marking purposes. The following six
factors were considered:
1) whether the article is completely finished;
2) the extent of the manufacturing process of combining the
imported article with the domestic article as compared with the
manufacturing of the imported article;
3) whether the article is permanently attached to its
counterparts;
4)the overall importance of the article to the finished
product;
5) whether the article is functionally necessary to the
operation of the finished article, or whether it is an accessory
which retains its independent function; and
6) whether the article remains visible after the combining.
These factors are not exclusive and there may be other
factors relevant to a particular case and no one factor is
determinative. See, HQ 728801 (February 26, 1986).
In this case, the water pans and charcoal pans are
completely finished articles when imported into the U.S. There
is no extensive manufacturing process of combining the pans with
its other domestic and foreign counterparts, besides simply
placing the articles into a cardboard container during the
repackaging operation. Placing the water pan and charcoal pan
into a cardboard container a long with other domestic and foreign
articles is a very minor operation which is not complex, requires
no skill and is not time-consuming. The water pan and charcoal
pan are not permanently attached to the smoker/grill unit during
the combining process nor are they permanently attached once
assembly of the unit is completed. There is no doubt that the
imported water pans and charcoal pans are functionally necessary
to the use of the finished smoker/grill unit. As stated above,
the water pans and charcoal pans are important to the operation
of the unit in that one could not perform the operations of
barbecuing, smoking, roasting or steaming without the pans.
We disagree with your assertion that Customs holding in HQ
730066 (January 16, 1987), that a detachable cord set
manufactured in Taiwan and imported into the U.S. together with
an electric coffeemaker manufactured in Hong Kong was excepted
from country of origin marking is applicable in this case. In
the coffeemaker case, the cord set only represented 3 percent of
the total cost of the unit. However, in this case, the
information you submitted indicates that the cost of the two pans
as compared to the total cost of the smoker/grill unit (excluding
packaging costs, labor and minor accessories) represents
approximately 19 percent of the total cost of the unit. This
definitely is significant to the total value of the smoker/grill
unit, unlike the detachable cord set. Therefore, we find that HQ
730066 is not applicable to this case. (See also, HQ 734046, May
10, 1991; base unit, headset, headset cord and telephone cord
imported from different countries and packaged together in the
U.S. as a telephone set were not substantially transformed and
each had to be marked with its country of origin).
Based on our consideration of all these factors, we conclude
that these imported water pans and charcoal pans are not
substantially transformed in the U.S. as a result of combining
them with other domestic and foreign components during a
repackaging operation. Therefore, Brinkmann would not be
considered the ultimate purchaser of the imported water pans and
charcoal pans under 19 CFR 134.35.
Section 134.1(d), Customs Regulations (19 CFR 134.1(d)),
defines the ultimate purchaser as generally the last person in
the U.S. who will receive the article in the form in which it was
imported. The definition then gives examples of who might be the
ultimate purchaser if the imported article is used in
manufacture, if the imported article is sold at retail in its
imported form and if an imported article is distributed as a
gift. If an article is to be sold at retail in its imported
form, the purchaser at retail is the ultimate purchaser. Since
the imported water pans and charcoal pans are not substantially
transformed, they are not considered to undergo a change in their
imported form. Therefore, the retail purchaser of the imported
pans is the ultimate purchaser and the water pans and charcoal
pans must be individually marked with their country of origin.
In addition, because the pans will be repacked in the U.S. prior
to sale to the ultimate purchaser the certification requirements
of 19 CFR 134.26 apply.
However, if certain conditions are met, the district
director may authorize an exception under 19 CFR 134.32(d) from
marking the pans at the time of importation. In this regard, 19
CFR 134.34(a) provides that:
an exception under section 134.32(d) may be authorized in
the discretion of the district director for imported
articles which are to be repacked after release from
Customs custody under the following conditions:
(1) The container in which the articles are repacked will
indicate the origin of the articles to an ultimate
purchaser in the U.S.
(2) The importer arranges for supervision of the marking
of the containers by Customs officers at the importer's
expense or secures such verification, as may be
necessary, by certification and the submission of a
sample or otherwise, of the marking prior to liquidation
of the entry.
Whether or not the district director authorizes the above
exception the retail box must satisfy the requirements of 19 CFR
134.46. Examination of the cardboard box in which the water pans
and charcoal pans are repackaged into reveals that the words
"4215 McEwen Road/Dallas, Texas 75234" are printed on the back
panel of the box. Section 134.46, Customs Regulations (19 CFR
134.46) requires that in any case in which the words "U.S.," or
"American," the letters "U.S.A.," any variation of such words or
letters, or the name of any city or locality other than the
country or locality in which the article was manufactured or
produced, appear on an imported article or its container, there
shall appear, legibly and permanently, in close proximity to such
words, letters or name, and in at least a comparable size, the
name of the country of origin preceded by "Made in," "Product
of", or other words of similar meaning (emphasis added).
Therefore the marking on the box must satisfy the requirements of
section 134.46 since the words "Dallas, Texas" appear on the back
panel.
Although the scope of the ruling request and thus this
ruling is limited to the marking requirements of the imported
pans, based on a similar analysis it would appear that the other
two foreign components, the grill and heat guage, would be
subject to similar marking requirements.
HOLDING
The imported water pans and charcoal pans are not
substantially transformed in the U.S. by combining them with
other domestic and foreign components during a repackaging
operation in the U.S. Therefore, the retail purchaser is
the ultimate purchaser of the imported water pans and charcoal
pans and they must be marked to indicate their country of origin,
i.e., China.
Sincerely,
John Durant, Director
Commercial Rulings Division