MAR-2-05 CO:R:C:V 734256 RSD
Bruce Shulman, Esq.
Stein, Shostak, Shostak & Ohara
1620 L Street, N.W.
Washington, D.C. 20036-5605
RE: Country of origin marking for golf clubs with foreign
shafts, heads and domestic grips, simple assembly, combining; 19
CFR 134.35, 19 CFR 134.14; U.S. v. Gibson-Thomsen Co., Inc.
Dear Mr. Shulman:
This is in reference to your letter dated July 15, 1991,
requesting a ruling on behalf of your client, Daiwa Corporation
(Daiwa), concerning the country of origin marking requirements
for golf clubs with imported components. On October 29, 1991, a
meeting was held at Customs Headquarters with you, another
attorney in your firm, Richard Shostak, and members of my staff
to discuss this case. We have received your supplemental
submission dated December 9, 1991, and a sample of the finished
golf club and the unassembled components.
FACTS:
Daiwa manufactures golf clubs at its facility in Garden
Grove, California. While some of the golf clubs are manufactured
entirely from components of U.S. origin, most of the clubs
contain one or more foreign components. Daiwa imports foreign
golf club heads and shafts into the U.S. where they are
manufactured into finished golf clubs by using U.S. labor and
adding some U.S. made grips. The golf club heads will be
manufactured in either Japan or Taiwan and the shafts will be
made in Japan.
The manufacture of the golf clubs involves inserting the
shafts into the golf club heads. The manufacturing process
involves inspection of the components, some grinding, cutting and
sanding to ensure that the components fit together properly.
The shaft and head are then glued together. The third component
of the golf club is the grips. The grips are placed on the clubs
by a grip inserting machine. Double coated tape is applied to
the top of the shaft and the grip is slid on the shaft. Care is
taken to make sure all the components are aligned properly to
make the finished club. We note that the sample components head,
shaft, and grip as imported are basically finished and ready for
the assembly into a finished golf club. The head has a hole on
the top of it for the insertion of the shaft. You state that
none of these components will ever be sold separately and that
Daiwa always combines them to make the finished golf club.
You also note that all of the golf club components will be
imported in separate shipments and will be combined after
importation. It is also your contention that the manufacturing
process and facts of this case are very similar to the facts
involved in the case of U.S. v. Gibson-Thompson Co., Inc. 27 CCPA
267, C.A.D. 98 (1940), thereby entitling Daiwa to a marking
exception.
ISSUE:
Does the combining of a foreign made golf club head and
shaft with a U.S. made grip in the U.S. constitute a substantial
transformation within the meaning of 19 CFR 134.35?
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. (See 19 CFR 134.35).
In such circumstances, the imported article is excepted from
marking. The outermost containers of the imported articles shall
be marked.
Customs ruled in ORR 824-70, (August 24, 1970), that a
manufacturer who purchased imported golf club heads, either
finished or unfinished, and assembled them with shafts and grips
of U.S. origin into finished golf clubs, was the ultimate
purchaser of the imported golf club heads. The ruling directed
that if the Regional Commissioner of Customs was satisfied that
the imported golf club heads were to be used by an original
equipment manufacturer, the golf club head were excepted from
individual marking. In HQ 728213, (July 3, 1985), Customs
reiterated this position. In HQ 724901, (April 9, 1984), Customs
advised that the ultimate purchaser of imported golf club grips
to be used in the manufacture of golf clubs was the golf club
manufacturer. Customs stated that golf club grips which are
imported by golf club manufacturers in the U.S. are substantially
transformed into a new and different article of commerce (i.e.
golf clubs).
In HQ 733185, (April 11, 1990), Customs reiterated the
position that golf club grips imported by golf club manufacturers
or intended to be sold to golf club manufacturers would be
excepted from individual marking. However, Customs also found
that imported golf club grips that were to be used in the repair
or replacement of grips on completed clubs that already had been
purchased or received by the consumer must be individually
marked. Customs reasoned that the mere fitting of a replacement
grip onto a golf club shaft is a simple assembly not constituting
a substantial transformation.
This case is different from our previous rulings on golf
clubs in that foreign shafts are being combined with foreign
heads and domestic grips to make the finished clubs. The
combining of the heads, shafts, and grips is an assembly of
nearly finished components.
In C.S.D. 85-25, (HQ 071827), (September 25, 1984), Customs
held that an assembly will not constitute a substantial
transformation unless the operation is "complex and meaningful."
Customs criteria for whether an operation is "complex and
meaningful" depends on the nature of the operation, including the
number of components assembled, number of different operations
involved, and whether a significant period of time, skill,
detail, and quality control are necessary for the assembly
operation. This criteria for determining whether a substantial
transformation occurs is applied on a case-by-case basis.
In C.S.D. 80-111, (HQ 710564), (September 24, 1980), Customs
considered whether the domestic manufacturing processes through
which imported ceiling fan components become finished fans
constituted a substantial transformation. In this ruling, it was
stated that mere assembly of parts will not constitute a
substantial transformation. We concluded that the assembly of
the fan was not a substantial transformation because the
processes were basically assembly line procedures which did not
physically alter the components. Furthermore, we noted that
manufacturing processes were mere combining processes that were
not complex or required a great deal of skill.
Similarly, in this case, despite claims to the contrary, we
believe that the making of the golf club is a simple assembly
process of basically finished parts. We note that there is a
hole on the top of the head so no drilling is necessary. The
combining of the head and shaft is a relatively simple operation
which does not take a great deal of time and skill and not a
complex assembly. Basically, all that is needed to make the
finished club is to insert the shaft into the head and to glue
them together.
This case is distinguishable from our previous rulings on
golf clubs in that both head and shaft (the two major components
of a golf club) are foreign while in our prior rulings at least
one of these parts was U.S. made. Although U.S. made grips are
added to the golf clubs, 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.
We disagree with your assertion that the origin of the
various components used in a U.S. assembly operation is not
relevant in determining whether a substantial transformation
results. Especially, in cases where the manufacturing operation
is performed in the U.S., we have considered the origin of the
components used a relevant factor and the addition of
significant U.S. components as a significant indicia of a
substantial transformation. For example in HQ 730069, (December
23, 1986), a substantial transformation of imported jack
components was found based in large part on the fact that
significant domestic components were added in the U.S. See also
HQ 734259, (April 13, 1992), (imported baler housing
substantially transformed when combined with essential U.S.
components to make high density hydraulic balers) and HQ 709570,
(November 24, 1978), (imported electric motor substantially
transformed when combined in the U.S. with abrasive belt machine
consisting of all domestic components; however, no substantial
transformation if an essential component of the abrasive belt
machine was foreign).
Although Daiwa concedes that no substantial transformation
would occur if the heads and shafts were imported together, it
maintains that this is not the case here because they are
imported separately and Customs must base its marking
determination on merchandise in its imported condition. This
position would permit importers to evade the country of origin
marking law by allowing an exception from the marking if an
article is to be assembled in the U.S. and the components are
imported in different shipments, even in cases where the assembly
was very simple. It would defeat the purpose of the marking law
of informing the ultimate purchaser in the U.S. of the country of
origin of merchandise of foreign origin. Principles which may be
applicable to other Customs matters, such as classification, do
not always apply to country of origin marking cases because they
have different purposes. An imported article will remain an
article of foreign origin unless it is substantially transformed
in the U.S. To determine if an article is substantially
transformed in the U.S. which would except the article from
marking under 19 CFR 134.35, it is necessary both to look at an
article as it is imported and the processed article. Pertinent
to the issue is the various foreign components that are used in
the manufacturing process; regardless of when these other
components were imported. If the processing in the U.S. does not
change the name, character, or use of an article, it will not be
substantially transformed and the article must be marked to
indicate its country of origin no matter how it was imported. In
this case because the heads and shafts are not substantially
transformed, they are not excepted from marking under 19 CFR
134.35, even if they are imported in different shipments.
Similarly, we find that your contention that the holding in
Gibson-Thomsen v. United States, supra, requires a finding that
the head and shafts are substantially transformed in U.S. is
without merit. This case is clearly distinguishable from the
Gibson-Thomsen case because in that case, which concerned the
manufacturing of brushes in the U.S., the imported items in
question, the brush handles were not finished and required
further manufacturing. The processing of the foreign brush
handles, involved drilling holes and embedding them with wire to
hold the bristles which changed their character. No such work is
done in this case. Rather, both major components, the heads and
shafts are imported in a finished condition. They are completed
articles which do not lose their separate identity when they are
combined. The manufacture of the golf clubs results from a
simple assembly of already finished components which does not
result in a substantial transformation.
You indicate that the heads are made in Taiwan and Japan and
that the shafts are all made in Japan. Because the heads and
shafts are not substantially transformed in the U.S., the country
of origin of each these components must appear. If the head and
shaft are made in two different countries, each component must be
separately marked to indicate its own country of origin with
markings such as "Shaft Made in Japan" and "Head Made in Taiwan."
If the head and the shaft are both made in Japan, marking of one
of the components is sufficient.
HOLDING:
The combining of a foreign golf club head with a foreign
golf club shaft and a U.S. made grip to make a finished golf club
is not a substantial transformation. Thus the head and the shaft
must be marked with their country of origin as indicated above.
Sincerely,
John Durant, Director
Commercial Rulings Division