MAR-2-05 CO:R:C:V 734440 KR
Mr. Steven B. Lehat
Sheldon & Mak
201 South Lake Avenue, Suite 800
Pasadena, CA 91101
RE: Country of origin marking of locking apparatus; keys;
combining; substantial transformation
Dear Mr. Lehat:
This is in response to your letter dated November 22, 1991,
requesting a country of origin ruling on behalf of your client,
Hampton Products International, regarding a locking apparatus
and keys which are imported from Taiwan which are to be combined
with other pieces and casings for a "jaws lock" which are
manufactured in the United States. A sample of a finished lock,
the imported locking apparatus with keys, and a "mock-up" lock
and keys with packaging were submitted for examination, and are
being returned to you, as requested. This ruling will apply only
to model numbers 400S, 400P, 500S, 500P, 550S, and 550P which use
the same imported locking apparatus.
FACTS:
You state that Hampton Products intends to import one model
of locking apparatus and keys for insertion into six different
models of locks. (30 millimeter widths-models 400S and 400P, 400
millimeter widths-models 500S and 500P, and 45 millimeter widths-
models 550S and 550P). You state that the only difference
between the 400, 500, and 550 series models is the size of the
lock, not the mechanism. The difference between the "S" and "P"
models is the type of 'grip' or 'post' used in the jaw of the
lock. You state that the imported brass lock apparatus contains
an unfinished surface and is not suitable for retail sale. The
brass lock apparatus is imported in boxes containing several
apparatus and keys. Each apparatus is not individually marked,
but the shipping box containing the lock apparatus and keys is
labeled with the country of origin, Taiwan. The keys are not
marked with the country of origin.
All the remaining parts of the lock are manufactured in the
United States. The United States manufactured pieces include:
an upper jaw, dow pin, lower jaw, jaw springs, allan assembly
pin, outer case, and bottom plate. The lock is assembled and
finished in the United States. You state that:
"[p]roduction of the Locks in the United States entails
die casting, grinding, polishing, and anodizing the
'upper jaw;' die casting and anodizing the 'lower jaw;'
extruding, cutting, milling, grinding, polishing,
anodizing, and then black powder coating the 'case;'
extruding, cutting, and drilling holes in the 'bottom
plate;' and finally assembling the Lock by pressing the
bottom plate into the case, grinding the edges thereof,
and otherwise incorporating the remaining components
into the finished Lock."
The packaging for the finished lock contains the lock, keys
and a printed card inside a clear plastic blister pack. The back
of the card lists instructions and a diagram of the parts and use
of the lock. The back of the card also states that the lock has
patents in the U.S. and Taiwan, and was "[m]anufactured for
Cotter & Company Chicago, IL 60614 ... 100% Retailer Owned." It
also contains the words "Made in USA". The cost of the imported
lock apparatus is approximately 18% of the cost of model 400S,
19% of model 400P, 24% of model 500S, 25% of model 500P, 23% of
model 550S, and 24% of model 550P.
The keys of one sample lock were imprinted with the word
"Hampton" on one side with the other side of the key blank. The
keys of the second sample inside the blister pack were imprinted
with the words "CUSTOM MADE" and "Hampton" on one side of the
key, and "CUSTOM MADE" and a four digit numeral on the other
side. The keys enclosed with the sample imported lock apparatus
were imprinted with "THE HIGH SECURITY" and "Gino" on each side
of the keys.
ISSUE:
Whether the imported lock apparatus and keys are
substantially transformed when they are combined in the United
States in the manner described above, and packaged 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 1120 (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. Frielaender & 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, 628
F. Supp. 978, 10 CIT 48 (CIT 1986); Koru North America v. United
States, 701 F. Supp. 229, 12 CIT 1120, (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. 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. United States, 542 F. Supp. 1026, 3 CIT 220 (CIT 1982),
to be the "essence of the completed shoe" and therefore, not
substantially transformed.
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 HQ 734219 (September 3, 1991), Customs applied these six
factors and ruled that imported water pans and charcoal pans were
not substantially transformed in the U.S. by combining them with
other domestic and foreign components during a repackaging
operation in the U.S. of smoker/grill units. Customs stated that
the water pans and charcoal pans were completely finished
articles when imported, there was no extensive manufacturing
process involved in combining the pans with its other domestic
and foreign counterparts and that placing the pans into a
cardboard container along with other domestic and foreign
articles was a minor operation which was not complex, required no
skill and was not time-consuming. Customs also stated that the
pans where not permanently attached to the smoker/grill unit
during the combining process nor where they permanently attached
once assembly of the unit was completed by the consumer.
Moreover, Customs stated that the pans were functionally
necessary to the use of the smoker/grill unit in that the unit
could not perform the essential operations of barbecuing,
smoking, roasting or steaming without the pans.
In this situation, the lock apparatus is substantially
transformed after entry into the U.S. The lock apparatus is only
part of the internal working of the whole of the lock. The lock
apparatus is permanently attached to the remaining pieces and is
not visible once assembled. The lock apparatus is functionally
necessary to the operation of the finished article, and not an
accessory retaining its independent function. The predominant
expense of the assembled lock is in the parts produced in the
U.S. The imported piece is a generic mechanism which is inserted
into remaining pieces which required extensive manufacturing and
development, and which received patents in the U.S. and Taiwan.
Based on our consideration of all these factors, we conclude
that the lock apparatus is substantially transformed in the U.S.
as a result of combining it with the U.S. manufactured pieces.
Accordingly, we find that Hampton Products is the ultimate
purchaser of the lock apparatus 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, the
purchaser at retail is the ultimate purchaser. Therefore, the
box containing the the imported lock apparatus prior to assembly
must continue to be marked with the country of origin of the lock
apparatus, Taiwan. However, it is not necessary to mark the
assembled lock with the country of origin of the imported lock
apparatus.
We further find that the keys associated with the imported
lock apparatus must be marked with the country of origin. Using
the six factors above, the keys which are imported from Taiwan
with the lock apparatus are a separate entity from the remaining
assembled lock. The keys are carried separately, and have a
separate and distinct function from the lock. The keys are an
"accessory which retains its independent function." See HQ
731432 (June 6, 1988). We, therefore, find that Hampton Products
would not be considered the ultimate purchaser of the imported
keys under 19 CFR 134.35; and that the keys must be marked with
their own country of origin. Further, since the keys are to be
repacked in retail containers, Hampton Products will have to
submit the proper certifications required under 19 CFR 134.26.
Alternatively, Hampton Products may request an exception from the
Customs district director under 19 CFR 134.34, if Hampton
Products agrees to mark the packaging in a legible, indelible and
permanent manner with the country of origin of the keys (e.g.,
"Keys Made in Taiwan").
The sample packaging contains the words, "Made in USA".
This ruling does not address the issue of whether "Made in USA"
may be marked on the packaging, or lock. The determination of
marking an item as "Made in USA" is under the primary
jurisdiction of the Federal Trade Commission and not this
service. We, therefore, recommend that you contact the Federal
Trade Commission, Division of Enforcement, located at 6th and
Pennsylvania Avenue, N.W., Washington, D.C. 20580, for any views
concerning marking the lock with the "USA" symbol.
HOLDING:
The imported lock apparatus is substantially transformed in
the U.S. by combining it with the U.S. manufactured remaining
lock pieces as described supra. However, the imported keys are a
separate entity and are not substantially transformed.
Therefore, Hampton Products is the ultimate purchaser of the lock
apparatus, but the retail purchaser is the ultimate purchaser of
the keys. The lock apparatus is excepted from marking provided
it is imported in a container which is properly marked to
indicate its origin, and the district director is satisfied that
Hampton Products will receive the lock apparatus in this
container and that such apparatus will be used only in the manner
described above and not otherwise sold. The keys must,
therefore, be marked to indicate their country of origin, Taiwan.
If the assembled locks will be repacked into a container which
obsures the marking on the keys, the certification requirements
of 19 CFR 134.26 are applicable.
Sincerely,
John Durant, Director
Commercial Rulings Division