MAR 2-05 CO:R:C:S 735198 AT
James L. Bikoff, Esq.
Timothy Trainer, Esq
Arter & Hadden
1801 k Street, NW., Suite 400K
Washington, D.C. 20006-1301
RE: Country of origin marking requirements for imported lock
parts used in making industrial padlocks; substantial
transformation; ultimate purchaser; 19 CFR 134.35
Dear Sirs:
This is in response to your letter dated June 3, 1993, as
supplemented on April 27, 1994, on behalf of Master Lock Company
("Master Lock") concerning the country of origin marking
requirements for imported Taiwanese locks parts that are to be
used in making finished industrial padlocks in the U.S. Samples
of each style of lock, their unassembled components and diagrams
of the assembly operation were submitted for review. This ruling
will apply only to padlock model numbers []. We regret the delay
in responding.
Contained in your submissions is material which you claim as
privileged business information and request that Customs make no
public disclosure of this information. Your confidentiality
request has been addressed in Customs response dated November 10,
1994. The confidential information is bracketed and will not be
disclosed in copies of this final determination made available to
the public.
FACTS:
Master Lock intends to import into the U.S. lock parts which
are made in Taiwan. These imported lock parts are assembled by
Master Lock with other U.S. parts to manufacture various models
of industrial padlocks []. All of these industrial padlocks are
basically similar with some differences as described in the
following paragraphs. Model No. [] contains 11 components, including the key set.
Of these 11 components, nine (the cylinder assembly, key set,
ball bearing, plated shackle stop pin, plated anti-saw pin,
screw, cylinder external assembly, plated shackle and hardened
shackle spring) are manufactured in the U.S. The remaining two
components, the lock case and cylinder retainer block, are of
Taiwanese origin. You state that the cost of the Taiwanese lock
parts represents between approximately 25 to 35 percent of the
total cost of the finished padlock, depending on the
configuration and keying system required.
Model No. [] also contains 11 components, including the key
set. Nine of these components (the cylinder assembly, key set,
ball bearing, plated shackle stop pin, plated anti-saw pin,
screw, cylinder external assembly, plated shackle and hardened
shackle spring) are manufactured in the U.S. The remaining two,
the lock case and cylinder retainer block, are of Taiwanese
origin. The cost of the Taiwanese lock parts represents between
approximately 35 to 43 percent of the total cost of the finished
padlock, depending on the configuration and keying system
required.
Model No. [] contains nine components, including the key
set. Eight of these components (the plated nut, non-key-retainer
cylinder external assembly, plated cylinder door, ball bearing,
screw, plated shackle, cylinder assembly and key set) are
manufactured in the U.S. The remaining component, the lock body,
is Taiwanese origin. The cost of the Taiwanese component
represents between approximately 49 to 53 percent of the total
cost of the finished industrial padlock, depending on the
configuration and keying system required.
As stated in your submission, each finished industrial
padlock consists of a lock body into which is inserted a
cylindrical locking mechanism and a retaining door. Each lock is
fitted with a shackle that is retained by steel ball bearings and
locks when snapped into place. The locks are unlocked with keys
sold with the locks, which themselves are manufactured in the
U.S.
Assembly of each of the industrial padlocks consists of the
following two operations:
1. The lock body is placed in a fixture, and all the
components are manually assembled into the body; and
2. The completed lock is then tested to assure the
locking mechanism is functional before packaging
the product for sale. You claim that the process of assembling these locks is
complex, requiring skilled workers to perform. Master Lock
employees who assemble the industrial locks receive 20 hours of
training. Also, the assembly operation requires specially
designed and built machines to hold the lock components in place
while they are manipulated with various hand tools by the
workers. In addition, the configuration of these machines must
be changed by the employees to accommodate the various assembly
processes for the different lock models. Based on these
considerations, you assert that the imported lock components are
substantially transformed in the U.S. when used in the
manufacture of industrial locks in that the name, character and
use of the imported parts change as a result of the U.S.
operations. Thus, Master Lock is the ultimate purchaser of the
imported parts and the parts themselves are excepted from country
of origin marking and only the outermost containers in which the
lock parts are imported must be marked with the country of
origin--Taiwan.
ISSUE:
What are the country of origin marking requirements of the
imported lock parts which are to be used in the manufacture of
industrial padlocks in the manner described above.
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 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, 19 CFR 134.35.
Customs has previously considered the issue of whether
imported components used in making a locking apparatus were
substantially transformed when they were combined with U.S.
components in the U.S. In HQ 734440 (March 30, 1992), Customs
ruled that an imported lock apparatus was substantially
transformed in the U.S. by combining it with U.S. manufactured
lock pieces into a finished jaw lock. We stated that the
imported lock apparatus was functionally necessary to the
operation of the finished lock, and was not an accessory
retaining its independent function after being assembled into the
finished article. In HQ 734923 (May 14, 1993), Customs ruled
that imported components of a door lockset, the rosettes and
parts of the latch, were substantially transformed when they were
assembled together with significant U.S. components in the U.S.
to make the finished door lockset. We stated that, although
assembly of the imported rosettes with the other U.S. components
of the lockset was not especially complex, these parts did not
have any independent function and did not have a separate
commercial use other than to be combined with the knobs and the
locking cylinder to make the door lockset. We further stated
that the finished article, the door lockset, is a distinct
article with a name, character, and use which is different from
its individual components. Rather than being a collection of
individual components, when it is fully assembled, the door
lockset functions as one unit, a door opening and closing
security device. The character of the rosettes is changed as
they become part of this unit, and they do not remain separate
articles after being assembled into the finished article.
Similarly, in this case, we find that the imported
components that are assembled in the U.S. into the finished
industrial padlocks [] are substantially transformed as a result
of the assembly operation. Like the imported components in HQ
734923, the lock case and cylinder retainer block do not have any
independent function or a separate commercial use other than to
be combined with U.S. components into a finished industrial lock. The character of the
lock case and cylinder retainer block is changed as they become
part of the finished article; they do not remain separate
articles after assembly. The finished article, industrial
padlock, is a distinct article with a name, character, and use
which is different from its individual components. Also, as you
state, a change in the name, character, and use of the imported
lock case and cylinder retainer block is evidenced by the fact
that there is a change in classification of the imported
components after assembly. That is, the lock case and cylinder
retainer block are classified as lock parts under subheading
8301.60.00, HTSUS, before assembly, but are classified under
subheading 8301.10, HTSUS, as a finished padlock, after the
assembly operation is completed. Thus, the imported lock
components for models [] are substantially transformed in the
U.S. as a result of being assembled with U.S. components into
industrial padlocks. Accordingly, the ultimate purchaser of the
imported lock parts is Master Lock and the lock cases and
cylinder retainer blocks are excepted from individual country of
origin marking. Only the outermost containers in which the lock
parts are imported must be marked to indicate Taiwan as the
country of origin of the parts.
Finally you indicate in your submission of June 3, 1993,
that Master Lock wants to mark the finished industrial padlocks
with the phrase "Made in U.S.A.". The Customs Service does not
have the authority to approve such a marking. If a phrase such
as "Made in the U.S.A." is proposed to be marked on the finished
padlocks, we advise you to contact the Federal Trade Commission
(FTC), Division of Enforcement, 6th & Pennsylvania Avenue, NW,
Washington D.C. 20508, before Master Lock undertakes to mark its
finished product in that fashion, since use of the phrase "Made
in U.S.A." is under the FTC's jurisdiction.
HOLDING:
The imported lock components for models [] are substantially
transformed in the U.S. as a result of being assembled with U.S.
components into industrial padlocks. Accordingly, the ultimate
purchaser of the imported lock parts is Master Lock and the lock
case and cylinder retainer block are excepted from individual
country of origin marking. Only the outermost containers in
which the lock parts are imported must be marked to indicate
Taiwan as the country of origin of the parts. A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division