OT:RR:CTF:VS JMV H305552
Sandra Liss Friedman
Barnes, Richardson & Colburn, LLP
Global Trade Law
100 William Street, Ste. 305
New York, NY 10038
RE: Toner Cartridges; Country of Origin Marking; Section 301 Measures
Dear Ms. Friedman,
This is in response to your correspondence, dated August 7, 2019, on behalf of your client Brother International Corporation, (“BIC”). In your letter, you request a ruling pursuant to 19 C.F.R. Part 177 regarding the country of origin of certain toner cartridges.
FACTS:
BIC, headquartered in Bridgewater, New Jersey, imports various toner cartridges that are designed and developed in Japan. These toner cartridges are used with BIC’s stand-alone laser and multifunction printers to carry out their printing function. The toner cartridge that is the subject of this ruling is Model TN439C, which is a color toner cartridge, capable of printing approximately 9,000 pages. The TN439C is assembled in China from parts of various origins.
You assert that the TN439C is similar in design to other toner cartridges and that the main component is the toner powder, which originates in Japan and is by far the single most valuable component. In support of this assertion, you provided this office with a bill of materials for the toner cartridge, which shows that the toner represents approximately 51% of the total cost of the finished toner cartridge, including labor. You also note that customers believe they are purchasing toner, not a cartridge, and refer to it as such.
The toner powder formula is proprietary and confidential. You state that the toner powder at issue is an electrically charged powder made of plastic and pigment. The pigment provides the color while the plastic allows the pigment to stick to the paper when the plastic is heated and melts. You state that the melting process gives laser toner an advantage over ink in that it binds firmly to the paper fibers resisting smudges and bleeding, and provides an even, vivid tone that helps text appear sharp on the page.
In addition to the toner, the finished toner cartridge contains several other components from Malaysia, South Korea, China and Japan. The blade and developer roller are sourced from outside China. These non-Chinese parts together with the Japanese toner represent 74% of the total cost of the finished toner cartridge. Conversely, Chinese parts and labor only make up 26% of the total production costs. The assembly process in China for the toner cartridge includes heat welding the developer assembly and the attachment or insertion of components to form the finished cartridge. You state that the process takes a total of 13 minutes to complete.
You ask this office to find that the country of origin of the BIC toner cartridge is Japan. You state in an email with this office that you are seeking a ruling for general customs purposes.
ISSUE:
Whether the country of origin of the BIC toner cartridges is Japan.
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 United States 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 United States the English name of the country of origin of the article. By enacting 19 U.S.C. § 1304, Congress intended to ensure “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, 302 (1940).
The country of origin marking requirements and the exceptions of 19 U.S.C. § 1304 are set forth in Part 134, Customs Regulations (19 C.F.R. Part 134). Section 134.1(b), Customs Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the United States. 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. A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments, Inc. v. United States, 681 F.2d 778, 782 (1982).
In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Id. at 1373. Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis.
The Court of International Trade (“CIT”) has applied the “essence test” to determine whether the identity of an article is changed through assembly or processing. For example, in Uniroyal, Inc. v. United States, 3 C.I.T. 220, 225 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), the court held that imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and thus were not substantially transformed into a product of the United States. Further, the court noted that the attachment of the outsole to the upper was a minor manufacturing or combining process which left the identity of the upper intact.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the CIT found that articles imported in a pre-fabricated form with a predetermined use are not substantially transformed by assembly into the final product, without more. In Energizer, the CIT interpreted the meaning of the term “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight, under the TAA. All of the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight. The CIT noted that the assembly operations were not complex and that the imported components retained their names after they were assembled into the finished Generation II flashlight. Therefore, the CIT determined that China, the source of all but two components, was the correct country of origin of the finished Generation II flashlights under the government procurement provisions of the TAA.
Similarly, in HQ H009107, dated August 2, 2007, CBP found that final assembly in the United States of remanufactured cartridge subassemblies of various origins, imported in a pre-fabricated form with restored functionality, did not result in a substantial transformation. In HQ H009107, empty toner cartridges of various origins were collected, and sent to a foreign country where damaged parts were removed. After being rebuilt with a clean blade, roller and gears, the developer section was temporarily assembled with the rebuilt waste hopper and a “host” toner section, which was used repeatedly for testing purposes only. The temporarily assembled unit was tested, and then the main sub-assembly components (the developer section, the toner hopper, and the waste hopper) were shipped to the United States, where they were reassembled, filled with toner and retested. CBP found that, even when the toner was of U.S. origin, the U.S.-operations were not complex enough to result in a substantial transformation of the sub-assemblies of various origin because the sub-assemblies, while not fully functional at the time of import, were essentially made functional again at the foreign facility.
When considering the origin of toner cartridges remanufactured from parts of various origins, CBP has generally found that the origin of the toner was an important consideration. In HQ W563548, dated November 9, 2009, CBP considered the country of origin of toner cartridges remanufactured in the United States. The toner cartridges were comprised of 52 parts plus toner: 32 parts salvaged from used cartridges and 20 new parts. Of the new parts, 14 were from the United States, 1 from the U.K., and 5 from China. The components with mechanical functions such as the shutters, mixing gear, mixing bar, and spiral attachments were simply cleaned and not replaced. The original doctor blade was cleaned and the original primary charge roller was sandblasted and recoated. The cartridges were filled with new toner of Japanese origin and tested. CBP found that the cartridges were not substantially transformed in the United States because the remanufacturing processes were rather simple. Rather, the toner was the only significant component replaced during the remanufacturing operation. CBP concluded that since the toner imparted the essential character of the remanufactured toner cartridge, the country of origin was Japan.
In addition to the origin of the toner, CBP has considered the origin of other essential parts when determining the origin of toner cartridges manufactured from new parts. In HQ H251592, dated June 24, 2014, CBP looked at the origin of the various subassemblies to determine the origin of an all-in-one (“AIO”) cartridge. In that case, the development unit was manufactured in China and the toner powder was manufactured in Japan. The Organic Photo Conductor (“OPC drum”), which enabled the toner particles to affix onto the paper, was manufactured in Thailand; however, the OPC drum was assembled into the cleaning unit in Japan with other parts of Japanese origin. The OPC drum therefore became an integral part of the cleaning unit such that it was considered a product of Japan. CBP found that these three components (two of Japanese origin and one from China) were brought together by the frame assembly also performed in Japan. Therefore, CBP found that the country of origin of the AIO cartridge was Japan. In making this decision, CBP noted that the Japanese origin toner powder was the most critical component of the cartridge.
CBP has also considered the value added by manufacturing processes in a country to be an important consideration in determining country of origin. In New York Ruling Letter (“NY”) G87305, dated March 12, 2001, while acknowledging that the Japanese origin toner and OPC drum were significant and essential to the operation of the cartridge, CBP found the origin of remanufactured laser printer cartridges to be China. In making its decision, CBP stated that the remanufacturing process in China was more than a simple assembly. CBP noted the significant value added in China, which accounted for most of the cost of the finished cartridges. This case is distinguishable from NY G87305 because, here, the processing that occurs in China is just a simple assembly and the greatest value is added by the toner made in Japan.
As acknowledged in all of the above referenced rulings, the toner is a critical component of the cartridge. The toner imparts the final product with its name, character and use. A toner cartridge is often referred to as simply “toner.” The toner’s use is to form printed text and images, while the cartridge is the container. The toner from Japan makes up more than half of the final cartridge’s value, which demonstrates that the toner is the most important component of the completed cartridge. The final assembly of the cartridge in China does not render the toner with a new name, character or use since incorporating the toner into the cartridge does not alter its function or physical properties—the toner remains a plastic powder and ink. Additionally, the parts come from a variety of countries, and none of the major parts, such as the developer roller and blade, are from China where the final assembly occurs.
This case is similar to Uniroyal and Energizer in that various parts, including the toner, are imported into China in a pre-fabricated form with a predetermined use. These parts are then assembled through a process that consists primarily of simple attachment. As in HQ H009107, where CBP found that final assembly of toner cartridges did not affect a substantial transformation, the physical parts here also do not undergo a substantial transformation in China. When the assembly of toner cartridge parts does not result in a substantial transformation, the origin of the toner becomes an important consideration. See HQ W563548. Like the shoe upper in Uniroyal, the toner imparts the essence of the toner cartridge. Additionally, the greatest value of the toner cartridge comes from the toner, which makes up 51% of the value. Therefore, we find that the origin of the cartridge is the country of origin of the toner and the country of origin of the BIC toner cartridge is Japan for purposes of marking and Section 301.
You correctly note that HQ 734140, dated September 12, 1991, is no longer applicable since it pertained to marking requirements per the repealed 19 C.F.R. § 10.22 under subheading 9802.00.80, HTSUS. Further, you note that in NY N018311, dated November 2, 2007, CBP found that combining certain Japanese components, including toner of Japanese origin, with various Chinese components in China to form a finished toner cartridge, did result in a substantial transformation of the Japanese components into a good of Chinese origin. The decision did not indicate what components were made in China; however, as we indicated in this case, the developer roller does not originate in China where the final assembly occurs. Therefore, it is our opinion that N018311 is distinguishable.
Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8443.99.50, HTSUS, are subject to an additional ad valorem rate of duty. Since the country of origin of the subject toner cartridges is Japan, the additional duty is not applicable.
HOLDING:
The country of origin of the BIC toner cartridge is Japan for purposes of marking and Section 301.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
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 CBP officer handling the transaction
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Classification Branch