CLA-2-84:OT:RR:NC:N2:220
Dora Chiang
XAC Automation Corp.
4F., No. 30 Industry E. Road IX
Science-Based Industrial Park
Hsin-Chu 300
Taiwan
RE: The country of origin of the Contactless Reader Module from Taiwan
Dear Ms. Chiang:
In your letter dated May 20, 2019 you requested a country of origin ruling determination on behalf of Dover Fueling Solutions.
The merchandise under consideration is identified as the Contactless Reader Module C150 and the Contactless Reader Module C150S (Reader Modules), which are described as secure payment card readers for use at kiosk or self-service payment stations. You have requested our office determine the correct country of origin of the subject Reader Modules which are assembled in Taiwan from parts and components of various origins.
The Reader Modules consist of a top and bottom plastic enclosure, an antenna board, a main printed circuit board assembly (PCBA), and various seals and hardware. You state in your request that the Reader Module main boards are manufactured in Taiwan from a bare printed circuit board and components which are soldered onto the board, and that the top and bottom covers as well as the antenna board are of Chinese origin. Once the boards are produced through a surface mount process, they are assembled into the top and bottom covers and tested prior to packing for export. All of the assembly, programming, and testing is performed in Taiwan.
With regard to the appropriate country of origin of the Reader Modules, Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin (or its container) 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 an ultimate purchaser in the United States the English name of the country of origin of the article. The regulations implementing the requirements and exception to 19 U.S.C. § 1304 are set forth in Part 134, Customs and Border Protection Regulations (19 C.F.R. Part 134).
19 C.F.R. § 134.1(b) provides in pertinent part as follows:
Country of origin means 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 this part;
As stated in HQ 735009 dated July 30, 1993, “The country of origin is the country where the article last underwent a “substantial transformation”, that is, processing which results in a change in the article's name, character, or use”. Customs and Border Protection (CBP) maintains, based on United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940), that “A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, and use that differs from the original material subjected to the processing.”
Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
In determining the origin of the Reader Modules, we would note that the manufacturing process of the main PCBA involves the placement and soldering of numerous individual components, integrated circuits, etc. onto a bare printed circuit board. In our view, the main PCBA is the essential component of the finished module as it is what is programmed to perform its function of scanning payment cards and communicating with the host controller. As such, the manufacturing processes and assembly performed in Taiwan constitutes substantial transformation of the original articles into a new or different article of commerce and the country of origin of the Reader Modules is Taiwan.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Karl Moosbrugger at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division