MAR-2-85:OT:RR:NC:N2:209

Tyler S. Potter
Trade Advisory Manager
Flexport Customs LLC.
760 Market Street
San Francisco, CA 94102

RE: The country of origin of Integrated Circuits

Dear Mr. Tyler:

In your letter dated July 7, 2022, you requested a country of origin and marking ruling on behalf of your client, Superacme Technology (Hong Kong) Limited.

The subject merchandise is Integrated Circuits, (product numbers KF1960, KF1968 and KF1973). The integrated circuits are comprised of an electronic circuit on a small piece of semiconducting silicon. The integrated circuits are used for data processing in computers. The production process is the same for each of the three integrated circuits. The front-end manufacturing process occurs in South Korea, a back-end or packaging process in either China or Taiwan and a final testing process also in China.

The production process that occurs in South Korea is as follows:

Wafer Production Oxidation Masking Lithography Development Etching Thin Film Deposition Metal Wiring Process Wafer Testing

Each 12-inch wafer produced in South Korea contains 4,872 bare chips. Each chip has a complete integrated circuit function and meets the technical parameters for its customer-specific design. Once the wafer arrives in China or Taiwan, the packaging process begins.

The packaging process occurs in China or Taiwan involves the following:

Bumping Grinding Cutting Encapsulation Connection Point Testing

Packaged integrated circuits are then sent for final testing in China. The testing process analyzes the integrated circuits' electrical characteristics, functional characteristics, and operating speed under different electrical signals, volt, and moisture. The purpose of these tests is to ensure that the products are fully functional and qualified to meet customer application requirements.

A complete description/explanation of each manufacturing step has been provided within the ruling request.

The marking statute, Section 304, 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 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.

The “country of origin” is defined in 19 CFR 134.1(b) 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 this part.”

For tariff purposes, the courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).

However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).

Based upon the facts presented, it is the opinion of this office that the front-end manufacturing process that takes place in South Korea, imparts the essence to the integrated circuits. The wafers, (which contain 4,872 integrated circuit chips incorporating their complete circuitry) manufactured within South Korea, do not undergo a substantial transformation as a result of the subsequent processing (i.e., back-end processing/packaging, final testing), that takes place in either China or Taiwan. They retain their identity with a predetermined end use. Therefore, the country of origin for marking purposes would be South Korea, where the front-end processing takes place. The integrated circuits, (product numbers KF1960, KF1968 and KF1973) should be legibly, conspicuously, and permanently marked in accordance with the requirements of 19 U.S.C. 1304 to indicate its country of origin.

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 Steven Pollichino at [email protected].

Sincerely,

Steven A. Mack
Director
National Commodity Specialist Division