MAR-2 OT:RR:NC:N4:433
David Munger
Strategic Sourcing Project Manager
Ergotron, Inc.
1181 Trapp Road
St. Paul, MS 55121
RE: COUNTRY OF ORIGIN AND COUNTY OF ORIGIN MARKING ON WORKFIT-T, SIT-STAND DESKTOP WORSTATIONS FINISHED IN THE UNITED STATES USING IMPORTED LIFT MECHANISMS FROM CHINA
Dear Mr. Munger:
This is in response to your letter received by the National Commodity Specialist Division on June 17, 2016, requesting a ruling on the country of origin and country of origin marking for imported lift mechanisms made in China which are assembled to U.S. components in the United States, thereby producing finished Workfit-T, Sit-Stand Desktop Workstations. See associated New York classification ruling issued to Ergotron Inc., N271412 dated December 28, 2015.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), requires, subject to certain specified exceptions, that every article of foreign origin imported into the U.S. shall be marked to indicate the country of origin to the ultimate purchaser in the U.S. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
An ultimate purchaser is defined in section 134.1, Customs Regulations (19 CFR §134.1), as “the last person in the U.S. who will receive the article in the form in which it was imported.” The regulation further provides that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he/she subjects the imported article to a process that results in a substantial transformation. However, if the manufacturing process is merely a minor one which leaves the identity of the imported article intact, 19 CFR §134.1 (d) (2) provides that the consumer or user of the article who obtains the article after the processing will be regarded as the ultimate purchaser.
According to United States v. Gibson-Thomsen Company, Inc., 27 CCPA 267 (C.A.D.98), a United States manufacturer is considered to be an ultimate purchaser if a manufacturing process is performed on an imported item so that the item is substantially transformed in that it loses its identity and becomes an integral part of a new article, with a new name, character or use. See Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (CIT 1982). The Court determined that in such circumstances, the imported article is excepted from individual marking. Only the outermost container is required to be marked. See Sections 134.32 (d) and 134.35 (a), Customs Regulations (19 CFR §134.32 (d), 19 CFR 134.35 (a)).
If the manufacturing or combining process is a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred and an appropriate marking must appear on the imported article so that the consumer can know the country of origin – further citing found in Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (CIT 1982). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will {generally} not result in a substantial transformation. See C.S.D. 80-111, C.S.D. 85-25, and C.S.D. 90- 97.
Consistent with Uniroyal, the Unites States Court of Appeals, Belcrest Linens v. the United States, 741 F2d 1368, No. 84-734, dated August 21, 1984, stated in context with the phrase “more than mere assembly operations”: In determining whether the combining of parts or materials constitutes a substantial transformation, the issue has been the extent of the operations performed and whether the parts lose their identity and become an integral part of a new article. See Adolphe Schwab, Inc. v. United States, 62 Treas.Dec. 248, T.D. 45908 (1932), aff'd, 21 CCPA 116 (1983) (watch parts transformed into watches); Carlson Industries, 65 Cust. Ct. 474 (1970) (chair parts transformed into finished chairs).
With emphasis placed, in Carlson Furniture Industries, it was held that the assembly of imported finished and unfinished chair parts into finished chairs in the U.S. was a substantial transformation. After importation, the importer assembled, fitted and glued the wooden parts together, inserted steel pins into the key joints, cut the legs and leveled them to length, and in some instances, upholstered the chair and fitted the legs with glides and casters. The court determined that the importer had to perform additional work on the imported materials, upholstery was added, and more was required than the mere assembly of parts. In T.D. 71 77 (March 8, 1971), Customs agreed with the Carlson court that “the company which assembles imported wood chair parts into chairs is the ‘ultimate purchaser’ of such parts,” but limited the decision to situations where the parts were imported in an unfinished condition.
We recognize that there are a number of Headquarters and New York rulings that have determined a substantial transformation has occurred based upon the complexity of United States processing, plus additional considerations such as processing time, cost, visibility of the imported article after processing and skill required by the assembly operation. Yet, on the other hand, there are a number of Headquarters and New York rulings, where the combining of parts and materials coupled with processing and assembly of a nature not so complex, have resulted in a substantial transformation too, such as the “chairs” in Carlson and moreover the “finished tables” of Headquarters ruling HQ 731676 dated June 22, 1989. See Headquarters ruling HQ 561258 dated April 15, 1999. Despite the duplicity of logic and reasoning, what is critically important in the ascertaining of whether a substantial transformation has occurred, is whether based on the totality of the evidence there has been a change in the character or use of the imported article after processing. To that extent, we focus our attention to Ergotron’s United States finishing operation, which entails a review of the domestic components manufactured and their associated process descriptions, followed by a review of “additional considerations.”
Processes Occurring in the United States:
Right and Left Keyboard Tray Brackets & Metal Support Bar ---
(1) The right and left keyboard support brackets and metal support bar are of United States origin. The process involves: (A) laser cutting sheet metal components, (B) Press braking to bend sheet metal components, (C) stud insertion into the sheet metal components, (D) painting the sheet metal components and (E) assembling the United States sheet metal components to the lift mechanism of Chinese origin.
Work Surface and Keyboard Tray ---
(1) The work surface and keyboard tray are of United States origin. The process involves: (A) sawing Medium-density Fibreboard (MDF) to the size of the work surface and keyboard tray, (B) routing of profiles on the MDF sheets, (C) sanding of MDF to prepare for the vinyl laminate, (D) applying glue to the MDF, (E) pressing the vinyl laminate onto the MDF, (F) removing the excess laminate from the work surface and keyboard tray, (G) removing the excess glue from the bottom of the work surface and keyboard tray, (H) printing the Ergotron logo onto work surface and (I) attaching the work surface and keyboard tray to the lift mechanism of Chinese origin.
Additional Considerations ---
Based on company provided information, we have fashioned a framework for “additional considerations” in the following sequence: bills of materials, processing time and processing cost, skill required by the assembly operation, and visibility of the imported article after processing.
(1) When viewing the bills of materials, the total cost of materials and/or components of the lift mechanism of Chinese origin as compared to the work surface and keyboard tray & metal support bar of United States origin, there is a nominal (insignificant) variance.
(2) When examining the processing time of the Chinese lift mechanism compared to the processing time of the United States finishing operation, we find that the Chinese operation takes longer than the United States operation, approximately ½ hour longer, yet the United States cost of processing is significantly higher, while taking into account the shorter time factor of processing. Factors explaining the higher United States cost would be the automated equipment used, the working of the MDF, the vinyl laminating process, wage differences, and to a lesser degree the laser cutting due to only three components being produced.
(3) We recognize that the Chinese processing time is manually intensive over that of the automated processing, laser cutting and laminating occurring in the United States, thereby explaining the longer processing time occurring in China. The assembling of many components would generally take longer to process into a finished product than fewer components.
(4) Ergotron’s process diagram of the manufacturing of the lift mechanism of Chinese origin entails similar processing of the metal components of the right and left keyboard tray brackets & metal support bar of United States origin, in that both the Chinese and United States metal products need to be formed, sized and assembled. We note that the metal components of Chinese origin are stamped versus laser cut in the United States, however, there are more stamped metal components to be assembled into the forming of a lift mechanism, than there are laser cut components to be attached to the lift mechanism.
(5) Observation of the finished Workfit-T, Sit-Stand Desktop Workstation depicts a work surface and keyboard tray capable of placing a computer upon and a keyboard for the primary purpose of conducting work related matters, principally while standing. The lifting mechanism allows for the functionality of conducting work while standing, however, it is the work surface and keyboard tray that allows for the work to be conducted, without which, all there [is], is a lifting mechanism incapable of being used as a workstation.
We find that simple assembly is involved in the attaching of three United States components, the right and left keyboard support brackets and a metal support bar to a lift mechanism of Chinese origin. Further, “additional considerations” 1 through 4 above lends no further support to answer the question of whether or not a substantial transformation occurred as a result of the finishing operations in the United States, while “additional consideration” 5 above bears down on the substantial transformation analysis. In spite of simple assembly and no further support provided by means of the “additional considerations” of 1 through 4 above, this office is {persuaded} that a “substantial transformation” has occurred by means of the United States inputs, the right and left keyboard tray brackets and metal support bar, and the work surface and keyboard tray, all of which are attached in the United States to the foreign lift mechanism, thereby forming a sit to stand workstation.
With case in point, there has been a change in character and use of the foreign lift mechanism by means of attaching and combining the United States components to the lift mechanism in the manufacture of the Workfit-T, Sit-Stand Desktop Workstation.
In accordance with Sections 134.32 (d) and 134.35 (a), Customs Regulations (19 CFR §134.32 (d), 19 CFR 134.35 (a)), we find that Ergotron is the “ultimate purchaser” of the lift mechanism made in China, which will be subsequently incorporated into a sit to stand workstation, and as such the individual lift mechanism(s) are excepted from marking and only the [outermost container] of the imported articles shall be marked to reflect the country of origin of China. Furthermore, goods of United States origin need not be marked with country of origin.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 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 Neil H. Levy at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division