MAR-2:OT:RR:NC:N2:220
Richard Mojica
Miller & Chevalier
900 16th St NW
Washington, DC 20006
RE: The country of origin, marking, and applicability of Section 301 trade remedy of the LED Whitening Device
Dear Mr. Mojica:
This is in response to your letter dated January 8, 2019 requesting a country of origin and marking ruling on behalf of your client, Colgate-Palmolive Company. The issue raised consists of whether or not the assembly operations performed in China constitute a substantial transformation of the finished good which would determine the application of Section 301 trade remedies. A detailed description of the manufacturing process was submitted for our review.
The merchandise under consideration is identified as the LED Whitening Device which is described as a handheld battery operated electrical appliance for whitening teeth in the home and is used directly by the consumer. The LED Whitening Device consists of the an LED Lighting Strip, a battery, a printed circuit board assembly (PCBA), a charging cradle and cable, plastic housing and structural components, and packaging.
You state that the LED strip is manufactured in the United States and subsequently shipped to China to be combined with the remaining components which are all of Chinese origin. The production steps you provide indicate the LED strip is inserted into the various plastic components and combined with the battery, PCBA, and enclosure/mouthpiece to produce a functioning appliance. After assembly, the LED Whitening Device is shipped to the United States where it will be packaged with a whitening gel and sold directly to consumers. You indicate, and we agree, that the correct classification of the LED Whitening Device is 8543.70.9960, Harmonized Tariff Schedule of the United States (HTSUS).
With regard to the origin of the LED strip, you state that it is produced from LED wafer of Taiwan origin which is sent to the U.S. where it is further processed into the LED strip. The manufacturing process completed in the U.S. of harvesting the crystals from the wafers and producing a liquid LED ink, which is then printed onto plastic substrates, is significant and one that establishes the origin of the LED strip as the United States.
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; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.”
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).
Moreover, 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.
Based upon the facts presented and the relevant authorities, it is the opinion of this office that the LED strip represents the single most important component which provides the finished article, the LED Whitening Device, with its character and function. Additionally, after the LED strip is exported from the U.S. and the assembly in China is concluded, the process does not substantially transform any of the individual components affecting a change in name, character, or use and the individual components that make up the finished article retain their identity and remain distinguishable. Consistent with Energizer, assembly of the U.S. origin LED strip, which is shipped to China for processing into the finished LED Whitening Device, does not result in a substantial transformation in China and the LED Whitening Device is considered a product of the U.S. for marking purposes at time of importation into the United States.
Accordingly, the LED Whitening Device will not be required to have any country of origin marking pursuant to 19 U.S.C. 1304 when imported into the U.S. Furthermore, the LED Whitening Device is not subject to the Section 301 trade remedies as provided for under 9903.88.02, HTSUS.
Whether or not an article may be marked with the phrase “Made in the U.S.A.” or similar words denoting U.S. origin, is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the FTC Division of Enforcement, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580 on the propriety of proposed markings indicating that an article is made in the U.S.
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