MAR-2-85:OT:RR:NC:N2:209
Maureen E. Thorson
Wiley Rein LLP
1776 K Street NW
Washington, DC 20006
RE: The country of origin of cellular telephones from China
Dear Ms. Thorson:
In your letter dated February 12, 2019, you requested a country of origin ruling on behalf of your client, Sonim Technologies Inc.
This request concerns the country of origin for two models of cellular telephones, the Sonim XP8 and the Sonim XP5s. The XP8 runs on the Android operating system and provides the typical complement of functions seen in smartphone devices, i.e., cellular telephone and texting capability, ability to access the internet, camera function, and the ability to access and interact with multiple applications. The XP5s runs on a proprietary operating system, but also allows the user to install and interact with Android-based applications, provides the user with cellular telephone/texting capability, and provides a camera function.
Sonim manufactures both the XP8 and the XP5s through a three-stage process:
In the first stage, the printed circuit board assembly (PCBA) is manufactured. Surface mounting technology (SMT) is used to load a raw circuit board with transistors, resistors, diodes, capacitors, and other electronic components, including the processor, memory, Bluetooth, and related microchips necessary for the finished product to function. In this stage, the PCBA is also tested to ensure that the Bluetooth, Wi-Fi, GPS, and cellular telephone (2G/3G and
LTE) function properly. The overall operating system software that runs the product is also downloaded onto the PCBA in this stage. Stage 1 as described above may take place within (Taiwan, Malaysia, or Vietnam).
In the second stage, the hardware of the phone is assembled together from a series of subassemblies and other major components. This includes the PCBA, housing, screen, keys/keypads, USB connectors, battery, and antenna. After assembly, the product is tested for overall functionality. While the PCBAs will be produced as described above, the other hardware subassemblies/major components will originate in China. Stage 2 as described above will take place in China.
In the third stage, the individual assembled devices are flashed with any customer specific software, and are packed with chargers, extra batteries, and other peripherals ordered by the specific customer. In stage 3, the customer software flashing will take place in China, and the packing operations will take place in 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 United States 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).
Based upon the facts presented and the pertinent authorities, it is the opinion of this office that the PCBA, which is created in stage one as described above, imparts the essential character to the cellular telephones. The assembly processes that take place as described in stages two and three do not result in a substantial transformation of the PCBA. Therefore, the cellular telephones would be considered a product of Taiwan, Malaysia, or Vietnam, depending upon which country the processes in step one take place, and should be marked accordingly at time of importation into the United States.
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