MAR-2-05 CO:R:C:V 732870 KG

Jack Ryan
3M Center
P.O. Box 33250
St. Paul, Minnesota 55133-3250

RE: Country of origin marking of imported computer diskette

Dear Mr. Ryan:

This is in response to your letter of November 1, 1989, requesting a country of origin ruling regarding imported computer diskettes.


As part of a marketing strategy designed to introduce your customers to pre-formatted computer diskettes, you intend to attach a free pre-formatted diskette to your regular ten diskette package. The ten non-formatted diskettes are manufactured in the U.S. However, the pre-formatted diskettes will be manufactured in Taiwan and formatted in the U.S.

Formatting of a diskette must be completed before it can be used in a computer. Formatting consists of writing, by computer read-write head, sector address identification information on the diskette surface and allotting space for the data field. It takes about 1 1/2 minutes to format a non- formatted diskette. Formatting a disk is a simple operation.


Whether formatting of a imported computer diskette is a substantial transformation for country of origin marking purposes.


Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin 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 the ultimate purchaser in the U.S. the English name of the country of origin of the article. The Court of International Trade stated in Koru North America v. United States, 701 F.Supp. 229, 12 CIT (CIT 1988), that: "In ascertaining what constitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297 at 302, C.A.D. 104 (1940), where the court stated that: "Congress intended that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will."

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.35, Customs Regulations (19 CFR 134.35), states that the manufacturer or processor in the U.S. who converts or combines the imported article into a different article having a new name, character or use will be considered the ultimate purchaser of the imported article within the contemplation of section 304(a) of the Tariff Act of 1930, as amended, and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked.

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940), National Juice Products Association v. United States, 10 CIT 48, 628 F.Supp. 978 (CIT 1986), Koru North America v. United States, 12 CIT ___, 701 F.Supp. 229 (CIT 1988).

In HQ 554230 (September 24, 1986), Customs ruled that a blank computer diskette exported to Barbados or St. Lucia where computer data was encoded on it was considered sufficient to transform the diskette into a product of the Caribbean country involved. Customs reached this conclusion because of the greatly increased value of the article after the processing ($5.50 to excess of $286.00) and the substantial change effected by the complex and highly technical manufacturing operation.

Customs recently issued two country of origin rulings involving the programming of computer diskettes. In HQ 732087 (February 7, 1990), imported blank computer diskettes were sold to persons who wrote or duplicated software programs onto them in the U.S. Customs held in that case that writing or duplicating a software program onto a computer diskette is a substantial transformation. In HQ 732018 (February 7, 1990), a ruling dealing primarily with issues other than substantial transformation, Customs stated that a U.S. computer software company that transposes computer programs onto a computer diskette is the ultimate purchaser of the diskette because programming a diskette is a substantial transformation. Writing a software program such as Wordperfect 5.0 or Lotus 1-2-3 onto a computer disk significantly increases the value of the disk and changes the product that a consumer would be buying from a pack of computer diskettes to a software program. The two products are not interchangeable. The distinction between a computer diskette and a computer diskette which is programmed with a software program is analogous to the distinction between a blank video tape and a video tape on which the movie "Gone With The Wind" has been recorded.

In contrast to the cases cited above, there is no evidence in this case that the processing would greatly increase the value of the imported article or that a complex and highly technical manufacturing operation is involved. Further, formatting a diskette does not create a new article. While a formatted diskette is more convenient for a computer operator, it is not a new or different product. Although, a non-formatted disc must be formatted by the computer operator prior to use, a formatted diskette and a non-formatted diskette are essentially interchangeable products with the same use. Furthermore, formatting a diskette does not change the fundamental character of a diskette. The only distinction is whether the diskette is purchased pre-formatted or whether the computer operator takes several minutes and formats the diskette himself. If one has a formatted diskette, this operation is not necessary and the operator can go immediately to the next operation. Simply adding a feature that adds to the convenience of the computer user without greatly increasing the value of the imported computer diskette or creating a new article with a new name, character or use does not constitute a substantial transformation. Since the imported computer diskette is not substantially transformed in the U.S., the country of origin remains Taiwan, the country of manufacture, pursuant to 19 CFR 134.1(b). Therefore, the pre- formatted diskette must be marked to indicate the country of origin. We cannot suggest how the ten pack plus one should be marked other than to advise that it must be marked in accordance with 19 U.S.C. 1304 and 19 CFR Part 134.


Formatting a computer diskette does not constitute a substantial transformation. Therefore, the country of origin of the imported diskette is Taiwan for country of origin marking purposes.


Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch