MAR-2-05 CO:R:C:V 734227 AT

Mr. Louis DeLeone, Jr.
Purchasing Manager
Corbin & Russwin Architectural Hardware
P.O. Box 4004
Berlin, Connecticut 06037

RE: Country of origin marking of imported lever handles to be assembled with locksets; substantial transformation; combining; 19 CFR 134.14

Dear Mr. DeLeone:

This is in response to your letters of June 20, 1991, January 3, and March 17, 1992, requesting a country of origin ruling regarding imported lever handles which are to be combined with locksets manufactured in the U.S. A sample of the lever handles and a completed lockset with cardboard box packaging container were submitted for review.

FACTS:

Your company manufactures heavy duty lever locksets for securing both residential and commercial doors. You intend to import die cast brass levers from Korea. You state that the brass levers will be chrome plated in your plant and then combined with locksets manufactured in the U.S. into the completed lever locksets. The plating consists of hand polishing, buffing, placing each lever on a rack plating line and then removing by hand each lever to be placed into a box. You also state that the cost of the lever represents approximately 10 percent of the total cost of a completed lever lockset.

Examination of the completed lever lockset indicates that the levers are attached to the lockset and that an ultimate purchaser must remove the levers from each side of the lockset in order to insert the lockset into the door. The cardboard box in which the completed lever locksets are sold at retail are marked with the words "Made in USA" on the front and right side panel in

black letters approximately 9 point (a point is a unit of type measurement equal to 0.01384 inch or nearly 1/72 in., and all type sizes are multiples of this unit). The words "Berlin, Connecticut 06037 USA" are printed on the bottom of the box in black lettering approximately 16 point. You state that you intend to mark the box either on the lefthand panel or righthand corner of the bottom panel with the words "Lockset Made in USA" in black lettering approximately 9 point. The words "Lever Trim Made in Korea" will appear directly below in black lettering approximately 4 point.

ISSUE:

Whether the imported brass levers are substantially transformed when they are chrome plated and combined in the U.S. with U.S. manufactured locksets and packaged for distribution to retail stores?

Whether the cardboard box marked in the manner described above satisfies the marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134?

LAW AND ANALYSIS:

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."

Substantial Transformation and Domestic Operations

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 19 U.S.C. 1304 and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked.

In this case, the brass levers are polished, buffed and chrome plated prior to being combined with the locksets. The Court of International Trade held in National Hand Tools Corp. v. United States, Slip Op. 92-61 (April 27, 1992), that the heat treating and nickel-chrome plating of various imported hand tool components did not substantially change the imported articles. Customs has also consistently ruled that these types of operations are finishing operations which do not substantially transform the imported components within the meaning of 19 CFR 134.35. See, T.D. 74-12(3) (November 1, 1973), the processing of fully machined components of socket wrench sets by heat treating, grinding, vibrating, polishing to remove scale or blemishes resulting from the heat treatment, plating, assembly, inspection and identification marking does not result in a substantial transformation of the imported components; HQ 711320 (March 6, 1981), removal of minor imperfection from imported socket blanks by a grinding or wrench process, die-stamping the blanks with an appropriate logo, a multi-step heat treatment, vibratory rotofinishing, chrome plating, further assembly and packaging did not substantially transform the imported socket blanks. Similarly, we find that the imported brass levers are not substantially transformed when polished, buffed and chrome plated prior to being assembled with the locksets.

The second issue is whether the combining of the chrome plated levers with domestic manufactured locksets constitutes a substantial transformation.

In HQ 731432 (June 6, 1988), Customs set forth some factors to be considered in determining whether imported goods combined in the U.S. with domestic products were substantially transformed for country of origin marking purposes. The following six factors were considered: 1) whether the article is completely finished;

2) the extent of the manufacturing process of combining the imported article with the domestic article as compared with the manufacturing of the imported article;

3) whether the article is permanently attached to its counterparts

4) the overall importance of the article to the finished product;

5) whether the article is functionally necessary to the operation of the finished article or whether it is an accessory which retains its independent function; and

6) whether the article remains visible after the combining.

These factors are not exclusive and there may be other factors relevant to a particular case and no one factor is determinative. See, HQ 728801 (February 26, 1986).

Applying these factors to this case, we note that the levers are completely finished, except for plating and other finishing operations, when they are attached to the domestic locksets. The assembly operation of attaching two levers to the completed lockset is neither complex nor requires a great deal of skill. At the time of purchase the levers are attached to the locksets in a non-permanent manner. In order to install the lockset, the lever must be disassembled. The levers are essential to the function of the completed article. The levers remain visible after the combining.

Assessing the factors noted above, we find that the chrome plated levers do not lose their separate identity when they are combined with domestic locksets to form completed lever locksets. The levers are a significant component of the completed article, due to the fact that one could not open or close the door without the levers essential character. Assembly of the levers with the domestic locksets in no way changes the characteristic of the lever, and the levers are clearly recognizable both before and after the assembly. In fact, as noted above, the lever is a separate component which must be disassembled from the rest of the lockset prior to installation. Although the levers only accounts for approximately 10 percent of the total cost of the finished article, this fact is not determinative. After examining all the factors we find that the imported levers are not substantially transformed when combined with domestic locksets into finished lever locksets and your company is not the ultimate purchaser of the imported levers under 19 CFR 134.35.

Section 134.1(d), Customs Regulations (19 CFR 134.1(d)), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. The definition then gives examples of who might be the ultimate purchaser if the imported article is used in manufacture, if the imported article is sold at retail in its imported form and if an imported article is distributed as a gift. If an article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser. Since the imported levers are not substantially transformed, they are not considered to undergo a change in their imported form. Therefore, the retail purchaser of the lever lockset is the ultimate purchaser and the levers must be individually marked with their country of origin. Because the levers are combined with domestic locksets before delivery to the ultimate purchaser, the levers should be marked in a manner which clearly shows that the origin indicated is that of the levers alone (e.g. "Levers Made in Korea"). See 19 CFR 134.14. In addition, because the levers will be repacked in the U.S. prior to sale to the ultimate purchaser the certification requirements of 19 CFR 134.26 apply.

Country of Origin Marking of Repackaging Container

However, if certain conditions are met, the district director may authorize an exception under 19 CFR 134.32(d) from marking the levers at the time of importation. In this regard, 19 CFR 134.34(a) provides that:

an exception under section 134.32(d) may be authorized in the discretion of the district director for imported articles which are to be repacked after release from Customs custody under the following conditions:

(1) The container in which the articles are repacked will indicate the origin of the articles to an ultimate purchaser in the U.S.

(2) The importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification, as may be necessary, by certification and the submission of a sample or otherwise, of the marking prior to liquidation of the entry.

Whether or not the district director authorizes the above exception the retail box must satisfy the requirements of 19 CFR 134.46. Examination of the cardboard box in which the finished lever locksets are intended to be repackaged into reveals that the words "Lockset Made in U.S.A" and "Lever Trim Made in Korea" will be printed on either the lefthand panel or righthand corner

of the bottom panel. Also, the words "Berlin, Connecticut 06037 USA" are printed on the bottom of the box. Section 134.46, Customs Regulations (19 CFR 134.46) requires that in any case in which the words "U.S.," or "American," the letters "U.S.A.," any variation of such words or letters, or the name of any city or locality other than the country or locality in which the article was manufactured or produced, appear on an imported article or its container, there shall appear, legibly and permanently, in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of", or other words of similar meaning (emphasis added). In order to satisfy the close proximity requirement of this regulation, the country of origin marking must appear on the same side(s) or surface(s) on which the name of the locality other than the country of origin appears. Therefore the marking on the box must satisfy the requirements of section 134.46 since the words "USA" and "Berlin, Connecticut USA" appear on the box.

We note that with respect to your proposed marking "Lockset Made in USA; Lever Trim Made in Korea" to be printed on either the lefthand panel or righthand corner of the bottom panel, the lettering "Made in Korea" is not in a comparable size to the marking "Made in USA", and therefore it does not meet the comparable size requirement of 19 CFR 134.46.

With respect to each "Made in USA" marking printed on the packaging container in which the lever locksets are sold to retail stores, we advise that an additional marking indicating that the levers are made in Korea is required in close proximity to and in comparable size letters. Further we advise you to contact the Federal Trade Commission, Division of Enforcement, 6th & Pennsylvania Avenue, NW, Washington, D.C. 20508 before you undertake to mark your finished product in that fashion since use of the phrase "Made in USA" is under that agency's jurisdiction.

Also, we are referring a copy of your March 3, 1992, letter to the Office of Trade Operations, regarding marking practices of your competitors along with a copy of this ruling to ensure that competitors are complying with country of origin marking requirements.

HOLDING

The levers are not substantially transformed when they are chrome plated and then assembled with domestic manufactured locksets to make lever locksets. The buyers of the lever locksets are the ultimate purchasers of the levers. The levers must be marked to indicate their country of origin in accordance

with the requirements of 19 CFR 134.14. Because the levers will be packaged in the U.S. prior to receipt by the ultimate purchaser the certification procedures set forth in 19 CFR 134.26 apply. Alternatively, you may request from the district director an exception from marking the levers itself under the procedures set forth in 19 CFR 134.34.

Sincerely,

John Durant, Director
Commercial Rulings Division