MAR-2-05 CO:R:C:V 734560 ER
Mr. Joan McLeod
Northern Telecom Inc.
77 Oriskany Drive
Tonawanda, NY 14150
RE: Reconsideration of Country of Origin Marking Ruling for
Imported Northern Telecom Telephone Sets (Residential
and Business) (HQ 734046 (5/10/91) clarified);
Substantial Transformation; Ultimate Purchaser;
Dear Ms. McLeod:
This is in response to your letter of July 16, 1991,
received by this office on April 2, 1992, in which you request
reconsideration of HQ 734046 (May 10, 1991) which involved the
country of origin marking requirements for imported residential
and business Northern Telecom telephone sets.
The facts as set forth in HQ 734046 are set forth below.
A sample [residential] telephone set was submitted for
our examination. Each telephone set consists of
different components from different countries of
origin. The telephone set consists of a base unit, a
handset, a handset cord and a cord to connect the
telephone to the jack. The base unit consists of
various components sourced from a variety of countries
(including the printed circuit board, which is made in
the U.S.) which are mounted on a printed circuit board
and enclosed in a housing in Malaysia. The handset is
made in China. The handset cord is made in Taiwan and
the telephone cord is made in Mexico.
The base unit, handset, handset cord and telephone cord
are packed together in the same box but are not
attached to each other or combined. The value of the
telephone base, which consists of a motherboard,
keypad, plastic base and housing, is $63.35. The value
of the handset, which consists of a receiver,
transmitter, loudspeaker and wiring, is $3.35.
We requested further information from Northern Telecom
as to exactly what processing is done in Malaysia. We
never received this information. Therefore, this
ruling is based on the limited information presented.
There, Customs ruled that the base unit, headset, headset cord
and telephone cord which were imported as a telephone set were
not substantially transformed when packed together. Accordingly,
each component had to be marked with its own country of origin.
In the subject request for reconsideration, the facts are
somewhat modified. You state that the handset is from Canada or
China ($3.35); the base is from Canada or Malaysia ($63.35
residential and $6000.00 business); the cords are from Canada or
Mexico ($0.35 to $1.00); and the transformers are from Taiwan
($3.00). These items are assembled and tested in either Canada
You state that Northern Telecom does not sell the individual
components on a retail level. Moreover, marketing strategy and
literature emphasize the sale of a complete telephone set (as
opposed to the sale of individual components).
The residential telephone sets are sold to and received by
the retail customer in a plain brown cardboard box. The business
telephone sets are installed by Northern Telecom installation
personnel. The containers of the business telephones are not
seen by the end user.
It is your position that the telephone set is an entirety
with a commercial identity different from its components. Hence,
you believe that the marking should be limited to the country in
which the components are brought together and assembled to create
the finished product.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides that 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 container) will permit, in such manner
as to indicate to the ultimate purchaser in the U.S. the English
name of the country of origin of the article. Part 134, Customs
Regulations (19 CFR Part 134), implements the requirements and
exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs
Regulations (19 CFR 134.1(b)), defines "country of origin" as the
country of manufacture, production or growth of any article of
foreign origin entering the U.S. 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
The primary purpose of the country of origin marking statute
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." United States v. Friedlaender & Co., 27
C.C.P.A., 297, 302, C.A.D. 104 (1940).
Neither the statute nor the Customs Regulations contains any
provisions regarding the marking of sets, mixtures or composite
goods. In the absence of any special requirements, the general
country of origin marking requirements apply, i.e., every article
that is imported into the U.S. must be marked to indicate its
country of origin as determined by where the article underwent
its last substantial transformation.
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); Koru North America v. United States, 12 CIT 1120, 701
F.Supp. 229 (1988). The question of when a substantial
transformation occurs for marking purposes is a question of fact
to be determined on a case-by-case basis. Uniroyal Inc. v.
United States, 3 CIT 220, 542 F.Supp. 1026 91982), aff'd, 1
Fed.Cir. 21, 702 F.2d 1022 (1983).
In determining whether the assembly of components amounts to
a substantial transformation, the issue is the extent of
operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linens
v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd 2
Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which
are minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation. See,
C.S.D.'s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.
The assembly operation performed to connect the components
in the kit to form the telephone is extremely simple. Hence, no
substantial transformation of the components can be said to occur
by virtue of the assembly and, accordingly, the country of origin
of each component should be identified. See, T.D. 67-173, 1
Cust. Bull. 366 (1967) (which involved the domestic assembly of
fishing rods imported in an unassembled or partially assembled
condition. There, Customs ruled that the assembly did not
constitute a substantial transformation because the manufacture
did not result in a new and different article.)
The telephone components for the residential telephone may
be excepted from individual country of origin marking pursuant to
19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs
Regulations (19 CFR 134.32(d)), so long as the customs officials
at the port of entry are satisfied that the ultimate purchaser,
the retail buyer, receives the set in the carton which is
correctly and conspicuously marked with country of origin. A
legend such as the following would constitute proper marking on
the carton: "Telephone base made in (name of country); Handset
made in (name of country); Transformer made in (name of country);
Line Cord made in (name of country), or similar language.
Consistent with the "common sense" approach to marking
discussed in T.D. 91-7, 25 Cust. Bull. 6 (1991), it would also be
appropriate to mark the residential telephone carton with a
legend which identifies each major component with its respective
country of origin and to list the country or countries of origin
of the remaining less significant components. Such a legend
could read: "Telephone base made in (name of country); Handset
made in (name of country); other component parts made in (names
of countries). When grouping together the countries of origin of
the remaining component parts, the actual countries of origin of
the components must be identified; designating two or more
countries in the alternative (either/or) is not satisfactory.
See, C.S.D. 89-111.
The "central" marking approach is appropriate for both the
the business and the residential telephone. This method
requires labelling one of the main parts of the telephone, such
as the base, with a single, conspicuous country of origin legend
which clearly indicates the countries of origin of the component
parts. Either one of the two legends described above for marking
the carton would be appropriate. See, T.D. 67-173, 1 Cust. Bull.
366 (1967) (where Customs found that one of the parts, such as
the main reel housing, should be marked to indicate the country
of origin so that the marking would be legible and conspicuous
after the assembly of the reels)and HQ 734165 (December 2, 1991)
(where the means of marking the packaging of articles made in
more than one country was proper where the package was marked
"Made in (name of country), (name of country) and (name of
country)".) Also see, HQ 734214 (November 19, 1991) and HQ 734497
(June 8, 1992).
In the past, Northern Telecom has marked both the individual
components (for residential and business telephones) and their
cartons with country of origin. If Northern Telecom prefers to
continue marking each component with country of origin instead of
adopting the marking approaches discussed above, and opts not to
exercise the 19 CFR 134.32(d) exception for the residential
telephones (also discussed above), then without exception, each
and every component has to be marked with country of origin.
Marking the plastic sleeve in which some of the components are
shipped, instead of the component itself will not suffice because
the sleeve is removed at the time the components are assembled.
By marking each component, after assembly it remains clear to the
consumer that only the marked component, and not the assembled
telephone as a whole, originates from the country designated on
any one component. So long as each component is marked, the
country name without more, e.g. "Canada", may appear on a
component originating therefrom. It is also acceptable to
designate the name of the component in addition to its origin,
e.g. "Handset made in Canada".
As provided in HQ 734046, telephone components packed
together as a set are not substantially transformed by virtue of
being assembled into a telephone unit. Consequently, the
countries of origin of the components must be identified. HQ
734046 is clarified so as to permit the forms of marking
John Durant, Director
Commercial Rulings Division
cc: District Director, Buffalo, NY