MAR-2-05 CO:R:C:V 734560 ER

Mr. Joan McLeod
Customs Specialist
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; Container.

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 or Malaysia.

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.


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 of origin."

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 described above.


John Durant, Director
Commercial Rulings Division

cc: District Director, Buffalo, NY