MAR-2-05 CO:R:C:V 735139 RSD

Mr. Eric Shea
Sherry-Stylo, Ltd.
300 Swenson Drive
Kenilworth, New Jersey 07033

RE: Country of origin marking for clutch mechanisms for mechanical pencils; Assembly; Combining; HQ 726001; HQ 735169

Dear Mr. Shea:

This is in response to your letter of March 30, 1993, and your follow-up letter dated April 5, 1993, on behalf of Economy Pencil Co., addressed to the National Import Specialist at the Customs office at the New York Seaport, requesting a ruling on the country of origin marking requirements for mechanical pencils. Customs at the New York Seaport forwarded your request to Customs Headquarters for a response. Samples of the mechanical pencils were submitted for examination.


Economy Pencil Co. imports clutch mechanisms from Japan and Taiwan for assembly into a mechanical pencil in the United States. The mechanism consists of a plastic tube. Attached to the end of the tube is a small plastic housing containing a metal tube with two plastic jaws which the hold the lead. The mechanism is intended to be inserted into the barrel of a propelling pencil. The action of this pencil resembles that of a ball point pen. When the button of the pencil is depressed, the lead extends. There is no direct means of retracting the lead. The lead can only be manually pushed back up into the pencil. Sherry-Stylo has represented that the outer parts of the pencils including the plastic or metal outer barrel, the metal clip, and rubber erasers are made in the United States. Two of the sample pencils are engraved on their metal clip with the letters "USA".


Are imported clutch mechanism substantially transformed when they are assembled in the United States with U.S. parts to make mechanical pencils?


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 its 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. Congressional intent in enacting 19 U.S.C. 1304 was "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." United States v. Friedlaender & Co. 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the 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" within the meaning of the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked (see section 134.35, Customs Regulations).

In HQ 726001 (September 11, 1984), Customs found that foreign-manufactured clutch mechanisms for mechanical pencils were substantially transformed when they were assembled in the U.S. with U.S. parts to make the finished pencils. Therefore, the clutch mechanisms were not required to be marked. This ruling was recently reaffirmed in HQ 735169 (January 26, 1994), when we ruled that the domestic assembly of the Japanese-manufactured clutch mechanism with U.S. components effected a substantial transformation in the U.S., and thus also in that case the clutch mechanisms were not required to be marked.

The facts of those two cases are almost identical to the facts of this case in that imported clutch mechanisms are being assembled in the U.S. with U.S. parts to form mechanical pencils. Therefore, we find that the same conclusion that the clutch mechanisms are substantially transformed should also be reached in this case. Accordingly, under 19 CFR 134.35, the party making the mechanical pencils, Economy Pencil, is the ultimate purchaser of the imported clutch mechanisms. They are excepted from country of origin marking, if the outermost containers which reach the ultimate purchaser are properly marked.

We note that several of the sample pencils are marked with "USA" on the clip. Because substantial parts of the pencils are not made in the United States, marking them with the letters "USA" could be misleading. The Federal Trade Commission has jurisdiction concerning the marking of products with phrases such as the letters "USA". Therefore, we suggest that you contact the Federal Trade Commission, Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508 for further information on marking products with the abbreviation "USA".


The imported clutch mechanisms are substantially transformed when they are assembled with the other parts to make the finished mechanical pencils. They are not required to be individually marked provided that their outermost containers are marked and the Customs officials are satisfied that they will be used only in the way described in this ruling.


John Durant, Director
Commercial Rulings Division

cc: Area Director, New York Seaport