MAR-2-05 CO:R:C:V 735139 RSD
Mr. Eric Shea
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
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
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 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