OT:RR:CTF:VS H303529 CMR

Sandra Liss Friedman, Esq.
Barnes, Richardson & Colburn, LLP
100 William Street, Suite 305
New York, NY 10038

RE: Country of origin of an incomplete postage meter

Dear Ms. Friedman:

This is in response to your request, on behalf of your client, Brother Industries (USA), Inc., for a country of origin determination of an incomplete postage meter, which you also refer to as a specialized printer.

FACTS:

In their condition as imported, the incomplete postage meters function as the specialized printers that carry out the printing function in the mail handling system, of which they are a part. You identify the major components of the incomplete postage meters as the print axis, printer module base assembly, transport assembly, waste ink tray, cutter assembly, tape transport assembly, and cover assembly.

You describe the printer axis, in relevant part, as follows:

The Print Axis is an integrated print engine that aligns the print head with the media path and prints images on passing media fed into the postage meter printer, such as envelopes or continuous length tape, each of which is fed through a different path in the Print Axis. This is accomplished by the activation of motors located in the Print Axis which will move the print head to the correct position, depending on which media has been selected. You indicate that the print axis monitors and maintains the functionality of the print head module; monitors the level of ink in the ink cartridge; and contains subassemblies necessary to carry out these functions, including "the main printed circuit board, print head cartridge, wiping station, priming station and ink delivery system." In addition, the print axis is loaded with U.S.-developed firmware to control it and to communicate with the other components of the entire mail handling system. You state that the print axis is the most expensive component of the incomplete postage meter, representing approximately 63% of the total cost of parts in the incomplete postage meter; and that the printer axis "performs the main function/output of the postage meter printer by physically printing the postal indicia on envelopes and postage tapes[.]" You indicate that the printer axis is a product of Malaysia. However, as the printer axis is produced by a third party, you are only able to provide a statement from that party that the component is a product of Malaysia and a photograph of the label on the component identifying it as a product of Malaysia.

You describe the other components of the incomplete postage meter, in relevant part, as follows:

Printer module base assembly: This subassembly consists of a metal frame for alignment and support of other subassemblies. It also contains the Distribution PWA [Printed Wire Assembly] which acts as a link between upstream power, control and data signals and downstream motors, sensors and print modules. The printer module base assembly consists of a printer frame assembly, foot, base, Distribution PWA and cable assemblies. . . .

Transport assembly: This subassembly includes a transport idler assembly and a transport belt assembly which consists of motors, drive belts, idler wheels and other non-moving components used to transfer incoming media into the printer module, align it with the print engine, and transfer it out of the printer module to a downstream stacker unit. . . .

Tape transport assembly: This subassembly consists of a motorized media path which pulls postage label tape from a continuous roll of labels and aligns and passes it through [the] Print Axis to receive a printed image. It passes the tape into the Cutter Assembly to be trimmed to the correct length for the print job. The Tape Transport Assembly consists of a tape track, tape feed assembly and tape motor assembly . . . .

Cutter assembly: This subassembly consists of a small motorized cutting blade aligned with the end of the address Tape Transport Assembly which cuts the continuous roll of postage tape label after it passes through the Print Axis. The postage tape is primarily used when a postage mark cannot be printed directly on the mail piece either because of a media transport failure or if the mail piece is too large or irregularly shaped to pass through the normal media path. The cutter assembly consists of a cutter frame and a motor assembly . . . .

Waste ink tray: This unit consists of a foam tray and waste ink pad which collects ink discharged from the Print Axis during print head maintenance. . . .

Cover Assembly: This subassembly, consists of a series of plastic covers used as a safety barrier to prevent the user having contact with energy sources within the printer module during normal operations. It also contains several moveable covers to give the user access to internal components for normal maintenance procedures such as replacing cartridges, print heads and waste tank foam or clear media feeding errors. The Cover Assembly consists of an upper cover assembly, mid cover assembly, right side cover, front cover and deck cover . . . .

With regard to the components used in the described subassemblies, you indicate that the majority of the components used to manufacture the printer module base assembly, transport assembly, waste ink tray, cutter assembly, tape transport assembly, and cover assembly are made in China. With regard to the components used to manufacture the printer axis, you indicate that the components are sourced globally, with only 10.8% of the components being sourced in China.

In your submission, you state that the final assembly process of the subassemblies described above "consists mainly of attaching the Print Axis and the various subassemblies, for the most part using nuts and bolts, in a so-called 'screwdriver operation,' and electrically connecting the various subassemblies as required." However, "[a]ll of the subassemblies, other than the print axis are assembled in China prior to the final assembly."[1]

ISSUE:

What is the country of origin of the incomplete postage meter assembled in China?

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 United States 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 an ultimate purchaser in the United States 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 markings on the imported goods the country of which the good is the product. "The evident purpose is to mark the goods so 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 (1940).

Part 134, Customs and Border Protection (CBP) Regulations (19 C.F.R. 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), CBP Regulations (19 C.F.R. 134.1(b)), defines "country of origin" as "the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 regulations]. . . ." A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982).

In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item's components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative.

You submit that the origin of the incomplete postage meter should be based upon the origin of the print axis as, in your view, the print axis imparts the essential character to the imported incomplete postage meter. In addition, you believe that the other subassemblies function to assist the print axis in carrying out its printing function; do not lose their identities when combined into the incomplete postage meter; and, are combined together in an assembly process that is not complex and does not result in a substantial transformation of the assembled components.

This situation differs from the situation examined by the court in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), in which the court found that components of a flashlight did not undergo a change in name, character or use as a result of post-importation processing in the United States, and that the nature of the post-importation assembly process was not sufficiently complex to give rise to a substantial transformation. See Energizer, at 1325 - 1326. In this case, with the exception of the subassembly of the print axis, the assembly of the incomplete postage meter occurs in China. The various subassemblies of the incomplete postage meter, i.e., the printer module base assembly, transport assembly, waste ink tray, cutter assembly, tape transport assembly, and cover assembly, are all assembled in China of primarily Chinese-made components. The question of the complexity of the assembly process which occurs in China is not limited to an examination of the assembly of the various subassemblies to one another, as initially presented in your submission, but includes an examination of all of the assembly processes involved in China in the production of the incomplete postage meter. As the court in Energizer points out, citing to National Hand Tool Corp. v. United States, 16 C.I.T. 308, 312 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), and Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121 (1996), "case law . . . indicates that a determination of substantial transformation must be based on a totality of factors."

You submit that the various subassemblies have been manufactured to specifications which impart to them a pre-determined use as parts of the imported incomplete postage meter, and that these components do not lose their identity when combined into the finished article. We disagree. In this case, the print axis is imported into China to be joined with the other Chinese assembled subassemblies to complete the incomplete postage meter. The true question here is whether the print axis is substantially transformed when it is assembled with the other components of the incomplete postage meter, i.e., whether it undergoes a change in name, character, and use. You focus on the function and value of the print axis, however, the print axis is subsumed into and becomes part of the incomplete postage meter when it is joined with the other components in China. While the printer axis functions to print postage indicia on envelopes or postage tape, without the other components to which it is joined in China, it could not carry out its function. With regard to the value of the print axis as compared to the other components, as the court pointed out in Energizer, such a consideration is subsidiary and one for which the courts have been divided on whether to consider. See Energizer, at 1319 - 1320, citing National Hand Tool, 16 CIT at 312. In our view, the assembly in China to create the incomplete postage meter is extensive and complex as all of the components of the incomplete postage meter, with the exception of the print axis, are assembled in China and the final assembly of those components with the print axis component occurs in China. Based on the totality of the circumstances, a substantial transformation of the print axis occurs in China when it is joined with the other components of the incomplete postage meter. The country of origin of the incomplete postage meter is China.

HOLDING:

The country of origin of the incomplete postage meters, produced as described herein, is China.

Please note that 19 C.F.R. 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.

Sincerely,

Monika R. Brenner, Chief
Valuation & Special Classification Branch

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[1] See Counsel's email, dated May 29, 2019.