OT:RR:CTF:TCM HQ 160298 AMM

Mr. Michael D. Esch
Wilmer Cutler Pickering Hale and Dorr, LLP
1875 Pennsylvania Ave. NW
Washington, DC 20006

RE: Ruling Request; Classification and Country of Origin Marking of Calibrators and Digital Multimeters

Dear Mr. Esch:

This is in response to your ruling requests, dated April 7, 2011, filed on behalf of Fluke Corporation (Fluke), regarding the country of origin marking of certain Calibrators and Digital Multimeters which Fluke intends to assemble in the United States from domestic and imported components. In reaching our decision, Customs and Border Protection (CBP) has considered three requests for rulings, each dated April 7, 2011.

FACTS:

On April 7, 2011, you filed three requests for binding rulings concerning the country of origin and marking requirements for five different products, to be assembled in the United States from domestic and imported components. For convenience, all three requests and all five products will be considered in this ruling.

The Fluke Model 5520A (5520A Calibrator) is a Multi-Product Calibrator, a versatile piece of electrical test equipment that is used to check, adjust, and compare electrical test equipment against accuracy specifications to ensure that the test equipment meets design standards. The 5520A Calibrator consists of ten printed circuit board (PCB) assemblies imported from Singapore, a main power transformer imported from China, a main chassis, and other components. Fluke describes the manufacture of the 5520A Calibrator as a six step process. In the first three steps, subcontractors build and supply the individual

components necessary for the final assembly. In the fourth step, Fluke performs a quality check on each of the imported PCB assemblies. In the fifth step, Fluke assembles all of the individual components into a final product, requiring hand operations by trained mechanical assemblers. In the sixth and final step, the final product is adjusted and verified. The fourth, fifth, and sixth steps take place in the United States.

The Fluke Model 8840A (8840A Multimeter) is a Precision Multimeter, a versatile piece of electrical test and measurement equipment that is used to troubleshoot electrical problems in a wide array of industrial devices. The 8840A Multimeter consists of four PCB assemblies imported from Singapore, a main power transformer and main chassis imported from China, and other components imported from Germany, China, Taiwan, and Hong Kong. Fluke describes the manufacture of the 8840A Multimeter as a four step process. In the first two steps, subcontractors build and supply the individual components necessary for the final assembly. In the third step, Fluke assembles all of the individual components into a final product, requiring hand operations by trained mechanical assemblers. In the fourth and final step, the final product is calibrated and verified. The third and fourth steps take place in the United States.

The Fluke Model 170 Series, 80-V Series, and 280 Series hand-held Digital Multimeters (DMMs) are versatile pieces of electrical and test equipment used for basic fault finding and field service work, including troubleshooting electrical problems in a wide array of industrial and household devices. All three devices perform similar functions, but the display varies by model. The DMMs consist of a PCB assembly imported from Singapore, and other components imported from China or Mexico, or sourced in the United States. Fluke describes the manufacture of the DMMs as a five step process. In the first three steps, Fluke and its subcontractors build and supply the individual components necessary for the final assembly. In the fourth step, Fluke assembles all of the individual components into a final product, requiring hand operations by trained mechanical assemblers. In the fifth and final step, the final product is calibrated and verified. The fourth and fifth steps take place in the United States.

Pictures of the Fluke products under consideration are included below:

   Model 5520A Multi-Product Calibrator Model 8840A Precision Multimeter      Model 170 Series Digital Multimeter 80-V Series Digital Multimeter 280 Series Digital Multimeter   ISSUE:

Whether the articles are substantially transformed by Fluke in the United States?

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 its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. §1304, Congress intended to ensure “that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are 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, 302 (1940).

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 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.

Section 134.35 (a), CBP Regulations (19 C.F.R. §134.35(a)), states:

Articles other than goods of a NAFTA country. An article used in the United States in manufacture which results in an article having a name, character, or use differing from that of the imported article, will be within the principle of the decision in the case of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98). Under this principle, the manufacturer or processor in the United States who converts or combines the imported article into the different article will be considered the "ultimate purchaser" of the imported article within the contemplation of section 304(a), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with this part.

See also 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 (Ct. Int’l. Trade 1982); M.B.I. Merchandise Industries, Inc. v. United States, 16 C.I.T. 495, 502 (1992). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal Inc. United States, 3 C.I.T. 220, 224, 542 F.Supp. 1026, 1029 (1982), aff’d, 1 Fed.Cir. 21, 702 F.2d 1022 (1983). Where it is determined that substantial transformation has occurred, the imported components are excepted from marking pursuant to 19 C.F.R. §134.35. In determining whether the combining of parts or materials constitutes 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, 573 F. Supp. 1149 (Ct. Intl. Trade 1983), aff'd, 741 F.2d 1368 (Fed. Cir. 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. 85-25, 19 Cust. Bull. 544 (1985). “To determine whether a substantial transformation of an article has occurred for purpose of ascertaining who is the 'ultimate purchaser' each case must be decided on its own particular facts.” National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (quoting Uniroyal, 542 F.Supp. at 1029).

In Headquarters Ruling Letter (HQ) H026666, dated July 21, 2008, CBP considered the country of origin and marking requirements of the Model 2000 Digital Multimeter (DMM), a “versatile piece of electrical test and measurement equipment, which measures different electrical characteristics such as: voltage, resistance and amps.” See HQ H026666. According to the manufacturer, the DMM was composed of hundreds of electrical components of various countries of origin. CBP considered the question of whether assembling the various components in the United States constituted a substantial transformation pursuant to 19 C.F.R. §134.35, and found that:

[The] Digital Mulitmeter is a single article and not merely a collection of individual components. The individual components and PCB sub-assemblies are permanently attached to each other and function together as a single unit. The combined sub-assemblies and components together form a new article with a new identity and use different and distinct from their identity and use prior to the final assembly operation performed in the U.S. As such, when applying Belcrest and Uniroyal it is clear that the operations performed in the U.S. are meaningful and that the PCB assemblies become integral parts of the final product which are solely and principally used as a part of the subject merchandise.

See HQ H026666. Accordingly, CBP found that the DMM was a product of the United States for country of origin and marking purposes.

CBP has considered other situations in which the assembly of various components into a final product constitutes a substantial transformation. In HQ W562827, dated November 5, 2003, CBP considered the MC-8 and MC-8B digital controllers, which are high-end audio/video components. The digital controllers were assembled in the United States, using PCB assemblies manufactured in China. CBP found that the digital controllers were able to perform functions that no single PCB assembly could perform at importation, such as accept, amplify, modify or output a signal, accept or process user inputs, and communicate with external audio/video devices. Therefore, CBP found that “[t]he PCB assemblies undergo a substantial transformation by reason of assembly in the U.S. into digital controllers” (see HQ W562827), and that the importer was not required to maintain the markings that appeared on the PCB assemblies at the time of importation.

In HQ 734045, dated October 8, 1991, CBP considered the manufacture of laptop and notebook computers in Hong Kong, and found “that in combining the sub-assemblies and other components in the manufacture of the computers, [the manufacturer] is creating a new article of commerce that is separate and distinct from its individual components that compose it.” See HQ 734045. The assembly process, which permanently attached the components to each other, created a new article with a new name, character, and use. Furthermore, the assembly process consisted of a series of complicated operations which required considerable time and skill. Accordingly, CBP found a substantial transformation occurred, and that the laptops and notebooks were products of Hong Kong for country of origin and marking purposes.

For each of the five products at issue, CBP must consider whether the assembly procedures performed in the United States create an article with a name, character, or use which differs from the original material subjected to the process. See 19 C.F.R. §134.35(a). Furthermore, CBP must consider whether the assembly process is merely a minor one that leaves the identity of the article intact, or whether the parts lose their identity and become an integral part of the new article. See Uniroyal, 542 F.Supp. at 1029; Belcrest, 741 F.2d 1368, 1373 (Fed. Cir. 1984).

Even though the starting components of each of the five products are not exactly the same, and the specific steps of the assembly procedures vary, there are certain commonalities. All of the PCB assemblies used in the products are imported from Singapore. The other components necessary for the final products, such as the main power transformer, main chassis, and display elements, are sourced either domestically, or from various other countries. Each of these components has their own individual identity and function. Like the DMM product considered by CBP in HQ H026666, the individual components are permanently attached to each other and function together as a single unit. The combined components together form a new article with a new identity and use different and distinct from their identity and use prior to the final assembly operation performed in the United States.

The assembly procedures for the five products are similar. In each case, Fluke starts with a collection of individual components. Each product has a main chassis or frame which outlines the final shape of the article. In one step, Fluke attaches certain auxiliary components to this chassis (such as transformers, fans, filters, fuses, batteries, etc.). In other steps, the PCB assemblies are attached to the chassis by mechanical and electrical connections. In yet another step, front panels, displays, or keypads are attached to the main chassis. Other electrical and mechanical connections are made, as necessary, and covers are placed where needed. Each of the article-specific assembly steps are performed by trained mechanical assemblers, and are necessary to create a completed functional article. These assembly steps are complex and meaningful, and require a significant amount of time to complete. See C.S.D. 85-25, 19 Cust. Bull. 544. Furthermore, each of the completed articles undergoes a testing and verification procedure after assembly, to verify that the device works properly. As in HQ H026666, the operations performed in the United States are meaningful and the various imported components lose their individual identities and become integral parts of the final product.

Because the final assembly operations performed in the United States create an article with a name, character, and use which differs from the original material, and the extent of the assembly process causes the parts to lose their identity and become an integral part of the new article, the five above-identified Fluke products are substantially transformed in the United States in accordance with Gibson-Thomsen and Belcrest. Furthermore, this analysis is consistent with prior rulings HQ H026666, HQ W562827, and HQ 734045.

HOLDING:

The imported components for the instant articles, identified as the Fluke Model 5520A Multi-Product Calibrator, Model 8840A Precision Multimeter, and Model 170 Series, 80-V Series, and 280 Series hand-held Digital Multimeters, are substantially transformed in the United States. In accordance with 19 C.F.R. §134.35(a), Fluke is considered the “ultimate purchaser” for purposes of 19 U.S.C. §1304, and the imported components need not be marked, except for the outermost containers in which they are imported.

Please be advised that the use of the phrase “Made in U.S.A.” or any marking similar to “Made in” when followed by the United States is within the jurisdiction of the Federal Trade Commission (“FTC”). Therefore, you should contact the FTC regarding the appropriateness of the use of this phrase. The FTC address is: Federal Trade Commission, Bureau of Consumer Protection, Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508.


Sincerely,


Monika Brenner, Chief
Valuation and Special Programs Branch