MAR 2-05 CO:R:C:V 732018 pmh

Mr. James G. Meagley
Phillips, Lytle, Hitchcock, Blaine & Huber
3400 Marine Midland Center
Buffalo, N.Y. 14203

RE: Country of origin marking requirements for flexible magnetic recording disks

Dear Mr. Meagley:

This is in response to your December 20, 1988 letter, requesting a ruling on the country of origin marking requirements for flexible magnetic recording disks. We regret the delay in responding to your request.

FACTS:

Your client imports from Mexico various models of microdisk and minidisk products. These products are used generally to record and store digital computer information for access by floppy disk drive. Each product consists of essentially two parts: an unrecorded flexible magnetic recording disk (with or without special coating) and a protective plastic shell (microdisk) or protective vinyl jacket (minidisk). The magnetic recording disks without special coating are manufactured by the importer in the U.S. and abroad. The magnetic recording disks with special coating are manufactured by the importer only in the U.S. In Mexico, all the disks are assembled to either a hub (microdisk) or hub ring (minidisk) and then assembled into either a protective plastic shell (microdisk) or protective vinyl jacket (minidisk). Each magnetic recording disk without special coating also undergoes a "burnishing" process in Mexico. You state that "burnishing" is essentially a minor polishing operation. Finally, each microdisk and minidisk product undergoes a final certification, inspection and packaging. The packaging consists of either a ten-pack retail carton or a bulk container (200/1000 units).

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According to your letter, less than half of the products imported from Mexico enter in bulk form and are sold to U.S. computer equipment and software companies who record computer programs onto each product before selling it. These U.S. purchasers may resell a small percentage of the bulk product without any such recording. The importer has estmated that such sales represent a very small amount of its total bulk sales of all microdisk and minidisk products. The remainder of the products imported from Mexico are packed in lots of ten in shrink wrapped retail cartons (with five or ten retail cartons being placed into one bulk container for shipping purposes).

Each bulk container and each shrink wrapped ten-pack retail carton is presently marked "Assembled in Mexico." In addition, you state that the importer is aware of the requirements of section 134.46, Customs Regulations (19 CFR 134.46), and has marked the retail cartons in compliance with that regulation. In that regard, we note that the three sample retail cartons submitted for examination bear the names of locations other than the country of origin. The locations of the importer's plants (both domestic and abroad) appear on the minidisk retail carton and the name and domestic address of the importer's parent corporation appear on the microdisk retail carton. The country of origin marking on each retail carton is on the same side and within a couple of inches of the names of the other locations.

It is the importer's position that the minidisk and microdisk products in this case are eligible for entry under subheading 9802.00.80, Harmonized Tariff Schedule of the United States (which replaced item 807.00, Tariff Schedules of the United States). The importer asserts that in the condition as currently imported into the U.S., each microdisk and minidisk product contains at least one component of U.S. origin which is eligible for entry under subheading 9802.00.80, HTSUS. Exhibits attached to your letter support that at least one component in each of the sample microdisk and minidisk products is of U.S. origin. The importer makes a distinction between those products that are entered under subheading 9802.00.80, HTSUS, and those that are not. For the merchandise entered under subheading 9802.00.80, HTSUS, the importer suggests the following markings:

a) "U.S. Disk, Assembled in Mexico with U.S. and other foreign components," or

b) "U.S. Disk, other U.S. and foreign components, Assembled in Mexico."

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For the merchandise not entered under subheading 9802.00.80, HTSUS, the importer suggests the following country of origin markings:

a) "Disk Made in USA, Finished in Mexico;"

b) "Disk Made in USA, Assembled in Mexico;"

c) "U.S. Disk, Finished in Mexico;" or

d) "U.S. Disk, Assembled in Mexico."

ISSUES:

Whether the subject minidisk and microdisk products are eligible for the partial duty exemption in subheading 9802.00.80, HTSUS.

Whether the proposed country of origin markings for the minidisk and microdisk products satisfy the applicable country of origin marking requirements with regard to the bulk packaging and the retail carton.

LAW AND ANALYSIS:

As you are aware, the HTSUS replaced the Tariff Schedules of the United States (TSUS), on January 1, 1989. Item 807.00, TSUS, was carried over into the HTSUS without change as subheading 9802.00.80. This provision applies to articles assembled abroad in whole or in part of fabricated components, the product of the U.S., with no operations performed thereon except the attachment of the components to form the imported merchandise and operations incidental thereto. An article classified under subheading 9802.00.80, HTSUS, is subject to duty upon the full appraised value of the imported article, less the cost or value of such products of the U.S.

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that the assembly operations performed abroad may consist of any method used to join or fit together solid components such as force fitting, gluing, etc. In Mattel Inc. v. the United States, C.A.D. 1248, 67 CCPA 74 (1980), the packaging of domestic phonograph records in envelopes was held to be a

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qualified assembly under item 807.00, TSUS. Citing that decision, Customs has held that the permanent joining of the jacket with the disk and hub ring is an acceptable assembly operation within the purview of the statute and 19 CFR 10.16(a). (See HQ 544161, dated May 2, 1989.)

Based upon the facts provided, we find that the subject minidisk and microdisk products undergo an acceptable assembly operation (i.e., the permanent joining of the disk with the hub or hub ring and the vinyl jacket or plastic shell). Since each of these products contains at least one U.S. component, these products are eligible for entry under subheading 9802.00.80, HTSUS. (The component disks without special coating are not eligible for duty exemption under subheading 9802.00.80, HTSUS due to the fact that they undergo a burnishing process in Mexico. Customs has held that such processing is not incidental to assembly. See 19 CFR 10.16 and HQ 555238, issued March 8, 1989.)

With regard to the country of origin marking of these products, section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires, subject to certain specified exceptions, that all articles of foreign origin imported into the U.S. shall be marked to indicate the country of origin to the ultimate purchaser in the U.S. Although the country of origin of a product is generally determined on the basis of where the last substantial transformation occurs, there is an exception to the general rule set forth in section 10.22, Customs Regulations (19 CFR 10.22), for articles which are entitled to an exemption from duty under subheading 9802.00.80, HTSUS. 19 CFR 10.22 provides that assembled articles entitled to the exemption are considered products of the country of assembly for purposes of 19 U.S.C. 1304, whether or not the assembly operation constitutes a substantial transformation. Since the minidisk and microdisk products in this case are eligible for entry under subheading 9802.00.80, HTSUS, 19 CFR 10.22, applies and the country of origin of the minidisk and microdisk products is Mexico, the country of assembly. Furthermore, section 10.22 is triggered by the "eligibility" of goods for entry under subheading 9802.00.80, HTSUS, not whether or not the goods were actually entered under that provision. Therefore, since all the subject goods are eligible for entry, the same marking requirements apply for the goods that are entered under subheading 9802.0080, HTSUS, as for those goods that are not.

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In addition, it is noted that Customs has previously determined that the words "Assembled in" constitute sufficient country of origin marking for articles subject to 19 CFR 10.22. (See HQ 731507, issued October 17, 1989.) Therefore, since the minidisk and microdisk products are assembled in Mexico and are eligible for duty exemption under subheading 9802.00.80, HTSUS, the country of origin is Mexico and the language "Assembled in" is acceptable. However, the words "Finished in" are not acceptable as it is our opinion that they are not words of similar meaning to the words "Made in" and "Product of."

With regard to the markings you have proposed for these products, it is our opinion that the language "Assembled in Mexico" should be foremost in the marking, since Mexico is the country of origin. It is acceptable for you to reference the origin of the components, but this should appear after the name of the country of origin (e.g., "Assembled in Mexico from U.S. and other foreign components"). Furthermore, we find that it is misleading to reference only the U.S. origin of the disks. Therefore, if you do reference the U.S. origin of the disks you should also reference the foreign origin of the other components (e.g., "Assembled in Mexico from U.S. Disk and other foreign components").

Retail Cartons

You have stated that more than half of the products imported from Mexico are packed in lots of ten in shrink wrapped retail cartons intended for retail sale in the U.S. Marking these cartons in lieu of marking the individual products is acceptable. Pursuant to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR 134.32(d)), an exception from individual marking is applicable where the marking of a container of such article will reasonably indicate the origin of the article. In addition, we note that the sample retail cartons submitted for our examination, bear the names of locations other than the country of origin and that, therefore the requirements of section 134.46, Customs Regulations (19 CFR 134.46), are triggered. As you are aware, 19 CFR 134.46, requires that the name of the country of origin preceded by "Made in," "Product of," or other words of similar meaning shall appear legibly and permanently, and in close proximity to such words and in at least a comparable size. As noted above, Customs has determined that the words "Assembled in," are similar in meaning to the words "Made in" and "Product of." In addition, the country of origin

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appears on the same side and in close proximity to the names of the other locations and in larger lettering. Consequently, it is our opinion that the marking on the retail cartons is in compliance with 19 CFR 134.46.

Bulk Containers

With regard to the country of origin marking on the bulk containers, you have stated that the magnetic recording disks are not individually marked and that the words "Assembled in Mexico" appear only on the outermost container. As noted above, pursuant to 19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs Regulations (19 CFR 134.32(d)), an exception from individual marking is applicable where the marking of a container of such article will reasonably indicate the origin of the article. This exception is normally applied in cases where the article is imported in a properly marked container and Customs officials at the port of entry are satisfied that the ultimate purchaser will receive it in the original unopened marked container. Section 134.35, Customs Regulations (19 CFR 134.35), provides that if the imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article. In this case we consider the ultimate purchaser to be the U.S. computer software companies that transpose computer programs onto the products. Such a process substantially transforms the microdisk and minidisk products from a media usable for recording purposes into a specific computer program. Therefore, so long as the microdisk and minidisk products are imported in properly marked containers and Customs officials at the port of entry are satisfied that the U.S. computer software company will receive them in the original unopened marked containers, the products are excepted from individual marking and it is sufficient to mark the outermost bulk container only. See 19 CFR 134.32(d).

You have further stated that of the total bulk product sold to U.S. software companies, a very small amount is resold with no recorded computer programming. Although a marking exemption under 19 U.S.C. 1304(a)(3)(D) may be allowed, we remind you that Customs has generally limited this exception to two types of situations: (1) where the importer is the ultimate purchaser (either because the importer substantially transforms the article

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into a product of the U.S. or because the importer uses the article himself and the shipping container indicates the country of origin; and (2) where the ultimate purchaser (other than the importer) will in all foreseeable circumstances receive the imported article in its original unopened marked container. In this case, you have not provided any information concerning how the products that are sold without computer programming by the U.S. software companies, are packaged and sold. Therefore, Customs cannot be sure that the ultimate purchaser, in all foreseeable circumstances, will receive the disks in properly marked containers. Consequently, because it is impossible to know which product of the total bulk import will be resold by the computer software company without programming, technically the bulk import does not qualify for this exemption. However, because the amount being resold without programming is very small, Customs can allow the exemption provided the importer submits written certification to Customs at the port of entry, that the products to be resold without programming will be repacked in containers properly marked to indicate the country of origin, and the importer notifies Customs if the amount of bulk imports sold by computer software companies without programming exceeds the amount indicated in your certification. If the importer is unable to do this, the total bulk product cannot receive this exemption. Therefore, we suggest you contact the Customs office at the port of entry and submit for their examination and approval written certification regarding the marked containers in which those products will be resold.

HOLDING:

On the basis of the information submitted, it is our opinion that the minidisk and microdisk products are eligible for entry under subheading 9802.00.80, HTSUS. Accordingly, 19 CFR 10.22 applies and Mexico, the country of assembly, is the country of origin for marking purposes. The marking "Assembled in Mexico" as exhibited on the retail cartons is in compliance with 19 U.S.C. 1304 and 19 CFR 134.46. If the U.S. origin of the disk is referenced, then the foreign origin of the other components should be referenced, as well. For the bulk product being imported for sale to U.S. software companies, it is acceptable to mark the outermost container only, in those instances where the product will be substantially transformed by the transposition of

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specific programs onto the microdisk and minidisk products. For that percentage of the bulk product that is not substantially transformed and is repackaged and resold by the U.S. software companies, written certification must be provided to Customs, as described above, regarding the repackaging of this product.

Sincerely,

John Durant, Director
Commercial Rulings Division