OT:RR:CTF:VS H342702 JH
Davis Lau
Account Manager
Mastercraft International Limited
Hunghim Commercial
Unit 503, 5th Floor. Tower B
Hong Kong, N/A 999077
China
RE: Accent Lamps; Country of Origin; Substantial Transformation; Generalized
System of Preferences
Dear Mr. Lau,
This is in response to your October 28, 2024 ruling request, filed on behalf of Old
East Main Company (the “importer”), regarding: (1) the country of origin of accent lamps
(“Lamp”), and (2) the eligibility of the lamps for duty-free treatment under the
Generalized System of Preferences (“GSP”) when imported into the United States from
Cambodia.
FACTS:
This ruling request involves three accent lamps that are intended to be used for
household purposes: SKU# 40504601, SKU# 40505601, and SKU# 40505501.
The lamps will be manufactured in Cambodia with parts imported from China,
and parts sourced locally in Cambodia. For purposes of this ruling request, we will
assume that the locally sourced parts will be of Cambodian origin. A complete list of the
components with photographs for each lamp were submitted with your request. The
provided manufacturing process for the lamp with SKU# 40504601 shows that the shade
fabric, shade iron wire frame, screws, plastic neck, felt pad, PE protection bag, and label
are made in Cambodia, and the ceramic body, E26 plastic socket, and cord are sourced
from China. The other two lamps (SKU# 40505601 and SKU# 40505501) have the same
materials with the same origins as the ceramic lamp (SKU# 40504601), except that
instead of a ceramic body, they have a polyresin body that is made in Cambodia.
The manufacturing process in Cambodia for all lamps to create lamp shades
includes:
o Cutting shade fabric to shape,
o Joining the adhesive fabric of the shade,
o Cutting iron wire to size for the lamp frame,
o Welding iron wire to join shade frame and top ring,
o Welding iron wire to join shade frame to bottom ring,
o Electroplating top ring, and
o Sewing and attaching fabric and shade’s iron frame together.
In addition to creating the lamp shade, the manufacturing process in Cambodia for
the ceramic lamp involves machine sawing some of the metal materials; vacuum
metalizing the plastic neck, decorative parts, and screws; hand painting the plastic neck;
and assembling the parts to complete the lamp.
The manufacturing process in Cambodia for lamps SKU# 40505601 and SKU#
40505501 is the same as the ceramic lamp, except that polyresin material is used to mold
the lamp body.
When assembled, the lamps are directly imported to the United States from
Cambodia and are classifiable under subheading 9405.29.80 1 of the Harmonized Tariff
Schedule of the United States (“HTSUS”).
ISSUES:
1. What is the country of origin of the accent lamps?
2. Whether the accent lamps qualify for the duty exemption under the GSP when
imported from Cambodia into the U.S.?
LAW AND ANALYSIS:
Country of Origin of Accent Lamps
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
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Subheading 9405.29.8010, HTSUS, provides for “Luminaries and lighting fittings including searchlights
and searchlights and spotlights and parts thereof, not elsewhere specified or included; illuminated signs,
illuminated nameplates and the like, having a permanently fixed light source, and parts thereof not
elsewhere specified or included: Other: Household”
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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 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.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940).
Part 134 of the U.S. 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 laws and regulations].”
A substantial transformation occurs when, as a result of manufacturing process, a new
and different article emerges, having a distinct name, character or use, which is different
from that originally possessed by the article or material before being subjected to the
manufacturing process. See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267
(C.A.D. 98) (1940); Texas Instruments, Inc. v. United States, 69 C.C.P.A. 142, 681 F.2d
778 (1982). 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. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982) aff’d, 702
F.2d 1022 (Fed. Cir. 1983).
In Headquarter Ruling (“HQ”) 562558, dated December 21, 2002, CBP ruled that
a manufacturing process that produced Rattan Road electric lamps in the United States
with domestic materials and foreign materials from China, Taiwan, Malaysia, and the
Philippines, resulted in a substantial transformation of the imported parts. Although the
requestor did not submit a written description of the assembly process for the lamp, CBP
recognized that the process of assembling a lamp, which typically includes joining,
gluing, and soldering parts, constitutes a substantial transformation. In HQ 562558, CBP
distinguished its decision from another ruling, HQ 734503 dated July 20, 1992, where a
cut crystal piece of an electrical lamp imparted the essential character of the lamp. As no
single component in the lamps under consideration in HQ 562558 imparted the essential
character, the assembled on the various parts was a substantial transformation. See also
HQ H311970, dated October 14, 2020 (CBP found that a manufacturing process that
produced a mixed greenery wreath resulted in a substantial transformation.)
SKU# 40504601
Regarding lamp SKU# 40504601, the component that imparts the character of the
lamp (the ceramic body), is imported into Cambodia and it does not undergo any
processing and maintains its integrity throughout the assembly process. The ceramic
body is by far the most expensive part of the lamp, and it is likely what a consumer
would consider in its purchasing decision of the lamp. Therefore, similar to HQ 734503,
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as the ceramic body is imported and the overall assembly process is not exceedingly
complex, we do not find that a substantial transformation occurs in Cambodia. Thus, the
country of origin of the lamp for marking purposes will be the same as the ceramic body
which is China.
SKU# 40505601
However, for the lamp with SKU# 40505601, in addition to creating the lamp
shade through cutting, sewing, attaching, electro-plating, joining, and welding, the lamp
body is created through the molding of the imported polyresin material in Cambodia.
Additionally in the lamp assembly, other components undergo machine sawing and
shaping. None of the components, before undergoing the manufacturing and assembly
process, impart the character of the lamp individually. Therefore, consistent with HQ
562558, we find that the material for lamp SKU# 40505601 does undergo a substantial
transformation and the country of origin of the lamp for marking purposes will be
Cambodia.
SKU# 40505501
Since the lamp with SKU# 40505501 involves the same manufacturing process as
the lamp with SKU# 40505601, the same analysis applies here. Accordingly, the country
of origin of the lamp for marking purposes will be Cambodia.
GSP Eligibility of the Accent Lamp imported from Cambodia
Under the GSP, eligible articles, which are the growth, product, or manufacture of
a designated beneficiary developing country (“BDC”) and are imported directly into the
customs territory of the U.S. from a BDC, may receive duty-free treatment if the sum of:
(1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the
processing operations performed in the BDC, is equivalent to at least 35 percent of the
appraised value of the article at the time of entry into the U.S. See 19 U.S.C.
§ 2463(a)(2)(A).
Pursuant to General Note (“GN”) 4(a), HTSUS, Cambodia is a designated BDC
for GSP purposes and may be afforded preferential tariff treatment if the imported accent
lamp is classified in a GSP-eligible provision containing SPI Code A. The accent lamp
imported from Cambodia is classified under subheading 9405.29.60, HTSUS, which is a
GSP eligible provision.
The first issue is whether the accent lamp is a “product of” Cambodia. To receive
duty-free treatment under the GSP, an article must be a “product of” the BDC. A good is
considered to be a “product of” a BDC if it is wholly the growth, product, or manufacture
of a BDC, or has been substantially transformed in the BDC into a new or different
article of commerce. See 19 U.S.C. § 2463(a)(3); 19 C.F.R. § 10.176(a).
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As determined in the previous section concerning country of origin marking, the
materials for the SKU# 40505601 and SKU# 40505501 lamps will undergo a substantial
transformation in Cambodia, but not for the SKU# 40504601 lamp. The same analysis
applies for purposes of the GSP, and therefore the SKU# 40505601 and SKU# 40505501
accent lamps may be considered a “product of” Cambodia, but not the SKU# 40504601
lamp. Since the lamp under SKU# 40504601 is not considered a “product of” Cambodia,
it is ineligible to receive preferential treatment under the GSP and does not need to be
analyzed.
Next, to be eligible for duty-free treatment under the GSP, the accent lamp must
also satisfy the 35 percent value-content requirement. If an article consists of materials
that are imported into a BDC, as in the instant case, the cost or value of these materials
may be counted toward the 35 percent value-content requirement only if they undergo a
double substantial transformation in the BDC. See 19 C.F.R. § 10.177(a)(2). Materials
imported into the BDC must first be substantially transformed into a new and different
article of commerce which becomes “material produced” and these materials produced in
the BDC must then undergo a second substantial transformation into a new and different
article of commerce (the final article). See Drexel Chem. Co. v. United States, 27 CIT
804 (2003) (a double substantial transformation occurred when a dichloro diphenyl
dimethyl urea cake was air milled into fine particles because the physical and chemical
changes to the cake resulted in a usable herbicide).
Thus, we need to determine whether the E26 socket and cord for SKU# 40505601
and SKU# 40505501 undergo a double substantial transformation in Cambodia when
they are used to make the accent lamp and therefore, may be counted toward the 35
percent value-content requirement.
In determining whether a substantial transformation has occurred in the
processing of metals, CBP has generally held that cutting or bending materials to defined
shapes or patterns suitable for use in making finished articles, as opposed to mere cutting
to length or width which does not render the article suitable for a particular use,
constitutes a substantial transformation. For example, in HQ 055684, dated August 14,
1979, CBP held that components of a water cooler gas absorption refrigeration unit which
were formed by cutting to length, cleaning and bending imported steel tubes into the
component shapes and configurations, or by cutting to length, flattening, and drilling
holes into imported tubing, substantially transformed constituent materials for GSP
purposes, while those imported tubes which were simply cut to length and assembled into
the final articles were not. See also HQ 555811, dated March 20, 1992 (die cutting,
stamping and shaping operations substantially transform aluminum flat stock into new
and different articles of commerce).
SKU# 40505601 and SKU# 40505501
In this case, for both lamps, the E26 socket and cord have not undergone a second
substantial transformation. The E26 socket and cord only undergoes assembly to make
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the accent lamp, and therefore, does not undergo a double substantial transformation, and
its cost may not be included in the 35 percent value-content requirement.
In your submission you provided a component list that details the price of the
materials used, and the cost of the production process of each accent lamp. Based on this
list, the value of the materials from Cambodia and the cost of manufacturing each lamp in
Cambodia is around 75 percent of the total cost for lamp SKU# 40505601, and 76 percent
of the total cost for lamp SKU# 40505501. Thus, based on the information presented,
each lamp satisfies the 35 percent value-content requirement. Nonetheless, upon
importation from Cambodia into the U.S., the importer will need to submit satisfactory
evidence that the value-content requirement has been met.
Lastly, for purposes of GSP eligibility, upon importation the importer should be
prepared to provide evidence that each lamp is imported directly from Cambodia. Such
information can be, but is not limited to, shipping records, bill of lading, invoices, and/or
any other evidence that individually or cumulatively establishes compliance with the
“import directly” requirement.
The “imported directly” requirement is defined in 19 C.F.R. § 10.175, in pertinent
part, as follows:
(a) Direct shipment from the beneficiary country to the United States without
passing through the territory of any other country; or
(b) If the shipment is from a beneficiary developing country to the U.S. through
the territory of any other country, the merchandise in the shipment does not enter
into the commerce of any other country while en route to the U.S., and the
invoice, bills of lading, and other shipping documents show the U.S. as the final
destination; or
(c) If shipped from the beneficiary developing country to the United States
through a free trade zone in a beneficiary developing country, the merchandise
shall not enter into the commerce of the country maintaining the free trade zone…
or
(d) If the shipment is from any beneficiary developing country to the U.S. through
the territory of any other country and the invoices and other documents do not
show the U.S as the final destination, the articles in the shipment upon arrival in
the U.S. are imported directly only if they:
(1) Remained under the control of the customs authority of the intermediate
country;
(2) Did not enter into the commerce of the intermediate country except for the
purpose of sale other than at retail, and the Center director is satisfied that the
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importation results from the original commercial transaction between the importer
and the producer or the latter’s sales agent; and
(3) Were not subjected to operations other than loading and unloading, and other
activities necessary to preserve the articles in good condition.
HOLDING:
Based on the information provided, the country of origin of the accent lamps
under SKU# 40505601 and SKU# 40505501 for marking purposes is Cambodia, and the
accent lamp under SKU# 40504601 is China.
The accent lamps under SKU# 40505601 and SKU# 40505501 imported into the
U.S. from Cambodia are eligible for preferential tariff treatment under the GSP, provided
the 35 percent value-content and the “imported directly” requirements are met at the time
of entry.
Please be aware that legal authorization for the GSP program expired on
December 31, 2020, and to date it has not been renewed by Congress. To obtain current
information on GSP, check our Web site at www.cbp.gov and search for the term “GSP.”
However, this office still makes determinations on GSP eligibility should the program be
renewed, and retroactive duties paid.
Additionally, 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 this merchandise is entered. If the documents have been filed without a copy, this
ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
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