Hodes Keating & Pilon
134 North LaSalle Street
Chicago, Illinois 60602
RE: The classification and country of origin of touchscreen controllers from Taiwan
Dear Mr. Hodes:
In your letter dated December 12, 2018 you requested a tariff classification and country of origin determination ruling on behalf of your client, Kristel Displays.
The subject merchandise is described as a touchscreen display controller having a liquid crystal display (LCD) and a resistive touch overlay (overlay). The touchscreen display controller is specifically designed to be used with an electrocardiograph (ECG) machine and provides for the electrical control of the machine as well as displaying the ECG data. You state that the LCD, which represents 29% of the cost, is imported into Taiwan from China and the overlay, which represents 64% of the cost, is manufactured in Taiwan.
The manufacturing process in Taiwan consists of bonding the LCD to the overlay with a bonding agent and curing in a thermal oven. Additional processing is conducted on the assembly such as cleaning, inspection, testing, and the application of a protective film. We would note that none of the assembly operations appear to be complex.
In your request you suggest the touchscreen display controller is classifiable under subheading 9018.11.9000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for other parts and accessories of electrocardiographs. Based on the information provided, the subject touchscreen display controller, which is constructed of a general purpose LCD and the overlay, performs two distinct functions: display of ECG data and electrical control of the ECG machine. It is the opinion of this office that the overlay, consisting of a two layers of indium tin oxide mounted within a frame to construct an apparatus of heading 8537, establishes the principal function of the device. Therefore, in accordance with Section 16 Note 2 and Note 2 to Chapter 90, HTSUS, classification under heading 9018 is not appropriate.
The applicable subheading for the touchscreen display controller will be 8537.10.9170, HTSUS, which provides for “Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of 8535 or 8536, for electric control or the distribution of electricity…: For a voltage not exceeding 1,000 V: Other: Other: Other”. The general rate of duty will be 2.7 percent ad valorem.
With regard to the appropriate country of origin marking of the touchscreen display controller, Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. 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. The regulations implementing the requirements and exception to 19 U.S.C. § 1304 are set forth in Part 134, Customs and Border Protection Regulations (19 C.F.R. Part 134).
19 C.F.R. § 134.1(b) provides in pertinent part as follows:
Country of origin means 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 this part;
As stated in HQ 735009 dated July 30, 1993, “The country of origin is the country where the article last underwent a “substantial transformation”, that is, processing which results in a change in the article's name, character, or use”. Customs and Border Protection (CBP) maintains, based on United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940), that “A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, and use that differs from the original material subjected to the processing.”
Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
In determining the origin of the touchscreen display controller, we would reiterate that the assembly operations conducted in Taiwan are not complex and in our view, gluing the LCD to the overlay does not constitute operations sufficient to transform the original articles into a new or different article of commerce. It is the opinion of this office that the country of origin of the touchscreen display controller is based on the overlay, which is the component that gives the assembly its essential character. Thus, the origin of the touchscreen display controller is Taiwan.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Karl Moosbrugger at email@example.com.
Steven A. Mack
National Commodity Specialist Division