Ms. Mary Elizabeth Strom
AEI Radix Customs Brokerage Services
5510 W. 102nd Street
Los Angeles, CA 90045
RE: The tariff classification and marking of Circuit Card Assemblies for the "OmniBand" (TM) Model BD-3570 Broadband Descrambler and Model BSC-3060 Broadband Scrambler from the Philippines.
Dear Ms. Strom:
This is in response to your undated letter requesting a tariff classification and marking ruling on behalf of your client, Multichannel Communication Sciences, Inc.(MCSI). Technical literature, product photographs, drawings of proposed shipping box markings, and assembly information were submitted with your letter for review. No samples were submitted.
The overall fundamental purpose of the "OmniBand" (TM) system is to allow cable TV system operators to limit distribution of their TV signals to paying subscribers. The cable operator achieves this by selectively pre-conditioning, or scrambling, the TV signal format before distribution, then providing individual subscribers with "enabled" de-scrambling equipment which locally restores the signal format for the subscriber's TV. Non-subscribers are denied access to the cable and/or have their descrambling equipment "disabled," resulting in loss of signal.
The pre-conditioning, or scrambling, of the TV signal occurs at a central (head-end) facility of the cable operator. The "OmniBand" (TM) head-end equipment consists of a Model CG-3570 IRC Comb Generator, a Model MM-3570 Master Monitor Unit, a Model PGG-3000 Pilot Genlock Generator, and one or more Model BSC-3060 Broadband Scramblers. A single head-end system can control the enabling/disabling of and provide the proper pre-conditioned signal to thousands of consumer units.
The consumer end of the system utilizes "OmniBand" (TM) broadband descrambling technology. The system implements simultaneous multichannel processing at a subscriber location by use of advanced digital RF signal processing methods which enable a broadband channel by channel processing. The processing that takes place at a subscriber location may include a combination of descrambling authorized scrambled channels, pass-through of authorized channels sent in the clear, or denial (local scrambling) of unauthorized channels sent in the clear. A single "OmniBand" (TM)-based broadband descrambler, the Model BD-3570, installed at the home performs all of these operations simultaneously in response to addressable control signals sent from the head-end.
The circuit card assemblies (CCA) for the Model BD-3570 Broadband Descrambler are manufactured in and shipped from the Philippines. In their condition as imported, they have complete electrical product functionality and lack only protection from the weather. After importation, the CCAs are forwarded to a domestic Motorola facility for final assembly and packaging. Motorola will surround the CCA with a weather resistant enclosure, which consists of five pieces plus attachment hardware. The assembly of the CCA into the housing is fairly straightforward and requires only simple hand tools and a work surface. At its option Motorola may duplicate the final electrical test or a portion of the final electrical factory test that the CCA undergoes before it is shipped. This is a five minute test and calibration. This test would most likely be done on an intermittant basis as a quality assurance measure, not as a way of advancing the assembly state of the product.
The CCA for the Model BSC-3060 Broadband Scrambler is not fully functional in its condition as imported. Each unit requires seven additional hours of careful testing and calibration. After importation, MSCI checks the CCAs for absence of manufacturing defects. Special test firmware is then loaded into the CCA and a six minute calibration step is carried out for each of the fifty seven channels. These calibration offsets are stored in the memory of the CCA itself and become part of the unit. The product is unable to perform the scrambling function without the calibration data. MCSI then forwards the CCAs to the domestic facility (Motorola or a third party assembly shop) that will perform the final assembly of the chassis. Two completed CCAs are then installed into the chassis box. The Front Panel CCA and the DC Distribution CCA are assembled and tested by the domestic assembly shop, then installed into the chassis box with the BSC CCAs. Also domestically installed are a power supply (an AC to DC converter) and mounting bracket, and a splitter/combiner and mounting bracket (this device accepts an RF signal from a cable at the rear of the chassis box and splits the signal into two portions, passing one half of the signal to each of the BSC CCAs). The final collection of circuits will then be tested at a chassis level for an hour before having the cover installed. The final assembled product resembles a thin consumer electronics product like a VCR or a stereo receiver.
The applicable subheading for the BD-3570 Broadband Descrambler Circuit Card Assembly will be 8525.10.3035, Harmonized Tariff Schedule of the United States (HTS), which provides for "[t]ransmission apparatus for radiotelephony, radiotelegraphy, radiobroadcasting or television...: [t]ransmission apparatus: [t]elevision: [o]ther: [o]ther: [c]onverters, decoders, preamplifiers, line amplifiers, distribution amplifiers, and other amplifiers; directional couplers and other couplers; all the foregoing designed for cable or closed-circuit television applications." The rate of duty will be 2.2 percent ad valorem.
The applicable subheading for the BSC-3060 Broadband Scrambler Circuit Card Assembly will be 8529.90.2400 HTS, which provides for "[p]arts suitable for use solely or principally with the apparatus of headings 8525 to 8528: [o]ther: [p]rinted circuit assemblies: [o]ther." The rate of duty will be 1.2 percent ad valorem.
In your letter, you hold that all of the CCAs should be exempt from marking of the country of origin for the following reasons: 1)in all cases the circuit cards will be further processed (addition of protective enclosures), which would cause the mark of origin to be permanently concealed; 2)the outer container (described as a "10 up" shipping carton) within which the circuit cards will be packed will reasonably indicate the country of origin to the purchaser that will do the additional processing; the addition of the protective enclosures will occur in an "industrial" environment, where the customer will generally be aware of the source of the components; 3)Motorola is generally aware of the source of the circuit card assemblies since their Quality and Manufacturing staff have already traveled to the actual factory in the Philippines for a factory audit.
The marking statute, section 304, 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 its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.
Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), Customs Regulations (19 CFR 134.41(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. Section 134.1(d), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. 19 CFR 134.1(d)(1) states that, if an 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. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See, 19 CFR 134.35.
This office finds that imported Model BSC-3060 Broadband Scrambler Circuit Card Assemblies are substantially transformed as a result of the U.S. processing. Therefore, the U.S. manufacturer is the ultimate purchaser of the imported Circuit Card Assemblies. Under 19 CFR 134.35, only the outermost containers (the "10 up" shipping cartons) which reach the ultimate purchaser are required to be marked with the country of origin "Philippines."
In the case of the Model BD-3570 Broadband Descrambler Circuit Card Asssemblies, we find that the domestic assembly of the CCAs into the weather resistant housing is not a substantial enough transformation as defined in 19 CFR 134.35(a). None of the components of the Descrambler is substantially transformed when it is combined with the other components, due to the fact that the U.S. operations do not change the name, character or use of the components. No further processing needs to be performed to the individual components in the U.S. other than final assembly. 19 CFR 134.1(d)(2) states that, if the manufacturing process is merely a minor one which leaves the identity of the imported article intact, the consumer or user of the article, who obtains the article after the processing, will be regarded as the "ultimate purchaser." Therefore, in the case of the Model BD-3570 Descrambler CCA, the cable TV system operator must be considered to be the ultimate purchaser.
Under the circumstances described, we find that 19 CFR 134.32(g) obtains, wherein it is stated that articles are excepted from marking which are to be processed in the United States by the importer or for his account otherwise than for the purpose of concealing the origin of such articles and in such manner that any mark contemplated by this part would necessarily be obliterated, destroyed, or permanently concealed. Therefore, the CCAs for the Descrambler do not have to be marked with the country of origin upon importation. Under 19 CFR 134.22(a), only the outermost containers (the "10 up" shipping cartons) are required to be marked with the country of origin "Philippines." Customs and the Court have consistently ruled that articles excepted from marking under the provisions of 19 CFR 134.32(g) at the time of importation must be marked to indicate the country of origin after processing unless such processing constitutes a substantial transformation. As noted above, this is not the case. Therefore, the CCAs are excepted from marking at the time of importation pursuant to 19 CFR 134.32(g), since any marking thereon would necessarily be permanently concealed during the U.S. processing, but, in accordance with previous Customs and Court rulings, the completed Broadcast Descrambler Unit (the CCA in the weather resistant enclosure) must be marked in any reasonable method by the U.S. processor (after such processing that would have obliterated the marking) to indicate the country of origin of the CCA which is obscured during assembly. This is to ensure that the sense and purpose of the marking statute not be frustrated and that the ultimate purchaser is advised of the country of origin.
It is our opinion that the circumstances of this case trigger the certification requirements of CFR 134.26. MCSI must certify to Customs at the time of importation that the articles which are excepted from marking will be marked with the country of origin after the U.S. processing, and will notify the subsequent processor of the requirement to mark the finished article in a conspicuous place as legibly, indelibly and permanently as the nature of the article 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. See 19 CFR 134.26(d). An example of an acceptable marking in this case would be "Electrical Components made in the Philippines" to be affixed to the weather resistant enclosure of the completed Broadband Descrambler Unit.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 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 Harvey Kuperstein at 212-466-5672.
Robert B. Swierupski