CLA-2-85:OT:RR:NC:N2:209
David Stepp
Crowell & Moring, LLP
515 South Flower St., 40th Floor
Los Angeles, CA 90071
RE: The tariff classification and country of origin marking of variable resistors from China
Dear Mr. Stepp:
In your letter dated December 10, 2018, you requested a tariff classification and country of origin marking ruling on behalf of your client, Thermo-O-Disc, Inc. (“T-O-D”).
The items concerned are variable resistors. The variable resistors will be imported into the United States from China. The products are manufactured either in the United States or Japan and then shipped to China for further minor processing prior to import into the United States.
These variable resistors are components of thermistors used to measure temperature.
Applications for the thermistors include heat pumps, HVAC units, furnaces, boilers, floor heating, refrigeration and freezing systems, humidifiers, dishwashers, laundry machines, automotive applications, etc.
In the first scenario Thermo-O-Disc, Inc. performs the following operations to manufacture the variable resistors:
United States origin carbon powder is shipped to China where it is mixed and formed into
a billet.
2. The billet is shipped back to the United States where it is sliced into ceramic resistor material wafers and coated with an electrode coating. At this stage of the manufacturing process a variable resistor has been created. The process of adding the electrode coating to the wafer of ceramic resistor material is the process whereby the material takes on the functionality and essential character of a variable resistor.
3. Thermo-O-Disc, Inc. ships the wafers back to China, where a dicing saw cuts each wafer into approximately 1,200 resistor chips. Then a plated lead is placed on both ends of each chip, and a glass tube is slid around the chip. The chip is then placed into an oven where the glass is melted to form a hermetic seal around the chip. The hermetic seal simply is a protective encapsulation for the variable resistor.
4. The variable resistors are inspected and packed, and then imported into the United States.
In the second scenario Thermo-O-Disc, Inc. performs the following operations to manufacture the variable resistors:
1. In Japan, the raw carbon material is weighed and mixed, and then formed and sintered
into a ceramic billet.
2. Next, the billet is sliced into wafers and coated with an electrode coating, thereby
creating a fully functioning variable resistor.
3. After inspection, the variable resistors are shipped to China. In China, leads are attached
and the chip is inserted into glass tubes that are melted and fused to form a hermetic seal
around the chip.
4. After inspection and packing, the variable resistors are shipped to the United States.
The applicable subheading for the variable resistors will be 8533.40.8070, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Electrical resistors (including rheostats and potentiometers), other than heating resistors; parts thereof: Other variable resistors, including rheostats and potentiometers: Other: Other: Other.” The general rate of duty will be Free.
With regard to the appropriate country of origin marking of the variable resistor, 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.
The “country of origin” is defined in 19 CFR 134.1(b) 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.”
For tariff purposes, the courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (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). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
Based upon the facts presented and the pertinent authorities, it is the opinion of this office that under scenario one, the United States manufactured variable resistor wafer which is exported to China and processed in China as described above, is not substantially transformed in China into a new and different article of commerce with a name, character, and use distinct from the article exported. Therefore, the variable resistor is considered a product of the United States for marking purposes at time of importation into the United States.
Accordingly, the variable resistors will not be required to have any country of origin marking pursuant to 19 U.S.C. 1304 when imported into the United States.
Whether an article may be marked with the phrase “Made in the USA” or similar words denoting United States origin, is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the FTC Division of Enforcement, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580 on the propriety of proposed markings indicating that an article is made in the U.S.
Based upon the facts presented and the pertinent authorities, it is the opinion of this office that under scenario two, the Japanese manufactured variable resistor wafer which is exported to China and processed in China as described above, is not substantially transformed in China into a new and different article of commerce with a name, character, and use distinct from the article exported. Therefore, the variable resistor is considered a product of Japan for marking purposes at time of importation into the United States.
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 Steven Pollichino at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division