HQ 734560

July 20, 1992

MAR-2-05 CO:R:C:V 734560 ER

CATEGORY: MARKING

Mr. Joan McLeod

Customs Specialist

Northern Telecom Inc.

77 Oriskany Drive

Tonawanda, NY 14150

RE: Reconsideration of Country of Origin Marking Ruling for

Imported Northern Telecom Telephone Sets (Residential

and Business) (HQ 734046 (5/10/91) clarified);

Substantial Transformation; Ultimate Purchaser;

Container.

Dear Ms. McLeod:

This is in response to your letter of July 16, 1991,

received by this office on April 2, 1992, in which you request

reconsideration of HQ 734046 (May 10, 1991) which involved the

country of origin marking requirements for imported residential

and business Northern Telecom telephone sets.

FACTS:

The facts as set forth in HQ 734046 are set forth below.

A sample \[residential\] telephone set was submitted for

our examination. Each telephone set consists of

different components from different countries of

origin. The telephone set consists of a base unit, a

handset, a handset cord and a cord to connect the

telephone to the jack. The base unit consists of

various components sourced from a variety of countries

(including the printed circuit board, which is made in

the U.S.) which are mounted on a printed circuit board

and enclosed in a housing in Malaysia. The handset is

made in China. The handset cord is made in Taiwan and

the telephone cord is made in Mexico.

The base unit, handset, handset cord and telephone cord

are packed together in the same box but are not

attached to each other or combined. The value of the

telephone base, which consists of a motherboard,

keypad, plastic base and housing, is \$63.35. The value

of the handset, which consists of a receiver,

transmitter, loudspeaker and wiring, is \$3.35.

We requested further information from Northern Telecom

as to exactly what processing is done in Malaysia. We

never received this information. Therefore, this

ruling is based on the limited information presented.

There, Customs ruled that the base unit, headset, headset cord

and telephone cord which were imported as a telephone set were

not substantially transformed when packed together. Accordingly,

each component had to be marked with its own country of origin.

In the subject request for reconsideration, the facts are

somewhat modified. You state that the handset is from Canada or

China (\$3.35); the base is from Canada or Malaysia (\$63.35

residential and \$6000.00 business); the cords are from Canada or

Mexico (\$0.35 to \$1.00); and the transformers are from Taiwan

(\$3.00). These items are assembled and tested in either Canada

or Malaysia.

You state that Northern Telecom does not sell the individual

components on a retail level. Moreover, marketing strategy and

literature emphasize the sale of a complete telephone set (as

opposed to the sale of individual components).

The residential telephone sets are sold to and received by

the retail customer in a plain brown cardboard box. The business

telephone sets are installed by Northern Telecom installation

personnel. The containers of the business telephones are not

seen by the end user.

It is your position that the telephone set is an entirety

with a commercial identity different from its components. Hence,

you believe that the marking should be limited to the country in

which the components are brought together and assembled to create

the finished product.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.

1304), provides that 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 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 requirements and

exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs

Regulations (19 CFR 134.1(b)), defines \"country of origin\" as the

country of manufacture, production or growth of any article of

foreign origin entering the U.S. 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.\"

The primary purpose of the country of origin marking statute

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.\" United States v. Friedlaender & Co., 27

C.C.P.A., 297, 302, C.A.D. 104 (1940).

Neither the statute nor the Customs Regulations contains any

provisions regarding the marking of sets, mixtures or composite

goods. In the absence of any special requirements, the general

country of origin marking requirements apply, i.e., every article

that is imported into the U.S. must be marked to indicate its

country of origin as determined by where the article underwent

its last substantial transformation.

A substantial transformation occurs when articles lose their

identity and become new articles having a new name, character, or

use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270

(1940); Koru North America v. United States, 12 CIT 1120, 701

F.Supp. 229 (1988). The question of when a substantial

transformation occurs for marking purposes is a question of fact

to be determined on a case-by-case basis. Uniroyal Inc. v.

United States, 3 CIT 220, 542 F.Supp. 1026 91982), aff\'d, 1

Fed.Cir. 21, 702 F.2d 1022 (1983).

In determining whether the assembly of components amounts to

a substantial transformation, the issue is the extent of

operations performed and whether the parts lose their identity

and become an integral part of the new article. Belcrest Linens

v\. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff\'d 2

Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which

are minimal or simple, as opposed to complex or meaningful, will

generally not result in a substantial transformation. See,

C.S.D.\'s 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.

The assembly operation performed to connect the components

in the kit to form the telephone is extremely simple. Hence, no

substantial transformation of the components can be said to occur

by virtue of the assembly and, accordingly, the country of origin

of each component should be identified. See, T.D. 67-173, 1

Cust. Bull. 366 (1967) (which involved the domestic assembly of

fishing rods imported in an unassembled or partially assembled

condition. There, Customs ruled that the assembly did not

constitute a substantial transformation because the manufacture

did not result in a new and different article.)

The telephone components for the residential telephone may

be excepted from individual country of origin marking pursuant to

19 U.S.C. 1304(a)(3)(D) and section 134.32(d), Customs

Regulations (19 CFR 134.32(d)), so long as the customs officials

at the port of entry are satisfied that the ultimate purchaser,

the retail buyer, receives the set in the carton which is

correctly and conspicuously marked with country of origin. A

legend such as the following would constitute proper marking on

the carton: \"Telephone base made in (name of country); Handset

made in (name of country); Transformer made in (name of country);

Line Cord made in (name of country), or similar language.

Consistent with the \"common sense\" approach to marking

discussed in T.D. 91-7, 25 Cust. Bull. 6 (1991), it would also be

appropriate to mark the residential telephone carton with a

legend which identifies each major component with its respective

country of origin and to list the country or countries of origin

of the remaining less significant components. Such a legend

could read: \"Telephone base made in (name of country); Handset

made in (name of country); other component parts made in (names

of countries). When grouping together the countries of origin of

the remaining component parts, the actual countries of origin of

the components must be identified; designating two or more

countries in the alternative (either/or) is not satisfactory.

See, C.S.D. 89-111.

The \"central\" marking approach is appropriate for both the

the business and the residential telephone. This method

requires labelling one of the main parts of the telephone, such

as the base, with a single, conspicuous country of origin legend

which clearly indicates the countries of origin of the component

parts. Either one of the two legends described above for marking

the carton would be appropriate. See, T.D. 67-173, 1 Cust. Bull.

366 (1967) (where Customs found that one of the parts, such as

the main reel housing, should be marked to indicate the country

of origin so that the marking would be legible and conspicuous

after the assembly of the reels)and HQ 734165 (December 2, 1991)

(where the means of marking the packaging of articles made in

more than one country was proper where the package was marked

\"Made in (name of country), (name of country) and (name of

country)\".) Also see, HQ 734214 (November 19, 1991) and HQ 734497

(June 8, 1992).

In the past, Northern Telecom has marked both the individual

components (for residential and business telephones) and their

cartons with country of origin. If Northern Telecom prefers to

continue marking each component with country of origin instead of

adopting the marking approaches discussed above, and opts not to

exercise the 19 CFR 134.32(d) exception for the residential

telephones (also discussed above), then without exception, each

and every component has to be marked with country of origin.

Marking the plastic sleeve in which some of the components are

shipped, instead of the component itself will not suffice because

the sleeve is removed at the time the components are assembled.

By marking each component, after assembly it remains clear to the

consumer that only the marked component, and not the assembled

telephone as a whole, originates from the country designated on

any one component. So long as each component is marked, the

country name without more, e.g. \"Canada\", may appear on a

component originating therefrom. It is also acceptable to

designate the name of the component in addition to its origin,

e.g. \"Handset made in Canada\".

HOLDING:

As provided in HQ 734046, telephone components packed

together as a set are not substantially transformed by virtue of

being assembled into a telephone unit. Consequently, the

countries of origin of the components must be identified. HQ

734046 is clarified so as to permit the forms of marking

described above.

Sincerely,

John Durant, Director

Commercial Rulings Division

cc: District Director, Buffalo, NY