Internal Advice Request 09/011; country of origin marking of a calculator and plastic case

HQ H056375 August 23, 2010 CLA-2 OT:RR:CTF:TCM H056375 JRB CATEGORY: Marking Port Director Port of Dallas/Fort Worth U.S. Customs and Border Protection P.O. Box 619050 DFW Airport, TX 75261-9050 RE: Internal Advice Request 09/011; country of origin marking of a calculator and plastic case Dear Port Director: This is in response to a memorandum from your port, dated March 24, 2009 forwarding a Request for Internal Advice, initiated by counsel for Dexas International Ltd. (Dexas), concerning the appropriate marking for purposes of the country of origin marking statute (19 U.S.C. §1304). FACTS: The product that is the subject of this request is a solar powered calculator imported from China. A picture of the product is below:
On the back of the calculator there is a marking indicating that the product is a product of China. A picture of that marking is below:
The imported calculator is then screwed onto a plastic case that Dexas markets as the “Clipcase with Tilt Calculator”. Dexas indicated to you that the plastic case is designed and manufactured in the United States. The marking on the calculator indicating that it is a product of China is hidden below the calculator and cannot be seen. A picture of the completed case with the attached calculator is below:
The Clipcase is then labeled with the following piece of paper that can be removed by the consumer after purchase:
Finally, the back of the Clipcase contains a marking indicating that the product is “Made in Dallas, Texas, USA”. A picture of that is below:
The calculator is also attached to another Dexas product known as the “Clipulator”. On this product instead of having the calculator screwed onto the case just above the clip, the calculator is incorporated onto the clip. A sample of this product was not included with the request and thus no pictures are provided. On September 6, 2007, your office issued a Notice to Mark (CBP Form 4647) to Dexas indicating that the merchandise must be marked properly. In response to this notice, Dexas requested that you seek Internal Advice regarding the appropriate country of origin marking of the Clipcase with Tilt Calculator pursuant to 19 U.S.C. §1304. ISSUE: Whether the Clipcase as sold to consumers must contain a marking indicating that the calculator attached to its cover is a product of China pursuant to the marking statute (19 U.S.C. §1304)? LAW AND ANALYSIS: 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 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." United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940). Part 134 of title 19 of the Code of Federal Regulations (19 C.F.R. §134) implement the country of origin marking requirements and exceptions of 19 U.S.C. §1304. Section 134.1(b) (19 C.F.R. §134.1(b)), defines “country of origin” as: [T]he 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 regulations]… A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use that differs from the original material subjected to the process. M.B.I. Merchandise Industries, Inc. v. United States, 16 C.I.T. 495, 502 (1992) (citing United States v. Gibson-Thomsen Co., C.C.P.A. 267, 270 (C.A.D. 98) (1940)). The question of whether a substantial transformation occurs for marking purposes is a question of fact; to be determined on a case-by-case basis. National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (quoting Uniroyal Inc. United States, 3 C.I.T. 220, 542 F.Supp. 1026 (1982), aff’d, 1 Fed.Cir. 21, 702 F.2d 1022 (1983)). In this case, an imported calculator is screwed onto a plastic case of U.S. origin. Dexas contends that the case as sold to consumers does not have to have a marking indicating that the calculator is of Chinese origin because they contend that Dexas is the ultimate purchaser of the calculator and is thus exempt from the marking statute. In particular Dexas cites to 19 C.F.R. §134.1(d)(1), which provides: The “ultimate purchaser” is generally the last person in the United States who will receive the article in the form in which it was imported; however, for a good of a NAFTA country, the “ultimate purchaser” is the last person in the United States who purchases the good in the form in which was imported. It is not feasible to state who will be the “ultimate purchaser” in every circumstance. The following examples may be helpful: (1) 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, even though the process may not result in a new or different article, or for a good of a NAFTA country, a process which results in one of the changes prescribed in the NAFTA Marking Rules as effecting a change in the articles country of origin. This particular provision of the CBP regulations was discussed in Uniroyal, Inc. v. United States, 3 CIT 220, 1029 (1982). In Uniroyal, the Court of International Trade determined that with respect to a situation where an imported good is incorporated with other goods in the United States the test is still whether or not the good has undergone a substantial transformation. Id. In Uniroyal, the court determined that the leather uppers of shoes did not undergo a substantial transformation in the United States when those uppers were combined with outer soles to make a completed shoe. Id. Applying the logic of Uniroyal to the present case, the calculator has not undergone a substantial transformation in the United States when it is screwed onto the plastic case. The calculator maintains its name because it is still just a calculator that is screwed onto a clipboard. The calculator maintains the same use as a machine to add, subtract, multiply, and divide various numbers. Finally, the character of the calculator has not changed it has just been screwed onto a case. As seen in the pictures above, the calculator is still readily identifiable on the case and has not undergone any change to its identity as a calculator. In fact, the only processing that occurs on the calculator is a simply assembly of screwing two screws to the calculator to attach it to the finished case. Therefore, the ultimate purchaser of the calculator is not Dexas, but is the consumer purchasing the case with the attached calculator. Dexas argues that because the completed Clipcase is classified in heading 3926, Harmonized Tariff Schedule of the United States (HTSUS), which provides for other articles of plastic, by application of General Rules of Interpretation (GRI) 3(b), that the good as sold to consumers is considered an article of plastic and not a calculator. However, Dexas’ argument oversimplifies both the classification and substantial transformation analysis required for this product. Dexas contends that the final clipcase with the attached calculator is classified by application of GRI 3(b). GRI 3(b) provides for, among other things, the classification of composite goods. A composite good is a good consisting of two different components or materials which are classified in different headings of the HTSUS, and which are joined together to make a particular good. See Headquarters Ruling Letter (HQ) H026521, dated March 30, 2010. In order to be classified by application of GRI 3(b) the good must have two different components, such as a plastic case and a calculator. In this case, Dexas is admitting that the good consists of two different components, a calculator and a plastic case. Thus, even under Dexas’ own argument, the calculator is still functioning as a calculator and has not lost its identity as such. Otherwise, the product could not be classified using a GRI 3(b) analysis. Dexas also argues that the calculator has taken on a new identity because it now called a Clipcase or a Clipulator, it has a new character because it is no longer hand held, and it has become part of the larger product. However, we disagree with this assessment of the situation. The calculator has not changed its use. As we noted above, the calculator, despite the fact that is no longer able to be put in a person’s pocket, is still just a calculator. In fact, the calculator is still mobile because it is part of a mobile plastic case. Further, in its marketing materials, Dexas indicates that the calculator has not changed its name. Dexas refers to the product as a “Clipcase with tilt calculator” (emphasis added). Since we find that the calculator has not undergone a substantial transformation in the United States, the Clipcase and Clipulator must indicate that the calculator is of Chinese origin in a manner that the retail purchaser of the product can see the country of origin of the calculator. In addition, since Dexas puts markings on its products like USA or Dallas, Texas, Dexas must mark its products in accordance with 19 C.F.R. 134.46. Finally, CBP does not make determinations on the appropriateness of markings such as “Made in the U.S.A.” In order to determine whether or not a good can be marked with that marking or similar markings indicating U.S. origin, Dexas must submit a request to the Federal Trade Commission (FTC), Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C., 20580. We believe that Dexas has initiated this process and should mark their products according the FTC’s determination with respect to the U.S. content. HOLDING: Pursuant to 19 U.S.C. §1304, the calculator imported from China and screwed or attached onto the Clipcase and Clipulator does not undergo a substantial transformation in the United States such that it is exempt from marking requirements. Therefore, the completed Clipcase and Clipulator must contain markings indicating the country of origin of the calculator as a product of China. You are to mail this decision to the Internal Advice requester no later than 60 days from the date of the decision. At that time, the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and to the public on the CBP website located at www.cbp.gov, by means of the Freedom of Information Act and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division