Country of Origin Marking of Handle Subassemblies for Caulking Guns

HQ H236718 December 20, 2013 CLA-2 OT:RR:CTF:TCM H236718 TNA CATEGORY: Marking Mr. Frederick L. Ikenson, Partner Blank, Rome LLP 600 New Hampshire Avenue, NW Washington, DC 20037 Re: Country of Origin Marking of Handle Subassemblies for Caulking Guns Dear Mr. Ikenson: This is in response to your request on behalf of your client, a United States (“U.S.”) manufacturer (“manufacturer”), submitted on December 20, 2012, to U.S. Customs and Border Protection (“CBP”), for a binding ruling on the country of origin marking of handle subassemblies that are used in the manufacture of dispensing tools. In coming to our decision, we have taken into consideration arguments presented to members of my staff at our offices on November 21, 2012. FACTS: The subject merchandise consists of handle subassemblies being imported into the U.S. for use in the manufacture of dispensing tools in the U.S. They will be used to make the handle of these dispensing tools, most of which are manual caulking guns for caulking or sealing joints or applying adhesives. Some components of the subject handle subassemblies are of Taiwanese origin and some are of U.S. origin. The components will be combined into the handle subassembly in Taiwan before being shipped to the U.S. These handle subassemblies are one of three main components of the caulking guns into which they are manufactured. The other two components are the nozzle and barrel of the gun. The subject handle subassembly provides the thrust needed to regulate the flow of material through the barrel and out of the nozzle. The subject subassembly is composed of two U.S.-made gripping plates, one U.S.-made recoil plate, one Taiwanese handle, one Taiwan-made trigger, and various pieces such as screws, pins, washers, lock nuts, and springs that are made in Taiwan. The total cost of the U.S.-made components is approximately one-third the cost of the total subassembly, while the cost of the Taiwan-made components is approximately two-thirds the total cost. The subject subassembly is produced by attaching the trigger to the handle with the hinge pin and nut lock, with the hinge pin washers on either side of the handle. The trigger-adjusting screw and the recoil lock are then added. The subassembly is completed by the recoil plate assembly, spring, and gripping plates. A dummy rod is then inserted to hold the plates and spring in place. No assembly of the handle itself occurs in the U.S. After entry, the handle subassembly is attached to a barrel and nozzle with a permanent rod, as well as the accompanying washers and rings. The attachments are tightened, adjusted, and tested, and the product is readied for sale. Counsel has limited this ruling request solely to these combined components that will constitute the handle portion of the U.S. manufacturer’s manual drive guns. A sample of the subject merchandise was received by this office in conjunction with an earlier country of origin marking ruling issued to the same manufacturer for similar merchandise. That sample, which this office has retained, was again examined in conjunction with the present case. ISSUE: What is the country of origin of the subject handle subassembly? 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 U.S., 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.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940). Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(d), Customs Regulations {19 CFR 134.1(d)}, defines "ultimate purchaser" as generally the last person in the U.S. who will receive the article in the form in which it was imported. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” 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 [the marking laws and regulations].” 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); National Juice Products Association v. United States, 628 F. Supp. 978 (CIT 1986). You argue that the U.S.-made gripping plates and recoil plate transmit the power through the caulking gun, and thus perform the gun’s basic function of delivering caulk. Therefore, you argue that the U.S. components provide the handle subassembly with its country of origin under 19 C.F.R. §134.1(d)(1). The subject handle subassembly consists of a number of pieces: a handle and trigger, gripping plates, a recoil plate, and various screws, pins, washers, lock nuts, and springs. Only three components, the two gripping plates and one recoil plate, are of U.S. origin; the rest are Taiwanese. Together, the cost of these three components is one half the cost of the Taiwanese pieces that make up the handle subassembly. Furthermore, the three U.S. pieces are shipped to Taiwan, and all of the manufacturing to complete the handle subassembly is done in Taiwan. The U.S. components undergo a substantial transformation when they are processed into the subject handle subassembly. The various pieces (recoil plates, pins, locks, screws, etc.) could have a variety of uses before their manufacture into the subject handles. Once manufactured into the handle, however, each piece loses its identity and becomes a component of the handle rather than a separate, identifiable piece. Prior CBP rulings have considered items such as screws, nuts, bolts and fasteners to be substantially transformed constituent materials when they are incorporated into larger merchandise in such a way that they lose their separate identity and become an indistinguishable component of that larger merchandise. See, e.g., HQ 556225, dated January 6, 1992; HQ H229157, dated November 16, 2012; HQ 558881, dated March 3, 1995. In the present case, the U.S. components undergo this substantial transformation in Taiwan, before the subject handle is imported into the U.S. At the time of importation, the handle is in the final form in which it will be used, except for replacement of a dummy pin. As such, we find that the substantial transformation of the U.S. merchandise occurs in Taiwan and the country of origin is Taiwan. The subject handles must be marked as such unless excepted by regulation. Because the handle subassembly will be used in the manufacture of caulking guns in the U.S., you also argue that the U.S. manufacturer is the ultimate purchaser of the imported handle subassembly, and that as a result, the handle subassemblies themselves are exempt from the marking requirements under 19 C.F.R. §134.32(h). As provided in 19 U.S.C. 1304(a)(3)(H), implemented in 19 CFR 134.32(h), an article is excepted from marking where the ultimate purchaser, by reason of the circumstances of the importation, must necessarily know the country of origin of such article even though it is not marked to indicate its country of origin. Containers or holders of articles within the exception set forth in 19 CFR 134.32(h) are not required to be marked to indicate the origin of the contents. See 19 CFR 134.22(d)(1). The applicability of the exception allowed under 19 CFR 134.32(h) depends upon the identity of the ultimate purchaser. Section 134.1(d), Customs Regulations (19 CFR 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. In HQ 732999 dated January 25, 1990, a U.S. buyer claimed to be the ultimate purchaser of imported hinge parts because it claimed to substantially transform them into finished hinges in the U.S. Therefore, the buyer requested that the hinge parts be excepted from country of origin marking pursuant to 19 CFR 134.32(h). Citing 19 CFR 134.35, CBP found that hinge halves were not substantially transformed into a new article with a different name, character or use by being connected together with a pin. CBP found such processing to constitute a mere assembly of parts which were intended to fit together as a complete article; in this case a hinge. On the other hand, CBP found that the incorporation of the hinges into a finished vehicle was a substantial transformation within the meaning of 19 CFR 134.35, such that the buyer was the ultimate purchaser of the hinge halves, and that the hinge parts may be excepted from individual country of origin marking pursuant to 19 CFR 134.32(h), as an article for which the ultimate purchaser must necessarily know the country of origin of the hinges by reason of its contract with the producer. We note that you have not submitted enough information to make a determination as to whether the manufacturer in the U.S. is in fact the ultimate purchaser of the handle subassemblies. As such, we cannot grant this exception in this case. As noted in HQ H229158 dated November 14, 2012, the manufacturer of the dispensing tools uses various sources for its components and manufactures many different types of such tools. As noted in HQ H229158, some of the dispensing tools using imported components are not products of the U.S. Accordingly, no exception under 19 U.S.C. 1304(a)(d)(H) or 19 C.F.R. 134.32(h) may be granted in this circumstance. Prior CBP rulings have considered a marking exception under 19 C.F.R. 134.32(g) when the merchandise at issue was to be processed by the importer or for his account, other than for the purpose of concealing the country of origin marking and in such a manner that would obliterate, destroy or permanently conceal the country of origin marking. In HQ 734741, dated November 25, 1992, for example, CBP granted a 134.32(g) marking exception for the imported parts of water pumps because any country of origin marking on the pumps would have been concealed by domestic processing. In the present case, the subject handle subassemblies will be processed by the importer. However, because the subject handle subassemblies will be subsequently manipulated after importation in ways about which we do not have enough information, we cannot know whether the marking required on the subject handle subassemblies will be concealed. As a result, we cannot grant an exception under 19 CFR 134.32(g). Lastly, CBP has also granted a marking exception under 19 CFR 134.32(d) when the marking of a container of such article will reasonably indicate the origin of such article. In HQ 734595, dated August 4, 1992, for example, CBP noted that, pursuant to section 134.34, Customs Regulations (19 CFR 134.34), an exception may be authorized at the discretion of the district director for imported articles which are to be repacked after release from Customs custody under the following conditions: (1) The containers in which the articles are repacked will indicate the origin of the articles to an ultimate purchaser in the U.S., and (2) The importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification, as may be necessary by certification and the submission of a sample or otherwise, of the marking prior to the liquidation of the entry. In HQ 734595, imitation jewelry was imported in bulk to be resold to retail buyers after minor processing such as plating and minor assembly. There, CBP required a certification from either the importer or the subsequent purchaser who finished and repacked the merchandise that the imported merchandise would be repacked in such a manner to inform the ultimate purchaser of the country of origin of the imported merchandise. See HQ 734595. In the present case, because the subject handle subassemblies will be subsequently manipulated after importation in ways about which we do not have enough information, marking the containers may well be enough to inform subsequent purchasers of the country of origin. However, in accordance with HQ 734595, a certification under 19 C.F.R. §134.26 must be included with each importation of the subject handle subassemblies. The requirements of such a certification may be found in CBP’s regulations at 19 C.F.R. §134.26. This ruling letter does not address the country of origin of the final good, namely, the caulking gun into which the subject handle subassembly is incorporated. The answer to that issue will depend on whether the subject handle subassembly is combined with foreign or U.S.-made barrels or nozzles in the United States once it is imported. The final product may well need to be marked with its country of origin, depending on what processing occurs and whether it undergoes a substantial transformation. For examples of the marking determination on a number of different manufacturing scenarios, please see HQ H229158, dated November 14, 2012. HOLDING: In accordance with provisions of 19 USC 1304, 19 C.F.R §134.32(h), and 19 C.F.R. §134.35, the subject U.S. components undergo a substantial transformation in Taiwan such that the country of origin of the imported handle subassembly is Taiwan. As such, the subject handle subassemblies must be marked with their country of origin; however, marking the container in which the subject handle subassemblies are imported is sufficient. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Ieva K. O’Rourke, Chief Tariff Classification and Marking Branch