Country of origin marking for brake pads

HQ H290366 March 5, 2018 OT:RR:CTF:FTM H290366 JER CATEGORY: Marking Chris Pey, Esq. Fisher Broyles, LLP 445 Park Avenue, 9th Floor New York, NY 10022 RE: Country of origin marking for brake pads Dear Mr. Pey: This is in response to your memorandum, dated April 25, 2017, filed on behalf of your client, Celerity Systems North America, requesting a country of origin marking ruling for imported automotive brake pads pursuant to 19 U.S.C. § 1304 (a)(D); 19 C.F.R. § 134.32(d); 19 C.F.R. § 134.22(a). FACTS: The merchandise is described as being brake system component parts which include: brake pads, disk rotors, brake shoes, slack adjusters and brake linings. According to the record, the merchandise is imported from either the United Kingdom, Turkey or China. Following entry the merchandise is sold and distributed directly to licensed automotive repair shops and auto parts stores. The merchandise is thereafter sold to the final customer (the retail consuming public) for installation into the consumer’s vehicle. The record further states that prior to shipment the merchandise is packaged in individual containers by component type. The brake parts are wrapped in plastic sheeting and placed inside a labeled retail container. Affixed to the containers are labels which state the part number, UPC code, the brand name, a bar code and the country of origin. The brake parts themselves do not have any country of origin marking. Instead, etched onto the brake parts is the brand name, the part number and other identifying product information. According to the inquirer, the individual container does not reach the retail consumer (the public) in its condition as imported. Instead, the auto parts remain inside the container until they are removed by the auto parts store or automotive repair facilities for installation of the part into the retail consumer’s automobile. ISSUE: Whether the automotive replacement parts must be individually marked with the country of origin when the parts are packaged inside individual containers which bear the proper country of origin marking. 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. By enacting 19 U.S.C. § 1304, Congress intended to ensure "that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are 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. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940). Subsection 1304(a)(D) (19 U.S.C. § 1304(a)(D)), provides an exception to the marking requirements when “[t]he marking of a container of such article will reasonably indicate the origin of such article[.]” The regulations implementing the requirements and exceptions to 19 U.S.C. § 1304 are set forth in Part 134 of the CBP Regulations (19 C.F.R. Part 134); specifically, 19 C.F.R. § 134.22 (a) and 19 C.F.R. § 134.32 (d). The CBP Regulations under consideration are as follows: Subpart A – General Provisions § 134.1   Definitions. * * * (d) Ultimate purchaser. 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 it 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 article's country of origin. (2) 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.” With respect to a good of a NAFTA country, if the manufacturing process does not result in one of the changes prescribed in the NAFTA Marking Rules as effecting a change in the article's country of origin, the consumer who purchases the article after processing will be regarded as the ultimate purchaser. (3) If an article is to be sold at retail in its imported form, the purchaser at retail is the “ultimate purchaser.” * * * Subpart C – Marking of Containers or Holders § 134.22 General rules for marking of containers or holders. (a) Contents excepted from marking. When an article is excepted from the marking requirements by subpart D of this part, the outermost container or holder in which the article ordinarily reaches the ultimate consumer shall be marked to indicate the country of origin of the article whether or not the article is marked to indicate its country of origin. Subpart D – Exceptions to Marking Requirements § 134.32 General exceptions to marking requirements. The articles described or meeting the specified conditions set forth below are excepted from marking requirements (see subpart C of this part for marking of the containers): * * * (d) Articles for which the marking of the containers will reasonably indicate the origin of the articles; * * * 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. 19 C.F.R. § 134.1 (d). Yet, the general rule that “[i]f an article is to be sold at retail in its imported form, the purchaser at retail is the ultimate purchaser” is often difficult to apply in the context of replacement automotive and appliance parts since the retail consuming public is typically purchasing both an installation service and a product. See Headquarters Ruling Letter (“HQ”) 734820, dated April 21, 1994, (Determining which party constituted the ultimate purchaser between the parts installer or the retail consumer is deliberated); see generally, 19 CFR § 131.1 (d)(3). In this context, the ultimate purchaser is sometimes not the retail consuming public since the part is often not visible to the consumer once it is installed inside the vehicle or appliance and therefore typically does not reach the consumer in its exact condition as imported. In keeping with the decision in Friedlaender & Co. and in the context of imported automotive parts, CBP has previously considered whether the automotive parts store, mechanic, manufacturer or public retail consumer constituted the ultimate purchaser. Establishing the identity of the ultimate purchaser assists in determining whether the container of the parts or the parts themselves are eligible for the 19 U.S.C. § 1304(a)(D) exception. In Headquarters Ruling Letter (“HQ”) 732940, dated July 5, 1990, CBP determined that a U.S. manufacturer who assembled imported automotive parts and incorporated those parts into a vehicle, constituted the ultimate purchaser. By contrast, in HQ 561939, dated December 20, 2000, CBP noted that a re-conditioner of transshipped used auto parts was not the ultimate purchaser. In this line of cases, CBP considered the extent to which substantial transformation impacted the country of origin. In the instant case however, neither NAFTA, manufacturing, assembly, nor substantial transformation are at issue. In cases where manufacturing and substantial transformation were not at issue, CBP has held that an automotive part is excepted from marking under 19 U.S.C. § 1304 (a)(3)(D), if the marking of a container of the automotive part will reasonably indicate the origin of such article to the ultimate purchaser. HQ 722727, dated October 21, 1983, cited by, HQ 733241, dated August 27, 1990; see also, New York Ruling Letter (“NY”) L81544, dated January 5, 2005. In HQ 722727, CBP ruled that various replacement automotive parts individually wrapped inside containers which bore the country of origin marking were excepted from individual marking by the exception set forth at 19 U.S.C. 1304(a)(3)(D). With respect to HQ 722727, we stated that “[i]f it is the ultimate purchaser who will receive the part in the closed cardboard box, the part itself is not required to be marked pursuant to 19 U.S.C. § 1304(a)(3)(D) and 19 C.F.R. § 134.32(d) as long as the box is properly marked.” In scenarios where the repair shop orders the part directly from the manufacturer and installs the replacement part, and the parts are small insignificant and installed exclusively by the dealership, CBP has held that the repair shop/installer is the ultimate consumer. HQ 734820, dated April 21, 1994. In this context, it is presumed that the part remains in the container until it is installed. In such scenarios, the retail consuming public does not order the part directly from the manufacturer and typically does not see the part until after it is installed; if at all. In contrast, as we stated in HQ 733241, dated August 27, 1990, with respect to automotive parts, that “[i]f the consumer is concerned about the country of origin, he or she can ask to see the box before purchasing the part and requesting the installation.” In HQ 733241 the automotive parts were imported in sealed cardboard boxes. The boxes in HQ 733241 were marked with the country of origin yet the parts (not themselves marked with the country of origin) would remain in the box until installation and therefore not be visible to the vehicle owner until after installation into the vehicle. In HQ 733241, CBP viewed the vehicle owner as the ultimate purchaser and ruled that the sealed cardboard boxes satisfied the requirements of 19 U.S.C. § 1304 and 19 C.F.R. § 134. In instances where the retail consuming public, themselves, order the part directly from the manufacturer or where the replacement part or component is readily available at retail outlets (e.g., department stores) and/or otherwise can reach the consumer in its condition as imported, then the retail consuming public constitutes the ultimate purchaser. See e.g., HQ H283715, dated April 17, 2017, where CBP found that iPhone devices, which were individually packaged in individual retail containers bearing the country of origin and reached the ultimate consumer in said retail containers, satisfied the marking requirements of 19 U.S.C. § 1304 and 19 C.F.R. § 134. Under our facts, the vehicle owner constitutes the ultimate purchaser. This conclusion is in line with HQ 733241, in that the vehicle owner does not see the part (in its condition as imported), but can ask to see the box (bearing the country of origin). The parts remain inside the container until the parts are installed; and thus are not visible to the public until after installation, if at all. The subject parts are not machined, assembled or manufactured further once imported and thus do not undergo any substantial transformation. Moreover, much like the decisions in HQ 733241, and NY L81544, we find that the subject containers are properly marked with the country of origin. Accordingly, inasmuch as the vehicle owner constitutes the ultimate purchaser, we find that the subject brakes parts which are packaged inside the individual containers are excepted from individual marking by the exception set forth at 19 U.S.C. § 1304(a)(3)(D); 19 C.F.R. § 134.22 (a). Moreover, the containers which bear the country of origin satisfy the marking requirements set forth in 19 U.S.C. § 1304. HOLDING: Based upon the facts provided and all the aforementioned, the imported automotive brake parts which are packaged inside retail containers are excepted from individual marking pursuant to 19 U.S.C. § 1304(a)(3)(D) and 19 C.F.R. § 134.32(d). Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division