Country of Origin of LED Light Sets; Marking

HQ H304679 June 11, 2024 OT:RR:CTF:VS H304679 JMV CATEGORY: Origin Long Vu Walgreens Co. 304 Wilmot Rd. MS #3163 Deerfield, IL 60015 RE: Country of Origin of LED Light Sets; Marking Dear Mr. Vu, This is in response to your letter dated May 29, 2019, on behalf of Walgreens Co. (“Walgreens”). In your letter, you request a ruling pursuant to 19 C.F.R. Part 177 regarding the country of origin of LED string lights. FACTS: The subject merchandise are LED string lights connected to a battery box (“LED Light Sets”), which are identified by Walgreens Item Codes (“WIC”) 150097, 150119, 150554 and 155564. WICs 150119, 150554, and 155564 are miniature LED Light Sets, which will be used for Christmas decorations. WIC 150119 is an assortment of two styles (15 White LEDs and 15 Multi Color LEDs). WIC 150554 contains 100 White LEDs and WIC 155564 contains 100 Multi Color LEDs. Most of the components/materials used in producing WICs 150119, 150554 and 155564 are of Chinese origin. The Chinese origin components include LED light bulbs, shrink sleeves, copper clips, color boxes, switches and integrated circuits. The main components of Cambodian origin are the battery/control boxes and electric wires. The label and instruction manual are also of Cambodian origin. The manufacturing operation process for these three WICs is as follows: Assemble the battery/control boxes. Cut the electric wires to specific length and peel the wires. Connect the light bulbs to lamp bases/sleeves to make the lamps. Workers manually assemble the lighting string with the lamp covers from Cambodia. Connect the incomplete light string to the battery/control box. Test and re-lamp the light sets. Perform the final inspection. Items in WIC 150097 are lighting sets for indoor use as Halloween decorations. WIC 150097 is in an assortment of three styles: ghost shape with white LED, pumpkin shape with yellow LED, and bat shape with white LED. Most of the components used in producing WIC 150097 are of Chinese origin. These Chinese originating components include copper wire lamps (wire incorporated with LED lamps), “TRY ME” battery case and metal parts, window color boxes and other small parts. The components of Cambodian origin are battery case, plastic flower shells (decorative lamp cover) and electric wires. The LED Light Sets of WIC 150097 are assembled in a different factory in Cambodia; however, the manufacturing process is similar to that for WICs 150119, 150554 and155564. It starts with affixing the lamp covers to the copper wire LED lamps to make the incomplete light strings. After the battery/control boxes and “TRY ME” units are assembled, the incomplete light strings, the battery/control boxes and the “TRY ME” units are connected together to make the complete light strings. Final inspection, packaging and packing are performed to complete the manufacturing process. ISSUE: Whether the country of origin is Cambodia for marking purposes. 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 purchaser 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). Part 134, 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(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 regulations]. . . .” A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982). In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative. Minimal or simple assembly operations will generally not result in a substantial transformation. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one, which leaves the identity of the article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and the character of the product remained unchanged and did not undergo substantial transformation in the United States). In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of the term “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight, under the TAA. All the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight. The court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool. Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article. In reaching its decision in the Energizer case, the court expressed the question as one of whether the imported components retained their names after they were assembled into the finished Generation II flashlights. The court found “[t]he constitutive components of the Generation II flashlight do not lose their individual names as a result [of] the post-importation assembly.” The court also found that the components had a pre-determined end-use as parts and components of a Generation II flashlight at the time of importation and did not undergo a change in use due to the post-importation assembly process. Finally, the court did not find the assembly process to be sufficiently complex as to constitute a substantial transformation. Thus, the court found that Energizer’s imported components did not undergo a change in name, character, or use because of the post-importation assembly of the components into a finished Generation II flashlight. The court determined that China, the source of all but two components, was the correct country of origin of the finished Generation II flashlights under the government procurement provisions of the TAA. Similarly, in Headquarters Ruling Letter (“HQ”) H304093, dated June 13, 2019, CBP found that the components of the string light sets did not lose their individual identities as a result of the assembly process in the Philippines. The string lights were comprised of a plug, a cord connector, fuses, electric wires, lead contacts, light bulbs, a color box, lamp holders/lamp husks and an Underwriters Laboratories (“UL”) safety label. All the components were of Chinese origin except for the UL label, from the United States, and the electric wires and packing materials, from the Philippines. CBP found that the components of the string light sets had a pre-determined end-use as parts and components of the light sets when imported into the Philippines and did not undergo a change in the Philippines as a result of assembling and connecting the parts. In New York Ruling Letter (“NY”) N300781, dated September 28, 2018, CBP again found that the assembly of light strings did not result in a substantial transformation. In NY N300781, CBP considered the origin of four different light sets used for Christmas trees with either LED or incandescent bulbs. Each item was comprised of the following components: a cord connector, electric wires, lead contacts, fuses, lamp base/husk, lamp cover/crust, light bulbs, color boxes, UL labels and a carton box. All of the components were of Chinese origin, except for the UL label from the United States, and the packaging material from Cambodia. The assembly operation in Cambodia primarily included assembling and connecting parts, cutting wires, and packaging. CBP found that the assembly operations performed in Cambodia did not substantially transform the Chinese originating components/materials into Cambodian products as the processing did not create a new and different article of commerce with a distinct character and use that was not inherent in the components when imported into Cambodia. When CBP considered the origin of string lights again in HQ 734182, dated February 17, 1993, CBP considered the complexity of the processing in each country. In HQ 734182, the light strings were assembled in China from entirely Taiwanese components and CBP found that the Chinese assembly operation did not substantially transform the Taiwanese components. The assembly of the lightbulb socket involved snapping the base of the socket into the wire, which only took 20 seconds and did not involve any high skilled workers. Also, CBP noted, the injection molding process of the sockets and plugs performed in Taiwan was much more complex than the assembly operation. CBP concluded that the Taiwanese components did not change in name, character or use as a result of the assembly operation because they still remained a wire, socket and plug after being assembled, although they became components of a light string. Accordingly, the country of origin of the light strings was found to be Taiwan. See also HQ 557796, dated June 3, 1994 (finding that the assembly of the components in China to produce the finished light sets “did not create a new and different article of commerce with a distinct character and use that was not inherent in the components imported into China.”). In this instance, none of the components of the subject LED Light Sets are substantially transformed by the assembly operation in Cambodia. The components of all four LED Light Sets have a pre-determined end-use as parts and components of the light sets when imported into Cambodia. Additionally, the assembly process is quite simple, involving only connecting and cutting of components. We also note that for WIC 150097, although more components are of Cambodian origin, the Chinese components, copper wire lamps, were formed from a complex process. Similar to the finding in Energizer, the components of the subject LED Light Sets do not lose their individual names as a result of the assembly process. Therefore, the country of origin of WICs 150119, 150554 and 155564, is China since all but two of the components are of Chinese origin. Likewise, the country of origin of WIC 150097 is China since all but three of the components are of Chinese origin. HOLDING: The country of origin of the subject LED Light Sets is China for marking purposes. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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, Monika R. Brenner, Chief Valuation & Special Classification Branch