The tariff classification of a gigabit interface connector ("GBIC") and a small form factor-pluggable (SFP) mini-gigabit interface connector ("Mini-GBIC"), the country of origin, and the country of origin marking

N026376 May 21, 2008 CLA-2-85:OT:RR:NC:N1:109 CATEGORY: Classification Ms. Jennifer R. Diaz Becker & Poliakoff Emerald Lake Corporate Park 3111 Stirling Road Fort Lauderdale, FL 33312-6525 RE: The tariff classification of a gigabit interface connector (“GBIC”) and a small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”), the country of origin, and the country of origin marking Dear Ms. Diaz: This is in response to your letter dated April 15, 2008, which you filed on behalf of your client, FCM Products, Inc. (“FCM”), located at 13727 S.W. 152nd Street, Suite 127, Miami, FL 33137. Your letter requests the classification of a gigabit interface connector (“GBIC”) unit and a small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit. You have also inquired as to the country of origin and marking requirements of this merchandise. A sample of a “raw” gigabit interface connector (“GBIC”) unit and a “raw” small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit, as well as “finished” versions of each, which contain proprietary software programming, were furnished along with your submission and are being returned as per your request. A gigabit interface connector (“GBIC”) unit and a small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit, also known as gigabit transceiver modules, are designed to provide an interface connection from open source network switching equipment such as Ethernet switches to the fiber or copper cabling structure. The GBIC and Mini-GBIC units consist of a printed circuit board, an interfaced RJ45 connector or transmitter optical subassembly (TOSA), a metal or plastic casing, and programming codes that allow the unit to function effectively. The units, once programmed, are operated and run in multi-source agreement (“MSA”) standard GBIC and SFP units in GBIC or SFP slotted switches. The programming code is designed to set the correct distance, speed, cabling type, and diagnostic monitoring functions that enable the unit to work effectively. These essential applications are fundamentally necessary to the operation of switches, repeaters, routers, network interface cards and hubs. It is explained in your letter that FCM Products, Inc. will import GBIC and Mini-GBIC units, which are manufactured in and exported from China into the United States. However, in its imported condition, although the GBIC and Mini-GBIC units are comprised of basic hardware assemblies and have the essential character of the finished product, they lack the functional intelligence characteristics and functionality that are present in the completed units. As such, you refer to these units as “raw” when imported from China and only after the software is installed into the merchandise do the products become functional. After importation, these “raw” GBIC and Mini-GBIC units will undertake further processing in the United States. The assembly process in the United States will encompass software code installation, subsequent integration, and testing. You claim that the processing that occurs in the United States provides the end products with the requisite functionality to perform. The operations performed in China and the assembly process performed in the United States, as stated in your letter, are outlined below: Operations performed in China: 1 – A bare printed circuit board is populated with various electronic components and an RJ45 or TOSA interface to form a completed printed circuit board (PCB), aka a printed circuit assembly (PCA). 2 – The PCA is tested with diagnostic apparatus for correct functionality and communication, including temperature testing and “burn-in” testing. 3 – A tracking serial number is created and entered into a data tracking system. 4 – Units are bulk-packed in trays for volume shipping. Operations performed in the United States: 1 – U.S. based software developed by FCM is downloaded to the eeprom area on the GBIC PCB. 2 – Customer specific coding is performed. 3 – Unit part numbers and serial numbers are written to the eeprom area on the PCB. 4 – Customer specified alarm ranges for temperature, voltage, current, transmit power, and receive power are programmed to a secondary eeprom. 5 – Read tests are initiated to confirm that correct information has been programmed. 6 – Units are inserted in a production switch for quality testing of data connectivity, throughput, and proper operation. Software codes are visually inspected for accuracy. 7 – Dust caps are put on the fiber connector ports and custom labels are stickered on the unit. 8 – Final quality assurance visual inspection is performed, and final configuration records are created including assembly part numbers and serial numbers. 9 – Each completed unit is initially packaged in a clear snap case and then packed again into a flap box for retail sale. Summary specification sheets and serial number sheets are placed into each flap box. The units, as exported from China, lack the functional “intelligence” characteristic that are present in the completed gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit because only the basic hardware of the completed gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit are manufactured and tested in China. Such “intelligence” characteristics found in the completed gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit are imparted by the US based software, customer specific coding and alarm ranges, and read testing that occur in the United States. The imported gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit are substantially transformed into fully configured transceiver modules, which provide an interface connection from open source network switching equipment, such as Ethernet switches, to the fiber or copper cabling structure, during the U.S. assembly process. As such, this substantial transformation provides the end products with their functionality. However, although in their imported condition, the imported gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit do not have the intelligence characteristics that enable them to function, they do have the essential characteristics of the completed transceiver modules for classification purposes, which renders them apparatus for communication within a network. You suggested subheading 8471.80.1000 under the Harmonized Tariff Schedule of the United States (HTSUS) as the classification of the gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit, Subheading 8471.80.1000 provides for "Automatic data processing machines and units thereof…: Other units of automatic data processing machines: Control or adapter units." However, the subject merchandise is excluded from classification in heading 8471 by Note 5 (D) (ii) to Chapter 85, which states: “Heading 8471 does not cover…..: (ii) Apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network)” The gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit are transceiver modules that function within a network interfacing open source network switching equipment, i.e. Ethernet switches, to fiber or copper cables. As such, the subject merchandise is apparatus for transmission and reception of voices, images or other data within a network. Therefore, Subheading 8471.80.1000, HTSUS, is inapplicable. The applicable subheading for the gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit, in their condition as imported, will be 8517.62.0050, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: Other.” The rate of duty will be free. The marking statute, Section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, 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 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. Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), Customs Regulations (19 C.F.R. 134.41(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. Section 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. 19 C.F.R. 134.1(d)(1) states that 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. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed, and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See 19 C.F.R. 134.35. In this case, FCM Products, Inc. is the ultimate purchaser because it subjects the imported gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit to a process in the United States that substantially transforms them into an article having a different use and character than that of the imported article. Therefore, the country of origin of these new products is the United States. Pursuant to 19 C.F.R. 134.35 (a), the imported article itself would be exempt from marking upon importation into the United States. Only the outermost container in which the hardware is imported must be marked to indicate China as the country of origin. In your letter you propose that the country of origin marking of the gigabit interface connector (“GBIC”) unit and small form factor-pluggable (SFP) mini-gigabit interface connector (“Mini-GBIC”) unit, after being substantially transformed in the United States, should read “Product of U.S.” The country of origin marking of merchandise after importation into the United States falls under the jurisdiction of the Federal Trade Commission. We advise you to contact the Federal Trade Commission, Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, DC 20508 regarding this matter. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. Part 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Linda M. Hackett at 646-733-3015. Sincerely, Robert B. Swierupski Director, National Commodity Specialist Division