Country of Origin Marking; Shock Absorber Parts; Substantial Transformation; 19 CFR 134.26

HQ W562131 December 18, 2001 MAR2-05 RR:CR:SM W562131 MLR CATEGORY: Marking Ms. Janet Westrick The A.W. Fenton Company, Inc. 21500 Aerospace Parkway Brook Park, OH 44142-1071 RE: Country of Origin Marking; Shock Absorber Parts; Substantial Transformation; 19 CFR 134.26 Dear Ms. Westrick: This is in reference to your letter dated May 10, 2001, requesting a ruling on behalf of American Showa, Inc., concerning the country of origin marking requirements of imported shock absorber parts. FACTS: The articles at issue are shock absorber parts from Japan, such as bottom cases, valve cases, vales (washer-like discs), threaded piston rods, springs, axle holders, etc., that will be used by the importer to manufacture motorcycle shock absorbers, also known as front fork assemblies. American Showa will import these parts in bulk that will arrive in containers that are marked to indicate the country of origin of the parts. In the U.S., the parts are combined and assembled with U.S.-origin parts to form the finished shock absorbers. You state that the processing in the U.S. involves: small parts washing, oil seal grease up, valve case force fitting, under seat sub-assembly, fork bolt sub-assembly, fork pipe washing, bottom case wash, date stamp fork pipe roll staking, center bolt tightening, oil seal force fitting, leak test oil filling spring install, fork bolt install, dust seal install, operation test and length check, and inspection packing. In response to a request for more information, you submitted photographs of the various parts, and show the parts that make up the oil lock collar subassembly, seat pipe subassembly, fork bolt subassembly, and the final assembly. A spreadsheet is also submitted of the parts list and the parts that comprise each subassembly. For example, it is indicated that the seat pipe and piston ring make up the oil lock collar; and that the rebound seat, valve spring, and oil lock collar make up the seat pipe. Other parts are combined in order to make the final assembly. It is also stated that in some instances, the imported parts will be diverted to service shops where they may be used by the serving company or placed in retail inventory for purchase by individual motorcycle owners for their own repair purposes. However, due to the variations in demand for spares and the small number of parts actually diverted, it is stated that the importer is unable to identify, prior to importation, which parts, if any, that will be diverted from manufacture to retail. ISSUE: What are the country of origin marking requirements of the imported shock absorber parts? LAW AND ANALYSIS: Substantial Transformation 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 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 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations {19 CFR 134.1(b)}, defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the U.S. 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. For country of origin marking purposes, a substantial transformation of an imported article occurs when it is used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. If such substantial transformation occurs, then the manufacturer is the “ultimate purchaser” of the imported article; such article is excepted from individual marking and only the outermost container in which the U.S. manufacturer receives the article is required to be marked. See 19 CFR 134.35. On the other hand, if the manufacturing or combining process is merely a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred and an appropriate marking must appear on the imported article so that the consumer can know the country of origin. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983). In Headquarters Ruling Letter (HRL) 560512 dated October 27, 1997, Customs considered whether the combination of four foreign components in the U.S. with other U.S. components to form hydraulic tie rod cylinders constituted a substantial transformation into a new article having a new name, character or use. The tie rod cylinders were comprised of 18 parts, four of which were from China. It was determined that the most important components were the foreign piston and a domestic cylinder. The foreign piston was designed to move in the closed U.S.-origin cylinder. Customs determined that since the foreign piston did not remain visible after assembly into a finished tie rod cylinder and an important component was of U.S. origin, the foreign components of the finished tie rod cylinders underwent a substantial transformation in the U.S. In this case, there are about 31 parts. Although it is not indicated which components will always be of U.S. origin, the photographs indicate that a number of parts are used to make subassemblies, which are then assembled together with other parts to make the finished shock absorbers. Therefore, since the assembly appears to be relatively complex, we find that the imported components lose their essential identity as pipes, springs, washers, bolts, rings, etc., and when assembled together will be substantially transformed into an article that absorbs shock on motorcycles. Therefore, once the parts are assembled, the finished shock absorbers will not be subject to the country of origin marking requirements of 19 U.S.C. 1304. Repackaging It is also stated that some of the parts will be sold to service shops or motorcycle owners for use in making repairs, and that at the time of importation it is unknown how many of the parts will be used as such. At the time of importation, the parts will be imported in containers that are marked with the origin of the parts. Articles for which the containers will reasonably indicate the country of origin are excepted from marking under 19 U.S.C. 1304(a)(3)(D). For an exception to be granted under 19 U.S.C. 1304(a)(3)(D), the article must generally be imported in the container and that container must generally reach the ultimate purchaser unopened. See also 19 CFR 134.32(d). Section 134.26 of the Customs Regulations (19 CFR 134.26), provides, in pertinent part: Certification requirements. If an article subject to these requirements is intended to be repacked in retail containers (e.g., blister packs) after its release from Customs custody, or if the district director having custody of the article, has reason to believe such article will be repacked after its release, the importer shall certify to the district director that: … (2) if the article is intended to be sold or transferred to a subsequent purchaser or repacker, the importer shall notify such purchaser or transferee, in writing, at the time of sale or transfer, that any repacking of the article must conform to these requirements. It is important to note that the procedures set forth at 19 CFR 134.26 apply only to articles which are legally marked at the time of importation. If the articles are not legally marked at the time of importation, the presentation to Customs of the certification and notice to subsequent purchasers or repackers specified in 19 CFR 134.26 will not serve to satisfy the importer's obligations under 19 U.S.C. 1304 and Part 134, Customs Regulations (19 CFR Part 134). In determining whether the imported articles are legally marked, an article otherwise subject to individual marking may be excepted from this requirement where its container will reasonably indicate the country of origin, pursuant to 19 CFR 134.32(d). Therefore, where the outermost container of the shock absorber parts is correctly marked with the country of origin of the articles contained within, the certification procedures of 19 CFR 134.26 may be utilized, provided that the containers in which the repackaged spare parts will reach the service shops or retail purchasers will be marked in accordance with the requirements of 19 U.S.C. 1304 and 19 CFR Part 134. The certification procedures of 19 CFR 134.26 should cover all of the parts since it is unknown at the time of importation which parts will be repacked. The certification may be submitted in blanket form to cover all importations of a particular product for a given period, but the certificate must be filed at each port where the articles are entered. As 19 CFR 134.26 indicates that the certificate of marking may cover all importations of a particular product, the importer must identify that product, whether by name or by part number. Furthermore, as American Showa will supply the parts to service shops, American Showa, as the importer, must file a certification with the port director as indicated in 19 CFR 134.26(a), and must provide notice to the service shops (who may resell the parts) of the marking requirements, as indicated in 19 CFR 134.26(d). HOLDING: Based upon the information provided, it is our opinion that the imported components will undergo a substantial transformation in the U.S., as the assembly appears to be relatively complex and the imported components lose their essential identity as pipes, springs, washers, bolts, rings, etc., when they are assembled together into sock absorbers. Therefore, the finished shock absorbers will not be subject to the marking requirements of 19 U.S.C. 1304. However, the Federal Trade Commission should be contacted regarding the use of any U.S. origin claims. Where the outermost container of the shock absorber parts is correctly marked with the country of origin of the articles contained within, the certification procedures of 19 CFR 134.26(a) and (d) may be utilized, provided that the containers in which the repackaged spare parts will reach the service shops or retail purchasers will be marked in accordance with the requirements of 19 U.S.C. 1304 and 19 CFR Part 134. 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 Customs officer handling the transaction. Sincerely, John Durant, Director Commercial Rulings Division