Main Idea: Simple assembly operations will not substantially transform components that give shape and form (i.e., character) to the finished article and define its use.
In ruling N329853 (Jan. 12, 2023), Customs and Border Protection (CBP) considers the country of origin of the Sapper XYZ Arm Assembly (the Sapper). This product is a monitor mount fashioned to hold one flat screen computer monitor weighing up to 20 pounds. The arm, which clamps onto a desk or tabletop, is adjustable and allows the monitor to sit vertically. The diecast aluminum monitor mount contains a gas spring that permits both vertical and horizontal adjustments.
While the ruling requestor suggested classification of the Sapper under subheading 7616.99 of the Harmonized Tariff Schedule of the United States (HTSUS), which provides for other aluminum articles, CBP rejects that classification because another heading covers the monitor arm more specifically. Namely, heading 8302, HTSUS, provides for, in relevant part, base metal hat-racks, hat pegs, brackets and similar fixtures, and parts thereof. CBP classifies the Sapper under subheading 8302.50.0000, HTSUS, a duty-free provision.
In all origin determinations, the sourcing of parts and manufacturing details are critical to CBP’s analysis. In this instance, the Sapper contains eight Chinese-origin aluminum alloy parts, which ship to Korea as furniture parts (under subheading 9403.99.9000) for processing. The Chinese-origin parts comprise approximately 65% of the weight, 29% of the value, and 65% of the labor hours necessary to complete the article. All other raw materials—plastic injection, pressing, and assembly—are sourced in South Korea. In Korea, an eight-minute assembly process occurs in which the manufacturer combines the Chinese diecast components with the Korean parts. After visual inspection, operating testing and packing in Korea, the finished monitor arm ships to the United States.
Under the U.S. marking statute, 19 U.S.C. 1304, “every article of foreign origin (or its container . . .) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.”
Under the customs regulations—19 C.F.R. 134.1(b)—the country of origin is that country where the article is manufactured, produced or grown. Any further work or material added to the article in another country must substantially transform the article in order to change the country of origin. The substantial transformation test considers whether the further work or material results in an article with a new name, character, or use different from the product prior to processing. See Texas Instruments Inc. v. U.S., 69 C.C.P.A. 151 (1982). This determination is based on totality of the evidence. See Nat’l Hand Tool Corp. v. U.S., 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
Based on the sourcing and manufacturing facts, CBP determines that the assembly operations in South Korea do not substantially transform the Chinese-origin diecast parts. These diecast parts comprise the structure of the monitor arms. Also, while the diecast parts enter Korea under heading 9403 as furniture parts, they are more appropriately classified under 8302.50.0000, HTSUS, which is the same provision covering the finished article. The additional Korean components do not create a new and different product with a unique character and use that differs from the Chinese-origin diecast parts as a result of assembly. Therefore, the country of origin of the completed Sapper is the country of origin of its diecast parts – China.
As the imported Sapper is a Chinese-origin good, it is subject to additional 25% duties (unless excepted) under U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, which implements the ongoing trade remedy taken against products of China under Section 301 of the Trade Act of 1974.
CBP’s ruling demonstrates why importers must have knowledge of the supply chain’s sourcing and manufacturing patterns, and a keen understanding of the substantial transformation test, to achieve compliance with customs country of origin rules.