MAR-2-05 CO:R:C:S 558919 MLR
John A. Bessich, Esq.
Follick & Bessich, P.C.
1 Cross Island Plaza
Suite 226
Rosedale, New York 11422
RE: Country of origin marking of extruder subassemblies;
vertical extruder; feed section; stainless steel hopper;
gear reducer; thrust housing; barrel; drive unit; control
cabinet; screw; assembly; substantial transformation;
Dear Mr. Bessich:
This is in reference to your letter of November 17, 1994,
requesting a ruling on behalf of Davis-Standard Division of
Crompton & Knowles Corporation ("Davis-Standard") regarding the
country of origin marking of extruder subassemblies.
FACTS:
Davis-Standard is a domestic manufacturer and supplier of
various machine tools and equipment, including several models of
extruders. Extruders are machine tools which form metal or
plastic components by "extruding"; that is, by pushing or driving
the materials through a die with great force. Among the extruder
models supplied by Davis-Standard are certain "vertical"
extruders. The vertical extruders are mounted on a pedestal and
are capable of swiveling or pivoting on a column bracket, thereby
allowing the extruders to be positioned at any angle, from fully
vertical to fully horizontal. Literature describing two models
of vertical extruders were submitted with the ruling request.
The principal components of both vertical screw models
consist of the following: (1) the extruder subassembly which
includes the feed section and stainless steel hopper, the gear
reducer and thrust housing, and the barrel; (2) the drive unit
which includes the DC motor, power unit, and belt drive; (3) the
electrical control cabinet or panel which incorporates solid-state temperature controllers, screw-speed indicator, drive
ammeter, pilot light on-off controls, and wiring; and (4) the
extruder screw which mixes and moves the material to be extruded
through the die.
The extruder subassembly is manufactured in England and
shipped to Davis-Standard in a partially knocked-down condition.
After importation into the U.S., it is stated that the
subassembly is assembled together with the drive unit which is
made in the U.S. by an unrelated manufacturer, and the electrical
control panel and the extruder screw which are both manufactured
in the U.S. by HES, a separate division of Crompton and Knowles
Corp. Assembly includes the complete wiring of the motor and
control panel to the subassembly, followed by a complete set up
and testing program to insure that the vertical extruder is
operating within its design parameters.
The relative costs of the various components and their
assembly are included in the record. The completed and tested
vertical extruders are sold to domestic and foreign manufacturers
of plastic components, which either specify the dies to be
supplied by Davis-Standard or supply their own dies for use with
the extruders.
ISSUE:
Whether the incorporation of the subassemblies into the
vertical extruders constitutes a substantial transformation,
thereby excepting the subassemblies from country of origin
marking.
LAW AND ANALYSIS:
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 imported into the U.S. shall be marked
in a conspicuous place as legibly, indelibly, and permanently as
the nature of the article (or 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.
Congressional intent in enacting 19 U.S.C. 1304 was "that the
ultimate purchaser should be able to know by an inspection of the
marking on the imported goods the country of which the goods is
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. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and the 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. In such circumstances, the manufacturer or processor in
the U.S. who converts or combines the imported article into the
different article will be considered the "ultimate purchaser" of
the imported article, and the article is excepted from marking
and only the outermost container is required to be marked. See
19 CFR 134.35.
In determining whether the combining of parts or materials
constitutes a substantial transformation, the issue is the extent
of operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linens
v. United States, 573 F. Supp. 1149 (CIT 1983), aff'd, 741 F.2d
1368 (Fed. Cir. 1984). Assembly operations which are minimal or
simple, as opposed to complex or meaningful, will generally not
result in a substantial transformation. See C.S.D. 85-25.
However, the issue of whether a substantial transformation occurs
is determined on a case-by-case basis.
It is claimed that the imported articles at issue consist of
partially unassembled portions of vertical extruders which, in
their imported forms, are totally and completely incapable of
operation. Without the addition of the drive unit which includes
the DC motor, power unit and belt drive; the electrical control
cabinet or panel which incorporates solid-state temperature
controllers, screw-speed indicator, drive ammeter, pilot light
on-off controls, and wiring necessary to operate the extruder;
and the extruder screw which mixes and moves the material to be
extruded through the die, it is stated that the extruder
subassembly is totally inoperative for any purpose. Even the
addition of a suitable die would not enable the extruder to
operate, since there is no power/drive source, control device or
conveying mechanism, all of which are stated to be essential to
enable the extruder to operate for its intended purpose. It is
also stated that the U.S. components added, and the assembly and
testing performed in the U.S. is substantial. Consequently, it
is claimed that the imported subassemblies, when combined with
the U.S. components, become new articles with a different name,
character, and use. Accordingly, it is claimed that Davis-Standard is the ultimate purchaser of the imported extruder
subassemblies, and therefore the subassemblies should be excepted
from marking pursuant to 19 CFR 134.35.
In several rulings, Customs has considered six factors in
order to determine whether imported goods combined in the U.S.
with domestic products were substantially transformed for country
of origin marking purposes:
(1) whether the article is completely finished;
(2) the extent of the manufacturing process of combining
the article with its counterparts as compared with the
manufacturing of the subject article;
(3) whether the article is permanently attached to its
counterparts;
(4) the overall importance of the article to the finished
product;
(5) whether the article is functionally necessary to the
operation of the finished article, or whether it is an
accessory which retains its independent function; and,
(6) whether the article remains visible after the
combining.
In Headquarters Ruling Letter (HRL) 732940 dated July 5,
1990, Customs considered water pump assemblies comprised of 6-8
components including a casting, bearing, impeller, hub, seal,
mounting gasket, and in some cases, a spacer, and tubes or plugs.
The casting and bearing were the most costly components.
Although the assembly process was not exceedingly complex, and in
one instance a Taiwanese-origin casting was used to produce the
water pump, which remained visible after assembly, a substantial
transformation was found. The main reason was because the
casting was only one of several important components of the water
pump (the others were of U.S.-origin), and because it was
permanently attached to the remaining components. See also HRL
731330 dated July 13, 1988 (imported spark plug insulator
assemblies consisting of a ceramic insulator and a center
electrode mounted in the insulator, and a ground electrode were
considered substantially transformed in the U.S. by the welding
of the ground electrode to a steel shell, bending the ground
electrode to the desired shape, and mounting the insulator
assembly in the steel shell using seals; accordingly, the
imported items did not require individual marking); and HRL
732350 dated June 23, 1989 (imported transducers (i.e.,
microphones and receivers) wired to a faceplate, along with a
signal processing circuit, which was then cemented into a shell
to create hearing aids were considered substantially transformed
and excepted from individual country of origin markings pursuant
to 19 CFR 134.35, primarily because the transducers could not be
removed from the shell).
Similarly, in this case, while the extruder subassembly
consists of pertinent components of the extruder, we find that
the drive unit, extruder screw, and control cabinet are also
important components of the vertical extruder. The direct
current motor drive is important for accuracy of control; the
extruder screw heats, fluidizes, and transports the plastic to
the die; and the controller cabinet ensures precise control of
the heating or cooling zones on the barrel. See McGraw Hill
Encyclopedia of Science & Technology (6th Ed. 1987); and
Encyclopedia Britannica (15th Ed. 1975). Consequently, it is our
opinion that the imported subassembly is substantially
transformed in the U.S. when it is wired and combined with the
U.S. components to create a vertical extruder. Accordingly, the
imported subassemblies will be excepted from individual marking,
provided the cartons in which Davis-Standard receives them are
properly marked with their country of origin, and Customs
officials at the port of entry are satisfied that the components
will be assembled in this manner.
HOLDING:
On the basis of the information submitted, we find that the
imported subassemblies are substantially transformed, and,
therefore, are excepted from individual marking, provided the
cartons in which Davis-Standard receives them are properly marked
with their country of origin, and Customs officials at the port
of entry are satisfied that the components will be assembled in
this manner.
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