MAR-2-05 RR:TC:SM 560239 MLR
John P. Donohue, Esq.
Donohue and Donohue
232 South Fourth Street
Philadelphia, PA 19106
RE: Country of Origin Marking on surgical instruments;
steel forgings; boxlock pin; finish grinding; beveling;
bending; heat treating; cleaning; substantial
transformation.
Dear Mr. Donohue:
This is in reference to your letters of December 11,
1996, January 13, 1997, and May 1, 1997, requesting a ruling
on behalf of Pilling Weck Company ("Pilling") and R.T.P.,
concerning the country of origin marking on certain surgical
instruments. Samples of the articles in their imported and
finished condition were submitted on May 8, 1997.
FACTS:
It is stated that "raw forgings", sourced from either
Germany or the U.S., are sent to Pakistan where some
machining and rough surface grinding is performed. From the
samples submitted, the ratchet, teeth, and boxlock are
created in Pakistan. It is then stated that Pilling imports
the "semi-manufactured" forgings into the U.S., where they
are made into finished stainless steel surgical instruments.
It is stated that the semi-manufactured forging parts are
received and sent to the assembly department where the
boxlock pin is inserted in the hinge joint and the pin is
put in place to obtain a well-defined meshing of the teeth.
Next, finish grinding is performed over the entire length of
the instrument to obtain a uniform grit finish. The jaw and
teeth area is beveled to remove all sharp edges, and the jaw
is bent and curved to specification and setting
requirements. The instrument is then placed on a heat
treatment rack and placed in a heat treating hardening
furnace to obtain the proper hardness and temper. The final
hard setting and alignment function are then performed.
Next, the final polishing operation is performed with a
buffing machine to obtain the desired final finish. The
instrument is then stamped and etched with a logo. Lastly,
the instruments are placed into a passivation bath solution,
the instruments are ultrasonically cleaned to remove all
manufacturing chemicals and residue, and the instrument is
inspected and packaged. Two sets of needle-holder samples
were submitted. One set consists of the "raw forging" from
Germany or the U.S., the "semi-manufactured forging" after
processing in Pakistan, and the finished surgical
instrument.
ISSUE:
Whether the surgical instruments are substantially
transformed in the U.S., and thereby excepted 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 (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.
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
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, and the article is excepted from
marking and only the outermost container 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).
It is contended that the forgings are substantially
transformed in the U.S. As support, Torrington Co. v.
United States, 596 F. Supp 1083 (CIT 1983), aff'd 764 F.2d
1563 (Fed. Cir. 1985), is cited where the Court of
International Trade held that an article has undergone a
substantial transformation when its semi-manufactured state
has changed from a producer good to a consumer good.
Midwood Industries v. United States, 313 F. Supp. 951
(1970), is also cited where the court noted that the imports
were producers' goods and the flanges were consumers' goods
and had undergone a substantial transformation. It is also
state that Headquarters Ruling Letter 734835 dated February
3, 1993, is similar to the facts in this case.
In Torrington, the Federal Circuit found that swage
needles were an intermediate "new and different" article
because they were more refined, and possessed a definite
size and shape suitable for further manufacturing into
needles, while having lost the identifying characteristics
of wire. 764 F.2d at 1568-1569. However, we note that
Torrington has been limited to the specific factual
situation found therein. See T.D. 86-7, 20 Cust. Bull.
(1986).
Additionally, in Uniroyal, supra, the court did not
rely on the producer versus consumer goods comparison. In
Uniroyal, when the court applied Midwood, in analyzing the
attachment of a shoe upper to an outsole, it was determined
that the complex assembly process of making the upper was
easily distinguishable from the minor assembly process of
attaching the sole. 3 CIT at 226. Accordingly, the
importer/processor who attached the sole was not the
ultimate purchaser of the upper. The court stated:
[T]o consider attachments of this kind to be a
substantial transformation' would be to open the door
wide to frustration of the entire purpose of the
marking statute. Thus in the present case it would be
misleading to allow the public to believe that a shoe
is made in the United States when the entire upper -
which is the very essence of the completed shoe - is
made in Indonesia and the only step in the
manufacturing process performed in the United States is
the attachment of an outsole. Id. at 224.
Furthermore, since the decisions of Torrington and
Midwood, in National Hand Tool Corp. v. United States, 16
CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), the
court considered sockets and flex handles which were either
cold formed or hot forged into their final shape prior to
importation, speeder handles which were reshaped by a power
press after importation, and the grip of flex handles which
were knurled in the U.S. The imported articles were then
heat treated which strengthened the surface of the steel,
and cleaned by sandblasting, tumbling, and/or chemical
vibration before being electroplated. In certain instances,
various components were assembled together which the court
stated required some skill and dexterity. The court
determined that the imported articles were not substantially
transformed and that they remained products of Taiwan. In
making its determination, the court focused on the fact that
the components had been cold-formed or hot-forged "into
their final shape before importation", and that "the form of
the components remained the same" after the assembly and
heat-treatment processes performed in the U.S. Although the
court stated that a predetermined use would not preclude the
finding of a substantial transformation, it noted that the
determination must be based on the totality of the evidence.
No substantial change in name, character or use was found to
have occurred as a result of the processing performed in the
U.S.
It is also our opinion that the processing performed in
the U.S. will not amount to a substantial transformation of
the imported forgings. The forgings as imported are
substantially complete articles and the processing done in
the U.S. is minor compared to the manufacturing that
previously took place abroad. We are also not persuaded
that Headquarters Ruling Letter (HRL) 734835 is applicable.
In HRL 734835 shear blade castings were imported into the
U.S., where a hole was further drilled; the rough surface
from the casting was ground off; a cutting edge was made;
various polishing operations were performed which resulted
in a rough finish; the blades were racked and nickel plated
by moving the blades through six consecutive liquid
solutions; the blade edges and points on the blades were
ground and sharpened; the rivet was inserted; the finger and
thumb pieces were assembled; the scissors were buffed; a
process called "Japanning" was performed which consisted of
dipping, racking, and baking; and lastly, the scissors were
tested and oiled. It was held that the imported castings
were substantially transformed in the U.S. as a result of
the further processing in the U.S., and therefore became a
product of the U.S.
However, in HRL 734835, we note that at least a cutting
edge was made in the U.S. In this case, on the other hand,
the shape of the finished surgical instrument is apparent in
the raw forging. Additionally, the instrument exported from
Pakistan already contains its ratchets and teeth. While
bending may occur in the U.S., we note that the reshaping of
the speeder handles in National Hand Tool did not result in
a substantial transformation. In light of the court's
decision in National Hand Tool, it's holding takes
precedence over a prior ruling, i.e., HRL 734835, especially
if the prior ruling does not involve the same articles and
procedures followed in this case.
Therefore, since the insertion of the boxlock pin is
not a complex assembly, and the finished grinding, beveling,
bending, heat treating, and cleaning do not result in a
substantial transformation, the finished surgical
instruments will not be exempt from country of origin
marking. Rather, it is our opinion that the country of
origin of the finished surgical instrument is the country in
which the raw forging is made (in this case either Germany
or the U.S.). See HRL 559847 dated January 2, 1997, where
it was determined that stainless steel forgings which had
been hot forged into the final shape of surgical instruments
were not substantially transformed into a new and different
article by additional milling, assembly, heat treating,
cleaning and polishing and inspection operations. See also
HRL 558747 dated January 20, 1995, which held that the
additional work of assembling a surgical instrument, cutting
ratchet teeth, and scaling down were not extensive enough to
result in a substantial transformation. Accordingly, based
upon the facts presented, the finished surgical instruments
made from German forgings should be marked "Germany" and no
marking under 19 U.S.C. 1304 will be required on the
finished surgical instruments made from U.S. origin
forgings. However, we suggest that you contact the Federal
Trade Commission regarding the use of U.S. origin claims.
HOLDING:
Based upon the information provided, it is our opinion
that the imported "semi-manufactured" forgings do not
undergo a substantial transformation in the U.S., where the
boxlock pin is inserted and the forgings are finish ground,
beveled, bent, heat treated, and cleaned. Rather, the
country of origin of the finished surgical instrument is the
country of origin of the raw forging, in this case either
"Germany" or the "U.S." However, the Federal Trade
Commission should be contacted regarding the use of U.S.
origin claims.
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
Tariff Classification Appeals
Division