MAR-05 RR:TC:SM 560399 KKV
Robert L. Eisen, Esq.
Paula Smith, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036-7703
RE: Country of origin marking requirements applicable
to imported pump castings not substantially
transformed by post-importation processing which
creates finished pump parts; National Hand Tool;
exception to marking; marking obliterated by post-importation processing; 19 U.S.C. 1304(a)(3)(G);
19 CFR 134.32(g); 19 CFR 134.26; HRL 734230; 19
CFR 134.34
Dear Mr. Eisen and Ms. Smith:
This is in response to your letter dated April 10, 1997
(and subsequent submissions dated January 20, 1998 and
February 19, 1998), on behalf of Ahlstrom Pumps, L.L.C.
("Ahlstrom"), which requests a binding ruling regarding the
country of origin marking requirements applicable to pump
castings imported from Finland for further processing the
U.S. Photographs of the castings at various stages in the
production process were submitted for our examination.
FACTS:
You indicated that Ahlstrom imports a variety of iron
and stainless steel pump castings from Finland into the U.S.
for further processing. These castings, which range from
ten inches to six feet in size, are made into the following
types of pump parts: casings, casing covers, impellers,
sideplates, adapters and bearing housings.
Once imported, the castings undergo the following
operations, although on the face of the documents submitted,
we note some inconsistency exists as to the precise
combination of operations performed on each type of casting.
We are informed that the castings undergo processing in the
following manner:
1) TURNING
Turning is performed on all of Ahlstrom's imported
castings. Castings that will become the larger
casings, casing covers and sideplates are turned
on a vertical turning mill, while castings that
will become impellers, smaller casing covers and
sideplates are turned with a lathe. As a result
of the turning operation, three to six millimeters
of material is removed from each side of the
smaller castings and three to ten millimeters is
removed from each side of the larger castings.
2) BORING AND/OR MILLING
All of the imported castings (with the exception
of the impellers) are subject to boring/milling
operations which further refine the shape of the
castings. The boring and/or milling operations
remove, on average, the same amount of material
from each casting as the turning operations
previously described (i.e., three to six
millimeters per side for the smaller castings and
three to ten millimeters per side for the smaller
castings).
3) DRILLING AND/OR TAPPING
Those castings which are destined to become
adapters, impellers, side plates, casing covers
and bearing housings undergo additional drilling
and/or tapping operations. On average, the amount
of material removed by the drilling/and/or tapping
operations per side is the same as that removed in
either the turning or milling operations.
4) BALANCING
Castings which are to be used as impellers also
undergo balancing, to ensure that the impeller is
capable of rotating properly.
5) TESTING
Upon completion of each step, a technician
performs a series of quality control tests which
involve taking precise and accurate measurements
of the castings.
Upon completion of the processing detailed above, some
of the pump parts are further processed into finished pumps,
while others are sold separately as replacement parts. Your
current inquiry does not involve the marking of the
assembled pumps, but the country of origin marking
requirements applicable to the finished pump parts.
Accordingly, no determination is made herein with regard to
the country of origin of the finished pumps.
ISSUE:
What are the country of origin marking requirements for
imported castings which are further processed in the United
States in the manner described above?
LAW AND ANALYSIS:
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 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 a manner as to indicate to the ultimate
purchaser in the United States 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., 27 C.C.P.A.
297, 302 (1940). Part 134 of the Customs Regulations
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304. Section 134.41(b), mandates
that the ultimate purchaser in the United States must be
able to find the marking easily and read it without strain.
"Country of origin" is defined in section 134.1(b),
Customs Regulations, as
The country of manufacture, production,
or growth of any article of foreign
origin entering the United States.
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 this part.
The well-established test for determining whether a
substantial transformation has occurred is derived from
language enunciated by the court in Anheuser-Busch Brewing
Association v. United States, 207 U.S. 556, 562 (1908),
which defined the term "manufacture" as follows:
Manufacture implies a change, but every
change is not manufacture and yet every
change in an article is the result of
treatment, labor and manipulation. But
something more is necessary, as set forth
and illustrated in Hartranft v. Wiegmann,
121 U.S. 609. There must be
transformation; a new and different
article must emerge, having a distinctive
name, character or use.
Simply stated, a substantial transformation occurs
"when an article emerges from a process with a new name,
character, or use different from that possessed by the
article prior to processing." See Texas Instruments, Inc.
v. United States, 69 CCPA 152, 681 F.2d 778 (1982) (cited
with approval in Torrington Co. v. United States, 764 F. 2d
1563, 1568 (1985)). Under this principle, the manufacturer
or processor in the United States who converts or combines
the imported article into the different article will be
considered the "ultimate purchaser" of the imported article,
and the article shall be excepted from marking (See 19 CFR
134.35) However, the outermost containers of the imported
articles must be marked (19 CFR 134.35). The issue of
whether a substantial transformation occurs is determined on
a case-by-case basis.
In determining whether the processing operations
constitute 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. See, Uniroyal Inc. v. United States, 3 CIT 220,
542 F. Supp. 1026 (CIT 1982), aff'd, 702 F.2d 1022 (Fed.
Cir. 1983). Assembly operations which are minimal or
simple, as opposed to complex or meaningful, will generally
not result in a substantial transformation. See, Customs
Service Decision (C.S.D.) 80-111, C.S.D. 89-129, and C.S.D.
90-51.
In National Hand Tool v. United States, Slip Op. 92-61
(April 27, 1992, aff'd, 989 F.2d 1201 (1993), a country of
origin marking case, certain hand tool components used to
make flex sockets, speeder handles, and flex handles, were
imported from Taiwan. The components were cold-formed or
hot-forged into their final shape prior to importation, with
the exception of speeder handle bars, which were reshaped by
a power press after importation. The grip of the flex
handles were also knurled in the U.S., by turning the grip
portion of the handle against a set of machine dies that
formed a cross-hatched diamond pattern. The components were
subject to heat treatment, which increased the strength of
the components, sand-blasting (a cleaning process), and
electroplating (enabling the components to resist rust and
corrosion). After these processes were complete, the
components were assembled into the final products, which
were used to loosen and tighten nuts and bolts.
The Court of International Trade decided the issue of
substantial transformation based on three criteria, i.e.,
name, character, and use. Applying these rules, the court
found that the name of the components did not change after
the post-importation processing, and that the character of
the articles similarly remained substantially unchanged
after the heat treatment, electroplating and assembly, as
this process did not
change the form of the components as imported. The court
further pointed out that the use of the articles was
predetermined at the time of importation, i.e., each
component was intended to be incorporated in a particular
finished mechanic's hand tool. The court dismissed as a
basis for a substantial transformation the value of the
processing, stating that the substantial transformation test
utilizing name, character and use criteria should generally
be conclusive in country of origin marking determinations,
and that this finding must be based on the totality of the
evidence. Based on this test, the court concluded that the
processing in the U.S. did not effect a substantial
transformation of the foreign hand tool components.
A similar finding was made in Superior Wire v. United
States, 867 F.2d 1409 (Fed. Cir. 1989), where the appellate
court affirmed the Court of International Trade's holding
that no substantial transformation occurred from the
multistage processing of drawing wire rod into wire. In
that case, the court noted that the "end use of the wire rod
is generally known before the rolling stage and the
specifications are frequently determined by reference to the
end product for which the drawing wire will be used."
Accordingly, the court found that the character of the final
product was predetermined and that the processing did not
result in a significant change in either character or use of
the imported material. While the wire rod and wire had
different names and identities in the industry, the court
concluded that they were essentially different stages of the
same product.
Upon careful review of all relevant documentation, we
find a similar conclusion must be reached with regard to the
pump castings at issue. Although a layer of material is
removed from the outer surface of each casting, the removal
does not create significant difference in the overall shape
of the casting. Upon importation into the U.S., the
castings are not rough, generic forms but have the same
shape as the finished pump parts. Indeed, we note that
Ahlstrom's own sales literature indicates that the
manufacturing process begins with "precise castings from our
own foundry," a statement which indicates that the articles
have a comparatively high degree of refinement at the time
the castings left the foundry in Finland. Like the hand
tool components in National Hand Tool and the wire rods in
Superior Wire, the use of the imported castings is
predetermined at the time of importation. As a result, the
imported castings do not lose their identity and become an
integral part of a new article, as required by the court in
Uniroyal, supra; rather, they already have the essential
characteristics of finished pump parts at the time of
importation. The processing performed in the U.S. upon the
imported castings does not create a new and different
article, but is a mere continuation of the manufacture of
pump
parts begun in Finland. Consequently, in the absence of a
substantial transformation, the
U.S. processor is not the "ultimate purchaser" and the
imported castings retain their foreign origin upon
completion into finished pump parts.
In these circumstances, Customs would normally require
that the articles be marked with their country of origin at
the time of importation. However, given the nature of the
processing performed upon the castings in the U.S., you
assert the applicability of 19 CFR 134.32(g), which excepts
from marking those articles to be processed in the United
States by an importer or for his account otherwise than for
the purpose of concealing the origin of such articles and in
such manner that any mark contemplated by part 134, Customs
Regulations (19 CFR Part 134) would necessarily be
obliterated, destroyed, or permanently concealed. Customs
has ruled that articles excepted from marking under these
provisions at the time of importation must be marked to
indicate the country of origin after processing unless such
processing constitutes a substantial transformation. The
purpose of such requirement is to ensure that the ultimate
purchaser is advised of the country of origin. See, HRL
729434, dated May 23, 1986; HRL 732196, dated May 16, 1989;
HRL 732574, dated June 25, 1990 and HRL 733676, dated
December 6, 1990.
Upon review, we conclude that the domestic processing
operations described above would necessarily obliterate any
country of origin marking on the castings at the time of
importation. Accordingly, where the outermost container in
which the castings are imported into the U.S. is marked with
the country of origin of the castings contained within, the
imported castings are excepted from individual marking at
the time of importation, provided that the certification set
forth in section 134.26, Customs Regulations (19 CFR
134.26), is executed, and the containers in which the
finished pump parts will reach the ultimate consumer are
marked in accordance with the requirements of 19 U.S.C. 1304
and 19 CFR Part 134.
We note, however, that the certification procedures of
19 CFR 134.26 are applicable only to articles which are
legally marked at the time of importation. See HRL 734230,
dated November 20, 1991. For unmarked articles not included
within the scope of 19 CFR 134.26, the separate procedures
of 19 CFR 134.34 are applicable. Accordingly, where the
outermost container in which the castings are imported into
the U.S. is not marked with the country of origin of the
castings, the imported castings are excepted from individual
marking at the time of importation, provided that the
containers in which the articles are repacked will indicate
the origin of the articles to an ultimate purchaser in the
U.S. and the importer arranges for supervision of the
marking of the containers by Customs officers at the
importer's expense or such other verification (e.g.,
certification and the submission of a sample or otherwise)
of the marking prior to liquidation of the entry, subject to
the discretion of the port director at the port of entry.
HOLDING:
Based upon the information provided, the imported
castings which undergo turning, and/or boring/milling,
and/or drilling/tapping, and/or balancing and testing are
not substantially transformed in the U.S. when made into
completed pump parts. Accordingly, the retail purchaser and
not the domestic processor is the ultimate purchaser and the
castings are subject to country of origin marking.
Based upon the described facts, imported castings which
are domestically processed, but not substantially
transformed, by operations which remove a layer of material
are processed in such a manner that any required origin
marking is necessarily destroyed. Accordingly, where the
outermost container in which the castings are imported into
the U.S. is marked with the country of origin of the
castings contained within, the imported castings are
excepted from individual marking at the time of importation
pursuant to 19 U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g)
provided that the certification set forth in section 134.26,
Customs Regulations (19 CFR 134.26), is executed, and the
containers in which the finished pump parts will reach the
ultimate consumer are marked in accordance with the
requirements of 19 U.S.C. 1304 and 19 CFR Part 134. Where
the outermost container is not marked, the imported castings
will be excepted from individual marking pursuant to 19
U.S.C. 1304(a)(3)(G) and 19 CFR 134.32(g) provided that the
containers in which the articles are repacked will indicate
the origin of the articles to an ultimate purchaser in the
U.S. and such marking on the containers is verified by
Customs prior to liquidation of the entry, at the discretion
of the port director at the port of entry.
The holding set forth above applies only to the
specific factual situation and merchandise identified in the
ruling request. This position is clearly set forth in
section 19 CFR 177.9(b)(1), which states that a ruling
letter is issued on the assumption that all information
furnished in connection with the ruling request and
incorporated therein, either directly, by reference, or by
implication, is accurate and complete in every material
respect. Should it be subsequently determined that the
information furnished is not complete and does not comply
with 19 CFR 177.9(b)(1), the ruling will be subject to
modification or revocation. In the event there is a change
in the facts previously furnished, this may affect the
determination of origin or eligibility of the articles for
an exception to marking requirements of 19 U.S.C. 1304.
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