MAR-2-05 RR:CR:SM 561521 RSD
Ms. Gayle Schoerverth
Ridge Tool Company
400 Clark Street
P.O. 4023
Elyria, Ohio 44036-2023
RE: Country of origin marking requirements for a power-crimping tool for joining copper pipes; substantial transformation; assembly
Dear Ms. Schoerverth:
This is in response to your letter dated September 17, 1999, requesting a ruling concerning the country of origin marking of a power-crimping tool. Accompanying your letter were copies of the operator’s manual, product brochure, and diagram. We received a second submission dated November 1, 1999, which contains a more detailed description regarding how the product is made.
FACTS:
Ridge Tool Company (Ridge) is planning to import electro-hydraulic hand held power tools that are used for crimping of specially designed fittings for copper tubing systems. The power tool is called the CT 400 Crimp Tool and will be marketed under the name “ProPress System” in Ridge’s product literature. Ridge’s product brochure describes the ProPress System as away to connect 1/2"-2" copper tubing which is designed to replace the soldering of copper with a high-strength crimped connection. The system consists of specially engineered copper fittings and an electro-hydraulic tool with interchangeable jaws that crimp the fittings to the copper tubing.
The crimping tool basically consists of a motor, a hydraulic system to create the crimping force, and the jaws. The motor acts as the power source for the tool. It was originally designed for use in a hand held power drill. Fein GmbH & Co. Elektrowerkzeuge manufactures the motor at their factory in Germany. Ridge designs and builds an electric printed circuit board for installation in the motor. After being assembled and tested in Germany, the is motor shipped to Von Arx AG in Switzerland for use in making the crimping tool.
The hydraulic portion of the tool creates the crimping force used to tighten the fittings. The hydraulic system consists of a hydraulic valve, a cylinder and piston arrangement, a hydraulic pump, seals and a small hydraulic fluid reservoir. The hydraulic pump, which pressurizes the hydraulic fluid, is assembled in Italy. The remaining components of the hydraulic system are made in Switzerland. The components of the hydraulic system are assembled using conventional hand tools such as wrenches, screwdrivers and snap ring pliers. Some of the components in the hydraulic system are also machined in Switzerland. This machining largely consists of operations such as simple drilling and deburring.
The crimping tool kit also includes several jaw sets. The jaw sets are the part of the crimping tool that actually grabs and tightens the fittings on the tubes. It consists of arms and side plates made in Germany and a pin made in the U.S. These components are assembled together in the U.S to make the jaw sets and are packaged with the crimping tool. The jaw sets are not permanently attached to the crimping tool. The crimping tool user can easily remove the jaws from the crimping tool and fasten another set of jaws in order to work on different sized tubes.
Von Arx AG assembles the crimping tool at its plant in Sissach, Switzerland. After the components are gathered at Von Arx’s plant in Sissach, Switzerland, the first step in the assembly procedure is the sub-assembly of the hydraulic components of the tool. Once the hydraulic portion of the tool is completed, the motor and the gear to drive the hydraulic pump are attached together. The next step is to finish bolting the tool together and to apply the nameplate, which includes the unit serial number. The motor is held in place by four screws. Although it is not described in the submission, we assume that some wiring is performed to connect the hydraulic system to the electric motor. The tool is then filled with hydraulic fluid. A special filling station apparatus is used for this process, which at the same time also bleeds any air out of the system. The tool is placed on a purpose built test stand which cycles the tool and measures the force output of the cylinder ram. The computer in the test stand compares measurements with predetermined limits and alerts the operator if there is a problem. After the tool is completed, it is cleaned and bulk packed in a large shipping box. The tools are placed on layers and separated by packing material to prevent damage during shipment.
The tools will be either air freighted or ocean shipped (depending on the urgency of the order) to Ridge’s Elyria, Ohio facility. Upon receipt, the crimping tool will be removed from the shipping container. A protective metal guard fabricated in Mansfield, Ohio is attached to the crimping tool. The crimping tool is then placed in a metal carrying case that is made in Chicago, Illinois. It is our understanding that the jaw set components are imported separately from the rest of crimping tool. Ridge assembles the jaw sets at its Elyria Ohio facility and packages the jaws with the rest of crimping tool. When it is completed, the crimping tool is placed in a cardboard box and shipped to Ridge’s distribution center.
The type of labor that Von Arx uses in making the tools in Switzerland is described as requiring general laboring skills that are typical of manual assembly. Very little specialized training is required for the assembly process. The components machined by Von Arx require typical factory machining skills to run conventional and CNC machine tools. Von Arx estimates that the assembly time for the crimping tool from start to finish is approximately 2 hours, but since the tool subassemblies are built in batches, it is difficult to tell the exact start to finish time for one tool. You also estimate that about 65% of the cost of producing the crimping tool is attributable to manufacturing operations performed in Switzerland.
ISSUE:
What are the country origin marking requirements for the electro-hydraulic crimping pipe fitting tool described above?
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 article occurs when it is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing.
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.
In this case, the hand tool consists of three basic parts: the motor, the hydraulic unit, and the jaws. The motor is made in Germany, the hydraulic system is assembled in Switzerland, and the jaws are assembled in the U.S with German parts and a minor U.S. part. Although the hydraulic system contains a pump of Italian origin, all of the other substantial parts of the hydraulic unit are made in Switzerland and the unit is assembled in Switzerland. The final assembly of the crimping tool is also performed in Switzerland. In addition, the German origin jaw set components are imported into the U.S. separately from the rest of crimping tool. Therefore, in determining the country of origin of the imported crimping tool, the issue that must be resolved is whether the German motor and the hydraulic pump made in Italy are substantially transformed when they are combined with the Swiss-made components in Switzerland.
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 which were assembled in the U.S. 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 primary reason was that most of the important components of the water pump were of U.S. origin, and because the foreign casting was permanently attached to the remaining components. See also HRL 732350 dated June 23, 1989, regarding imported transducers (i.e., microphones and receivers) which were wired to a faceplate in the U.S. along with a signal processing circuit, and were then cemented into a shell to create hearing aids. The transducers were considered substantially transformed and excepted from individual country of origin marking pursuant to 19 CFR 134.35 as they lost their separate identity and were merged into a new and different article (a hearing aid) when they were securely attached to the faceplate.
We believe that Customs rulings on the country of origin marking of golf clubs, which consist of three parts:(a head, a shaft, and a grip, may also provide guidance in determining if the assembly of the crimping tool in Switzerland results in a substantial transformation. In determining the country of origin of golf clubs made in the U.S. with an imported foreign component, Customs ruled in ORR 824 70, dated August 24, 1970, that a U.S. manufacturer who purchased imported golf club heads, either finished or unfinished, and assembled them with shafts and grips of U.S.-origin into finished golf clubs, was the ultimate purchaser of the imported golf club heads. The ruling stated that if the imported golf club heads were to be used by an original equipment manufacturer, they would be substantially transformed by being assembled with the U.S. origin shaft and therefore excepted from individual marking. The general principle which is applied in these cases is that where one of the major components of the golf clubs (i.e. the shaft or head) is of the same origin as the country where the assembly of the clubs occurs, the country of origin of the clubs is the country where the assembly is performed. See also HRL 735125, dated November 17, 1993, and HRL 73442, dated June 28, 1993, where the combination of having a major component and final assembly done in the same the country determines the country of origin of the finished golf clubs.
In this case, the attachment of the German origin motor to the Swiss assembled hydraulic system containing an Italian pump does not appear to be exceedingly complex. However, we note that the country of origin for the majority of parts used in making the crimping tool is Switzerland, and Switzerland is also the country of assembly of the finished crimping tool. In reviewing the diagram and information provided, we note that numerous different parts are joined together in order to make the finished crimping tool. Most of the Swiss parts are used in the production of the hydraulic section of the crimping tool. The hydraulic system and the motor are permanently attached together and function together as a unit. Consequently, we find that the non-Swiss components lose their separate identity and become part of a new product when they are permanently assembled with the Swiss parts in Switzerland to make the crimping tool. Therefore, we find that the name, character and use of the individual components are changed when they are assembled together to make the crimping tool. Accordingly, the country of origin of the finished crimping tool is Switzerland, and it must be marked to indicate that its country of origin is Switzerland.
With respect to the jaws component of the crimping tool, the most important parts, the arms and side plates, are made in Germany and only a minor component, the pins, are made in the U.S. Although the jaws are assembled in the U.S., the assembly appears to be fairly simple. Accordingly, we believe that the country of origin of the completed jaw sets is the country in which the most important parts are made--Germany. We note that the jaws component is not permanently attached to the tool and can be easily removed and changed to accommodate different sized tubes. Several different sized jaws are packaged together with the crimping tool, but they are not permanently attached to the crimping tool. We have repeatedly held that the mere packaging of an item does not constitute a substantial transformation. See HRL 559912 dated March 25, 1997. Accordingly, we conclude that the jaws retain their own separately identity and are not substantially transformed when they are packaged together with the crimping tool. Accordingly, the jaw sets must be separately marked to indicate their own country of origin, which in this case is Germany.
HOLDING:
Based on the information provided, the assembly of numerous parts in Switzerland to produce the CT 400 Crimping Tool results in a substantial transformation. The country of origin of the CT 400 Crimping Tool is Switzerland, and it must be marked to indicate that its country of origin is Switzerland. The jaw sets are not substantially transformed by being packaged together with the remainder of the crimping tool. The jaw sets must be separately marked to indicate their own country of origin, which in this case is Germany.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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