MAR-2-05 RR:CR:SM 562763 EAC
Mr. Nathan W. Johnson
Bradley Arant Rose & White, LLP
One Federal Place
1819 Fifth Avenue North
Birmingham, AL 35203-2104
RE: Marking requirements for fire hydrants; replacement parts; exception from marking; substantial transformation; ultimate purchaser; trademarks
Dear Mr. Johnson:
This is in response to your letter, dated May 14, 2003, submitted on behalf of United States Pipe & Foundry Company (“U.S. Pipe”), in which you request a binding ruling pertaining to the marking requirements for assembled fire hydrants and individual replacement fire hydrant parts.
FACTS:
The pertinent facts in this case, as set forth in the letter referenced above, are as follows:
U.S. Pipe is a manufacturer of ductile iron pipe and
related products. In connection with this business, U.S. Pipe
produces and provides fire hydrants to municipalities and other customers. The fire hydrants comprise approximately 30 to 40 components. Among these components is the barrel, which is
the outer above-ground frame to which fire hoses are attached
when in use. Assembly requires substantial time and attention.
If improperly assembled, the hydrant may not function properly,
if at all.
Components for assembly may be manufactured and
modified in different locations. For the sake of argument, this
request seeks an opinion regarding all hydrant components that
are manufactured abroad and that are each individually (but not
in the context of the hydrant as an assembled unity) last
substantially transformed in a non-NAFTA country. It is
anticipated that all assembly will occur in the United States.
In addition to assembly, finishing (e.g., painting, etc.), packaging,
end user shipping, and any installation assistance also will
occur in the United States. Gaskets and fasteners are purchased domestically. The dollar value of the most visible component,
the upper barrel, is in the range of 12% or 15% of total component
cost of the hydrant.
You state that the parts assembled into the hydrants are obtained from China, Canada, and the United States.
In addition to manufacturing hydrants, U.S. Pipe may occasionally sell individual imported hydrant components to serve as replacement parts for existing hydrants. Regarding these circumstances, U.S. Pipe has requested clarification as to whether such individual replacement parts must be marked with their country of origin.
U.S. Pipe is the owner of federal trademark registration 1,478,262 for the marking “U.S. Pipe” and trademark application, number 78/181,268 for valves and hydrants. In consideration of these facts, the manufacturer seeks permission to place the U.S. Pipe trademark on the outside surface of the assembled hydrants.
ISSUES:
Whether U.S. Pipe may be considered to be the ultimate purchaser of the imported fire hydrant components when such components are assembled into fire hydrants within the United States.
Whether U.S. Pipe may be considered to be the ultimate purchaser of the imported fire hydrant components when such components are sold individually as replacement parts for existing hydrants.
Whether the placement of the U.S. Pipe trademark on the outside surface of the fire hydrants will violate the requirements of 19 U.S.C. §1304.
LAW AND ANALYSIS:
Ultimate Purchaser – Assembled Hydrants
Section 304 of the Tariff Act of 1930 (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 its 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 purposes 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. Friedlander & Co., 27 C.C.P.A. 297 at 302 (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 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 the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940), provides that an article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed and, as a result, the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See, 19 CFR 134.35(a). Therefore, the first issue we must analyze in this case is the identity of the ultimate purchaser of the imported fire hydrant components when such components are combined with U.S.-origin items to form fire hydrants. Section 134.1(d)(1), Customs Regulations (19 CFR 134.1(d)(1)), states that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he or she subjects the imported article to a process which results in a substantial transformation of the article.
In Headquarters Ruling Letter (“HRL”) 562657, dated April 29, 2003, fire hydrants were assembled from approximately 48 parts. Parts imported from China accounted for 25 percent of the value of the hydrant and parts produced within the United States accounted for the remaining 75 percent. All of the components were assembled together within the United States, raising the issue of whether the Chinese-origin parts were substantially transformed as a result, thereby excepting the imported parts from the individual marking requirements. With respect to this issue, we held that the imported parts were substantially transformed as a result of the assembly operations that occurred within the United States. In support of this determination, we further noted that the majority of the parts were of U.S.-origin and that the U.S.-origin parts comprised the inner functioning components of the fire hydrant. Therefore, as the hydrant parts were substantially transformed, the U.S. processor was considered the ultimate purchaser of the imported parts and, as long as the U.S. processor received the imported parts in a properly marked container labeled with the country of origin of the parts, the individual imported parts were not required to be marked.
In HRL 734785, dated March 17, 1993, an imported upper barrel was combined with bolts, nuts, nozzles, O-rings, gaskets, iron caps, a housing, a cover, an operating nut, an upper rod and copper sleeve, and an iron dome to make fire hydrants. Based upon the facts presented in this case, we held that such processing effected a substantial transformation of the foreign-origin components. Therefore, in accordance with 19 CFR 134.35, since the U.S. manufacturer of the fire hydrants was the ultimate purchaser of the upper barrels, the upper barrels were excepted from marking as long as their outermost containers were properly marked with the country of origin of the parts when imported. See also, HRL 731307, dated February 23, 1990 (imported castings which were used with U.S.-origin components in the manufacture of gate valves, butterfly valves and fire hydrants were excepted from individual marking pursuant to Section 134.35).
Based upon the facts in the case presently under consideration, it is our opinion that assembling approximately 30-40 components, of foreign and U.S.-origin, within the United States to form fire hydrants effects a substantial transformation of the foreign parts because the components are subsumed into a new and distinct article of commerce that possesses a new name, character and use. Under these circumstances, since U.S. Pipe is the ultimate purchaser of the hydrant parts, the individual parts are not required to be marked with their country of origin as long as such parts are imported in containers that properly indicate their country of origin.
Ultimate Purchaser – Replacement Parts
We will next determine the identity of the ultimate purchaser of the hydrant components in cases where U.S. Pipe merely sells individual imported parts to customers to serve as replacement parts for existing hydrants. Based upon the information before us, it does not appear that U.S. Pipe intends to subject these replacement parts to any significant processing within the United States. Therefore, the individual replacement parts will not be substantially transformed within the United States. Accordingly, U.S. Pipe is not considered to be the ultimate purchaser of the replacement parts under these circumstances; rather the ultimate purchaser is the person who purchases the part to repair or maintain the hydrant. Therefore, in such cases, the individual parts or the containers, if any, in which they are sold to the ultimate purchaser must be legibly, indelibly, and permanently marked in such a manner as to indicate to the ultimate purchaser the English name of the country of origin of the article.
Marking
The final issue we must consider in this case is whether U.S. Pipe may mark the outside surface of the fire hydrants with the trademark “U.S. Pipe.” Under section 134.41(b), Customs Regulations, the country of origin is considered to be conspicuous if the ultimate purchaser in the United States is able to find the marking easily and read it without strain. Potentially of concern here, however, are the requirements of two related provisions of the marking regulations, section 134.36, Customs Regulations (19 CFR 134.46) and section 134.47, Customs Regulations (19 CFR 134.47). Section 134.46 requires that, in instances where the name of any city or locality in the United States, or the name of any foreign country or locality other than the name of the country or locality in which the article was manufactured or produced, appears on an imported article or its container, and those words or name may mislead or deceive the ultimate purchaser as to the actual country of origin of the article, there shall appear, legibly and permanently, in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of," or other words of similar meaning. Customs and Border Protection (“CBP”) has ruled that in order to satisfy the close proximity requirement, the country of origin marking must appear on the same side(s) or surface(s) in which the name of the locality other than the country of origin appears. See, HRL 708994, dated April 24, 1978. The requirements of 19 CFR 134.46 are designed to alleviate the possibility of misleading an ultimate purchaser with regard to the country of origin of an imported article, if such article or its container includes language which may suggest a U.S. origin (or other foreign locality not the correct country of origin).
On the other hand, section 134.47, Customs Regulations (19 CFR 134.47), provides that when as part of a trademark or trade name or as part of a souvenir marking, the name of a location in the U.S. appears, the article shall be legibly, conspicuously, and permanently marked to indicate the name of the country of origin of the article preceded by the words "Made in," "Product of," or other similar words, in close proximity or in some other conspicuous location. In such circumstance, no comparable size requirement exists. The purpose of both provisions is the same, namely to prevent the ultimate purchaser from being misled or deceived when the name of a country or place other than the country of origin appears on an imported article or its container. The critical difference between the two provisions is that 19 CFR 134.46 requires that the name of the actual country of origin appear "in close proximity" to the non-origin reference and in lettering of at least comparable size. By contrast, 19 CFR 134.47 is less stringent, providing that the name of the country of origin must appear in close proximity to the non-origin reference or "in some other conspicuous location." In other words, the latter provision triggers only a general standard of conspicuousness. In either case, the name of the country of origin must be preceded by "Made in," "Product of," or other similar words.
However, with respect to the assembled hydrants, U.S. Pipe is the ultimate purchaser of the parts that are utilized in assembly of the hydrants; therefore, the proposed marking under consideration would not trigger the application of either provision mentioned above. In this respect, HRL 734785 (discussed, supra) is applicable. In HRL 734785, a U.S. manufacturer produced fire hydrants from domestic and imported parts at a facility in Beaumont, Texas. The upper barrels for the hydrant were made in, and imported from, Brazil. The U.S. manufacturer requested approval for the name “Beaumont, Texas” to be marked onto the outside surface of the upper barrels at the Brazilian factory, even though the barrels were not, in fact, forged in Beaumont, Texas. The name “Beaumont, Texas” would be visible on the hydrant when imported and would remain visible after the hydrant was installed into service. When considering the marking issue in that case, CBP noted that 19 U.S.C. §1304 is intended to ensure that the ultimate purchaser is informed of the country of origin of the imported article. Therefore, as the U.S. manufacturer was considered to be the ultimate purchaser and was aware that the upper barrels were, in fact, produced in Brazil, we found that the reference to Beaumont, Texas would not mislead the U.S. producer as to the origin of the imported merchandise. Accordingly, we held that the reference to Beaumont, Texas could be placed upon the barrels prior to importation. We additionally noted that, because the barrels were substantially transformed within the United States, “the concern that the general public might be misinformed by the reference to ‘Beaumont, Texas’ on the finished hydrant is misplaced and beyond the scope of 19 U.S.C. §1304.”
HRL 734785 is not directly on point here because the issue in that case involved consideration of the potential confusion to the ultimate purchaser in the United States caused by a U.S. geographical reference marking that was placed upon foreign-origin merchandise prior to importation. In this case, on the other hand, we are considering the potential confusion to the ultimate purchaser caused by the placement of a trademark after importation. However, we believe the guidance set forth in HRL 734785 remains applicable to this case.
When assembling hydrants, U.S. Pipe substantially transforms the imported fire hydrant components into products of the United States and is, therefore, considered to be the ultimate purchaser of the imported parts. Accordingly, the threat in this case of the ultimate purchaser being deceived or misled by the trademark is not a concern that precludes placement of the U.S. Pipe trademark on the outside surface of the assembled hydrants. Moreover, because the hydrants are substantially transformed into products of the United States, the concern that the general public might be misinformed by the trademark is misplaced and beyond the scope of the marking statute, 19 U.S.C. §1304.
HOLDING:
Based upon the facts of this case, we find that the foreign-origin parts are substantially transformed when U.S. Pipe assembles them into completed fire hydrants. In accordance with 19 CFR 134.35(a), U.S. Pipe is considered to be the ultimate purchaser of the imported parts in such cases. Therefore, if U.S. Pipe receives the imported parts in a properly marked container indicating the country of origin of the parts, the individual parts are not required to be marked.
However, U.S. Pipe is not considered to be the ultimate purchaser of the imported parts where the imported components are merely sold as replacement parts, because such parts will not be substantially transformed within the United States. In such cases, the person who purchases the replacement part to repair a hydrant is considered to be the ultimate purchaser of the component. Accordingly, fire hydrant parts (or the container, if any, in which they are sold to the ultimate purchaser) imported and sold as replacement parts must be legibly, indelibly, and permanently marked in such a manner as to indicate to the ultimate purchaser the English name of the country of origin of the item.
With respect to the trademark issue in this case, where U.S. Pipe is considered to be the ultimate purchaser of hydrant components used in the assembly of completed hydrants, the exterior surface of the completed fire hydrants may be marked with the “U.S. Pipe” trademark.
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 CBP officer handling the transaction.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division