MAR-2-05 CO:R:C:V 732487 KG
Kenneth L. Bargteil
Kuehne & Nagel, Inc.
7483 "H" Candlewood Road
Hanover, MD 21076
RE: Country of origin marking of rough forgings
Dear Mr. Bargteil:
This is in response to your letter of June 6, 1989, (your
reference CBLO/BLTBO/EascoSpa), requesting a country of origin
marking ruling on behalf of Easco Hand Tools, Inc., for imported
rough forgings which are made into wrenches in the U.S. Four
samples of rough forgings and completed wrenches were submitted
for examination.
FACTS:
Your client is considering using foreign sources for rough
forgings. The processes performed overseas to convert stock
steel bars into rough forgings consist of cutting to length,
heating and drop forging. The rough forging has an open end and
a box end which is not cut out. In the U.S., the rough forging
is made into a finished wrench by coining (flattening), shot
blasting (rough edit), polishing and grinding, stamping,
tempering, chrome plating and calibrating both ends (brooching).
You estimated that the cost to produce the rough forging is 40-
45% of the finished product while the U.S. processes constitute
55-60% of the total cost of the finished product.
ISSUE:
Whether the imported rough forgings are substantially
transformed in the U.S. and therefore, are exempt from individual
country of origin marking.
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 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. The United States Court
of International Trade stated in Koru North America v. United
States, 701 F.Supp. 229, 12 CIT (CIT 1988), "In ascertaining
what constitutes the country of origin under the marking statute,
a court must look at the sense in which the term is used in the
statute, giving reference to the purpose of the particular
legislation involved. The purpose of the marking statute is
outlined in United States v. Friedlaender & Co., 27 CCPA 297,
302, C.A.D. 104 (1940), where the court stated that: 'Congress
intended that the ultimate purchaser should be able to know by an
inspection of the marking on 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."
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and exceptions of 19
U.S.C. 1304. An ultimate purchaser is defined in section 134.1,
Customs Regulations (19 CFR 134.1), as "generally the last
person in the United States who will receive the article in the
form in which it was imported." The regulation further provides
that if an imported article will be used in manufacture, the
manufacturer may be the ultimate purchaser if he subjects the
imported article to a process which results in a substantial
transformation.
Under section 134.35, Customs Regulations (19 CFR 134.35),
an imported article that is substantially transformed in the U.S.
is excepted from individual country of origin marking and only
the outermost containers of the imported article must be marked
with the country of origin. An article is described in U.S. v.
Gibson-Thomsen Company, Inc., 27 CCPA 267 (1940), as being
substantially transformed because it is "so processed in the U.S.
that it loses its identity in a tariff sense and becomes an
integral part of a new article having a new name, character and
use."
Imported rough forgings made into flanges and fittings in
the U.S. were found to be substantially transformed in the U.S.
in Midwood Industries, Inc. v. United States, 64 Cust.Ct. 499,
313 F.Supp. 951 (1970). In that case, the court pointed out
that the rough forgings have no commercial use in their imported
condition because the forgings are used to connect pipes of a
matching size and in their imported state, the forgings had no
connecting ends. In HQ 731572 (July 25, 1989), copy enclosed,
Customs held that imported rough forgings made into sockets,
socket wrench extensions and adapters in the U.S. were
substantially transformed. The domestic processing included:
lathing, drilling, centerless grinding, marking, heat treatment,
performing hardness and torque strength testing, sand blasting,
tumbling, chemical vibrating, acid dipping, plating, painting and
quality control testing. The rough forgings were considered
substantially transformed because a significant amount of
machining was done which included machining to achieve the actual
dimensions of the tools. The processing performed by your
principal is similar to both of the above cases; machining is
required to drill a cavity for fastener and bolt clearance and
the rough forging does not have its basic characteristic until
the box end of the rough forging is bored out. In its imported
state, the rough forgings have no commercial use. Therefore, the
rough forgings are substantially transformed and the U.S.
processor of the rough forgings is the ultimate purchaser.
Accordingly, the imported rough forgings are excepted from
individual country of origin marking under 19 CFR 134.35 and only
the outermost container of the imported articles must be marked.
We note that the finished samples submitted contain the
words "Forged in U.S.A." The facts submitted clearly indicate
that the rough forgings involved in this case were forged
overseas. Therefore, we assume that imported rough forgings
would not be marked "Forged in U.S.A." Further, it would be
necessary to contact the Federal Trade Commission, Washington,
D.C. 20580, in order to determine if the words "Forged in U.S.A."
were properly used on the sample.
HOLDING:
The U.S. processor of the imported rough forgings is the
ultimate purchaser. The imported rough forgings are
substantially transformed in the U.S. and therefore, are excepted
from individual country of origin marking pursuant to 19 CFR
134.35 and only the outermost containers of the imported article
must be marked with the country of origin.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch
Enclosure