MAR-2-05 CO:R:C:V 733352 EAB
John J. Martuge, Area Director
U.S. Customs
J.F.K. Airport Area
Building 178
Jamaica, NY 11430
Re: Country of origin marking of industrial pressure gauges. IA
MAR-2:K:C:A AG; Substantial transformation; ultimate
purchaser; 19 U.S.C. 1304; 19 CFR 134.1(d); 19 CFR
134.1(d)(2); 19 CFR 134.32(d); 19 CFR 134.35; 19 CFR
134.41(a); Koru North America; Friedlaender & Co.; Gibson-
Thomsen Co.; National Juice Products Association; Uniroyal;
727936 revoked; ORR 824-70; 728213; 724901; 733185; 732999;
733578; 733151; 732057; 732940; 728801
Dear Mr. Martuge:
This is in response to your memorandum dated May 2, 1990,
requesting internal advice concerning the country of origin
marking of pressure gauges imported for use in various industrial
applications or sold to independent "jobbers", as more fully set
forth hereinafter. Of course, we have discussed the issue at
length with the District Director, Cleveland, the National Import
Specialist, New York, and import specialists in Cleveland and New
York and we regret the delay in responding in writing.
FACTS:
Pressure gauges are imported either to be used in the
manufacture of commercial dishwashers, drilling equipment or
refrigeration equipment, or to be sold to independent contractors
and plumbers to be used by them in the repair of the foregoing or
similar equipment. The gauges may be either stem- or panel-
mounted as an integral and permanent part of the particular
equipment. Stem-mounted gauges are fully visible after they have
been assembled into the particular machinery by way of wrenching
the threaded stem of the gauge into the receptacle for which it
was designed. Panel-mounted gauges, by whatever method they are
mounted, have only their face visible, as, for example, the
speedometer in the dashboard of a car.
Two sets of samples representing two different importations
have been submitted. In both sets, the foreign origin of the
particular gauges appears die-stamped, etched or cut into the
metal nut locking the gauge onto the threaded stem. On some
samples, the country of origin marking appears on the back of the
nut; in others, on the front. In no case is the country of
origin indicated on the face of the dial of any gauge.
For purposes of this ruling, we will presume that the gauges
that are to be sold to original equipment manufacturers are
assembled into domestic commercial dishwashers, drilling
equipment or refrigeration equipment.
ISSUE:
Whether imported pressure gauges must be marked with the
country of origin on the face of the dial.
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 Court of Interna-
tional Trade stated in Koru North America v. United States, 701
F.Supp. 229 (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 (1940) at 302: "Congress intended
that the ultimate purchaser should be able to know by an inspec-
tion of the marking on the imported goods that 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. Section 134.1(d), Customs Regulations (19 CFR
134.1(d)), defines the ultimate purchaser as "generally the last
person in the U.S. who will receive the article in the form in
which it was imported. 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 of the article." Pursuant to 19 CFR
134.35, if the manufacturer is the ultimate purchaser, the
imported article is excepted from individual marking provided the
outermost container to reach the ultimate purchaser is marked to
indicate the country of origin of the article.
A substantial transformation occurs when an article loses
its separate identity and becomes a new article having a new
name, character or use. United States v. Gibson-Thomsen Co., 27
CCPA 267 (1940); National Juice Products Association v. United
States, 10 CIT 48, 628 F.Supp. 978 (CIT 1986); Koru North America
v. United States, supra.
In HQ 732999 (January 25, 1990), Customs determined that a
U.S. manufacturer who assembles imported automotive door hinge
parts and then incorporates the finished hinges into a vehicle is
the ultimate purchaser of the imported hinge parts. The articles
were substantially transformed as a result of the combining
operations in which they lost their separate identities; thus,
the imported parts were excepted from individual country of
origin marking, provided that Customs officials at the port of
entry were satisfied that the articles would be used only in the
manufacture of finished door hinges and vehicles, and not
otherwise sold. In HQ 733578 (August 27, 1990), Customs found
that imported electrical outlet boxes lost their separate
identities when used in the manufacture of mobile homes and
recreational vehicles; the manufacturer was the ultimate
purchaser of the electrical outlet boxes, which were excepted
from individual marking so long as Customs officials at the port
of entry were satisfied that they would reach the manufacturer in
their properly marked containers and not be re-sold.
Customs ruled in ORR 824-70 (August 24, 1970), that a manu-
facturer who purchases imported golf club heads, either finished
or unfinished, and assembles them with shafts and grips of U.S.
origin into finished golf clubs, is the ultimate purchaser of
the imported golf club heads. The ruling directed that if the
Regional Commissioner of Customs was satisfied that the imported
golf club heads were to be used by an original equipment manufac-
turer, then the golf club heads were excepted from individual
marking. Accord, HQ 728213 (July 3, 1985) and HQ 733151
(September 11, 1990). In HQ 724901 (April 9, 1984), Customs
advised that the ultimate purchaser of imported golf club grips
to be used in the manufacture of golf clubs was the golf club
manufacturer. Customs stated that golf club grips which are
imported by golf club manufacturers in the U.S. are substantially
transformed into new and different articles of commerce, i.e.,
golf clubs.
In HQ 733185 (April 11, 1990) Customs reiterated the posi-
tion that golf club grips imported by golf club manufacturers or
intended to be sold to golf club manufacturers would be excepted
from individual marking. However, Customs also found that
imported golf club grips that were to be used in the repair or
replacement of grips on completed clubs that already had been
purchased or received by the consumer must be individually
marked. Customs reasoned that the mere fitting of a replacement
grip onto a golf club shaft is a simple assembly not constituting
a substantial transformation.
For purposes of determining the identity of the ultimate
purchaser in the case of a manufacturing process which may be a
mere combining operation under 19 CFR 134.1(d)(2) or a
substantial transformation under 19 CFR 134.35, Customs has often
looked at six factors:
1) whether the article is completely finished;
2) the extent of the manufacturing process of combining the
article with its counterparts as compared with the manufac-
turing of the subject article;
3) whether the article is permanently attached to its
counterparts;
4) the overall importance of the article to the finished
product;
5) whether the article is functionally necessary to the
operation of the finished article, or whether it is an
accessory which retains its independent function; and,
6) whether the article remains visible after the combining.
See HQ 732057 (April 16, 1990) and HQ 732940 (July 5, 1990).
These factors are not exclusive and there may be other factors
relevant to a particular case and no one factor is determinative.
See HQ 728801 (February 26, 1986) and HQ 732940, supra. Of
course, where the imported article is the essence of the
completed article, and the cost of and skill in manufacturing the
foreign component are significantly greater than those of the
domestic manufacturing or combining process which leaves the
identity of the imported component intact, there is no
substantial transformation of the imported article, and the
domestic manufacturer is not the ultimate purchaser of the
foreign goods, Uniroyal, Inc. v. United States, 3 CIT 220 (1982).
In HQ 727936 (January 27, 1986), Customs ruled that pressure
gauges must be marked on the face of the dial, stating that "a
pressure gauge is, itself, a separate entity which retains its
distinct identity after its attachment to another article
subsequent to importation." No specific import transactions were
involved in the case. Referring to 19 CFR 134.1(d)(2), which
provides that, if a manufacturing process is a minor one which
leaves the identity of the imported article intact, then the
consumer or user of the article who obtains it after the
processing will be the ultimate purchaser, Customs found that
the ultimate purchaser of pressure gauges, "in most cases", will
be the user of the gauges after they have been attached to an
appliance, such as a gas boiler. We find the reasoning of this
ruling to be over-broad and the application of it unduly
restrictive. In point of fact, a pressure gauge would be
completely useless if attached in such a manner that it could not
be seen, which is the effect of the reasoning in our previous
ruling. A pressure gauge that cannot be seen to indicate whether
a system is operating under less than optimal conditions, or
within a range of acceptable conditions, or to indicate potential
danger if corrective steps are not duly taken, could hardly serve
any function for which it would be intended.
After careful consideration of the cases discussed above we
conclude that the U.S. original equipment manufacturers of
commercial dishwashers, drilling equipment or refrigeration
equipment and other products are the ultimate purchasers of the
foreign pressure gauges.
Applying the factors enumerated in HQ 732057, supra,
supports this conclusion. On the one hand, the pressure gauge is
an important component which remains visible after assembly to
the various pieces of equipment, and the process of assembling
the gauges to the various pieces of equipment has not been
alleged to be complex. However, the pressure gauge is only one
of several important components, it is permanently attached to
the remaining components, and it is functionally necessary to the
operation of the finished article and not merely an accessory
which retains its independent function. As we have stated, the
pressure gauge must remain visible in order to have any
utilitarian purpose. The facts are, however, that the pressure
gauge, unlike the imported shoe uppers in the Uniroyal case which
were the essence of the completed shoes, by itself is not the
essence of the completed equipment, nor does it impart the
ultimate shape, form and size to the completed product as the
shoe upper did. Commercial dishwashers, drilling equipment and
refrigeration equipment all will function without pressure
gauges, and we note here that residential dishwashers and
refrigeration equipment do not have pressure gauges. But just as
an automobile will operate without a speedometer, it would surely
be unsafe to operate commercial dishwashers, etc. without
pressure gauges. Finally, while no cost figures are given and no
discussion of the manufacturing process is presented with respect
to the pressure gauges, we are comfortable in presuming that the
cost and skill of manufacturing the pressure gauges is not
significantly greater than the cost and skill required of
manufacturing a complete commercial dishwasher, drilling
equipment or refrigeration equipment.
We find that imported pressure gauges are substantially
transformed by original equipment manufacturers of commercial
dishwashers, drilling equipment and refrigeration equipment. The
original equipment manufacturers are the ultimate purchasers of
such pressure gauges when the gauges are combined with other
components to become integral components of commercial
dishwashers, drilling equipment and refrigeration equipment.
Pressure gauges so imported and used are excepted from individual
country of origin marking, and only their outermost containers
need bear such marking. Statements to the foregoing effect must
be filed with the district director of the port for each entry to
be made pursuant to this ruling. Alternatively, the gauges
themselves may be legibly and permanently marked in a conspicuous
location.
In the case of pressure gauges not imported for use by
original equipment manufacturers, but resold to or used by
independent "jobbers" as replacement parts, the ultimate
purchaser generally will be the owner of the commercial
dishwasher, drilling equipment or refrigeration equipment. The
owner of the commercial dishwasher, drilling equipment or
refrigeration equipment generally will be the last person in the
U.S. who will receive the pressure gauge in the form in which it
is imported. See 19 CFR 134.1(d). Unless the district director
is satisfied that in all reasonably foreseeable circumstances the
ultimate purchaser will receive the replacement pressure gauges
in their original unopened and properly marked containers,
pressure gauges imported for such use must be legibly and
permanently marked in a conspicuous location. We find that
marking of the nut securing the pressure gauge to the threaded
stem by either die casting, etching or cutting similar to the
submitted samples, is acceptable.
HOLDING:
Imported pressure gauges which will be used by original
equipment manufacturers in the manufacture of commercial
dishwashers, drilling equipment or refrigeration equipment are
excepted from individual country of origin marking pursuant to 19
CFR 134.35 and 19 CFR 134.32(d), provided that the containers in
which they are imported are properly marked to indicate the
county of origin of the articles, and Customs officials at the
port of entry are convinced that the imported articles will reach
the ultimate purchaser in their original unopened marked
containers. Imported pressure gauges to be used as replacement
parts generally must be marked with the country of origin in a
conspicuous location, unless the district director is satisfied
that all such gauges are imported and sold in properly marked
containers which will reach the ultimate purchaser, generally the
owner of the equipment. Statements to this effect must be
submitted for each entry for which this exception applies.
HQ 727936, which required all pressure gauges to be marked
on the face of the dial, is revoked.
Sincerely,
John Durant, Director
Commercial Rulings Division