MAR 2-05 CO:R:C:V 734673 LR
Mr. Patrick H. Gray
General Manager
Uni-Flange
5285 Ramona Blvd.
Jacksonville, Florida 32205
RE: Country of origin marking; cast iron flanges and fittings;
machining; drilling; grinding; assembly; pipe fitting;
substantial transformation
Dear Mr. Gray:
This is in response to your letter dated May 28, 1992,
regarding the country of origin marking of imported ductile iron
adapter flanges.
FACTS:
Ductile Iron Adapter Flange as described on commercial invoice as
"Series 900, 1300 or 1350".
You import two rough castings for each complete unit. Each
casting is placed on a special grinding fixture and the mating
surfaces are ground smooth. The castings then move to a three part
drilling station, where three bolt holes are drilled in each
casting. After this drilling, domestic galvanized fasteners are
placed in the bolt holes, joining the two halves together. The
assembled "unit" then goes to the cutting lathe, where two
machining functions are performed. First, a machine cut is
performed to bring the inside surface to a totally smooth,
cylindrical shape. Next, a special serrating tool is inserted into
the lathe and the unit receives a series of machine serrations, to
exacting standards, on its inside surface. After 100% gauging, the
unit it epoxy coated. Additional connecting hardware (domestic)
is added.
Ductile Iron Adapter Flange as described on commercial invoice as
"Series 200/400/420"
A rough, one piece ductile iron casting is imported. This
casting is then placed on a lathe and the outside surface (rim) is
machined smooth, followed by the face of the casting. Set screw
holes are then drilled and tapped around the perimeter of the
casting. Depending on the size, the amount of set screw holes can
range from 2 to 48. The casting is then placed on a special
drilling fixture/template, and both holes are in the face of the
case. Domestic set screws are then installed and the casting is
epoxy coated.
You contend that the above-described products are excepted
from country of origin marking by virtue of the substantial
machining, fabrication, finishing, and assembly functions that are
performed on each item; however, you intend to mark all containers.
ISSUE:
Whether the castings which are processed in the manner
described above, may be marked with the country of origin on the
container in lieu of the article itself.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires, subject to certain specified exceptions, that
every article of foreign origin imported into the U.S. shall be
marked to indicate the country of origin to the ultimate purchaser
in the U.S. 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 "the last
person in the U.S. 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 manufacture, the manufacturer may
be the ultimate purchaser if he subjects the imported article to
a process which results in a substantial transformation. However,
if the manufacturing process is merely a minor one which leaves the
identity of the imported article intact, 19 CFR 134.1(d)(2)
provides that the consumer or user of the article, who obtains the
article after the processing will be regarded as the ultimate
purchaser.
According to United States v. Gibson-Thomsen Company, Inc.,
27 CCPA 267 (C.A.D.98), a U.S. manufacturer is considered to be an
ultimate purchaser if a manufacturing process is performed on an
imported item so that the item is substantially transformed in that
it loses its identity and becomes an integral part of a new article
will a new name, character or use. The court determined that in
such circumstances, the imported article is excepted from
individual marking. Only the outermost container is required to
be marked. See 19 U.S.C. 1304(a)(3)(D), section 134.32(d) and
134.35, Customs regulations (19 CFR 134.32(d), 134.35).
In Midwood Industries v. United States, 64 Cust. Ct. 499, C.D.
4026, 313 F. Supp. 951 (1970), the Customs Court considered the
effect of U.S. processing on the country of origin marking
requirements of imported steel forgings. Although the edges of
the forgings were legibly and conspicuously marked with the
country of origin at the tie of importation, the country of origin
marking was obliterated or destroyed during the course of the
domestic processing. The processes involved in finishing the
imported articles included, cutting, boring, facing, spotfacing,
drilling tapering, threading, bevelling, heating and compressing.
The court found that the marking was sufficient because the
processing substantially transformed the imported forgings into
fittings and flanges. As such, the court found the U.S. processor
was the ultimate purchaser of the imported merchandise and that the
removal of the marking during processing was acceptable.
Although the court based its decision in part on the fact that
the processing changed a producer's forgings to a consumer's
flange, the decision makes clear the numerous machining operations
were performed in the U.S. which imparted essential characteristics
to the forgings that enabled them to be used as fittings and
flanges. For example, there was testimony that the rough forgings
have no connecting ends and therefore, cannot be used to connect
pipes of matching size, the essential purpose of fittings.
In T.D. 87-46, Customs determined that threading operations
alone do not substantially transform pipe fittings so as to change
their country of origin. Customs found that threading does not
change the name, character or use of a fittings, and that the
operation is insubstantial in relation to the nature of the
operations needed to manufacture a fitting. In C.S.D. 89-121, July
25, 1989, Customs construed Midwood as requiring that significant
machining operations which change the actual dimensions of imported
forgings into those of the finished article must be undertaken
before a finding of substantial transformation may be reached.
Operations such as lathing, drilling and grinding, which changed
the fundamental character of the imported articles were
distinguished from cosmetic or minor processing operations such as
identification marking, and blasting, tumbling and plating. See
also HRL 732883, August 1, 1990 (extensive U.S. machining
operations of imported cast iron components of pipe fittings
constituted a substantial transformation).
In this case, the machining operations that are performed on
the imported articles described as "ductile iron adapter flanges
series 900, 1300 or 1350" are similar to those involved in Midwood.
As in Midwood, the castings are imported in a rough condition with
a significant amount of machining to be done to enable them to be
used as flanges. While the imported castings resemble the size and
shape of the finished articles, they are not yet machined to the
actual dimensions. In order to achieve the shape and dimensional
requirements, they are subjected to numerous machining operations
and assembly which change the fundamental character of the imported
articles from castings to flanges.
We find that such processing, which involves lathing, grinding
and drilling, coupled with assembly, constitutes more than minor
machining operations and substantially transforms the imported
castings into articles with a new name, character or use. As such,
we find that the U.S. processing constitutes a substantial
transformation and, for this reason, the U.S. manufacturer is the
ultimate purchaser.
Although in these circumstances, the imported articles would
ordinarily be excepted from individual marking pursuant to 19
U.S.C. 1304(a)(3)(D), 19 CFR 134.32(d) and 19 CFR 134.35, this is
not the case with respect to imported iron and steel pipe fittings.
In this regard, 19 U.S.C. 1304(c) provides that, with two
exceptions not applicable here, no exception from marking may be
made under subsection (a)(3) of this section with respect to pipes
of iron, steel or stainless steel, to pipe fittings of steel,
stainless steel, chrome-moly steel, or case and malleable iron each
of which shall be marked with the country of origin by means of die
stamping, cast-in-mild lettering, etching, or engraving.
Therefore, if the imported articles are classifiable as pipe
fittings, they must be marked in accordance with the requirements
of 19 U.S.C. 1304(c). However, in view of the fact that the
importer is the ultimate purchaser, the marking may appear in a
location where it will be obliterated during the U.S. processing.
See HQ 728693, November 5, 1985.
With respect to the imported articles described as "ductile
iron adapter flange series 200/400/420", less domestic processing
is performed and we do not have enough information to determine
whether it is enough to constitute a substantial transformation.
Before and after samples, a detailed description of each process
and cost information associated with the domestic processing are
needed before we can make a decision regarding the marking of these
articles.
HOLDING:
For purposes of 19 U.S.C. 1304, the domestic processing of
the imported articles described as "ductile iron adapter flange
series 900, 1300 or 1340" constitutes a substantial transformation
and the U.S. importer/manufacturer is considered the ultimate
purchaser. If these articles are classified as pipe fittings, they
may be marked in a location were the country of origin marking will
be obliterated during the U.S. processing. If they are not
classified as pipe fittings, marking of the containers in lieu of
the articles themselves is sufficient. No determination is made
regarding the other imported articles.
Sincerely,
John Durant, Director