CLA-2 OT:RR:CTF:TCM H035441 KSH
Mr. Matthew Maletta, Vice President
Allegran Sales, LLC
2525 Dupont Drive
Irvine, CA 92623-9534
RE: Country of origin marking of a LAP-BAND® SYSTEM AP
Dear Mr. Maletta:
This is in regard to your request for a prospective ruling, dated August 4, 2008, on behalf of Allegran Sales LLC, in which you request the country of origin marking of a LAP-BAND® SYSTEM AP.
FACTS:
The merchandise at issue is identified as the LAP-BAND® SYSTEM AP. You state it is the first adjustable medical device approved in the United States for individualized weight loss. The LAP-BAND® SYSTEM AP is designed to be placed laparoscopically and works by placing an inflatable band around the top portion of the stomach to create a small pouch that limits or reduces food consumption.
All of the components which make up the LAP-BAND® SYSTEM AP originate in the United States. The components are shipped to Costa Rica for inspection, testing for quality assurance, packaging, sterilization and final packaging for distribution. You state that the components cannot be distributed as a finished medical device without the steps performed in Costa Rica. The LAP-BAND® SYSTEM AP is sold as a complete sterile system ready for surgical use.
ISSUE: Whether the operations performed in Costa Rica constitute a substantial transformation.
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 and Border Protection (CBP) Regulations (19 C.F.R Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), CBP Regulations (19 C.F.R 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. Since the U.S. origin components are subjected to additional operations in Costa Rica, we must determine whether they undergo a substantial transformation.
A substantial transformation results when a new and different article
emerges from the processing having a distinctive name, character or use. U.S. v. Gibson-Thomsen Co., Inc., 27 CCPA 269 (1940). If the manufacturing or combining process is merely a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 542 F. Supp. 1026 (CIT 1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. 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). See also C.S.D. 85-25. However, the issue of whether a substantial transformation occurs is determined on a case-by-case basis. CBP ruled in C.S.D. 80-111, dated September 24, 1979, that a ceiling fan assembled in the United States in assembly line procedures was not substantially transformed in the United States. CBP considered factors such as the nature of the assembly, the amount of skilled labor and specialized equipment involved and the cost of the assembly process.
In Headquarters Ruling Letter (HQ) 734457, dated May 26, 1992, fishing rods were assembled in China from component parts manufactured in different countries (i.e., semi-finished Taiwanese rods and reel seats, Korean line guides, and Japanese paint). HQ 734457 followed T.D. 67-173, 1 Cust. Bull. 366 (1967), which held that the domestic assembly of fishing rod parts did not constitute a substantial transformation of those parts and, therefore, the main reel housing was required to be marked with the country of origin.
In HQ 734560 dated July 20, 1992, telephone sets, which consisted of a base unit made in Canada or Malaysia, a handset made in Canada or China, a handset cord made in Canada or Mexico, a cord to connect the telephone to the jack made in Canada or Mexico, and a transformer made in Taiwan, were assembled and tested in either Canada or Malaysia. It was determined that the assembly of these components into a telephone was extremely simple, and that they were not substantially transformed. Therefore, the carton in which the ultimate purchaser received the telephone could be marked: "telephone base made in (name of country); handset made in (name of country); transformer made in (name of country); line cord made in (name of country), or similar language."
In HQ 558881, dated March 3, 1995, we determined the assembly of a hollow wall anchor which involved screwing the imported screw into a U.S.-origin housing, in the U.S., did not constitute a substantial processing of the imported component. We noted it was a simple combining operation entailing only the screwing together of two components in which the ultimate purchaser had to remove the screw from the housing before the hollow wall anchor may be placed into the wall. Although the screw was claimed to only represent 8 percent of the cost of the hollow wall anchor, we found that the screw was an important component of the hollow wall anchor, without which an object cannot be affixed to the wall.
In HQ 561167, dated December 14, 1998, CBP determined that foreign origin surgical sutures did not undergo a substantial transformation as a result of a sterilization process in the U.S. See also HQ 555154, dated March 20, 1989 and New York Ruling Letter (NY) M86916, dated October 4, 2006.
Like the assembly processes in HQ 734457, HQ 734560, HQ 558881, and
sterilization processes in HQ 561167 and HQ 555154, the operations performed in Costa Rica to create the LAP-BAND® SYSTEM AP are relatively simple. Consequently those operations do not result in a substantial transformation of the components. Each of the components remains intact upon assembly and does not loose its identity.
Therefore, the country of origin is the United States. Goods determined to be an article of U.S. origin are not subject to the country of origin marking requirements of 19 U.S.C. §1304. Whether an article may be marked with the phrase "Made in the USA" or similar words denoting U.S. origin, is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the FTC Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20508 should you intend to mark the LAP-BAND® SYSTEM AP to indicate that it is “Made in the USA.”
HOLDING: On the basis of the information submitted, we find that the LAP-BAND® SYSTEM AP is not substantially transformed by the operations performed in Costa Rica. In accordance with 19 U.S.C §1304, the LAP-BAND® SYSTEM AP need not be marked.
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,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch