CLA-02 RR:TC:SM 559147 KKV
Peter S. Herrick, Esq.
3520 Crystal View Court
Miami, Florida 33133
RE: Country of origin marking; orthodontic instruments;
North American Free Trade Agreement (NAFTA); simple
assembly; minor processing; shape; assemble;
adjust; polish; sharpen; 19 CFR 102.11(d)(1); 19
CFR 102.11(d)(2)(ii)
Dear Mr. Herrick:
This is in response to your letter dated April 3, 1995,
on behalf of Ikon Orthodontic Instruments (hereinafter
"Ikon"), which requests a ruling under the Customs
Regulations and the North America Free Trade Agreement
(NAFTA) with regard to the country of origin marking of
certain orthodontic instruments in conjunction with two
separate proposed manufacturing scenarios. Photographs
representative of the manufacturing stages described below
have been submitted and, upon our request, samples of the
forgings were subsequently submitted for our examination.
FACTS:
The importation of the initial components involved in
the production of the orthodontic instruments, applicable to
both of the proposed manufacturing scenarios, has been
described as follows. Rough forgings for the orthodontic
instruments, are imported into the U.S. from Germany and
subsequently exported to Mexico. These forgings consist of
a right and left side, which will ultimately make up a pair.
Ikon also purchases screws in the United States which will
be supplied by Ikon and used in the assembly process.
I. First Proposed Manufacturing Scenario:
The operations involved in the production of orthodontic
instruments under the first proposed manufacturing scenario
have been described as follows:
1). The rough forgings are shaped in Mexico.
2). The shaped forgings are returned to the United
States where they are heat treated and then
laser engraved.
3). The shaped forgings are returned to Mexico,
where the forgings are assembled and adjusted,
using the screws originating in the U.S. and
supplied by Ikon.
4). The assembled forgings are returned to the
United States for laser welding.
5). The assembled forgings are returned to Mexico,
where they are polished and sharpened.
6). The assembled forgings are sent to Ikon in the
United States, where Ikon provides the final
quality control check of the instruments and
the packaging.
II. Second Proposed Manufacturing Scenario:
The operations involved in the production of orthodontic
instruments under the second proposed manufacturing scenario
have been described as follows:
1). The rough forgings are shaped in Mexico.
2). The shaped forgings would be returned to the
United States where they are heat treated and
then laser engraved.
3). The shaped forgings are sent to another
location in the U.S., where the forgings are
assembled and adjusted, using the screws
originating in the U.S. and supplied by Ikon.
4). The assembled forgings are sent to a location
in the U.S. for laser welding.
5). The assembled forgings are sent to Mexico,
where they are polished and sharpened.
6). The assembled forgings are sent to Ikon in the
United States, where Ikon provides the final
quality control check of the instruments and
the packaging.
ISSUE:
Under the two proposed manufacturing scenarios
presented, what is the country of origin of orthodontic
instruments, the rough forgings of which were imported into
the United States from Germany, and subsequently exported
and re-exported to Mexico for processing, while also
undergoing processing in the United States?
LAW AND ANALYSIS:
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 United States shall be
marked in a conspicuous place as legibly, indelibly and
permanently as the nature of the article 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
county 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 at 302, (C.A.D. 104)
(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 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 this part; however,
for a good of a NAFTA country, the NAFTA
Marking Rules will determine the country
of origin.
Section 134.1(j) of the Customs regulations provides
that the "NAFTA Marking Rules" are the rules promulgated for
purposes of determining whether a good is a good of a NAFTA
country. Section 134.1(g) of the interim regulations
defines a "good of a
NAFTA country" as an "article for which the country of
origin is Canada, Mexico or the United States as determined
under the NAFTA Marking Rules." Section 134.45(a)(2) of the
interim regulations provides that a "good of a NAFTA country
may be marked with the name of the country of origin in
English, French, or Spanish."
Section 134.35(b), Customs Regulations (19 CFR
134.35(b)) states that
A good of a NAFTA country which is to be processed
in the United States in a manner that would result
in the good becoming a good of the United States
under the NAFTA Marking Rules is excepted from
marking.
Unless the good is processed by the importer or on
its behalf, the outermost container of the good
shall
be marked in accord with this part.
I. First Proposed Manufacturing Scenario:
In order to determine the country of origin marking
requirements of the orthodontic instruments under the first
proposed manufacturing scenario, we must initially apply the
NAFTA Marking Rules to determine whether the forgings
imported into the United States from Mexico are goods of
Mexico prior to being further processed in the United
States. Part 102, Customs Regulations (19 CFR Part 102) sets
forth the "Nafta Marking Rules." Section 102.11 of the
interim regulations sets forth the required hierarchy for
determining country of origin for marking purposes. Section
102.11(a) of the interim regulations states that, "[t]he
country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic
materials; or
(3) Each foreign material incorporated in that
good undergoes an applicable change in
tariff classification set out in section
102.20 and satisfies any applicable
requirements of that section, and all
other requirements of these rules are
satisfied."
Neither section 102.11(a)(1) or (2) is applicable to the
instant case because the forgings imported from Mexico are
originally forged in Germany. Because an analysis
of sections 102.11(a)(1) and 102.11(a)(2) do not yield a
country of origin determination, Customs examination
continues to 102.11(a)(3).
Pursuant to 19 CFR 102.11(a)(3), the country of origin
of a good is the country in which each foreign material
incorporated in that good undergoes an applicable change in
tariff classification as set forth in section 102.20.
Section 102.20 of the interim rules sets forth the specific
tariff classification changes and/or other operations, which
are specifically required to occur in order for country of
origin to be determined on the basis of operations performed
on the foreign materials contained in a good. In the case
before us, because the shaped forgings imported from Mexico
are classified under subheading 9018.49, HTSUS, the change
in tariff classification must be made in accordance with
section 102.20(r), Section XVIII: Chapters 90 through 92,
subheading 9018.41 - 9018.50, HTSUS, of the interim
regulations, which requires, "[a] change to subheading
9018.41 through 9018.50 from any other subheading, including
another subheading within that group."
Upon receipt from you by our office, the sample of the
rough forging was forwarded to our Metals and Machinery
Classification branch, which determined that the rough
forging, in its condition as imported from Germany, does not
have the essential shape of an orthodontic instrument, but
could be manufactured into a number of different articles,
e.g., pliers, cutters, and toenail clippers, which are
classified under Chapter 82. Accordingly, it concluded
that, upon importation into the U.S. from Germany and prior
to exportation to Mexico for processing, the forgings are
classifiable under subheading 7326.19.00, HTSUS, as other
articles of iron or steel: forged or stamped, but not
further worked...other. Not until the rough forgings are
shaped in Mexico would the articles possess the essential
shape of finished orthodontic instruments. Thus, the rough
forgings, which are initially classified under 7326.19.00,
HTSUS, and subsequently classified under subheading
9018.49.80, HTSUS, after having been shaped in Mexico,
undergo the applicable tariff shift. Consequently, the
country of origin of the shaped forgings imported into the
U.S. is Mexico.
Having determined that the shaped forgings qualify as a
good of Mexico when imported into the United States, the
country of origin marking requirements of the finished
orthodontic instruments will be based upon a determination
as to whether subsequent processing in the U.S., at any of
the listed stages of manufacturing, would result in the
article becoming a good of the United States under the NAFTA
Marking Rules.
Upon return to the U.S., th sahped forgings
aresubsequently heat treated and laser engraved. To
determine the effect of this processing on marking
requirements, we return to 19 CFR 102.11(a), which sets
forth the required hierarchy for determining country of
origin for marking purposes.
Because the shaped, heat-treated, engraved forgings are
neither wholly obtained or produced, within the meaning of
the regulations, nor produced exclusively from domestic
materials, 19 CFR 102.11(a)(1) and 102.11(a)(2) are
inapplicable.
Umder 19 CFR 102.11(a)(3), because the shaped, heat-treated, engraved forgings are classified under subheading
9018.49, HTSUS, the change in tariff classification must be
made in accordance with section 102.20(r), Section XVIII:
Chapters 90 through 92, subheading 9018.41 - 9018.50, HTSUS,
of the interim regulations, which requires, "[a] change to
subheading 9018.41 through 9018.50 from any other
subheading, including another subheading within that group."
In the case before us, the finished orthodontic
instruments are classified under 9018.49.8040, HTSUS, as
dental hand instruments, including parts and accessories
thereof. The item will bear the same classification number
at all stages of manufacturing (after the initial shaping in
Mexico), and is unaffected by any amount of subsequent
processing. Thus, there is no applicable change in tariff
classification within the requirements of section 102.20,
and country of origin of the good may not be determined in
accordance with this section.
Because 19 CFR 102.11(a) (incorporating section 102.20),
is not determinative of origin, the next step is section
102.11(b) of the interim regulations, which states:
Except for a good that is specifically
described in the Harmonized Tariff
Schedule as a set, or is classified as a
set pursuant to General Rule of
Interpretation 2, where the country origin
cannot be determined under paragraph (a),
the country of origin of the good:
(1) Is the country or countries of
origin of the single material
that imparts the essential
character of the good, or
(2) If the material that imparts the
essential character of the good is
fungible, has been commingled, and
direct physical identification of the
origin of the commingled material is
not practical, the country or
countries of origin may be determined
on the basis of an inventory
management method provided under the
Appendix to part 181 of the Customs
Regulations.
Here, because section 102.11(b)(2) is not applicable in
this case, the applicable rule that must be applied to
determine the country of origin of the orthodontic
instrument is section 102.11(b)(1), which states that the
country of origin is the country of origin of the "single"
material that imparts the essential character of the good.
In the instant case, the orthodontic instrument is composed
of two identical forgings from Mexico, which are assembled
together with a screw of U.S. origin.
"Material" is defined in 19 CFR 102.1(1) of the interim
regulations as "a good that is incorporated into another
good as a result of production with respect to that other
good, and includes parts, ingredients, subassemblies, and
components." When determining the essential character of a
good under section 102.11, Customs regulations, section
102.18(b)(2), provides that, "for purposes of applying
section 102.11, only domestic and foreign materials
(including self-produced materials) that are classified in a
tariff provision from which a change in tariff
classification is not allowed in the rule for the good set
out in section 102.20 shall be taken into consideration in
determining the parts or materials that determine the
essential character of a good."
Because there are no distinguishing features between
these two forgings and they are classified in the same HTSUS
provision, we find that, for purposes of section 102.11(b),
the two identical forgings collectively constitute the
"single" material from which imparts the essential character
to the finished good. Accordingly, the country of origin of
the orthodontic instrument after having been heat treated
and laser engraved in the U.S. is Mexico.
After these U.S. operations, the shaped forgings are
returned to Mexico, where they are assembled and adjusted,
using screws originating in the U.S. supplied by Ikon.
Subsequently, the assembled instrument is returned to the
U.S. for laser welding. Because the instrument still
qualifies as a good of Mexico when imported into the United
States, we must apply the hierarchical rules of 19 CFR
102.11 to determine whether this subsequent processing in
the United States transforms the article into a good of the
United States.
The instrument is neither wholly obtained/produced nor
is produced exclusively from domestic materials and
therefore paragraphs (a)(1) and (a)(2) of section 102.11
cannot be used to determine the country of origin of the
orthodontic instrument. There is no change in subheading
during the manufacturing process, after the initial shaping.
Therefore, the article does not undergo an applicable tariff
shift and country of origin may not be determined under
paragraph (a)(3) of section 102.11. Because section
102.11(a) is not determinative of origin, we continue to
102.11(b).
As previously discussed, under section 102.11(b)(1),
country of origin of a good is the country or countries of
origin of the single material that imparts the essential
character of the good. Here, the essential character of the
instrument is supplied by the shaped forgings, which remain
a product of Mexico. Accordingly, the country of origin of
the assembled instrument which has undergone laser welding
in the United States is Mexico.
Subsequently, the instrument is returned to Mexico,
where the article is polished and sharpened before its final
importation into the U.S. for a quality control check and
packaging. Because the instrument remains a good of a
Mexico upon its final importation into the United States,
and the subsequent processing in the U.S. does not result in
the instrument becoming a good of the United States (by
application of 19 CFR 102.11), the finished article is not
excepted from marking.
II. Second Proposed Manufacturing Scenario:
In order to determine the country of origin marking
requirements of the orthodontic instruments under the second
proposed manufacturing scenario, we initially apply the
NAFTA Marking Rules, as set forth in Part 102, Customs
Regulations (19 CFR Part 102) to determine whether the
forgings imported into the United States from Mexico are
goods of a NAFTA country prior to being further processed in
the United States. As set forth under our analysis of the
first proposed manufacturing scenario, the shaped forgings
are a product of Mexico by application of 19 CFR 102.11
Under the second manufacturing scenario, the shaped
forgings are imported into the United States where they are
heat treated and laser engraved. The shaped forgings are
sent to another location in the U.S. where the forgings are
assembled and adjusted, using
screws originating in the United States supplied by Ikon.
The assembled forgings are sent to another location in the
U.S. where the article is laser welded.
Having determined that the shaped forgings qualify as a
good of Mexico when imported into the United States, the
country of origin marking requirements of the finished
orthodontic instruments are based upon a determination as to
whether any of the subsequent processing performed in the
U.S., would result in a change of origin from Mexico to the
United States, under the NAFTA Marking Rules. If so, the
finished instruments are excepted from marking.
Neither section 102.11(a)(1) or (2) can be used to
determine country of origin. Under 19 CFR 102.11(a)(3), the
applicable change in tariff classification is found in
section 102.20(r), Section XVIII: Chapters 90 through 92,
subheading 9018.41 - 9018.50,
HTSUS, of the interim regulations, which requires, "[a]
change to subheading 9018.41 through 9018.50 from any other
subheading, including another subheading within that group."
The finished orthodontic instruments under consideration
are classified under 9018.49.8040, HTSUS, as dental hand
instruments. The item will bear the same classification
number at all stages of manufacturing (after the initial
shaping in Mexico), and is unaffected by any amount of
subsequent processing in the United States. Thus, there is
no applicable change in tariff classification within the
requirements of section 102.20, and the analysis continues
to 102.11(b).
As set forth above, section 102.11(b)(1) determines the
country of origin of a good as the country or countries of
origin of the single material that imparts the essential
character of the good. Also as discussed above, the
essential character of the instrument is supplied by the
identical forgings, which are a product of Mexico.
Accordingly, the country of origin of the shaped forgings
which have been heat treated, laser engraved, assembled,
adjusted and laser welded in the United States, is Mexico.
Subsequent to the above operations, the assembled
article is exported to Mexico for polishing and sharpening
before it is returned to the Untied States for a final
quality control check and packaging. Because the instrument
remains a good of a Mexico upon its final importation into
the United States, and the subsequent processing in the U.S.
does not result in the instrument becoming a good of the
United States (by application of 129 CFR 102.11), the
finished article is not excepted from marking.
HOLDING:
With regard to the first proposed manufacturing
scenario, on the basis of the information presented, we are
of the opinion that, pursuant to section 102.11(b)(1) of the
Nafta Marking rules, the orthodontic instruments are
considered to be a product of Mexico for purposes of country
of origin marking.
With regard to the second proposed manufacturing
scenario, on the basis of the information presented, we are
of the opinion that, pursuant to section 102.11(b)(1) of the
Nafta Marking rules, the orthodontic instruments are also a
product of Mexico for purposes of country of origin marking.
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 Customs officer
handling the transaction.
Sincerely,
John Durant, Director
Tariff Classification
and Appeals Division