MAR-2-05 RR:TC:SM 560441 MLR
Patricia M. Hanson, Esq.
Katten, Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
RE: Country of Origin Marking on surgical and medical
instruments; machined Hungary; Germany forgings; 19 CFR
134.32(c) and (o); 19 CFR 134.43(a)
Dear Ms. Hanson:
This is in reference to your letters of April 29, and
November 5, 1997, requesting a ruling on behalf of
Allegiance Healthcare Corp. ("Allegiance"), concerning the
country of origin marking on certain surgical and medical
instruments.
FACTS:
It is stated that Allegiance purchases medical and
surgical instruments from an unrelated supplier in Hungary.
It is stated that the Hungarian supplier crafts the finished
instruments from German forgings made from German steel.
The German rough forgings are sent to Hungary for machining,
assembly, and finishing processes that remove a layer of
impurities from the forgings, and the forgings are cut down
to the shape of the instrument. For two-component
instruments, the refined pieces are assembled by putting a
rivet in the boxlock to connect the two components together
to form the instrument. The instruments are further cut and
machined to refine the tips. The two-component instruments
are aligned and set so that they are capable of gripping,
closing, and locking in place. Then, the instruments are
cleaned, rough polished, heat treated, and cleaned. It is
stated that 50 percent of the value of the finished
instrument is added in Hungary, and inclusive of the
Hungarian manufacturer's profit, the value added is
approximately 70 percent. The instruments are then shipped
to the U.S.
It is stated that the Hungarian processor will not mark
the finished instruments as a product of Germany and has
notified Allegiance in a letter dated July 11, 1996 that it
does not have "the right to etch Made in Germany' on the
surgical instruments manufactured by itself." Submitted as
support, you have supplied a copy of the pertinent
provisions of the Hungarian law, Act C. 1995. In your
letter dated November 5, 1997, it is stated that the
Hungarian manufacturer has agreed to mark the finished
instruments exported from Hungary "German Stainless". After
importation into the U.S., it is stated that Allegiance will
sell the finished instruments in polybags and that the
marking "German Stainless" will be visible through the bag.
Additionally, it is stated that Allegiance will place a
label on the polybag bearing its name and its U.S. address,
and the following language: "NOT A PRODUCT OF THE UNITED
STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES".
ISSUE:
Whether the proposed marking consisting of "German
Stainless" on the finished instruments and Allegiance's
name, U.S. address, and the words "NOT A PRODUCT OF THE
UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED
STATES" on the polybag in which the instruments are sold
satisfies the marking requirements of 19 U.S.C. 1304.
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 (or its container) imported
into the U.S. shall be marked in a conspicuous place as
legibly, indelibly and permanently as the nature of the
article (or its 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 Regulations (19 CFR Part 134)
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs
Regulations {19 CFR 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.
For country of origin marking purposes, a substantial
transformation of an
imported article occurs when it is used in the manufacture,
which results in an article having a name, character, or use
differing from that of the imported article. On the other
hand, 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 and an
appropriate marking must appear on the imported article so
that the consumer can know the country of origin. Uniroyal,
Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029
(1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).
In National Hand Tool Corp. v. United States, 16 CIT
308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), the court
considered sockets and flex handles which were either cold
formed or hot forged into their final shape prior to
importation, speeder handles which were reshaped by a power
press after importation, and the grip of flex handles which
were knurled in the U.S. The imported articles were then
heat treated which strengthened the surface of the steel,
and cleaned by sandblasting, tumbling, and/or chemical
vibration before being electroplated. In certain instances,
various components were assembled together which the court
stated required some skill and dexterity. The court
determined that the imported articles were not substantially
transformed and that they remained products of Taiwan. In
making its determination, the court focused on the fact that
the components had been cold-formed or hot-forged "into
their final shape before importation", and that "the form of
the components remained the same" after the assembly and
heat-treatment processes performed in the U.S. Although the
court stated that a predetermined use would not preclude the
finding of a substantial transformation, it noted that the
determination must be based on the totality of the evidence.
However, no substantial change in name, character or use was
found to have occurred as a result of the processing
performed in the U.S.
You cite Headquarters Ruling Letter (HRL) 558747 dated
January 20, 1995, as support that the finished instruments
in this case are a product of Germany. HRL 558747 involved
the same type of processes as in this case, except that the
German forgings were shipped to the U.S. (rather than
Hungary alone) for assembly, cutting, and scaling down and
then to Russia or Hungary for heat treatment, a final
cleaning, and plating. Although all of the finishing
processes and assembly operations in this case are performed
in Hungary, we find that pursuant to National Hand Tool,
there is no substantial transformation of the forgings in
Hungary, and the country of origin of the finished
instruments for marking purposes is Germany.
However, it is claimed that the Hungarian manufacturer
will not mark the finished instruments as made in Germany
because 50 percent of the value of the instruments is added
in Hungary. In fact, it is claimed that the Hungarian
manufacturer is required to mark its goods. The Hungarian
Act C. Of 1995, subsection (3) states:
Unless an international convention provides otherwise,
processing or working to a sufficient extent ... shall
mean the processing or working, as a result of which an
increase in excess of fifty percent occurs in the value
of the goods....
It is stated that under Hungarian law, the value of the
materials is based on the customs value and the value of
good is based on the value to be paid to the last
manufacturer, i.e., on the ex-works price (including the
profit of the manufacturer), provided that the price
includes all the costs of products used during the
processing. There is no indication, however, that this law
applies to exports from Hungary (such as involved in this
case) as opposed to imports into Hungary. In any case,
notwithstanding the Hungarian law cited, the U.S. country
foreign marking statute, 19 U.S.C. 1304, will still be
applicable to foreign articles imported into the U.S., and
as determined above, the finished instruments are a product
of Germany.
In your letter dated November 5, 1997, it is stated
that the Hungarian manufacturer has agreed to mark the
finished surgical instruments with the words "German
Stainless." After importation in the U.S., it is stated
that Allegiance will sell the finished instruments in
polybags which are marked with its name and U.S. address.
Allegiance proposes to place the following words "NOT A
PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF
THE UNITED STATES" beside its name and U.S. address.
Treasury Decision ("T.D.") 97-62, was published (62 FR
44211, August 20, 1997) amending section 134.46, Customs
Regulations (19 CFR 134.46), to ease the requirement that
whenever words appear on imported articles indicating the
name of a geographic location other than the true country of
origin of the article, the country of origin marking must
appear in close proximity and in comparable size lettering
to those words preceded by the words "Made in", "Product
of", or other words of similar meaning. The effective date
of the final rule was September 20, 1997. The revised
section 134.46 provides that:
In any case in which the words "United States," or
"American," the letters "U.S.A.," any variation of
such words or letters, or the name of any city or
location in the United States, or the name of any
foreign country or locality other than the country
or locality in which the article was manufactured
or produced appear on an imported article or its
container, and those words, letters or names may
mislead or deceive the ultimate purchaser as to
the actual country of origin of the article, there
shall appear legibly and permanently in close
proximity to such words, letters or name, and in
at least a comparable size, the name of the
country of origin preceded by "Made in," "product
of," or other words of similar meaning.
Accordingly, under the revised section 134.46, it must
first be determined whether the marking on the polybag may
deceive or mislead the ultimate purchaser regarding the
country of origin of the finished instruments. In several
rulings, Customs has ruled that the presence of a U.S.
address triggers the requirements of 19 CFR 134.46. For
example in HRL 559388 dated February 13, 1996, various
surgical instruments marked by means of an adhesive label on
the containers of the surgical instruments which contained
the U.S. address of United States Surgical Corporation,
"Norwalk, Connecticut", triggered the requirements of 19 CFR
134.46, and country of origin was required to appear on the
same label and in equal size print as the U.S. address,
preceded by the words "Made In". However, Customs has also
ruled that geographic names appearing in connection with
imported articles do not necessarily trigger the
requirements of 19 CFR 134.46. For example, in HRL 732329
dated July 29, 1989, Customs held that an address on a
warranty card did not pose a risk of confusion or deception
to ultimate purchasers.
The basis of this ruling was that while the name and
address, taken alone, would be the kinds of potentially
confusing information addressed by 19 CFR 134.46, their
context was such that the address information would not
mislead or confuse the ultimate purchaser as to the country
of origin of the article.
Additionally, Customs under certain circumstances has
allowed importers to place a marking on the exterior
container instructing the ultimate purchaser to view the
actual article to determine its country of origin. For
example, in HRL 734469 dated September 22, 1992, Customs
ruled that hang tags which were affixed to conspicuously
marked sunglasses and marked with the words "Country of
Origin Indicated On Sunglasses" in close proximity and in at
least a comparable size to the non-origin geographical
reference "Dallas, TX U.S.A." satisfied the country of
origin requirements of 19 CFR 134.46.
In this case, we find that the words, "German
Stainless" are sufficient to indicate Germany as the country
of origin of the surgical instruments. In addition, while
the U.S. address alone would trigger the requirements of 19
CFR 134.46, we find that in conjunction with the words "NOT
A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF
THE UNITED STATES", the ultimate purchaser in the U.S. will
not be misled to believe that the finished surgical
instruments are products of the U.S. Accordingly, since the
non-origin address will not mislead or deceive an ultimate
purchaser as to the country of origin of the imported
article, we find that the special marking requirements of 19
CFR 134.46 are not triggered. Therefore, provided the
marking "German Stainless" is etched permanently, legibly,
and conspicuously onto the finished surgical instruments and
the polybags containing the finished instruments will be
marked with the U.S. address along with the words "NOT A
PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF
THE UNITED STATES", the requirements of 19 U.S.C. 1304 will
be satisfied.
HOLDING:
Based upon the information provided, we find that
provided the imported surgical instruments are permanently,
legibly, and conspicuously etched with the marking "German
Stainless" and the polybags in which the instruments will be
sold in the U.S. contain the U.S. address with the words
"NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED
OUTSIDE OF THE UNITED STATES", the requirements of 19 U.S.C.
1304 will be satisfied.
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
Commercial Rulings Division