MAR-2-05 CO:R:C:V 732883 NL
Thomas J. Lindmeier, Esq.
Suite 401, Regency One Building
10050 Regency Circle
Omaha, Nebraska 68114
RE: Country of Origin Marking of Cast Iron Pipe Fittings; 19
U.S.C. 1304(c); Substantial Transformation; Machining
Dear Mr. Lindmeier:
This is in response to your letters of November 13, 1989,
and January 24, 1990, in which you request a ruling concerning
the country of origin marking of certain castings to be imported
by your client, Central Plastics Company (Central).
FACTS:
The imported articles are unfinished malleable cast iron
components of pipe fittings which as imported have no threading,
beveled edges or other features beyond their rough shape. In
their condition as imported the components cannot be joined
together to function as pipe fittings. From the imported
castings Central plans to manufacture pipe fittings known as
unions and fittings known as dialectrics. Each three-piece union
will be made from three imported castings: a nut; a head; and a
tail. Each five-piece dialectric will be made from two imported
castings: a nut and a head, to which will be added a brass tail
and nylon and rubber gaskets of domestic origin. Samples were
submitted. For the imported union components a ruling is
requested with respect to castings of between 1/4" and 3" in
diameter. For the imported components of the dialectrics the
ruling request covers dimensions from 1/2" to 2".
The U.S. manufacturing process undertaken by Central is
extensive. To manufacture the union a multi-station dial index
boring and threading machine and a lathe are used. The inside
diameter of the casting for the tail piece is bored, trued and
threaded. Then the outside diameter of the tail piece is trued.
The raised portion of the tail (the hub) is rounded and a groove
created to accommodate a molded-on nylon gasket. The end of the
tail piece is faced to create a flat surface at a right angle to
the plane created by the machined inside diameter, and one end is
bevelled. The head piece is processed by boring, facing,
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threading and tapping. The nut is finished by boring and
threading. The head and nut of the dialectric fitting are
manufactured from the imported castings in the same manner, using
the same machinery.
Central has submitted detailed confidential cost data which
demonstrate that the U.S. processing done by Central adds between
[216] percent and [910] percent in direct manufacturing costs to
the cost of the imported castings, depending upon the size of the
fitting. These costs do not include sales commissions,
transportation, and research and development engineering costs.
The castings are imported by Central for its own account
directly from a sole foreign manufacturer, to be used only in the
manufacture of unions and dialectrics. Central represents that
the imported castings will not be sold to third parties, and
suggests that this undertaking can be enforced because its name
will be die engraved on each cast nut.
Central also asks whether the requirements of section 207 of
the Trade and Tariff Act of 1984 (19 U.S.C. 1304(c)), apply to
these imported castings. Section 207 requires that all imported
steel pipes and fittings be marked with their country of origin
by means of die stamping, cast-in-mold lettering, etching or
engraving. See 19 U.S.C. 1304(c)(1). A claim that marking by
the prescribed methods is technically or commercially infeasible
has been withdrawn.
ISSUES:
Are the imported castings substantially transformed by U.S.
processing such that Central is their ultimate purchaser?
Are the imported castings subject to the special marking
requirements of 19 U.S.C. 1304(c)?
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 entering the U.S. shall be marked in a conspicuous manner
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.
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, defines
"ultimate purchaser" as generally the last person in the U.S. who
will receive the article in the form in which it was imported.
Section 134.35, Customs Regulations, provides that an article
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used in the U.S. in manufacture which results in an article
having a name, character or use differing from that of the
imported article will be within the principle of the case of U.S.
v. Gibson, Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940).
The manufacturer who converts or combines the imported article
into the different article will be considered the ultimate
purchaser of the imported article, and the article shall be
excepted from country of origin marking, although its outermost
container must be marked.
Section 207 of the Trade and Tariff Act of 1984 (19 U.S.C.
1304(c)), provides that no exception from country of origin
marking may be made with respect to pipes and pipe fittings, each
of which shall be marked with the English name of the country of
origin by means of die stamping, cast-in-mold lettering, etching
or engraving. 19 U.S.C. 1304(c)(2) provides that if, because of
the nature of the article, it is technically or commercially
infeasible to mark by means of one of the four methods specified
above, the article may be marked by an equally permanent method
of marking such as paint stenciling, or, in the case of small
diameter pipe, tube, and fittings, by tagging the containers or
bundles. The effect of section 207, therefore, is to prescribe
by statute the methods of marking which must be used on imported
pipes, tubes and fittings.
In this case, Central's processing of the imported castings
to convert them into finished unions and dialectrics
is a substantial transformation under the principle of Gibson-
Thomsen. The castings are imported in a rough condition, and
only after numerous machining operations to achieve shape and
dimensional requirements do the castings become finished unions
or dialectrics. These machining operations change the
fundamental character of the imported articles from castings to
finished pipe fittings, enabling them to be used for a different
purpose. See, C.S.D. 89-121 (July 25, 1989), 23 Cust. B. & Dec.
38 (significant machining of imported forgings into socket
wrenches effects a substantial transformation of the imported
articles). In addition, we are satisfied that the processing
done by Central is comparable to that addressed in Midwood
Industries v. United States, 64 Cust. Ct. 499, C.D. 4026, 313 F.
Supp. 951 (1970), where the court found that a substantial
transformation had occurred. Finally, we note that the cost of
the finished unions and dialectrics significantly exceeds the
cost of the imported castings; substantial value is added to the
imported articles.
As articles substantially transformed by manufacture in the
U.S., pursuant to 19 CFR 134.35 the castings are eligible to be
excepted from country of origin marking and Central is their
ultimate purchaser. The imported castings are, however, required
to be marked on their outermost containers at the time of
importation. These articles also would be eligible for
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exception from country of origin marking pursuant to 19 U.S.C.
1304(a)(3)(H) and 19 CFR 134.32(h), since Central, the ultimate
purchaser, has direct dealings with the foreign producer of the
castings and thus necessarily knows their country of origin.
This eligibility is, however, subject to the statutory
limitations imposed by section 207 of the Trade and Tariff Act of
1984 (19 U.S.C. 1304(c)).
As discussed above, 19 U.S.C. 1304(c) precludes the
approval of any exception from country of origin marking for
pipe fittings. Even if it is determined that an imported article
has been substantially transformed by manufacture or processing
in the U.S. such that it is no longer an article of foreign
origin, 19 U.S.C. 1304(c) limits the authority of Customs to
approve an exception from country of origin marking. Even if
otherwise eligible for exception, a subject article must be
marked in accordance with those requirements at importation and
until it reaches its ultimate purchaser.
The classification of the castings used to make unions and
dialectrics will determine whether they are subject to the
stringent marking requirements of section 19 U.S.C. 1304(c). See
T.D. 86-15, 20 Cust B. & Dec. No. 7 (Feb. 19, 1986) (articles
classified under specified provisions are subject to the
requirements of 19 U.S.C. 1304(c)). The three-piece castings
used to produce unions qualify as "blanks" under General Rule of
Interpretation (GRI) 2(a), which states in part that any
reference in a heading to an article shall be taken to include a
reference to that article incomplete or unfinished provided that,
as entered, the incomplete or unfinished article has the
essential character of the complete or finished article. Blanks
are considered incomplete or unfinished articles for purposes of
GRI 2(a). The castings for unions have the approximate shape or
outline of the finished unions, and can only, except in
exceptional circumstances, be used for completion into unions,
and thus possess the essential characteristics of finished
unions. Accordingly, the castings for unions are provided for
under subheading 7307.19.9030, Harmonized Tariff Schedule of the
United States (HTSUS): pipe fittings of iron or steel, cast
fittings, other, other, unions. The rate of duty is 6.2 percent
ad valorem. Thus it is our conclusion that the castings used to
produce fittings known as unions are pipe fittings within the
meaning of 19 U.S.C. 1304(c), and are subject to its marking
requirements. These requirements may be satisfied by marking the
country of origin as requested in cast-in-mold lettering on the
head piece or tail piece of the union casting. We do not
construe this section to require, however, that the marking of
the country of origin of a pipe or tube product remain on the
article after it has reached the ultimate purchaser in the U.S.
After processing in the U.S. which substantially transforms the
fitting, there is no remaining obligation on the part of the
ultimate purchaser to preserve the markings. See, HQ 728693
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(November 5, 1985); HRL 730416 (May 11, 1987).
Our conclusion is different with respect to the two-piece
castings which are used to make the dialectrics. Since the brass
tail and gaskets are added after importation, the imported
castings are only parts of a completed fitting. Since there is
no HTSUS provision for parts of fittings, they would be
classifiable under HTSUS subheading 7325.99.10, which provides
for other cast articles of iron or steel, other, other, of cast
iron. The rate of duty is 3.1 percent ad valorem. Articles
classified under this subheading are not subject to the special
marking requirements of 19 U.S.C. 1304. Accordingly, the
requirements of 19 U.S.C. 1304 may be satisfied by tagging or
paint stenciling of the castings or, as specified in 19 CFR
134.35, by marking the containers in which they are imported.
HOLDINGS:
1) Pursuant to 19 CFR 134.35 the imported castings are
substantially transformed by processing in the U.S. into finished
pipe fittings known as unions and dialectrics, and the
importer/manufacturer is their ultimate purchaser for country of
origin marking.
2) The imported castings for unions are classifiable as
pipe fittings under subheading 7307.19.90.30, HTSUS. As such, it
is subject to the special marking requirements of 19 U.S.C.
1304(c). For these castings the marking requirement may be
satisfied by marking the country of origin in cast-in-mold
lettering on either the head piece or tail piece of the
unfinished union. The castings for the dialectrics are
classifiable under subheading 7325.99.10, HTSUS, a provision for
articles of cast iron. Articles so classified are not considered
pipe fittings and are not subject to the special marking
requirements of 19 U.S.C. 1304(c). These castings may be
imported with country of origin marking on their containers, as
provided in 19 CFR 134.35.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch