Mar-2-05 CO:R:C:V 735010 AT
District Director of Customs
Key Tower Center
Seattle, Wa. 98174
RE: Internal Advice request concerning the country of origin
marking requirements for imported rubber dental dams;
assembly of foreign rubber dental dams with domestic plastic
frames; substantial transformation; 19 CFR 134.35
Dear Sir:
This is in response to your memorandum dated February 19,
1993, requesting internal advice on the country of origin marking
requirements for foreign dental dams imported by Aseptico Inc.
("Aseptico"), to be further processed in the U.S. A sample of
the completed article as well as the individual components before
assembly were submitted with your memorandum. We regret the
delay in responding.
FACTS:
Aseptico imports foreign rubber dental dams (6" squares) to
be further processed in the U.S. The company indicates that it
also sells a portion of these foreign dental dams to dentists to
be used in their imported condition. The dental dams which are
sold to dentists in their imported condition are packaged in
properly marked retail containers. Dental dams are used by
dentists during oral surgery and are placed in a patient's mouth
in order to isolate a patient's tooth/teeth and keep the area dry
from saliva. The processing performed by Aseptico in the U.S.
consists of individually gluing dental dam squares to domestic
manufactured plastic frames, trimming of the excess material and
punching. The finished dams are then repackaged 20 to a carton
and sold to dentists under the name "Handidam". It is Aseptico's
position that the imported dental dams are substantially
transformed as a result of the U.S. processing, and therefore
should be excepted from marking. In support, Aseptico states
that the domestic components and assembly operation performed in
the U.S. approximately quadruple, at cost, the value of the
finished Handidam ($.43) versus the value of the rubber dam
square ($.10). It argues that this increase in value constitutes
a substantial transformation of the imported dental dam squares.
ISSUE:
What are the country of origin marking requirements of
imported dental dams assembled by Aseptico in the U.S. with
domestic plastic frames in the manufacture of Handidams in the
manner described above?
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 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., 27
C.C.P.A. 297 at 302, C.A.D. 104 (1940).
The country of origin marking requirements of imported
dental dams that are assembled by Aseptico in the U.S. with
domestic plastic frames rests upon whether Aseptico is the
ultimate purchaser of the imported dams.
The "ultimate purchaser" is defined generally as the last
person in the U.S. who will receive the article in the form in
which it was imported. 19 CFR 134.1(d). If an imported article
will be used in domestic manufacture, the manufacturer may be the
"ultimate purchaser" if [s]he subjects the imported article to a
process which results in a substantial transformation of the
article. However, if the manufacturing process is a minor one
which leaves the identity of the imported article intact, the
consumer or user of the article, who obtains the article after
the processing, will be regarded as the "ultimate purchaser." 19
CFR 134.1(d)(1) and (2).
Substantial Transformation and Domestic Assembly Operations
For country of origin marking purposes, a substantial
transformation occurs when an article loses its identity and
becomes a new article having a new name, character, or use. Koru
North America V. United States, 12 CIT 1120, 701 F. Supp. 229
(1988). Under this principle, the manufacturer or processor in
the U.S. who converts or combines the imported article into a
different article will be considered the "ultimate purchaser" of
the imported article, and the article shall be excepted from
marking. However, the outermost containers of the imported
articles must be marked. 19 CFR 134.35. The question of when a
substantial transformation occurs is a question of fact to be
determined on a case-by-case basis. Uniroyal Inc. v. United
States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd, 1 Fed.Cir.
21, 702 F.2d 1022 (1983).
The issue involved in this case is whether the imported
dental dams which are assembled with domestic plastic frames in
the U.S. to form completed Handidams are substantially
transformed into a new article having a new name, character or
use.
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 Linen v.
United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2
Fed.Cir. 105, 741 F.2d 1368 (1984). Assembly operations which
are minimal or simple, as opposed to complex or meaningful, will
generally not result in a substantial transformation. See,
C.S.D.s 80-111, 89-110, 89-129, 90-51.
Customs has held that operations, such as cutting to length,
dyeing and gluing are merely finishing and assembly operations
which do not result in a substantial transformation of the
imported article. In HQ 734907 (May 12, 1993), Customs held that
the bonding operation of gluing domestic foam to Canadian vinyl
in the U.S. to manufacture foam bonded vinyl was a minor
operation which did not constitute a substantial transformation
of the foreign vinyl. In HQ 728269 (July 29, 1985), Customs held
that operations performed on greeting cards, such as pressing
out, folding and gluing, were minor and did not constitute a
substantial transformation of the imported card.
Similarly, in this case, we find that the bonding operation
of gluing imported dental dam squares to domestic plastic frames
does not constitute a substantial transformation of the foreign
dental dams. The operation is very simple and does not require a
great deal of skill or time. The bonding of rubber dental dam
squares to plastic frames only involves gluing the rubber square
to the plastic frame by means of an adhesive material. The
formation of the finished Handidam is made by this simple bonding
operation. Furthermore, although the finished Handidam has a
somewhat different appearance than the imported dental dam both
are used essentially in the same manner by dentists. The
addition of a plastic frame merely makes it easier to use (e.g.
it does not have to be removed to take an X-ray of a patient's
tooth during oral surgery). Though, as Aseptico claims, the
U.S. operations increase the value of the finished Handidams
significantly, determinations of substantial transformation based
simply on an increase in value were recently rejected by the
Court in National Hand Tool Corp. v. United States, Slip Op. 92-
61 (April 27, 1992). After careful consideration of the
information presented, we conclude that the imported rubber
dental dams are not substantially transformed as a result of the
U.S. processing and are subject to the marking requirements set
forth in 19 U.S.C. 1304. The outermost container in which the
rubber dental dams are imported must be marked to indicate the
foreign origin of the dental dams.
We note that since the imported dental dams are processed
and then repacked into retail containers in the U.S. the
certification requirements of 19 CFR 134.26 are applicable. 19
CFR 134.26 provides in part that:
If an article subject to these requirements is intended
to be repacked in new containers for sale to an ultimate
purchaser after its release from Custom custody, or if the
district director having custody of the article, has
reason to believe such article will be repacked after its
release, the importer shall certify to the district
director that: (1) If the importer does the repackaging,
the new container shall be marked to indicate the country
of origin of the article in accordance with the
requirements of this Part: or (2) If the article is
intended to be sold or transferred to a subsequent
purchaser or repacked, the importer shall notify such
purchaser or transferee,in writing, at the time of sale
or transfer, that any repacking of the article must
conform to these requirements.
HOLDING:
For purposes of 19 U.S.C. 1304, the domestic processing of
imported rubber dental dams by gluing, trimming excess material,
punching and packaging into finished Handidams does not
constitute a substantial transformation. Accordingly, the
repackaged Handidams are subject to the country of origin marking
requirements of 19 U.S.C. 1304 and 19 CFR Part 134 and Aseptico
(importer) must follow the certification procedures of 19 CFR
134.26. The outermost container in which the dental dams are
imported and the retail containers must be marked to indicate the
foreign origin of the dental dams.
Sincerely,
John Durant, Director
Commercial Rulings Division