CLA-2 RR:CTF:TCM H003713 HkP
Marking
Ms. Marianne Handel
International Logistics
Synthes (USA)
1690 Russell Road
Post Office Box 1766
Paoli, PA 19301
RE: Country of Origin Marking Requirements for Grade 316L Stainless
Steel Screws; 19 CFR §134.32(m), 134.35; Classification of Screw Blanks
Dear Ms. Handel:
This is in response to your undated letter, received by the National Commodity Specialist Division of U.S. Customs and Border Protection (“CBP”) on October 18, 2006, in which you requested a binding ruling on behalf of Synthes (USA). At issue is the proper tariff classification of, and country of origin marking requirements for, medical grade screw blanks and finished screws under the Harmonized Tariff Schedule of the United States (“HTSUS”). Your request included information provided by you in a previous ruling request submitted on August 10, 2006, which was returned to you with a request for additional information. Your letter, with samples appended, was forwarded to this office for a response.
FACTS:
Synthes (USA) is a skeletal fixation company that designs, manufactures and distributes implants and instruments for all aspects of internal and external fixation. At issue are screw blanks made of 316L grade stainless steel that are produced by Synthes in the United States from U.S. sourced material. According to research done on the Internet, grade 316 stainless steel is vacuum melted to achieve the extremely high levels of purity and cleanliness required for surgical implants. Designed for use in corrosive environments, this grade of stainless steel has been used in applications ranging from chemical/industrial to medical devices. See www.americantube.com, “Alloy Selections”, and www.alloywire.com, “Products”.
During manufacturing operations in the United States the machine that makes the blanks is set to size and head specifications of the finished screws. Blanks are cut hundreds at a time. However, no threading, de-burring, polishing or finishing operations are performed in this country. The blanks are kept in inventory in lots of 100s or 1000s until finished screws are needed. The numbering logic for the blanks in inventory and in transit consists of the finished part number followed by “.999”.
When finished screws are needed, the blanks are exported to Switzerland for finishing operations involving several pieces of equipment which clean the blanks, cut the threads and finish the heads. Once an individual screw is complete it is polished, cleaned and packaged, one screw per bag. The screws are not sterilized. When the lot is approved by quality inspection the finished items are returned to the United States. At the time of importation into this country the screws are considered finished goods and are lot number and U.S. Food and Drug Administration (“FDA”) controlled until final sale.
The samples provided are of the 4.5 mm cortex screw (product no. 214.014) and its blank (product no. 214.014.999), and the 4.0 mm cancellous bone screw (product no. 206.010) and its blank (product no. 206.010.999). According to the information provided, the blanks cannot be processed to create anything other than the finished screw with defined thread and dimensions.
ISSUE:
What is the correct classification of the U.S. manufactured screw blanks?
What is the country of origin of the finished screws?
LAW AND ANALYSIS:
Classification of Screw Blanks
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
The HTSUS provisions under consideration are as follows:
7318 Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers (including spring washers) and similar articles, of iron or steel:
* * *
Threaded articles:
7318.15 Other screws and bolts, whether or not with their nuts or washers:
* * *
Other:
7318.15.60 Having shanks or threads with a diameter of less than 6mm …..
9021 Orthopedic appliances, including crutches, surgical belts and trusses; … ; hearing aids and other appliances which are worn or carried, or implanted in the body, to compensate for a defect or disability; parts and accessories thereof:
9021.10.00 Orthopedic and fracture appliances, and parts and accessories thereof …..
9021.10.0050 Bone plates, screws and nails, and other internal fixation devices or appliances …..
Note 1(h) to Section XV excludes instruments and apparatus of Section XVIII from Section XV. Chapter 73 is in Section XV and Chapter 90 is in Section XVIII of the tariff. Consequently, if the blanks are provided for in Chapter 90 then they are not classifiable in chapter 73.
Note 1(f) to Chapter 90 excludes parts of general use, as defined in note 2 to Section XV, of base metal (section XV) from Chapter 90. Note 2 to Section XV defines “parts of general use” as, among other things, “articles of heading … 7318 and similar articles of other base metals.”
Note 2 to Chapter 90 provides, in relevant part:
Subject to note 1 above, parts and accessories for machines, apparatus, instruments or articles of this chapter are to be classified according to the following rules:
* * *
(b) Other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus … are to be classified with the machines, instruments or apparatus of that kind[.]
As an initial matter, we address the treatment of “blanks” by the HTSUS. GRI 2(a) provides, in relevant part:
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.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the HTSUS. While not legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80. The ENs to GRI 2(a) provide, in pertinent part:
(II) The provisions of this Rule also apply to blanks unless these are specified in a particular heading. The term “blank” means an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into the finished article or part (e.g., bottle preforms of plastics being intermediate products having tubular shape, with one closed end and one open end threaded to secure a screw type closure, the portion below the threaded end being intended to be expanded to a desired size and shape).
Semi manufactures not yet having the essential shape of the finished articles (such as is generally the case with bars, discs, tubes, etc.) are not regarded as “blanks”.
The screw blanks, although “not ready for direct use, hav[e] the approximate shape or outline of the finished article or part, and . . . can only be used, other than in exceptional cases, for completion into the finished article or part.” Applying the provisions of GRI 2(a) to the articles at issue, we find that the screw blanks that are exported from the United States must be treated as finished screws for classification purposes.
You claim that the screws are classified under heading 9021, HTSUS, as parts of orthopedic appliances, by application of Note 2(b) to Chapter 90. However, Note 2 is subject to the provisions of Note 1 to Chapter 90. In particular, note 1(f) excludes parts of general use, such as articles of heading 7318 (screws, among other things) from being classified in Chapter 90.
CBP has previously considered the nature of screws classifiable in heading 9021, HTSUS. See New York Ruling Letter (“NY”) I82642 (June 20, 2002), regarding sterile, bioresorbable interference screws used in anterior cruciate ligament (“ACL”) reconstruction. See also NY R03768, dated May 10, 2006, in which classification of titanium screws in heading 9021, HTSUS, turned on whether the screws were identifiable as parts of external midface distractors. In this instance, the screws at issue are not identifiable as parts of orthopedic appliances. We note that screws of the same dimension and constituent material as the screws at issue are considered to be medical devices by the FDA. However, CBP need not consider other agency’s regulations in defining tariff terms. Sabritas S.A. de C.V. v. United States, 998 F. Supp. 1123 (CIT 1998). We note further that the screws at issue are made of a grade of stainless steel (316 L) that is suitable for medical use but also that 316L stainless steel is also used in chemical and industrial applications. Further, we have found no information which indicates that these screws are suitable for use only with orthopedic appliances. Given these circumstances, we find that the screws at issue are parts of general use and do not rise to the level of parts suitable for use solely or principally with orthopedic appliances of heading 9021, HTSUS. Consequently, we find that they are excluded from classification in Chapter 90 by application of Note 1(f) and are classified in heading 7318, HTSUS.
Country of Origin
Section 304 of the 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 United States 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 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 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 CCPA 297, 302, C.A.D. 104 (1940). Part 134, U.S. Customs and Border Protection Regulations (19 C.F.R. §134) implements the country of origin marking requirements and 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 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 [the marking laws and regulations].” For country of origin marking purposes, a substantial transformation of an article occurs when it is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
Under Section 134.32(m), CBP Regulations (19 C.F.R. § 134.32(m)), products of the United States that are exported and returned are excepted from the country of origin marking requirements of 19 U.S.C. § 1304.
In National Hand Tool Corp. v. United States, (“National Hand Tool Corp.”) 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993), the court considered the nature of “substantial transformation”. At issue were sockets and flex handles which were either cold formed or hot forged into their final shape prior to importation from Taiwan, 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 necessarily preclude a finding of a substantial transformation, it noted that such determination must be based on the totality of the evidence. The court then concluded that no substantial change in name, character or use occurred as a result of the processing performed in the U.S. See also Superior Wire v. United States, 867 F.2d 1409 (Fed. Cir. 1989), regarding the origin of wire rod made into wire. CBP has recently discussed the applicability of these and similar court decisions to stainless steel drill bits and other various articles exported from the U.S. for finishing purposes. See Headquarters Ruling Letter (“HQ”) W968396, dated December 21, 2006.
In view of the decision of the Court of International Trade in the National Hand Tool case and its affirmation by the Federal Circuit, we conclude that the processing operations that will be done in Switzerland are finishing operations that will not change the basic nature of the articles at issue. Significantly, the screw blanks shipped to Switzerland are clearly dedicated for use to make the finished screws and cannot be used for any other purpose. Like the hand tool components in National Hand Tool and the stainless steel drill bits in HQ W968386, we find that the screw blanks do not undergo substantial transformation in character or use when they are processed into the finished screws in Switzerland. Rather, the screw blanks and the finished screws represent “different stages of the same product.” In other words, the screw blanks have the very essence of the finished screws and the processing that will be performed in Switzerland does not change the shape, character or predetermined use of the screw blanks.
Based on the information and samples submitted, and in accordance with the above analysis, we find that the screw blanks are not substantially transformed by the processing done in Switzerland; therefore, the country of origin of the finished screws is the United States. In accordance with 19 C.F.R. §134.32(m), the screws are not required to be marked to indicate their country of origin.
HOLDING:
By application of GRI 2(a) and Legal Note 1(f) to Chapter 90, we find that the screw blanks are classified under heading 7318, HTSUS, specifically under subheading 7318.15.60, which provides for, inter alia: “Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers (including spring washers) and similar articles, of iron or steel: Threaded articles: Other screws and bolts, whether or not with their nuts and washers: Other: Having shank or threads with a diameter of less than 6 mm.” For export purposes, the screw blanks are also classifiable under Schedule B number 7318.15.9000.
In accordance with 19 C.F.R. §134.32(m), the finished screws are not required to be marked to indicate their country of origin.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch