OT:RR:CTF:TCM H190655 CKG
Port Director
U.S. Customs and Border Protection
Port of Laredo
P.O. Box 3130 Laredo, TX 78044-3130
Attn: Ray Peña
Supervisory Import Specialist
RE: Request for Internal Advice No. 11/043 on the Country of Origin Marking of Medical Kits
Dear Port Director,
This letter is in response to your request for Internal Advice 11/043, of October 18, 2011, on the country of origin marking of medical kits imported by Medline Industries, Inc. In reaching our decision, we have taken into account additional information provided by Medline during a conference call on December 19, 2011 and in additional submissions dated October 4, November 2 and December 30, 2011.
FACTS:
The instant merchandise consists of various medical kits, imported into the U.S. from Mexico. The kits contain numerous components, which are organized and packaged into sub-kits. The components include items such as needles, scissors, towels, catheters, sponges, scalpels, plastic bowls, forceps, gauzes, etc. The sub-kits group various components together into a single container—for example, a box with scissors of different sizes or a sealed bag with a catheter, needles, and blades. The components are sourced from various countries, including the U.S., Canada, Mexico, China, the Dominican Republic, South Korea, Thailand and Vietnam, are assembled into sub-kits by outside suppliers, and are packaged into a single container—the final medical kit—in Mexico. The components in the sub-kits may have different countries of origin. Upon importation into the U.S., some kits are sold directly to hospitals and some are repacked, with additional components inserted into the finished kit.
The imported kits are marked on the outside container with the names of countries from which the subject merchandise may originate, for example “Products of the U.S., Mexico, China, Taiwan”. The individual components are not marked. Medline notes that the value of the components of U.S. or Mexican origin in the subject kits comprise the majority of the value of the finished kit, such that it considers the components from other countries to be de minimis. Medline thus suggests that “products of the U.S. and Mexico” is an appropriate marking for those kits whose non-NAFTA components constitute less than 7% of the value of the total kit. An approximate cost breakdown of the Medline Open-Heart CDS-4 surgical procedure pack was provided to CBP.
Based on telephone conversations between Medline and CBP, as well as additional submissions from counsel to CBP dated October 4, November 2 and December 30, 2011, Medline in fact does not know the countries of origin of many of the individual components of some or most of the imported medical kits because an outside supplier has declined, for unspecified business reasons, to identify where these components are sourced. Thus, the country of origin of the articles is not readily ascertainable, and Medline claims that they can only be ascertained, if at all, only with the expenditure of considerable time and expense. Finally, during the teleconference held with CBP officials on December 19, 2011, Medline stated that even if their supplier did identify the countries of origin of the kit components, there would be no way to verify the truth or accuracy of those statements.
For this reason, Medline proposes to identify the origin of non- U.S. components by marking the outside container of the medical kits with a list of the source countries in which the components may have originated, such as: “Products of USA, Canada, China, Dominican Republic, Mexico, Thailand, Vietnam.”
ISSUE:
What is the country of origin of the medical kits?
Can the medical kits be marked with the names of the source countries in which the components may have originated, even if the origin of the components is not known?
Is it sufficient to mark the outer container only, or must the individual components or sub-kits also be marked with the country of origin?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires 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 manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. 1304 are set forth in Part 134, CBP Regulations (19 C.F.R. 134). Section 134.1(b), CBP Regulations (19 C.F.R. 134.1(b)), defines "country of origin" as:
[T]he 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 requirements] …
What is the country of origin of the medical kits?
Section 134.1(j), CBP Regulations (19 C.F.R. 134.1(j)), 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), CBP Regulations (19 C.F.R. 134.1(g)), 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, set forth at 19 C.F.R. Part 102.
Section 102.11(a), CBP Regulations (19 C.F.R. 102.11(a)), sets forth the required hierarchy under the NAFTA Marking Rules for determining country of origin for marking purposes. This section states that the country of origin of a good is the country in which:
The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in [section] 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
As the instant kits are neither wholly obtained or produced in a NAFTA territory nor produced exclusively from domestic materials, the country of origin cannot be determined under section 102.11(a)(1) or 102.11(a)(2). Analysis must continue to 19 C.F.R. 102.11(a)(3) to determine the country of origin of the Medline kits under the NAFTA Marking Rules.
Pursuant to 19 C.F.R. 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 set out in §102.20 and satisfies any other applicable requirements of that section.” Section 102.1(e), CBP Regulations (19 C.F.R. 102.1(e)) defines “Foreign material” as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.”
19 C.F.R. 102.17 provides, in relevant part:
A foreign material shall not be considered to have undergone an applicable change in tariff classification specified in [section] 102.20 or [section] 102.21 or to have met any other applicable requirements of those sections merely by reason of one or more of the following:
(c) Simple packing, repacking or retail packaging without more than minor processing;
The foreign components of the instant kits are packaged in Mexico, . ). Even if the goods were to undergo the applicable change in tariff classification in 19 CFR 1012.20, as the goods are subject to simple packing or repacking it would not be a qualifying operation in Mexico under 19 CFR 102.17.Hence, the Medline kits cannot be considered to be products of Mexico pursuant to 19 C.F.R. 102.11(a)(3
As the various items contained in the Medline kits are classified in different headings, put up together to meet a particular need or carry out a specific activity (e.g., vaginal delivery, open heart surgery), the Medline kits would be considered sets pursuant to GRI 3. Therefore, since section 102.11(b) contains an exception for goods classified as sets, it does not apply.
Under 19 C.F.R. 102.11(c), the country of origin of a GRI 3 set or composite good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the set. All of the materials of the set, foreign and domestic, which merit equal consideration, must be considered.
Components which are considered de minimis do not merit equal consideration for determining the essential character of the set. De minimis goods are discussed in 19 CFR 102.13, which states:
Except as otherwise provided in paragraphs (b) and (c) of this section, foreign
materials that do not undergo the applicable change in tariff classification set out in § 102.20 or satisfy the other applicable requirements of that section when incorporated into a good shall be disregarded in determining the country of origin of the good if the value of those materials is no more than 7 percent of the value of the good or 10 percent of the value of a good of Chapter 22, Harmonized System.
Medline states that although the foreign articles of the Medline kits constitute a majority of the components in some kits, the foreign components each constitute less than 7% of the total value of the finished kit, and are thus de minimis. However, the de minimis rules of 19 CFR 102.13 clarify that it is the cumulative value of all foreign materials which must be seven percent or less of the total value of the good, not the value of each individual foreign component of a set. According to the cost breakdown provided for the Open Heart CDS-4 kit, this standard is met—the cumulative cost of the foreign materials is roughly 2%, well below the de minimis threshold. However, Medline notes that the cost breakdown is only an estimate, and that they do not possess the country of origin information of many of their components sourced from outside suppliers. Without this information, we cannot accurately and reliably assess the relative cost of the foreign and domestic articles of the Open Heart CDS-4 or other Medline kits. Without the de minimis information, the set would have to be marked with the country of origin of all of the items meriting equal consideration. See, for example HQ 560372, dated May 8, 1997.
Because we cannot definitively determine whether the foreign materials in the Open Heart CDS-4 or other Medline kits may be disregarded, we do not find the suggested marking “Product of the U.S. and Mexico” to be correct at this time.
Can the medical kits be marked with the names of the source countries in which the components may have originated, even if the origin of the components is not known?
Medline argues that it should be permitted to mark the subject medical kits with the names of the countries in which the non-originating articles may have originated, because it cannot determine the exact country of origin of these articles (except at an economically prohibitive expense), because the supplier of these articles refuses to disclose this information for confidentiality reasons. However, in the instant case, it is unclear that Medline can even verify that the merchandise was sourced from any of the countries listed as the possible countries of origin. Given the facts presented to us, the proposed marking “Products of Canada, China, Dominican Republic, Mexico, Thailand, Vietnam” represents an arbitrary list of countries which may or may not be the country or countries of origin of the subject merchandise. This is not an acceptable marking under 19 U.S.C. 1304.
The reluctance of a supplier to disclose the exact country of origin is not sufficient to warrant an exception to the marking requirements of 19 USC 1304. Nor is the potential expense of applying the correct country of origin marking, which Medline claims would be economically prohibitive. The marking exceptions of Section 134.32, Customs Regulations (19 CFR 134.32), specifically 134.32 (c) and (o) (which exempt articles that cannot be marked either prior to or after importation because the expense would be economically prohibitive), allow only individual articles to be exempted from marking. Even if these exceptions applied, the containers of the imported products must still be marked with an accurate list of the countries of origin of all the components, regardless of expense. See 19 CFR 134.22(a), contents excepted from marking (“When an article is excepted from the marking requirements by subpart D of this part, the outermost container or holder in which the article ordinarily reaches the ultimate purchaser shall be marked to indicate the country of origin of the article whether or not the article is marked to indicate its country of origin.”)
We further note that whether an article may be marked with the phrase "Made in the USA" or similar words denoting U.S. origin is an issue under the authority of the Federal Trade Commission (FTC). Thus, the propriety of any proposed markings indicating that an article is made in the U.S. is to be determined by the FTC Division of Enforcement, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
3. Must the individual components or sub-kits be marked with the country of origin?
With respect to the marking of the individual components, it is stated that the
Medline medical kits will be sold exclusively to hospitals for use during surgical procedures. 19 CFR 134.1(d)) defines an ultimate purchaser as "generally the last person in the U.S. who will receive the article in the form in which it was imported." Accordingly, we find that the hospitals will be the ultimate purchasers of the Medline kits. See e.g., HQ 560266, dated January 17, 1997, and HQ H016800, dated December 10, 2007. Under section 1304(a)(3)(D) (19 C.F.R. 134.32(d)) to the marking statute, an imported article is not required to be marked with its country of origin if the marking of a container of such article will reasonably indicate the origin of such article to the ultimate purchaser.
CBP has ruled in the past that products that are imported for sale to or for use by
medical facilities need not be individually marked as to their country of origin but rather could be marked on the packages or on the outside of the containers in which the products were packed provided the medical facility receives the products in such properly marked packages or containers. See e.g., HQ 560266 and HQ H016800 supra. If the containers of the Medline kits are properly marked, with the origin of the contents, it is sufficient that the ultimate purchasers—the hospitals—will receive the kits in their condition as imported, with only the outer container marked.
HOLDING:
The medical kits cannot be marked “Made in Mexico”
Medline must mark the outer containers of the imported kits with an accurate list of the countries of origin of all the articles. The individual articles may be excepted from individual country of origin marking pursuant to 19 CFR 134.32.
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 CBP officer handling the transaction.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division