MAR-2-05 RR:TC:SM 560512 MLR
Lawrence R. Pilon, Esq.
Hodes & Pilon
33 North Dearborn
Suite 2203
Chicago, IL 60602-3109
RE: Country of Origin Marking of hydraulic tie rod cylinder
components; substantial transformation
Dear Mr. Pilon:
This is in reference to your letter of June 11, 1997,
requesting a ruling on behalf of Energy Manufacturing
Company ("Energy"), concerning the country of origin marking
on certain hydraulic tie rod cylinders. A diagram and
program literature were submitted with your request.
FACTS:
It is stated that four machined cast iron components, a
base clevis, piston, rod guide, and rod clevis, will be
imported from China. It is stated that Energy will subject
the components to cleaning and finishing operations and
combine them with U.S. origin components in the manufacture
of completed hydraulic tie rod cylinders. Each tie rod
cylinder consists of 18 parts, four of which are from China.
Five different tie rods cylinders will be built ranging from
two to four inches in diameter for use in heavy machinery.
It is stated that Energy will import the Chinese
components only for use in manufacturing tie rod cylinders,
and that they will not be sold independently as spare or
replacement parts.
ISSUE:
Whether the imported components are substantially
transformed in the U.S., so that Energy is the ultimate
purchaser thereof under 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 U.S. in manufacture, which results in an article
having a name, character, or use differing from that of the
imported article. If such substantial transformation
occurs, then the manufacturer is the "ultimate purchaser" of
the imported article; such article is excepted from
individual marking and only the outermost container in which
the U.S. manufacturer receives the article is required to be
marked. See 19 CFR 134.35. 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).
The question in this case is whether the combination of
the four foreign components in the U.S. with the other U.S.
components to form hydraulic tie rod cylinders constitutes a
substantial transformation into a new article having a new
name, character or use. In this case, based upon the
information submitted, the tie rod cylinders are comprised
of 18 parts, four of which are from China.
In Headquarters Ruling Letter (HRL) 734566 dated June
25, 1992, Customs considered the manufacture of water pumps
which generally consisted of a casting, bearing, impeller,
hub, seal, gasket, and in certain circumstances a backplate.
Depending on quality and cost, it was stated that various
sources were used and, therefore, all parts could either be
all foreign or domestic, or both. In HRL 734566, it was
determined that a water pump is comprised of four essential
components, the casting, bearing, impeller and hub, and in
determining the origin of the finished water pumps, the
focus was upon these four components. Relying on National
Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd,
989 F.2d 1201 (Fed.Cir. 1993), where the Court of
International Trade held that imported hand tool components
which were used to produce flex sockets, speeder handles and
flex handles were not substantially transformed when further
processed and assembled in the U.S., in HRL 734566 it was
held that none of the essential components of the water
pumps was substantially transformed when assembled in the
U.S.
In HRL 734566, Customs also reexamined and revoked HRL
732940, dated July 5, 1990, which also considered the
assembly of a water pump. The rationale for revoking HRL
732940 was because, in one instance, a Taiwanese-origin
casting was used to produce the water pump, which remained
visible after assembly.
In this case, as noted from the diagram and product
literature, the hydraulic tie rod cylinders consist of a
foreign piston that moves in a closed U.S.-origin cylinder.
The piston is attached to a U.S.-origin rod that extends
from one end of the cylinder to provide the mechanical
output. Accordingly, in this case, it is our opinion that
the most important components are the foreign piston and
domestic cylinder. Unlike HRL 734566 where the foreign
casting remained visible after assembly, the piston in this
case will not be visible after it is assembled into a
finished tie rod cylinder. Furthermore, the tie rod which
is of U.S. origin is important in allowing the piston to
transmit motion. Additionally, the U.S. origin rings that
fit inside the piston provide a seal to prevent leakage. We
also note that the imported clevis may be used in articles
other than tie rod cylinders. Therefore, it is our opinion
that since the finished tie rod cylinder is largely
comprised of U.S. origin components, one of the most
important components is of U.S. origin, and the tie rod
cylinder is assembled in the U.S., the foreign components
will undergo a substantial transformation in the U.S. into
an article with a different name, character, and use, such
that the finished hydraulic tie rod cylinders will not be
subject to the marking requirements of 19 U.S.C. 1304.
HOLDING:
Based upon the information provided, it is our opinion
that the imported components will undergo a substantial
transformation in the U.S., as the finished tie rod cylinder
is mainly comprised of U.S. origin components, one of the
most important components is of U.S. origin, and the tie rod
cylinder is assembled in the U.S. Therefore, the finished
hydraulic tie rod cylinders will not be subject to the
marking requirements of 19 U.S.C. 1304. However, the
Federal Trade Commission should be contacted regarding the
use of any U.S. origin claims.
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