MAR-2 RR:CR:SM 561297 KSG
Annette Stevens
Imp/Exp Trans Manager
Century Arms Inc.
P.O. Box 714
5 Lemnah Drive
St. Albans, Vermont 05478
RE: Country of origin marking of rifles; substantial transformation;
19 CFR 134.35(a)
Dear Ms. Stevens:
This is in response to your letter dated February 24, 1999, requesting a country of origin marking ruling regarding imported raw castings. Supplemental information was provided in letters dated March 9, and April 15, 1999.
FACTS:
Century Arms Inc. intends to import raw castings from Spain and process them into “receivers” and ultimately, into rifles in the U.S. The U.S. processing of the raw castings into receivers includes machining, heat treatment, drilling four holes, sandblasting, dipping the casting into a hot caustic solution where it turns black (a chemical treatment known as “bluing”), stamping, and final inspection. The receiver is then ready to be assembled into a rifle. You state that the raw castings cost $28 each and the costs associated with the machining and labor performed in the U.S. to make the receivers is $35.
The U.S. assembly of the rifles using the receiver involves a total of 47 parts. You state that the assembly is done by highly trained machinists who must be capable of very precise work (the dimensions must be accurate to .003 of an inch).
You ask that we address whether the processing of the imported raw castings into receivers in the U.S. results in a substantial transformation and, secondly, whether the processing of the raw castings into receivers in the U.S. coupled with the subsequent assembly of the receivers with other components to create finished rifles results in a substantial transformation. The first issue presumably relates to situations in which receivers are not made into completed rifles in the U.S.
ISSUES:
Whether the imported raw castings are substantially transformed when they are made into receivers in the U.S.
Whether the raw castings are substantially transformed when they are assembled into completed rifles in the U.S.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), as amended, 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 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.
Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements of 19 U.S.C. 1304. Pursuant to
19 CFR 134.35(a), articles other than goods of a NAFTA country 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 decision in the case of U.S. v. Gibson-Thomsen Co., Inc., 27 CCPA 269 (1940). Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article will be considered the “ultimate purchaser” of the imported article and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with this part.
If the manufacturing or combining process is 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. See Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (CIT 1982). 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. 80-111, C.S.D. 85-25, and C.S.D. 90-97.
The court noted in Uniroyal that the imported article, an upper, in its condition as imported, was a complete shoe except for the absence of an outsole that had “already attained its ultimate shape, form and size” and was “the very essence of the completed shoe.” The other factors considered by the court included the time involved in the combining process, the significantly less costly nature of the combining process and that five highly skilled operations were involved in making the upper while only one highly skilled operation was necessary to attach the upper and the outsole.
The first issue is whether the raw castings processed in the U.S. into receivers are substantially transformed. In Superior Wire v. U.S., 867 F.2d 1409 (Fed Cir. 1989), the court held that wire rod made into wire in Canada was not substantially transformed because there was no significant change in use or character. The court noted that the strength characteristic of the wire was “metallurgically predetermined” and the changes were primarily cosmetic. The court viewed the wire rod and wire as “different stages of the same product.”
In National Hand Tool v. United States, 16 CIT 38 (CIT 1992), aff’d 989 F.2d 1201(Fed Cir. 1993), the court held that hand tool components imported from Taiwan used to make flex sockets, speeder handles, and flex handles were not substantially transformed in the U.S. The components were cold formed or hot-forged into their final shape prior to importation, with the exception of speeder handle bars which were reshaped by a power press after importation, and the grip of flex handles which were knurled in the U.S. In the U.S., the imported articles were 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 focused on the fact that the components had been cold-formed or hot-forged into their final shape before importation and their use was predetermined at the time of importation. The court stated that the fact that there was only one predetermined use of the imported articles did not preclude the finding of substantial transformation but that the finding would be based on a “totality of the evidence.”
In this case, it is our opinion that the raw casting and the receiver represent “different stages of the same product.” Like the wire rod in Superior Wire and the hand tool components in National Hand Tool, we find that the raw casting here undergoes no significant change in character or use when processed into a receiver. The raw casting is the very essence of the receiver and the processing does not change the shape, character or predetermined use of the finished receiver. The raw casting has a dedicated use and merely requires intermediate finishing operations. Based on the above, we find that the raw castings are not substantially transformed when made into receivers in the U.S.
The second issue raised is whether the processing of the raw castings into receivers in the U.S. coupled with the subsequent assembly of the receivers with other components to create finished rifles results in a substantial transformation.
In Headquarters Ruling Letter (“HRL”) 559392, dated February 2, 1996, Customs ruled that components from England, Spain, Belgium, the United States and China are substantially transformed when they are made into barreled actions (completed rifles without rifle stocks) based on the complexity of the assembly operations performed in Belgium. This processing consisted of the assembly of 28 pieces requiring the expertise and precision of trained technicians and finishing operations as well as a chemical treatment (bluing), polishing and engraving.
HRL 558849, dated March 29, 1995, involved an imported pistol made from German and Chinese components and assembled in Germany. The processing in Germany included a chemical treatment known as “bluing”, the assembly of the barrel and magazine, machining and the assembly of more than 40 components and finally, the engraving of the appropriate markings and serial numbers. The assembly was done by trained technicians. Customs held in that case that the Chinese components were substantially transformed into an article of German origin.
In the instant case, we find that the raw castings processed into receivers and assembled with other components into a finished rifle in the U.S. results in a substantial transformation creating a new article with a new name, character and use. The factors considered were the complexity of the assembly operation, the number of parts involved, and the need for trained technicians to meet very exacting specifications.
HOLDING:
The processing of the raw castings into receivers in the U.S. does not result in a substantial transformation and pursuant to 19 CFR 134.35(a), imported raw casting made into finished receivers in the U.S. are not excepted from country of origin marking.
However, when the imported castings are processed into receivers which in turn are assembled with other components to create a finished rifle in the U.S., a substantial transformation results and pursuant to 19 CFR 134.35(a), the imported components (including the raw castings) made into finished rifles in the U.S. are excepted from country of origin marking and only the outermost containers in which Century Arms receives the imported components will be required to be marked.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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