MAR 2-05 CO:R:C:V 734785 RSD
Frederick L. Ikenson, Esq.
1621 New Hampshire, N.W.
Washington, D.C. 20009
RE: Country of origin marking requirements for imported metal
castings used in making a fire hydrant; upper barrels;
substantial transformation; false or misleading marking; ultimate
purchaser; U.S. place references; 19 CFR 134.35; 19 CFR
134.36(b); 19 CFR 134.46; HQ 734327; HQ 709965
Dear Mr. Ikenson:
This is in response to your letter dated August 20, 1992, on
behalf of Southland Marketing concerning the country of origin
marking requirements for imported metal castings known as upper
barrels used in making fire hydrants. Attached to your letter
are diagrams of the components of the fire hydrants.
FACTS:
Southland Marketing (Southland) of Little Rock, Arkansas,
imports metal castings, which are made in Brazil, into the United
States through the port of New Orleans, Louisiana. These metal
castings, known as upper barrels, are sold to Southland's
customer, American Valve, which uses them to produce fire
hydrants at its facility in Beaumont, Texas.
American Valve's production process consists of combining
and assembling, with the upper barrel, three brass nozzles, six
O-rings, five gaskets, three iron caps, a bearing housing and
cover, a brass operating nut, a machined and threaded upper rod
and copper sleeve, an iron dome, and 16 bolts and nuts. To this
subassembly, American Valve adds a lower barrel with a machined
and threaded lower rod and seat assembly, consisting of three
machined brass castings, two machined cast iron parts, and a
rubber seal. Finally, the hydrant base, with gaskets, is
attached with bolts, and the completed assembly is painted to
American Valve's customers' specifications. The cost of the
imported upper barrel represents approximately five percent of
the cost to manufacture American Valve's hydrants.
The upper barrels are marked in raised letters on the inside
surface with the name "Brazil", the foundry code and the
production date code. The New Orleans District determined that
the upper barrels were not conspicuously marked with their
country of origin. However, once the district was satisfied that
the American Valve was aware of the origin of the articles, it
did not require any further or alternative country of origin
marking. As a condition of not requiring any additional marking,
the district required a certification from American Valve for
each entry that it had affirmative knowledge of the origin of the
articles. It is our understanding that the containers bearing
the upper barrels are also marked to indicate that their contents
are made in Brazil.
American Valve wants to have the name "Beaumont, Texas" cast
into the outside of the upper barrels when they are produced at
Southland's Brazilian foundry. The name "Beaumont, Texas" will
be visible on the completed fire hydrant produced by American
Valve, and will remain visible after the hydrant is installed
into service. American Valve and Southland claim that this is
the industry standard; all manufacturers of fire hydrants
identify the producer and the location of the production facility
on the outside of the hydrant.
Based on 19 CFR 134.36(b) and 19 CFR 134.46 the New Orleans
District has prohibited the importation of the upper barrels
marked with "Beaumont, Texas" and required that these words be
removed from all the upper barrels that have not yet been
exported from Brazil. Southland has complied with those
instructions, and the upper barrels currently being produced for
American Valve do not carry such markings. Southland seeks a
ruling which would allow them to import the upper barrels into
the United States marked with the name "Beaumont, Texas".
ISSUE:
Can the imported upper barrels which are used to make fire
hydrants in the United States be marked with the name "Beaumont,
Texas" when they are imported into the United States?
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 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. 27
C.C.P.A. 297 at 302; C.A.D. 104 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and the 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. The case of U.S. v. Gibson-Thomsen Co., Inc., 27
C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in
manufacture which results in an article having a name, character
or use differing from that of the constituent article will be
considered substantially transformed and that the manufacturer or
processor will be considered the ultimate purchaser of the
constituent materials. In such circumstances, the imported
article is excepted from marking and only the outermost container
is required to be marked (see section 134.35, Customs
Regulations).
The first matter that must be analyzed is who is the
ultimate purchaser of the imported upper barrels. 19 CFR
134.1(d)(1) states that if an imported article will be used in
manufacture, the manufacturer may be the ultimate purchaser if he
subjects the imported article to a process which results in a
substantial transformation of the article. There is no dispute
that the upper barrels are substantially transformed when they
are used in the manufacture of fire hydrants. The upper barrels
are only one of many components involved in making the fire
hydrants. It appears that the assembly is complex. We note that
the upper barrels account for only about 5 percent of cost of the
finished fire hydrants. Most significantly, in HQ 731307
(February 23, 1990), Customs held that imported castings which
were to used with U.S. components in the manufacture of gate
values, butterfly valves and fire hydrants were excepted from
individual marking pursuant to 19 CFR 134.35. These upper
barrels, which are also castings, are substantially transformed
when they are used to produce fire hydrants. Therefore, in
accordance with 19 CFR 134.35, American Valve is the ultimate
purchaser of the upper barrels.
Because the upper barrel are being substantially transformed
in the U.s. after importation, normally under 19 CFR 134.35, they
would be excepted from marking as long as their outermost
containers which reach the ultimate purchaser were properly
marked. However, American Valve wants to have a U.S. place
reference, "Beaumont, Texas", cast into the upper barrels when
they are imported into the United States. 19 CFR 134.36(b)
provides that an exception from marking shall not apply to any
article or retail container bearing any word letters, names, or
symbols described in section 19 CFR 134.46 or 19 CFR 134.47 (e.g.
geographic references which imply that article was made or
produced in a country other than actual country of origin). 19
CFR 134.46 requires that when the name of any city or locality in
the U.S., other than the name of the city or locality in which
the article was manufactured or produced, appears on an imported
article or its container, there shall appear, legibly, and
permanently, in close proximity to such words, letters or name
and in at least a comparable size, the name of the country of
origin preceded by "Made in," "Product of" or other words of
similar meaning. The purpose of this requirement is to prevent
the possibility of misleading or deceiving the ultimate purchaser
of an article as to the actual origin of the imported good.
Customs had previously held that the presence of a U.S.
reference on an article would trigger application of 19 CFR
134.36(b) and 19 CFR 134.46 even if the article would be
substantially transformed in U.S. prior to its sale.
In HQ 709965, (May 18, 1979), published as C.S.D. 79-412, Customs
ruled that valve bodies made in Canada which were marked
"Cleveland, Ohio, U.S.A." could not be excepted from country of
origin marking even though the ultimate purchaser, the U.S.
company that purchased and used the valve bodies in the
manufacture of automotive pressure relief valves, knew the
country of origin of the valve bodies and would not be misled by
the "Cleveland" marking. The rationale for this determination
was that the "final consumer" of the valves might incorrectly
conclude that the automatic pressure relief valve was made
entirely in the U.S. The ruling stated "because section 19 CFR
134.36(b) is to be strictly construed and the marking on the
valve body is potentially misleading to the final consumer there
should be compliance with the specific marking requirements of 19
CFR 134.46."
Customs has recently determined that this policy pertaining
to 19 CFR 134.36(b) should not be applied automatically to all
imported articles or their containers which bear a non-origin
geographical reference. In HQ 734327 (February 17, 1993), a case
involving sunglasses frames imported with a trademark containing
a U.S. reference, we determined that this policy was
inappropriate in cases where an imported article, bearing an importer's trademark or trade name with a U.S. reference, will be
substantially transformed by the importer in the U.S. In such an
instance, the importer will be the ultimate purchaser, and if
there is sufficient evidence to establish that it knows the
origin of the article then the ultimate purchaser will not be
misled by the trademark or trade name and there is no reason to
require the article to be individually marked.
Moreover, in HQ 734327 we explained that the term "final
consumer" is not found within the framework of 19 U.S.C. 1304 or
its implementing regulations. Rather, 19 CFR 134.36(b) must be
read as referring to words, symbols, etc. which imply to the
ultimate purchaser a country of origin other than the actual
country of origin of an article. In cases in which the ultimate
purchaser is arranging the importation of articles to which his
own trademark is affixed, there is no risk that the ultimate
purchaser will be misled as to actual country of origin of the
imported article. If markings which appear on the substantially
transformed articles are misleading to subsequent purchasers,
there exist other legal remedies which are beyond the scope of 19
U.S.C. 1304.
The same reasoning applies to this case. The marking law,
19 U.S.C. 1304, is intended to ensure that the ultimate purchaser
is informed of the country of origin of the imported article.
Because it is substantially transforming the imported upper
barrels, American Valve is the ultimate purchaser. Therefore,
the question that must be resolved is whether the U.S. reference,
"Beaumont, Texas", would mislead American Valve as to the origin
of the imported merchandise. If American Valve as the ultimate
purchaser knows the country of origin and will not be misled by
the U.S. place reference, then 19 CFR 134.36(b) would not be
applicable and the imported merchandise can be excepted from
individual country of origin marking.
Here, the evidence indicates that American Valve knows that
the country of origin of the upper barrels is Brazil and it will
not be mislead by the U.S. place reference on the upper barrels.
This is evidenced by the fact that in every shipment American
Valve has certified that it is aware that the country of origin
of the merchandise is Brazil and is willing to continue to submit
similar certifications in the future. Furthermore, it is our
understanding that the shipping containers containing the upper
barrels, which reach American Valve, are marked with the country
of origin of upper barrels. Because American Valve is the one
who is requesting that the upper barrels be imported with
"Beaumont, Texas" cast into them, there is no way that they will
be misled by this U.S. place reference.
Because the upper barrels are substantially transformed in
the United States, the concern that the general public might be
misinformed by the reference to "Beaumont, Texas" on the finished
fire hydrant is misplaced and beyond the scope of 19 U.S.C. 1304.
Accordingly, the reference to "Beaumont, Texas" may in these
circumstances appear on the imported upper barrels.
HOLDING:
The imported upper barrels are substantially transformed
when American Valve uses them to make fire hydrants. In
accordance with 19 CFR 134.35, American Valve is the ultimate
purchaser of the upper barrels. Because American Valve is aware
of the country of origin of the upper barrels, and is not being
misled by the U.S. reference, "Beaumont, Texas", 19 CFR 134.36(b)
and 19 CFR 134.46 are not applicable. The upper barrels may be
imported into the United States with "Beaumont, Texas" reference.
They can also be excepted from individual marking provided that
the district director is satisfied that American Valve knows the
country of origin of the imported articles as evidenced by
proper marking of the containers in which the upper barrels are
imported. Customs officers at the port of entry must be
satisfied that these upper barrels will reach the fire hydrant
manufacturer in the original marked containers, and that the
upper barrels will only be used in the manufacture of fire
hydrants as described above and not otherwise sold.
All rulings or the relevant sections of those rulings
applying the prohibition of 19 CFR 134.36(b) to articles imported
bearing the U.S. location of the ultimate purchaser who
substantially transforms the imported article, and which are
inconsistent with this ruling are revoked.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: District Director
New Orleans