MAR 2-05 CO:R:C:V 735453 AT
Robert T. Keyser, Esq.
International Law Offices
1931 N Street, Suite 300
Sacramento, California 95814-4220
RE: Country of origin marking requirements for imported ball
bearings further processed in the U.S.; substantial
transformation; ultimate purchaser; 19 CFR 134.35
Dear Mr. Keyser:
This is in response to your letter dated October 27, 1993,
on behalf of Perfect Fit Industries, Inc. ("PFI"), concerning the
country of origin marking requirements for radial ball bearings
imported from China that are to be further processed in the U.S.
into double shielded ball bearings. Samples of the imported ball
bearings and finished double shielded bearings were submitted
with your letter. We regret the delay in responding.
You state that PFI intends to import radial bearings which
are made in China, into the United States. Once imported, PFI
further processes the bearings into double shielded ball
bearings. The U.S. processing consists of quality checking the
open ball bearing, cleaning the bearing with a solvent, adding
ball bearing grease and a rust inhibitor to the bearing and
encasing the radial ball bearing with two shields (one pair)
forming the finished double shielded ball bearing. You also
state that the approximate cost of the imported bearings compared
to the total cost of a completed double shielded ball bearing
ranges between 55 to 65 percent depending on the size of the
An examination of the samples indicates that the imported
radial ball bearings are substantially deep grooved radial
bearings. They consist of an assembly of one outer ring (race),
an inner ring, several polished steel balls (which you state are
of U.S. origin), and a steel cage or retainer. In China, all of
the parts have been fully machined, heat treated, ground,
polished, honed, the balls and rings have been matched for size
and tolerance levels, and the entire article is lightly
lubricated with oil. A slot is cut into each side of the
bearings in China for insertion of the metal shields. The
finished double shielded ball bearing has the same
characteristics as the imported bearing except that a metal
shield is pressed into each side of the bearing. The function of
the shields is to keep dirt out of the bearing.
You contend that the imported bearings are substantially
transformed as a result of the U.S. processing in that the
bearings are unusable in their imported condition. Only after
the shields have been inserted into the bearing can the bearing
function as a double shielded bearing. Without the shields, the
imported bearing cannot be commercially used. Thus, you assert
that the imported bearings are excepted from being marked with
their country of origin "China". You have also inquired as to
whether the imported bearings which are used in the manufacture
of double shielded bearings in the U.S. are required to be marked
if they are later to be exported to foreign countries.
What are the country of origin marking requirements for
imported bearings which are to be used in the manufacture of
finished double shielded bearings in the U.S. in the manner
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).
The country of origin marking requirements for the imported
bearings that are to be further processed by PFI in the U.S.
depends upon whether PFI is the ultimate purchaser of the
imported article. The "ultimate purchaser" is defined generally as the last
person in the U.S. who will receive the article in the form in
which it was imported. 19 CFR 134.1(d). If an imported article
will be used in domestic manufacture, the manufacturer may be the
"ultimate purchaser" if he or she subjects the imported article
to a process which results in a substantial transformation of the
article. However, if the manufacturing process is a minor one
which leaves the identity of the imported article intact, the
consumer or user of the article, who obtains the article after
the processing, will be regarded as the "ultimate purchaser." 19
CFR 134.1(d)(1) and (2).
Substantial Transformation and Domestic Assembly Operations
For country of origin marking purposes, a substantial
transformation occurs when an article loses its identity and
becomes a new article having a new name, character or use. United
States v. Gibson-Thomsen Co., 27 CCPA 267 (1940); National Juice
Products Association v. United States, 10 CIT 48. Under this
principle, the manufacturer or processor in the U.S. who converts
or combines the imported article into a different article will be
considered the "ultimate purchaser" of the imported article, and
the article shall be excepted from marking. However, the
outermost container of the imported article must be marked. 19
CFR 134.35. Whether a substantial transformation occurs is
determined on a case-by-case basis.
In determining whether the combining of parts or materials
constitutes a substantial transformation, the issue is the extent
of operations performed and whether the parts lose their identity
and become an integral part of the new article. Belcrest Linen v.
United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed.
Cir. 105, 741 F.2d 1368 (1984). 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.'s 80-111, 89-110, 89-129, 90-51.
The issue involved in this case is whether the imported
bearing which is further processed and combined with domestic
metal shields in the U.S. to form a completed double shielded
bearing is substantially transformed into a new article having a
new name, character or use.
You contend that the imported bearings are substantially
transformed by PFI as a result of the U.S. processing, making PFI
the ultimate purchaser. Therefore, the imported bearings should
be excepted from marking provided the outermost container which
reaches the ultimate purchaser is marked with the country of
origin "China. We disagree.
In National Hand Tool Corp., v. United States, Slip Op. 92-
61 (April 27, 1992), aff'd, 989 F.2d 1201 (1993), 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. One of the factors considered by the
court in reaching its conclusion was whether the use of the
imported components changed as a result of the processing and
assembling operations performed in the U.S. In finding that the
use of the imported components did not change, the court stated
that the use of the imported articles was predetermined at the
time of importation; each component was intended to be
incorporated in a particular finished mechanic's hand tool.
Although the court recognized that only one predetermined use of
imported articles does not preclude the finding of substantial
transformation (See, Torrington Co., v. United States, 764 F.2d.
1563 (1985)), it went on to say that the determination of
substantial transformation must be based on the totality of the
Similarly, based on the totality of the evidence in this
case, we find that the U.S. operations do not substantially
transform the imported bearings.
Arguably, there may be a change in the name of the imported
bearing after the U.S. processing is performed, in that it is a
radial bearing before, and double shielded bearing after the
processing. However, a change in the name of the product is the
weakest evidence of a substantial transformation. See, Uniroyal,
Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd,
702 F.2d. 1022 (Fed. Cir. 1983). Also, the fact remains that
both the imported and completed bearings are still referred to as
bearings, although the completed bearing is specifically referred
to as a double shielded bearing.
What is critical in ascertaining whether a substantial
transformation has occurred is whether, based on the totality of
the evidence, there has been a change in the character or use of
the imported article after the U.S. processing.
A review of the samples of the imported bearings and the
completed double shielded bearings indicates that the imported
bearing is an essentially finished article. No further
processing needs to be performed to the individual bearing except
finishing operations such as quality checking, cleaning, and
adding bearing grease and rust inhibitor. The process of
inserting the two metal shields into the imported bearings is a
very simple one which involves merely pressing the shields in.
In fact, the requisite grooves in which the shields are inserted
have already been pre-machined into the imported bearings. Like
the hand tool components in National Hand Tool, the use of the
imported bearings is predetermined at the time of importation.
Each bearing is intended to be inserted with metal shields to
make a completed double shielded bearing. This is supported by
the fact that the requisite grooves for inserting the metal
shields have been pre-machined into the imported bearing to ease
the insertion process. Also, the use of the imported bearing
does not change as a result of the insertion of the metal
shields. The primary use of the bearing is to reduce friction,
which both the imported bearing as well as the double shielded
bearing can perform. The only feature the metal shields adds to
the bearing is the ability to keep dirt out. Also, we have been
advised by the National Import Specialist, Glass & Metals Branch,
New York Seaport, that the imported bearings are representatives
of the most popular bearing "family" imported into the U.S. - the
6000 series deep groove radial bearing. This bearing group is as
commonly sold without shields as it is with shields.
The imported bearings do not change in character as a result
of the U.S. processing. After being assembled with the metal
shields, the bearings retain their original shape and form.
There is no change in the microstructure or chemical composition
after assembly. See, Ferrostaal Metals Corp., v. United States,
11 CIT 470, 664 F.Supp. 535 (1987). In addition, the imported
bearing is not an insignificant component, but is the essential
component, representing approximately 55 to 65 percent of the
total cost to manufacture the completed product.
Accordingly, the imported radial bearings are not
substantially transformed when they are used to produce completed
double shielded bearings. Therefore, PFI is not the ultimate
purchaser of the imported bearings. Rather, the ultimate
purchaser is the person(s) who purchases the completed double
shielded bearings in the U.S., and the imported bearings must be
conspicuously, legibly and permanently marked to indicate the
country of origin "China" to such person(s).
In the alternative, the importer may seek approval of local
Customs officials for a repacking operation conducted under
Customs supervision as provided under 19 CFR 134.34. Section
134.34, Customs Regulations (19 CFR 134.34), provides that an
exception may be authorized in the discretion of the district
director under 19 CFR 134.32(d) for imported articles which are
to be repacked after release from Customs custody under the
following conditions: (1) The containers in which the articles
are repacked will indicate the origin of the articles to an
ultimate purchaser in the U.S.; and (2) The importer arranges for
supervision of the marking of the containers by Customs officers
at the importer's expense or secures such verification, as may be
necessary by certification and the submission of a sample or
otherwise, of the marking prior to the liquidation of the entry.
If approval is granted by the district director under 19 CFR
134.34, it would be acceptable to mark the finished article (or
its container) with a single, centrally-located, country of
origin marking that denotes the foreign bearing as well as the
We note that the marking requirements set forth in 19 U.S.C.
1304 and 19 CFR Part 134 do not apply to articles which are to be
exported from the U.S. to another foreign country, but only apply
to foreign articles imported into the U.S. Therefore, the
marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134 are
not applicable to the imported bearings which are to be processed
in the U.S. and later exported.
Imported radial bearings which are used by PFI to
manufacture double shielded radial bearings in the U.S. in the
manner described above, are not substantially transformed as a
result of the U.S. operations. Thus, PFI is not the ultimate
purchaser of the imported bearings and the bearings must be
individually marked with their country of origin "China", unless
the district director at the port of entry approves marking after
importation pursuant to 19 CFR 134.34.
John Durant, Director
Commercial Rulings Division