MAR-2-05 CO:R:C:V 732883 NL

Thomas J. Lindmeier, Esq.
Suite 401, Regency One Building
10050 Regency Circle
Omaha, Nebraska 68114

RE: Country of Origin Marking of Cast Iron Pipe Fittings; 19 U.S.C. 1304(c); Substantial Transformation; Machining

Dear Mr. Lindmeier:

This is in response to your letters of November 13, 1989, and January 24, 1990, in which you request a ruling concerning the country of origin marking of certain castings to be imported by your client, Central Plastics Company (Central).


The imported articles are unfinished malleable cast iron components of pipe fittings which as imported have no threading, beveled edges or other features beyond their rough shape. In their condition as imported the components cannot be joined together to function as pipe fittings. From the imported castings Central plans to manufacture pipe fittings known as unions and fittings known as dialectrics. Each three-piece union will be made from three imported castings: a nut; a head; and a tail. Each five-piece dialectric will be made from two imported castings: a nut and a head, to which will be added a brass tail and nylon and rubber gaskets of domestic origin. Samples were submitted. For the imported union components a ruling is requested with respect to castings of between 1/4" and 3" in diameter. For the imported components of the dialectrics the ruling request covers dimensions from 1/2" to 2".

The U.S. manufacturing process undertaken by Central is extensive. To manufacture the union a multi-station dial index boring and threading machine and a lathe are used. The inside diameter of the casting for the tail piece is bored, trued and threaded. Then the outside diameter of the tail piece is trued. The raised portion of the tail (the hub) is rounded and a groove created to accommodate a molded-on nylon gasket. The end of the tail piece is faced to create a flat surface at a right angle to the plane created by the machined inside diameter, and one end is bevelled. The head piece is processed by boring, facing, -2-

threading and tapping. The nut is finished by boring and threading. The head and nut of the dialectric fitting are manufactured from the imported castings in the same manner, using the same machinery.

Central has submitted detailed confidential cost data which demonstrate that the U.S. processing done by Central adds between [216] percent and [910] percent in direct manufacturing costs to the cost of the imported castings, depending upon the size of the fitting. These costs do not include sales commissions, transportation, and research and development engineering costs.

The castings are imported by Central for its own account directly from a sole foreign manufacturer, to be used only in the manufacture of unions and dialectrics. Central represents that the imported castings will not be sold to third parties, and suggests that this undertaking can be enforced because its name will be die engraved on each cast nut.

Central also asks whether the requirements of section 207 of the Trade and Tariff Act of 1984 (19 U.S.C. 1304(c)), apply to these imported castings. Section 207 requires that all imported steel pipes and fittings be marked with their country of origin by means of die stamping, cast-in-mold lettering, etching or engraving. See 19 U.S.C. 1304(c)(1). A claim that marking by the prescribed methods is technically or commercially infeasible has been withdrawn.


Are the imported castings substantially transformed by U.S. processing such that Central is their ultimate purchaser?

Are the imported castings subject to the special marking requirements of 19 U.S.C. 1304(c)?


Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin entering the U.S. shall be marked in a conspicuous manner as legibly, indelibly, and permanently as the nature of the article (or 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 and exceptions of 19 U.S.C. 1304. Section 134.1(d), Customs Regulations, defines "ultimate purchaser" as generally the last person in the U.S. who will receive the article in the form in which it was imported. Section 134.35, Customs Regulations, provides that an article -3-

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 case of U.S. v. Gibson, Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)(1940). The manufacturer who converts or combines the imported article into the different article will be considered the ultimate purchaser of the imported article, and the article shall be excepted from country of origin marking, although its outermost container must be marked.

Section 207 of the Trade and Tariff Act of 1984 (19 U.S.C. 1304(c)), provides that no exception from country of origin marking may be made with respect to pipes and pipe fittings, each of which shall be marked with the English name of the country of origin by means of die stamping, cast-in-mold lettering, etching or engraving. 19 U.S.C. 1304(c)(2) provides that if, because of the nature of the article, it is technically or commercially infeasible to mark by means of one of the four methods specified above, the article may be marked by an equally permanent method of marking such as paint stenciling, or, in the case of small diameter pipe, tube, and fittings, by tagging the containers or bundles. The effect of section 207, therefore, is to prescribe by statute the methods of marking which must be used on imported pipes, tubes and fittings.

In this case, Central's processing of the imported castings to convert them into finished unions and dialectrics is a substantial transformation under the principle of Gibson- Thomsen. The castings are imported in a rough condition, and only after numerous machining operations to achieve shape and dimensional requirements do the castings become finished unions or dialectrics. These machining operations change the fundamental character of the imported articles from castings to finished pipe fittings, enabling them to be used for a different purpose. See, C.S.D. 89-121 (July 25, 1989), 23 Cust. B. & Dec. 38 (significant machining of imported forgings into socket wrenches effects a substantial transformation of the imported articles). In addition, we are satisfied that the processing done by Central is comparable to that addressed in Midwood Industries v. United States, 64 Cust. Ct. 499, C.D. 4026, 313 F. Supp. 951 (1970), where the court found that a substantial transformation had occurred. Finally, we note that the cost of the finished unions and dialectrics significantly exceeds the cost of the imported castings; substantial value is added to the imported articles.

As articles substantially transformed by manufacture in the U.S., pursuant to 19 CFR 134.35 the castings are eligible to be excepted from country of origin marking and Central is their ultimate purchaser. The imported castings are, however, required to be marked on their outermost containers at the time of importation. These articles also would be eligible for -4-

exception from country of origin marking pursuant to 19 U.S.C. 1304(a)(3)(H) and 19 CFR 134.32(h), since Central, the ultimate purchaser, has direct dealings with the foreign producer of the castings and thus necessarily knows their country of origin. This eligibility is, however, subject to the statutory limitations imposed by section 207 of the Trade and Tariff Act of 1984 (19 U.S.C. 1304(c)).

As discussed above, 19 U.S.C. 1304(c) precludes the approval of any exception from country of origin marking for pipe fittings. Even if it is determined that an imported article has been substantially transformed by manufacture or processing in the U.S. such that it is no longer an article of foreign origin, 19 U.S.C. 1304(c) limits the authority of Customs to approve an exception from country of origin marking. Even if otherwise eligible for exception, a subject article must be marked in accordance with those requirements at importation and until it reaches its ultimate purchaser.

The classification of the castings used to make unions and dialectrics will determine whether they are subject to the stringent marking requirements of section 19 U.S.C. 1304(c). See T.D. 86-15, 20 Cust B. & Dec. No. 7 (Feb. 19, 1986) (articles classified under specified provisions are subject to the requirements of 19 U.S.C. 1304(c)). The three-piece castings used to produce unions qualify as "blanks" under General Rule of Interpretation (GRI) 2(a), which states in part that any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. Blanks are considered incomplete or unfinished articles for purposes of GRI 2(a). The castings for unions have the approximate shape or outline of the finished unions, and can only, except in exceptional circumstances, be used for completion into unions, and thus possess the essential characteristics of finished unions. Accordingly, the castings for unions are provided for under subheading 7307.19.9030, Harmonized Tariff Schedule of the United States (HTSUS): pipe fittings of iron or steel, cast fittings, other, other, unions. The rate of duty is 6.2 percent ad valorem. Thus it is our conclusion that the castings used to produce fittings known as unions are pipe fittings within the meaning of 19 U.S.C. 1304(c), and are subject to its marking requirements. These requirements may be satisfied by marking the country of origin as requested in cast-in-mold lettering on the head piece or tail piece of the union casting. We do not construe this section to require, however, that the marking of the country of origin of a pipe or tube product remain on the article after it has reached the ultimate purchaser in the U.S. After processing in the U.S. which substantially transforms the fitting, there is no remaining obligation on the part of the ultimate purchaser to preserve the markings. See, HQ 728693 -5-

(November 5, 1985); HRL 730416 (May 11, 1987).

Our conclusion is different with respect to the two-piece castings which are used to make the dialectrics. Since the brass tail and gaskets are added after importation, the imported castings are only parts of a completed fitting. Since there is no HTSUS provision for parts of fittings, they would be classifiable under HTSUS subheading 7325.99.10, which provides for other cast articles of iron or steel, other, other, of cast iron. The rate of duty is 3.1 percent ad valorem. Articles classified under this subheading are not subject to the special marking requirements of 19 U.S.C. 1304. Accordingly, the requirements of 19 U.S.C. 1304 may be satisfied by tagging or paint stenciling of the castings or, as specified in 19 CFR 134.35, by marking the containers in which they are imported.


1) Pursuant to 19 CFR 134.35 the imported castings are substantially transformed by processing in the U.S. into finished pipe fittings known as unions and dialectrics, and the importer/manufacturer is their ultimate purchaser for country of origin marking.

2) The imported castings for unions are classifiable as pipe fittings under subheading 7307.19.90.30, HTSUS. As such, it is subject to the special marking requirements of 19 U.S.C. 1304(c). For these castings the marking requirement may be satisfied by marking the country of origin in cast-in-mold lettering on either the head piece or tail piece of the unfinished union. The castings for the dialectrics are classifiable under subheading 7325.99.10, HTSUS, a provision for articles of cast iron. Articles so classified are not considered pipe fittings and are not subject to the special marking requirements of 19 U.S.C. 1304(c). These castings may be imported with country of origin marking on their containers, as provided in 19 CFR 134.35.


Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch