CLA-2 R:C:S 559236 kbr
George O. Shecter, Phd.
ALTOMEC
6925 Canby Avenue
Suite 102
Reseda, CA 91335
RE: Country of origin marking of steel surgical instruments;
substantial transformation; 19 CFR 134.35
Dear Dr. Shecter:
This is in response to your letters of March 6, 1995 and
July 26, 1995, and a meeting held on October 17, 1995, requesting
a ruling on behalf of ALTOMEC, regarding the country of origin
marking of certain steel surgical instruments forged in Germany,
sent to Pakistan for further processing and returned to Germany
for final processing and exported to the U.S. Samples of the
surgical instruments as they appear after processing in each
country were submitted with your request.
FACTS:
You have described the operations involved in producing the
surgical instruments as follows. Forgings or "blanks" of two
blades of one instrument are made in Germany from German
stainless steel. In the meeting held on October 17, 1995, you
stated that the slot, or "box lock" through which one blade of
the instrument is inserted is part of the forging made in
Germany. You also stated that the teeth in the ratchet part of
the handle by the finger holes were cut in Germany. The ratchet
teeth define the increments at which the instrument holder's
grasp can be adjusted. The serrations of the functional end of
the instrument are done in Germany. These serrations must be
made to exactly meet the counterparts on the opposite blade so as
not to tear the flesh. The blades are then sent to Pakistan
where they are hardened, polished and assembled to each other
with screws and pins also made in Germany. The assembled
instrument is returned to Germany where it is tested, marked and
labeled.
ISSUE:
Whether the surgical instruments are substantially
transformed by the assembly process in Pakistan.
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 imported into the U.S. shall be marked
in a conspicuous place as legibly, indelibly, and permanently as
the nature of the article 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 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. For country of origin marking purposes, a
substantial transformation of an article occurs when it is used
in manufacture, which results in an article having a name,
character, or use differing from that of the article before the
processing. See HQ 558747 (January 20, 1995).
In C.S.D. 90-101 (June 6, 1990), a case involving surgical
scissors and other surgical instruments, Customs ruled that the
milling and the intricate cutting of forged blanks that create
the ratchet, teeth, inside rings, and box lock on surgical
instruments were extensive operations that "give the surgical
instruments their actual dimensions and essential characteristics
such as the capacities to grip and close" and that these
operations coupled with heat treating and polishing gave the
surgical instruments their basic character and resulted in a
substantial transformation.
In contrast, in Headquarters Ruling Letter (HRL) 733565
(September 11, 1990), Customs ruled that unfinished household
scissors exported to Pakistan for further processing including
grinding, polishing, nickel plating, heat treating, and assembly
did not constitute a substantial transformation. It was
determined that these processes were nothing more than finishing
operations which did not alter the basic character of the shears.
In HRL 732844 (February 12, 1990), Customs ruled that U.S.-made forgings not machined to their actual dimensions and which
lacked the capacities to grip, close, lock in place, and to be
adjusted, were substantially transformed into surgical
instruments by extensive machining, bending, cutting, riveting,
assembly, and polishing operations performed in Pakistan. It was
noted that these operations gave the surgical instruments their
basic characteristics. In HRL 734904 (April 30, 1993), Customs
considered strip stainless steel forged in Germany and exported
to Pakistan, where the forgings were milled, machined, or forged.
The parts were then assembled into surgical instruments, riveted,
adjusted, heat treated, annealed, polished, passivated, stamped
or marked, ultrasonically cleansed, and packaged. It was
determined that these operations performed in Pakistan
constituted a substantial transformation, so that the country of
origin was Pakistan.
In HRL 553197 (February 11, 1985), however, steel forgings
were machined in the U.S., mainly consisting of deburring,
swagging, and broaching. These articles were then exported to
Pakistan, where they were rough polished, hand shaped and curved,
subjected to a heat treatment, and final polished. In that case,
it was held that because the key machining operations occurred in
the U.S., and the processes in Pakistan were finishing
operations, the instruments would be exempt from individual
marking pursuant to 19 CFR 134.32(m).
Finally, in HRL 734835 (February 3, 1993), shear blade
castings from Taiwan were imported into the U.S., where a hole
was further drilled; the rough surface from the casting was
ground off; a cutting edge was made; various polishing operations
were performed which resulted in a rough finish; the blades were
racked and nickel plated by moving the blades through six
consecutive liquid solutions; the blade edges and points on the
blades were ground and sharpened; the rivet was inserted; the
finger and thumb pieces were assembled; the scissors were buffed;
a process called "Japanning" was performed which consisted of
dipping, racking, and baking; and lastly, the scissors were
tested and oiled. It was held that the imported castings were
substantially transformed in the U.S. as a result of the further
processing in the U.S., and therefore became a product of the
U.S.
In a recent ruling, HQ 558747 (January 20, 1995), Customs
cited the court's decision in National Hand Tool Corp. v. United
States, Slip Op. 92-61 (CIT April 27, 1992), aff'd, 92-1407 (CAFC
February 3, 1993), as establishing the criteria for determining
whether there has been a substantial transformation.
Specifically, Customs stated that the criteria set forth in
National Hand Tool, to be applied "based on the totality of the
evidence," include:
[1] whether the tool forging has the same name as the
finished tool,
[2] whether the tool forging has a predetermined use, and
[3] whether the tool forging has the essential character of
the finished tool.
In National Hand Tool, sockets and flex handles were either
cold formed or hot forged into their final shape, speeder handles
were reshaped by a power press after importation, and the grip of
the flex handles were knurled in the U.S. The imported parts
were then 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 determined that the
imported components were not substantially transformed by the
strengthening, cleaning, and assembly performed in the U.S.;
therefore, they remained products of Taiwan. In making its
determination, the court focused on the fact that the components
had been cold-formed or hot-forged "into their final shape before
importation", and that "the form of the components remained the
same" after the assembly and heat-treatment processes performed
in the U.S. Although the court stated that a predetermined use
would not preclude the finding of a substantial transformation,
the determination must be based on the totality of the evidence
and, therefore, no substantial change in name, character or use
was found. Slip. Op. 92-61, at 7, 8.
In a recent ruling discussing both C.S.D. 90-101 and
National Hand Tool, Customs found that after the surgical
instrument forgings were exported from Germany, the additional
work of assembling the surgical instrument, cutting the ratchet
teeth and the scaling down operations were not extensive enough
operations to effect a substantial transformation, pursuant to
National Hand Tool. See HRL 558747 (January 20, 1995).
In regard to the facts of this case, we find that ALTOMEC's
surgical instruments are a product of Germany. Since the
forgings are made in Germany, the box lock is part of the
original forging made in Germany, and the cutting of the ratchet
teeth and serrations is done in Germany, we find that the final
shape and essential characteristics of the instruments are
imparted by the operations performed in Germany. The hardening,
polishing and assembly of the two pieces in Pakistan does not
effect a substantial transformation under either C.S.D. 90-101 or
National Hand Tool. Therefore, the German country of origin must
be marked on the finished surgical instruments.
HOLDING:
Based upon the information provided, we find that for
purposes of 19 U.S.C. 1304, the processing in Pakistan of the
surgical instrument forgings imported from Germany in the manner
set forth above does not constitute a substantial transformation;
therefore, the finished surgical instruments are products of
Germany.
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
Tariff Classification Appeals Division