MAR-2-05 RR:TC:SM 560303 MLR
Patricia M. Hanson, Esq.
Katten, Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
RE: Country of Origin Marking on surgical and medical
instruments; United States; Germany; handle; function-specific component; substantial transformation
Dear Ms. Hanson:
This is in reference to your letter of February 5,
1997, requesting a ruling on behalf of Allegiance Healthcare
Corp. ("Allegiance"), concerning the country of origin
marking on certain surgical and medical instruments.
Samples of the articles in their unfinished and finished
forms were submitted on June 5, 1997.
FACTS:
It is stated that various types of medical/surgical
instruments, such as a "cottle rasp", "yankauer suction
tube", "joseph periosteotomes", etc., are crafted and
machined in the U.S. from two-piece forgings or two
components. It is stated that one forging/component is
imported from Germany for the handle of the instrument,
while the other forging/component is of U.S. origin which
is for the working or function-specific end of the
instrument.
Some of the imported handles are stated to be solid and
some are hollow. The hollow handles are stated to consist
of two pieces that are welded together prior to importation,
and they bear a seam where they have been welded together.
In the U.S., the seam is ground down and the handle appears
to be made of one piece. Thereafter, the handles are put
into inventory, along with the solid handles, for subsequent
processing and combining with the component for the
functional end of a medical instrument. The handles are
stated to be interchangeable, in that the same handle may be
combined with any one of a number of different function-specific component pieces.
The function-specific component of each instrument is
stated to be completely forged in the U.S. from bar stock,
12 feet in length (or stamped from sheet stock). The bar
stock is cut to length, approximately four to six inches
long. These pieces go through a lathe, by which the pieces
are shaped. The tips of the pieces are then further shaped
by one of two processes: either they are forged or they are
machined and hand-ground. After the function-specific end
of the instrument is finished, the piece is welded to an
imported handle. This is accomplished by heating filler
material and fusing the two parts together. The completed
instrument (function-specific piece and attached handle)
then undergoes blending and grinding with finishing wheels
and belts. The instruments also undergo several other
manufacturing operations, such as a heat treatment for
hardening and passification in a nitric acid solution for
corrosion prevention. Lastly, the instruments are polished,
cleaned, and laser-etched with the proper product code. The
instruments are stated to be sold in the U.S.
ISSUE:
Whether the imported handle components are
substantially transformed in the U.S., such that the
finished surgical/medical instruments are excepted from
country of origin marking.
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 (or its container) 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. 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
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 imported article occurs when it is 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. If such substantial transformation
occurs, then the manufacturer is the "ultimate purchaser" of
the imported article, and the article is excepted from
marking and only the outermost container is required to be
marked. See 19 CFR 134.35. On the other hand, if the
manufacturing or combining process is merely 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. Uniroyal,
Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029
(1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).
In this case it is contended that the component which
has the same name and predetermined use as the finished
instrument is the function-specific component which is of
U.S. origin and that the imported handle component has
neither the same name nor the predetermined use as the
finished medical instrument. It is claimed that the handle
component is merely the forging or base piece of a handle
and has the predetermined use only of a handle, and since
the imported handle forgings are never dedicated to any one
instrument and may be combined with one of a number of
different types of function-specific forgings, they never
possess the essential characteristics of any one instrument.
Furthermore, it is stated that the crafting and
processing operations in the U.S. give the instruments their
actual dimensions and essential characteristics. The
essential characteristics of the instrument are located on
the function-specific end of the instrument, which is stated
to be completely forged (or stamped from sheet stock),
crafted and finished in the U.S.
In National Hand Tool Corp. v. United States, 16 CIT
308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), the court
considered sockets and flex handles which were either cold
formed or hot forged into their final shape prior to
importation, speeder handles which were reshaped by a power
press after importation, and the grip of flex handles which
were knurled in the U.S. The imported articles 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 articles were not substantially
transformed and that 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, it noted that the
determination must be based on the totality of the evidence.
However, no substantial change in name, character or use was
found to have occurred as a result of the processing
performed in the U.S.
In this case, based upon the information and samples
presented, all of the components from which the finished
instruments are made are not imported as in National Hand
Tool, and the processing performed in the U.S. involves more
than just assembly, bending, and finished operations.
Rather, in this case, the "function-specific" component of
the instrument is stated to be crafted out of bar stock
which is lathed and further shaped in the U.S. by being
forged or machined and hand-ground.
In Uniroyal, supra, in analyzing the attachment of a
shoe upper to an outsole, it was determined that the complex
assembly process of making the upper was easily
distinguishable from the minor assembly process of attaching
the sole. 3 CIT at 226. Accordingly, the
importer/processor who attached the sole was not the
ultimate purchaser of the upper. The court stated:
[T]o consider attachments of this kind to be a
substantial transformation' would be to open the door
wide to frustration of the entire purpose of the
marking statute. Thus in the present case it would be
misleading to allow the public to believe that a shoe
is made in the United States when the entire upper -
which is the very essence of the completed shoe - is
made in Indonesia and the only step in the
manufacturing process performed in the United States is
the attachment of an outsole. Id. at 224.
Accordingly, pursuant to Uniroyal, it is our opinion
that the crafting of the function-specific portion of the
instrument is more complex than the assembly of the handle
to the function-specific portion. While complex operations
may have also been performed abroad to make the handle, it
is our opinion that the most complex operations are
performed in the U.S. especially when the additional
assembly and finishing operations are considered.
Additionally, the handle's name, character, and use are
changed in the U.S. when finished and assembled into a
specific instrument because it is possible to use the same
handle for various instruments. Accordingly, we find that
the finished instruments are products of the U.S. and no
marking under 19 U.S.C. 1304 will be required on the
finished surgical instruments. However, we suggest that you
contact the Federal Trade Commission regarding the use of
U.S. origin claims.
HOLDING:
Based upon the information provided, we find that the
imported handles undergo a substantial transformation in the
U.S., and the handle's name, character, and use are changed
in the U.S. as a result of the operations performed in the
U.S. to make the finished assembled instrument.
Accordingly, no marking under 19 U.S.C. 1304 will be
required on the finished surgical instruments. However, the
Federal Trade Commission should be contacted regarding the
use of U.S. origin claims.
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