MAR-2-05 RR:CR:SM 561141 MLR
Stuart E. Benson, Esq.
Farkas & Manelli, PLLC
2000 M Street, N.W.
7th Floor
Washington, D.C. 20036-3307
RE: U.S. Government Procurement; Final Determination; Country
of origin of Surgical Instruments; forging; substantial
transformation; Title III, Trade Agreements Act of 1979
(19 U.S.C. 2511); 19 CFR 177.21
Dear Mr. Benson:
This is in reference to your letter of September 9, 1998,
requesting a final determination under Subpart B of Part 177,
Customs Regulations 19 CFR 177.21 et seq.). Under these
regulations, which implement Title III of the Trade
Agreements Act of 1979, as amended (19 U.S.C. 2411 et seq.),
the Customs Service issues country of origin advisory rulings
and final determinations on whether an article is or would be
a product of a designated foreign country or instrumentality
for the purpose of granting waivers of certain "Buy American"
restrictions in U.S. law or practice for products offered for
sale to the U.S. Government. Samples were submitted with
your request.
This final determination concerns the country of origin
of certain surgical instruments made by Aesculap AG
(hereinafter "AAG") in Germany and imported by Aesculap, Inc.
(hereinafter "AIC"), a U.S. company, and which AIC supplies
under a Federal Supply Schedule contract with the Department
of Veterans Affairs. Accordingly, AIC is a party-at-interest
within the meaning of 19 CFR 177.22(d)(1), and is entitled to
request this final determination.
FACTS:
AIC requests this final determination for the prospective
importation of certain hand-held surgical instruments. The
instruments are forged at AAG's facility in Germany
from stainless steel made in Germany. Strips of steel are
sheared off in appropriate sizes and
heated in a blast furnace. They are then forged, which
entails hot-stamping or pressing the steel over a mold. The
forged parts are annealed, which entails heating and then
cooling slowly to prevent brittleness. Excess metal
(flashing) is then removed by stamping. The German forgings
are then shipped to Malaysia.
In Malaysia, for parts requiring teeth, the jaw parts are
milled. For curved instruments, the parts are shaped. For
instruments consisting of one piece, such as blade handles,
the parts are machined. For instruments with two pieces
(such as scissors or forceps), ratchets are milled and shanks
are shaped; male box locks are milled; female box locks are
broached and filed; female box locks are cold-stretched and
filed; male box locks are fitted into place; the two parts
are pressed together, adjusted and aligned; holes for the
pins are drilled, and the pins are press-fitted and finished
flat and smooth with the boxes. The instruments then undergo
a quality-assurance check for compliance with dimensions and
material integrity. The instruments are then tempered in a
vacuum furnace, adjusted and aligned (two piece instruments
only) and polished.
Most of the instruments are then shipped to Germany for
quality assurance checks of their dimensions, material
integrity, function and uniform finish. They then undergo
marking, packaging, and labeling before shipment to the U.S.
Some instruments undergo final quality assurance, marking,
packaging and labeling in Malaysia.
It is stated that some forgings are used by AAG to make
just one type of instrument. However, some parts are used to
make a limited number of forms of a type of instrument. For
example, one particular forging can be used to produce four
different types of delicate tissue forceps that are five
inches in length: (1) Semken delicate forceps without teeth,
(2) Semken delicate forceps with 1x2 teeth, (3) Semken
delicate forceps with 2x3 teeth, and (4) Waugh delicate
forceps with 1x2 teeth. It is stated that "Semken" and
"Waugh" are names of instrument patterns. "Teeth" are placed
at the very tip of the instrument. Instruments with 1x2
teeth have one tooth on one side and two on the other so that
the single tooth fits between the two on the other side.
Instruments with 2x3 teeth have two on one side and three on
the other. Teeth are different from serrations, which are
the lateral grooves found in some instruments from the tip to
the box lock. It is stated that the delicateness and number
of teeth vary according to the specific use in surgery. It
is also stated that some forgings are shortened slightly by
machining, for example to produce 5 1/2 inch forceps and 5
1/4-inch needle holders.
ISSUE:
Whether the surgical instruments are products of Germany
or Malaysia.
LAW AND ANALYSIS:
As prescribed under Title III of the Trade Agreements
Act, the origin of an article not wholly the growth, product,
or manufacture of a single country is to be determined by the
rule of substantial transformation. 19 U.S.C. 2518(4). Such
an article is not a product of a country unless it has been
substantially transformed there into a new and different
article of commerce with a name, character or use different
from that of the article or articles from which it was
transferred.
AIC claims that the surgical instruments are products of
Germany based specifically on National Hand Tool Corp. v.
United States, 3 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed.
Cir. 1993), and Headquarters Ruling Letter (HRL) 558747 dated
January 20, 1995; HRL 559847 dated January 2, 1997; and HRL
560239 dated June 17, 1997.
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 necessarily
preclude a finding of a substantial transformation, it noted
that such determination must be based on the totality of the
evidence. The court then concluded that no substantial
change in name, character or use occurred as a result of the
processing performed in the U.S.
In HRL 559847 January 2, 1997, Customs considered
U.S.-origin stainless steel sheets cut into strips of
suitable width, which were further cut into blanks. The
blanks were then heated and hammer forged. The forgings were
annealed and trimmed, and cold stamped to straighten the
trimmed forgings. The forgings were then shipped to Pakistan
where they underwent milling operations to cut the box,
rachet, and jaw serrations into the forceps; assembled;
ground; filed; heat treated, including tempering and testing
for hardness; acid pickled; polished; chemical cleaned; and
buffed. It was held that inasmuch as the forgings
resembled the shape and size of the completed instruments
upon importation into Pakistan, the operations performed in
Pakistan did not substantially transform the forgings into a
new and different article of Pakistani origin. Accordingly,
the origin of the finished instruments was the U.S. See also
HRL 560441 dated November 18, 1997 (no substantial
transformation when German rough forgings were machined,
assembled, rough polished, heat treated, and cleaned in
Hungary).
Although HRL 558747 dated January 20, 1995, involved the
same type of processes as in this case, the German forgings
in that case were shipped to the U.S. for assembly, cutting,
and scaling down and then to Russia or Hungary (rather than
just to Malaysia alone) for heat treatment , a final
cleaning, and plating. However, it was also held that the
processing in the U.S. did not substantially transform the
surgical instrument forgings and neither did the finishing
processes performed in Russian or Hungary. Therefore, the
surgical instruments were required to be marked as products
of Germany. A similar finding was made in HRL 560239.
We find the processes in this case to be similar to the
ones considered in HRL 559847 and HRL 560441. Accordingly,
pursuant to those rulings and National Hand Tool, we find
that there is no substantial transformation of the forgings
in Malaysia, and the country of origin of the finished
instruments will be Germany. While we also note that some
raw part forgings may be shortened to either make 5 1/2 inch
forceps or 5 1/4-inch needle holders, in National Hand Tool,
the reshaping of the speeder handle was not extensive enough
to result in a substantial transformation. Therefore, in
this situation, too, we find that the country of origin of
the finished surgical instruments will be Germany.
HOLDING:
Based on the facts and samples presented, we find that
the processing in Malaysia does not result in a substantial
transformation of the German forgings. Therefore, the
country of origin of the finished surgical instruments is
Germany.
Notice of this final determination will be given in the
Federal Register as required by 19 CFR 177.29. Any party-at-interest other than the party which requested this final
determination may request, pursuant to 19 CFR 177.31, that
Customs reexamine the matter
anew and issue a new final determination. Any party-at-interest may, within 30 days after publication of the Federal
Register notice referenced above, seek judicial review of
this final determination before the Court of International
Trade.
Sincerely,
Stuart P. Seidel
Assistant Commissioner
Office of Regulations & Rulings