OT:RR:CTF:FTM H322967 TJS
Ms. Chandri Navarro
Hogan Lovells U.S., LLP
555 13th Street Northwest
Washington, District of Columbia 20004
Re: Affirmation of NY N319278; Country of Origin of Hypodermic Safety Needles; Substantial Transformation
Dear Ms. Navarro,
This is in response to your request, dated January 10, 2022, on behalf of your client Cardinal Health, Inc. (“Cardinal Health”), for reconsideration of New York Ruling Letter (“NY”) N319278, issued on May 21, 2021. In that ruling, U.S. Customs and Border Protection (“CBP”) determined the country of origin of hypodermic safety needles constructed from component parts of various origins. While CBP also opined on the proper method of marking for the hypodermic safety needles at issue, you specifically request reconsideration of CBP’s country of origin determination. Specifically, CBP found that the country of origin of the hypodermic safety needles was “China, Japan, France or South Korea depending on the country of origin of the stainless steel needles/cannulae.” We have reviewed NY N319278 and determined that it is correct, and for the reasons set forth below we are affirming that ruling.
Within your request for reconsideration, you asked that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), your request for confidentiality is approved. The information contained within the brackets of your request for reconsideration, which was not already publicly disclosed in NY N319278, that was submitted to our office will not be released to the public and will be withheld from published versions of this ruling.
NY N319278 described the hypodermic safety needles as follows:
The products under consideration are hypodermic safety needles individually packaged in a preformed sterile barrel film pocket, sealed closed with a sterile barrier paper lidding. Each hypodermic safety needle consists of four parts: (1) a stainless steel needle (also referred as cannula) – a thin hollow tube with a sharp tip, (2) a plastic hub adapter, (3) a plastic needle safety shield, and (4) a plastic needle sheath (cap).
The stainless steel needles/cannulae are purchased and imported into the United States. They are already cut to length and sharpened when imported and can be of Chinese, Japanese, French or South Korean origin. The plastic hub adapters, plastic needle safety shields and plastic needle sheaths are all manufactured through a molding process in the United States where the plastic pieces are then assembled with the purchased stainless steel needles, packaged, and sterilized.
Furthermore, NY N319278 provides comprehensive descriptions of the various
processing the hypodermic safety needles are subject to, such as the assembly process, the sterile packaging process, and the sterilization process. These processing descriptions state:
Assembly Process:
The plastic molded components (hub, shield, sheath) are assembled with the stainless steel needle/cannula using UV epoxy in an automated sequential assembly process. Each component/raw material is added into the indexing sequence at the proper process step. As the machine indexes and builds the assembly, several stations within the process perform product alignment for quality/design, perform automated dimensional visual inspections utilizing high technology vision systems, and track the quality of individual parts all through the process until they are completed. This creates the needle assembly. The needle assemblies are then staged to await packaging.
Sterile Packaging Process:
The needle assembly is placed in a preformed sterile barrel film pocket, sealed closed with a sterile barrier paper lidding in a continuous automated packaging machine. The individual needles are cut/perforated into groups for placement into unit cartons of a specific count. The cartons containing the packaged assemblies receive an “Instruction For Use,” and the cartons are closed and lot coded. The cartons are then forwarded into an automated corrugated loading system, sealed closed, labelled, lot coded and then palletized for transport to sterilization.
Sterilization Process:
The corrugated cases are placed in metal carriers to transport through the irradiation process on a timed indexing sequence. The metal carriers progress through the irradiator maze, allowing products inside the carrier to be exposed to the appropriate dose of gamma irradiation. The metal carriers then exit the irradiator and are repalletized, shrink wrapped and staged, awaiting quality release, and distribution for fulfillment of customer orders.
In your request for reconsideration, you contend that the country of origin of the hypodermic safety needles for marking purposes is the United States. Specifically, you assert that NY N319278 “misapplied CBP precedent to find that the cannula used in the manufacture of the hypodermic safety needles imparts the essential character, and consequently the origin, to the hypodermic safety needles.” Instead, you contend that the “extensive and complex manufacturing and assembly operations substantially transform [the] imported cannulae of various origins into a new and different article of commerce.” As a result, you conclude that the “finished hypodermic safety needles [are] of U.S. origin.”
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 United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such a manner as to indicate to an ultimate purchaser in the United States 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 markings on the imported goods the country of which the good is the product. “The evident purpose is to mark the goods so 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, 302 (1940).
Part 134, U.S. Customs and Border Protection Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b) defines “country of origin” as:
[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 regulations]…
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use that differs from the original material subjected to the process. M.B.I. Merchandise Industries, Inc. v. United States, 16 C.I.T. 495, 502 (1992) (citing United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267, 270 (C.A.D. 98) (1940)). The question of whether a substantial transformation occurs for marking purposes is a question of fact, to be determined on a case-by-case basis. National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (quoting Uniroyal Inc. v. United States, 3 C.I.T. 220 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983)). Courts have held that when the properties and uses of a product are predetermined by the material from which it was made, no substantial transformation occurs. Superior Wire v. United States, 669 F. Supp. 472 (Ct. Int’l Trade 1987), aff’d, 867 F.2d 1409 (Fed. Cir. 1989).
For courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the articles or components. See, e.g., National Hand Tool, 16 C.I.T. at 311. Courts have not found a change in character when the “form of the components remained the same.” Id. In other cases, courts have looked to the “essence” of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing. Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-1098 (Ct. Int’l Trade 2000) and Uniroyal, Inc. v. United States, 3 C.I.T. 220). In Uniroyal, Inc. v. United States, 3 C.I.T. at 225, the court held that imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and thus the character of the product remained unchanged and did not undergo substantial transformation in the United States.
As discussed, there are four component parts which make up the hypodermic safety needles. The first component part of the hypodermic safety needles is the pre-cut, stainless steel needle/cannula, described as “a thin hollow tube with a sharp tip.” Each pre-cut, stainless steel needle/cannula is manufactured in China, Japan, France, or South Korea before importation into the United States. The remaining three hypodermic safety needle component parts – the plastic hub adapter, the plastic safety shield, and the plastic needle sheath – are manufactured by Cardinal Health in the United States. Since the pre-cut, stainless steel needles/cannulae are the sole “article of foreign origin entering the United States” for the production of the hypodermic safety needles, we analyze the “[f]urther work or material added” to it within the United States to determine whether or not a substantial transformation has taken place so as to render the United States the country of origin. For this to occur, the pre-cut, stainless steel needles/cannulae must emerge from the manufacturing process with a different name, character, or use.
We find that the assembly and processing that occurs in the United States are simple and minor processes which leave the identity of the pre-cut, stainless steel needle/cannulae intact. Substantial processing operations go into the production of the hypodermic safety needles in their respective countries – such as the pre-cut, stainless steel needles/cannulae in China, Japan, France, or South Korea and the plastic components in the United States. As in Uniroyal, the character of the hypodermic safety needles is imparted by the needle. The assembly of the components into the finished hypodermic safety needle in the United States is also relatively simple. Specifically, the assembly of the hypodermic safety needles is done via a mechanically automated process solely consisting of adhering the components together with an epoxy solution and flashes of ultraviolet radiation. This mechanized assembly of the various hypodermic needle components is a highly repetitive, low-skill function; merely requiring that the assembly line be switched on and that adhesive epoxy be utilized. The additional processing of the hypodermic safety needles merely consists of sterilization and packaging.
This aforementioned processing does not change the name, character, or use of the imported pre-cut, stainless steel needles/cannulae. Despite being assembled with plastic components, the imported pre-cut, stainless steel needles/cannulae retain the name “needles” upon the production of the finished hypodermic needles. Moreover, the character, properties, and uses of the pre-cut, stainless steel needles/cannulae are pre-determined by the products themselves and are not altered as a result of the aforementioned U.S. assembly and processing operations. As delineated within NY N319278, the main function of the pre-cut, stainless steel needles/cannulae are to “inject fluids or withdraw fluids from parts of the body below the surface of the skin” – a function shared by the assembled hypodermic safety needles. While the attachment of the plastic components may facilitate the function of the pre-cut, stainless steel needles/cannulae, the needle does not lose its individual identity, nor does it lose its ability to perform its intended function as a result of the aforementioned processing. As a result, we find that the Chinese, Japanese, French, or South Korean-origin pre-cut, stainless steel cannulae determines the origin of the product.
This determination is supported by CBP rulings involving similar products specifically utilized in subdermal procedures within the medical field which possess cannulae or needle-like components. In Headquarters Ruling Letter (“HQ”) H296072, dated July 13, 2018, CBP determined the country of origin of subdermal needle electrodes. The subdermal needle electrodes were made from six component parts: the needle electrode, the leadwire, a miniscule amount of solder, a heat shrink tube, a protective cover for the needle, and packaging. The needle electrode was manufactured entirely in either the United States or Japan from U.S. or Japanese origin stainless steel. This processing included cutting the stainless steel to precise lengths as well as “sharpness and insertion force requirements.” The needle electrode was then attached to a Korean-origin leadwire before being sent to China for further processing, which included soldering the needle electrode to the leadwire and adding a Japanese origin heat shrink. Additionally, a U.S. origin “protective needle cover [was] placed over the needle electrode to prevent accidents.” Lastly, the needle electrode was packaged and re-exported to the United States, where it was sterilized and tested prior to sale.
CBP held that “the assembly and processing that [occurred] in China are simple and minor processes that leave the identity of the needle electrode intact.” Specifically, CBP found that the cleaning, drying, adding a protective cover, and packaging were simple and minor operations involving highly repetitive, low-skill functions. CBP highlighted that “the properties and uses of the [needle electrodes] are predetermined by the qualities of the needle electrode itself, which do not change as a result of Chinese assembly and processing operations.” CBP elaborated that the needle electrode’s “main function is to penetrate the skin or other membrane to allow medical diagnostic equipment to record or stimulate neurophysical biopotentials” and that “the needle electrode is nonetheless capable of performing its main function without a pre-connected leadwire.” As such, CBP found that the country of origin to be either the United States or Japan, depending on the country where the needle electrode was manufactured, as the “name, character, and use of the needle electrode remain[ed] unchanged after the attachment of [ ] other components.”
Similarly, in HQ H300744, dated February 20, 2019, CBP determined the country of origin of stimulating probes. The stimulating probes were manufactured from stainless steel rods, which were cut to specified length and ground to a precise diameter within the United States. In China, the stimulating probes were attached to Korean-origin leadwire with Chinese-origin solder and a handgrip made from U.S. and Korean origin components. The probes were inserted into protective covers before being re-exported to the United States, where they were sterilized and tested prior to sale. CBP ultimately found that “the processing of the probes that occurs in China does not change the name, character[,] or use of the probes.”
Within the request for reconsideration, you cite to a line of CBP rulings involving medical sutures. See HQ 965318, dated November 7, 2002; HQ 730999, dated December 12, 1988; HQ 561167, dated December 14, 1998; and HQ 554957, dated March 7, 1990. The product at issue in HQ 965318 was a non-sterile suture attached to a suture needle in a cardboard wrapper. In that ruling, the surgical needles and sutures/threads of various origins were exported from the United States to either Mexico, China, or the Dominican Republic where the suture material was attached to the needle. CBP determined the assembly operations resulted in a substantial transformation and therefore the country of origin was the country of assembly. In HQ 730999, CBP held that imported surgical needles attached to thread in the United States and thereby made into sutures suitable for use in cardiovascular surgery were substantially transformed in the United States. CBP stated that “the surgical needles alone, prior to processing, have no apparent use; it is only after the addition of surgical thread that the article becomes known as a suture and is suitable for use in surgery to bind body tissue.” The suture needles described in these rulings are distinguishable from the hypodermic needles at issue. Indeed, suture needles are simply the vehicle for placing the thread where it needs to go, and it is the thread that plays a crucial role in stitching and holding together surgical incisions. Thus, they are more akin to sewing needles as opposed to injection needles. Suture needles are generally hook-shaped, with distinct “eyes” or channels on the dull end where suture thread is attached for medical use. These needles are then utilized in a manner virtually identical to a sewing needle, in that they act as a guide for the surgical thread. In contrast, here, we are dealing with pre-cut, stainless steel injection needles whose purpose is to subdermally inject or withdraw liquids. Put simply, these “needles” are homonyms – both understood as “needles” but with completely different lexical definitions and purposes. As such, while we agree with our earlier determinations, we do not find them informative to our current analysis.
As the name, character, and use of the pre-cut, stainless steel needles/cannulae remain unchanged after the attachment of the plastic components to form the completed hypodermic safety needle, we find that the pre-cut, stainless steel needles/cannulae are not substantially transformed as a result of assembly and processing operations in the United States. Therefore, based on the facts provided, the country of origin of the hypodermic safety needles is China, Japan, France, or South Korea depending on where the pre-cut, stainless steel needles/cannulae are manufactured. Accordingly, we affirm NY N319278.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division