HQ 0731655 - Country of origin marking requirements for imported castings of iron or stainless steel - United States International Trade Commision Rulings

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HQ 731655

February 3, 1989

MAR-2-05 CO:R:C:V 731655 jd

CATEGORY: MARKING

District Director of Customs
Second & Chestnut Streets
Philadelphia, Pennsylvania 19106

RE: Country of origin marking requirements for imported castings of iron or stainless steel

Dear Mr. Piazza:

This is in reply to your request for internal advice, IA 8/88, dated January 25, 1988, concerning the country of origin marking requirements for imported castings of iron or stainless steel. The importer involved is (omitted).

FACTS:

According to your submission, and that of the importer, castings of raw malleable iron or stainless steel are imported from Korea. The importer uses the castings in production of four products: shank couplings, hose nipples, wing nuts and hose shanks.

The steps involved in producing each product are as follows.

SHANK COUPLINGS

1. Castings are inspected for imperfections. 2. Imperfections are "attended to", i.e., removed. 3. The coupling is faced, i.e., the end is machined so that the coupling will fit snugly against another coupling. 4. The coupling is threaded.
5. The coupling is then cleaned, electroplated and a rubber gasket is inserted in the groove.

HOSE NIPPLE

1. Castings are inspected for imperfections. 2. Minor defects are "cured" if possible. 3. The nipple is threaded.
4. The nipple is reamed.

WING NUT

1. The hole in the casting is enlarged.
2. The inner diameter of the hole is machined. 3. The inner diameter of the hole is threaded. 4. It is cleaned and electroplated.

HOSE SHANK

1. Castings are machined down to appropriate size. 2. They are inspected, cleaned and electroplated.

The importer believes the operations performed on the various castings are sufficient to constitute substantial transformation and thereby except the pieces from individual country of origin marking requirements. Your office, and the Chief, NIS Branch 1, New York Seaport, believe the castings are not transformed by the operations and must be individually marked as to country of origin.

ISSUE:

Are castings of shank couplings, hose nipples, wing nuts and hose shanks substantially transformed by the above described operations so as to make the importer/processor the ultimate purchaser of the castings for country of origin marking purposes?

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that every article of foreign origin (or its container) 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 the ultimate purchaser in the United States the English name of the country of origin of the article.

Section 134.35, Customs Regulations (19 CFR 134.35), provides that an article 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 considered substantially transformed, and therefore the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the ultimate purchaser of the imported article within the contemplation of 19 U.S.C. 1304(a). Accordingly, the article shall be excepted from marking. However, as stated in { 134.1(d)(2), Customs Regulations (19 CFR 134.1(d)(2)), if a manufacturing process is a minor one which leaves the identity of the imported article intact, the consumer or user of the article who obtains it after processing, will be regarded as the ultimate purchaser.

In support of the claim of substantial transformation of the castings, the importer cites Midwood Industries, Inc. v. United

States, 64 Cust. Ct. 499, C.D. 4026 (1970). In Midwood, imported rough steel forgings were subjected to several machining processes by the U.S. importer/processor such as boring, facing, spot facing, drilling, tapering, threading, bevelling and heating and compressing. It was determined that the importer/processor was the ultimate purchaser of the forgings since he substantially transformed them and the resulting finished flanges and fittings did not have to carry country of origin marking.

For sake of comparison, the following chart illustrates the processing done in Midwood and the processing done to the subject castings. We have not included steps such as inspection, cleaning or electroplating since they do constitute substantial transformation alone, nor would they constitute substantial transformation when considered in combination with the steps listed.

PROCESS MIDWOOD SHANK CPL HOSE NIP WING NUT HOSE SHK

Boring x
Facing x x
Spot facing x
Drilling x
Tapering x
Threading x x x x
Bevelling x
Heat/Compress x
Reaming x
Hole enlarged x
Machined x x

It is the opinion of this office that the processing performed by the importer does not amount to a substantial transformation of the castings. We believe as did the court in Uniroyal, Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd 702 F.2d 1022 (Fed.Cir. 1983), when they were asked to apply Midwood to the case of a shoe upper having an outsole attached. They determined that the complex assembly process of making the upper was easily distinguishable from the minor assembly process of attaching the sole. Accordingly, the importer/processor who attached the sole was not the ultimate purchaser of the upper. The court opined, "To 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." [footnote omitted]

Similarly in this case, we believe it would be misleading to allow the public to believe that the final articles here, shank couplings, hose nipples, wing nuts and hose shanks, were made
entirely in the U.S. The castings as imported are substantially complete articles and we consider the processing done in the U.S. to be minor compared to the manufacturing that took place previously in a foreign country.

We are not persuaded by the importer's reliance on certain Customs rulings. Ruling 717662 (October 23, 1981), found a substantial transformation of socket wrench blanks. Ruling 717662 modified the decision of ruling 711320 (March 6, 1981). Ruling 711320 determined that imported unfinished components of socket wrench sets were not substantially transformed by grinding, die-stamping of a logo, heat treating,roto-finishing, plating and in some cases assembly with other component parts. Several months later, the importer submitted additional information that he would import blanks in a more unfinished condition and stated he would now perform machining of the drive end or wrench end, drilling of the web, drilling of the hole for the pin in the drive end, machining of the recess in the drive end and drilling of the ball and spring hole. In light of the additional steps, he was determined to be the ultimate purchaser of the unfinished blanks and ruling 717662 was issued.

We believe the importer of the four types of castings in the current matter is operating like the importer of the socket blanks when he was importing them in a substantially complete condition and was performing minor processing operations.

In regard to the importer's reliance on 055703 (September 24, 1979), concerning the transformation of forgings for surgical instruments, we have these comments. First, we are not convinced we would decide that matter in the same fashion if we were presented with an appropriate opportunity for reconsideration. From the brief discussion of the processing operations performed on the forgings, it is not certain a substantial transformation occurred. Accordingly, we are unwilling to use ruling 055703 as precedent for the castings under consideration here. Secondly, assuming arguendo that 055703 was properly decided we would point to the phrase "significant milling operations" as describing the processing performed on the surgical instrument forgings. Since it took significant processing to cut teeth into the gripping portions of the instruments, that would distinguish it from the ordinary process of threading that is applied to some of the castings in this situation.

HOLDING:

It is the opinion of this office that castings for shank couplings, hose nipples, wing nuts and hose shanks are not substantially transformed by the processing described above. Accordingly, the importer/processor is not the ultimate purchaser of the castings and the castings are not excepted from individual country of origin marking. If any of the castings are subject to 19 U.S.C 1304(c)(1), marking must be by means of die stamping, cast-in-mold lettering,etching or engraving. Otherwise, another
permanent method of marking will suffice.

A member of my staff was recently contacted by an attorney for the importer who was concerned that should we find his client is not the ultimate purchaser of the various castings, his client be given a reasonable amount of time in which to conform his operations to the requirement of individual marking. In this regard, this office would have no objection to any reasonable period of time you would see fit to grant the importer for this purpose.

Sincerely,

Marvin M. Amernick
Chief, Value, Special Programs and

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