United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1990 HQ Rulings > HQ 0731902 - HQ 0732330 > HQ 0732259

Previous Ruling Next Ruling



HQ 732259


February 16, 1989

MAR-2-05 CO:R:C:V 732259 EAB

CATEGORY: MARKING

Rodney O. Thorson
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005-2107

RE: Country of origin marking of adjustable wrench made from imported and domestic components

Dear Mr. Thorson:

This is in reply to your letter of March 24, 1989, on behalf of The Stanley Works, requesting a ruling on the country of ori- gin marking requirements of adjustable wrenches made from two im- ported components and three U.S. components. We regret the delay in responding.

FACTS:

The wrench consists of an imported frame and adjustable jaw, and a domestic knurl, spring and pin. After importation, the frame and adjustable jaw are machined to approximate dimen- sional standards in a series of metal cutting operations. A channel is cut in the frame to provide access for the movable part of the jaw. A barrel area side hole is broached in the frame to accommodate the domestic knurl. A hole is drilled to accommodate the domestic pin that holds the knurl in the frame. The frame is deburred, then permanently marked with the size, model number and brand name in compliance with ANSI/ASME product specifications. Separately, the adjustable jaw is broached on the active jaw face and at the barrel area, and teeth are cut to accommodate the knurl.

The articles are subjected to recrystallization annealing in a furnace at 1600` F. for 40 minutes, then cooled in an oil bath to set its new molecular structure so as to harden and strengthen it. The wrench is washed and tempered to meet further ANSI/ASME standards. It is smoothed to remove scale and rough edges to prepare it for chrome plating to inhibit corrosion. Assembly of the frame, adjustable jaw, knurl, tension spring and pin completes the manufacturing of the adjustable wrench.

As described above, your client makes adjustable wrenches in 4, 6, 8, 10 and 12 inch lengths. You provide cost analyses for each wrench, and we note that the cost of the imported frame and adjustable jaw for the 4" wrench is 16% of the total manufactured cost; the cost of the 12" wrench is 34% of the total manufactured cost.

LAW AND ANALYSIS:

Section 304 of the 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 container) will permit, in such a manner as to indi-cate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. The primary purpose of the country of origin marking statute 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 the product, if such marking should influence his will." United States v. Friedlaender & Co., 27 CCPA 297 (1940); National Juice Products Association v. United States, 10 CIT 48, 628 F. Supp. 978 (1986).

An exception of an article from marking is specifically provided in 19 U.S.C. 1304(a)(3)(D), if the marking of a con- tainer of such article will reasonably indicate the origin of such article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and excep- tions of 19 U.S.C. 1304. Section 134.1(d), Customs Regulations (19 CFR 134.1(d)), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. However, Section 134.35, Customs Regulations (19 CFR 134.35), provides that articles used in the U.S. in manufacture which results in articles having a name, character or use differing from that of the imported articles will be within the principle of the decision in the case of United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267 (1940). Under this principle, the manufacturer in the U.S. who converts or combines the imported article into a different article will be considered the ultimate purchaser for purposes of meeting the general requirement of 19 U.S.C. 1304(a).

If the manufacturing process is merely a minor one leaving the identity of the imported article intact, the consumer or user of the article who obtains the article after the processing will be regarded as the ultimate purchaser, 19 CFR 134.1(d)(2). In the case of socket wrench components imported fully machined, Customs has found that finishing operations including heat treat-
ing; grinding, vibrating and polishing; plating; assembly; and inspection and identification marking were not a substantial transformation within the meaning of 19 CFR 134.35. Accordingly, the processor was not considered the ultimate purchaser of the imported components, T.D. 74-12(3), November 1, 1973, favorably commented upon in Headquarters Ruling 711320, March 6, 1981. See also Headquarters Ruling 729516, May 12, 1986: "The final identi- ty and character of the finished tools are established by the manufacturing operations performed in Japan. Although the fur- ther processing in the U.S. is essential to finishing the import- ed items, the processing results in neither a loss of identity nor a new and different product having a new name, character or use."

While mere finishing operations are insufficient to consti- tute a substantial transformation, if an imported article will be used in manufacture, the manufacturer may be the ultimate pur- chaser if he subjects the imported article to a process which re- sults in a substantial transformation of the article. A substan- tial transformation occurs when an article loses its identity and becomes a new article having a new name, character, or use, see United States v. Gibson-Thomsen, 27 CCPA 267 (1940) and National Juice Products Association v. United States, 10 CIT 48, 628 F. Supp. 978 (1986). The degree of technical skill or competence involved in the further work to be done, and the importance of the work to the functioning of the finished article are also considered in determining whether a substantial transformation has occurred. For example, Customs has previously ruled that broaching teeth into plier halves to provide the tool with its working edges, when followed by finishing operations such as grinding, sandblasting, heat treating, tempering, polishing, assembly, electroplating and packaging is a substantial trans- formation and the U.S. manufacturer is the ultimate purchaser. Broaching teeth was considered a skilled machining operation which imparted essential characteristics to the article, Head- quarters Ruling 723271, February 8, 1984 and Headquarters Ruling 721562, October 17, 1983.

In this case, the frame and adjustable jaw are not fully machined in their condition as imported and lack several impor- tant features of a finished wrench. We find that the broaching of the side hole into the frame and the broaching of the adjust- able jaw, to accommodate the knurl, and the cutting of the teeth, coupled with the finishing operations that include heat treatment, deburring, tempering, plating, logo, size and model number stamping, and assembly, substantially transform the im- ported frame and adjustable jaw, and that your client is the ul- timate purchaser of the imported articles. Therefore, the frame and adjustable jaw may be excepted from individual marking under

19 U.S.C. 1304(a)(3)(D), provided: (1) the containers in which they are imported are legibly and conspicuously marked to indi- cate the country of origin; (2) Customs officers at the port of entry are satisfied that the articles will reach your client in the original marked containers, and (3) the articles will be used only in the manufacture of adjustable wrenches as described here- in and not otherwise sold. Documentation to such effect may be required by Customs at the time of entry.

HOLDING:

The imported adjustable wrench frame and adjustable jaw are substantially transformed by your client, thus making your client the ultimate purchaser of the imported articles. The frame and jaw are excepted from marking, provided the containers in which they are imported are marked to indicate the country of origin and Customs officials at the port of entry are satisfied that the articles will be used only in the manner described above and will not be sold otherwise.

Sincerely,

Marvin M. Amernick, Chief
Value, Special Programs and

Previous Ruling Next Ruling