HQ 0731328 - Country of Origin Marking of Crankshafts - United States International Trade Commision Rulings

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HQ 731328

May 11, 1990

MAR-2-05 CO:R:C:V 731328 EAB

CATEGORY: MARKING

Nicholas F. Coward, Esquire
Baker & McKenzie
815 Connecticut Avenue, NW
Washington, DC 20006-4078

RE: Country of Origin Marking of Crankshafts

Dear Mr. Coward:

This is in response to your letters of February 25, 1988, and March 24, 1989, submitted on behalf of your client, Maschinenfabrik Alfing Kessler GmbH, concerning the country of origin of crankshafts forged in the U.K. and machined in West Germany. Additional facts were provided by you to Mr. Edward A. Bohannon, an attorney-advisor in this office, during a telephone conversation on March 5, 1990. We regret the delay in responding.

FACTS:

Your client proposes to buy crankshafts forged in the U.K. and ship them to its machining facilities in West Germany. There each forged crankshaft will be measured, faced to length and subjected to the boring of center holes at each end for rough machining. The first phase of rough machining consists of the turning and milling of crank pins, main journals, flange and end trunnion ends. The next phase of the rough machining consists of the drilling of oil holes so that the bearings may be lubricated once a finished crankshaft is in place and the engine is running. The bearing surfaces and fillet radii are hardened by a heat treatment process to increase the fatigue resistance of a crankshaft and improve the wear resistance of the bearing surfaces of the crank pins and main journals. In the precision machining process, a crankshaft is rough ground, holes are drilled in both the flange and the end trunnion, and keyways are milled so that the fly wheel and gear wheel may be fastened to a finished crankshaft. After the end parts are machine finished, each crankshaft is dynamically balanced to minimize operational vibration and the differing distribution of the mass of the shaft is equalized; all bearing surfaces are lapped and polished to improve surface finish. The crankshaft is washed and inspected against customer specifications and tolerances.

ISSUES:

For country of origin marking and duty assessment purposes, are crankshafts forged in one country substantially transformed by initial rough and then precision machining processes in another country?

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 con- tainer) 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 C.C.P.A. 297, 302, C.A.D. 104 (1940), cited with approval in National Juice Products Associa- tion v. United States, 10 CIT 48, 628 F. Supp. 978 (1986).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. In particular, "country of origin" means "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 this part." Section 134.1(b), Customs Regulations (19 CFR 134.1(b)).

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. United States v. Gibson-Thomsen Co., 27 CCPA 267, 270 (1940); National Juice Products Association v. United States, 10 CIT 48 (1960); Koru North America v. United States, 12 CIT , 701 F.Supp. 229 (CIT 1988).

Where imported flange forgings were subjected to the removal of excess material, then faced, bored, threaded or bevelled, and drilled and spotfaced, the Customs Court found "that the end result of the manufacturing processes to which the imported articles [were] subjected in plaintiff's ... plant is the transformation of such imported articles into different articles having a new name, character and use." Midwood Industries, Inc. v. United States, 64 Cust. Ct. 499, C.D. 4026, 313 F. Supp 951

(1970). In this case, the processes to which the U.K. crankshafts are subjected in W. Germany also include facing to length, boring, turning and milling, and drilling. Where West German crankshafts underwent further processing in France, consisting of the turning of the main and rod bearing journals, the drilling of oil feed holes, the drilling and tapping of the flange, and further heat treatment, Customs has found such processing to be a substantial transformation. Customs Ruling HQ 709253, dated August 9, 1978; see also Customs Ruling HQ 732923, dated December 13, 1989. In this case, the further processing in W. Germany similarly includes the turning and milling of journals, the drilling of oil feed holes, and further heat treatment.

Based upon the above discussion, we are of the opinion in this case that the West German rough and precision machining processes similarly result in a substantial transformation of the U.K. forgings into a different article having a new name, character and use, namely, crankshafts.

HOLDING:

For marking and duty assessment purposes, crankshafts that are forged in the U.K. are substantially transformed as a result of initial rough and precision machining to customers' specifications and tolerances in West Germany. Accordingly, the country of origin of such machined crankshafts is West Germany, for purposes of marking and duty assessment.

Sincerely,

Marvin M. Amernick, Chief

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