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 > 1991 HQ Rulings > HQ 0731024 - HQ 0732487 > HQ 0732487

Previous Ruling Next Ruling



HQ 732487

September 20, 1989

MAR-2-05 CO:R:C:V 732487 KG

CATEGORY: MARKING

Kenneth L. Bargteil
Kuehne & Nagel, Inc.
7483 "H" Candlewood Road
Hanover, MD 21076

RE: Country of origin marking of rough forgings

Dear Mr. Bargteil:

This is in response to your letter of June 6, 1989, (your reference CBLO/BLTBO/EascoSpa), requesting a country of origin marking ruling on behalf of Easco Hand Tools, Inc., for imported rough forgings which are made into wrenches in the U.S. Four samples of rough forgings and completed wrenches were submitted for examination.

FACTS:

Your client is considering using foreign sources for rough forgings. The processes performed overseas to convert stock steel bars into rough forgings consist of cutting to length, heating and drop forging. The rough forging has an open end and a box end which is not cut out. In the U.S., the rough forging is made into a finished wrench by coining (flattening), shot blasting (rough edit), polishing and grinding, stamping, tempering, chrome plating and calibrating both ends (brooching). You estimated that the cost to produce the rough forging is 40- 45% of the finished product while the U.S. processes constitute 55-60% of the total cost of the finished product.

ISSUE:

Whether the imported rough forgings are substantially transformed in the U.S. and therefore, are exempt from individual country of origin marking.

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 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 indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. The United States Court of International Trade stated in Koru North America v. United States, 701 F.Supp. 229, 12 CIT (CIT 1988), "In ascertaining what constitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297, 302, C.A.D. 104 (1940), where the court stated that: 'Congress intended that the ultimate purchaser should be able to know by an inspection of the marking on imported goods the country of which the goods is the product. The evident purpose 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 them, if such marking should influence his will."

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. An ultimate purchaser is defined in section 134.1, Customs Regulations (19 CFR 134.1), as "generally the last person in the United States who will receive the article in the form in which it was imported." The regulation further provides that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation.

Under section 134.35, Customs Regulations (19 CFR 134.35), an imported article that is substantially transformed in the U.S. is excepted from individual country of origin marking and only the outermost containers of the imported article must be marked with the country of origin. An article is described in U.S. v. Gibson-Thomsen Company, Inc., 27 CCPA 267 (1940), as being substantially transformed because it is "so processed in the U.S. that it loses its identity in a tariff sense and becomes an integral part of a new article having a new name, character and use."

Imported rough forgings made into flanges and fittings in the U.S. were found to be substantially transformed in the U.S. in Midwood Industries, Inc. v. United States, 64 Cust.Ct. 499, 313 F.Supp. 951 (1970). In that case, the court pointed out that the rough forgings have no commercial use in their imported condition because the forgings are used to connect pipes of a matching size and in their imported state, the forgings had no connecting ends. In HQ 731572 (July 25, 1989), copy enclosed, Customs held that imported rough forgings made into sockets, socket wrench extensions and adapters in the U.S. were substantially transformed. The domestic processing included: lathing, drilling, centerless grinding, marking, heat treatment, performing hardness and torque strength testing, sand blasting, tumbling, chemical vibrating, acid dipping, plating, painting and quality control testing. The rough forgings were considered substantially transformed because a significant amount of machining was done which included machining to achieve the actual dimensions of the tools. The processing performed by your principal is similar to both of the above cases; machining is required to drill a cavity for fastener and bolt clearance and the rough forging does not have its basic characteristic until the box end of the rough forging is bored out. In its imported state, the rough forgings have no commercial use. Therefore, the rough forgings are substantially transformed and the U.S. processor of the rough forgings is the ultimate purchaser. Accordingly, the imported rough forgings are excepted from individual country of origin marking under 19 CFR 134.35 and only the outermost container of the imported articles must be marked.

We note that the finished samples submitted contain the words "Forged in U.S.A." The facts submitted clearly indicate that the rough forgings involved in this case were forged overseas. Therefore, we assume that imported rough forgings would not be marked "Forged in U.S.A." Further, it would be necessary to contact the Federal Trade Commission, Washington, D.C. 20580, in order to determine if the words "Forged in U.S.A." were properly used on the sample.

HOLDING:

The U.S. processor of the imported rough forgings is the ultimate purchaser. The imported rough forgings are substantially transformed in the U.S. and therefore, are excepted from individual country of origin marking pursuant to 19 CFR 134.35 and only the outermost containers of the imported article must be marked with the country of origin.

Sincerely,

Marvin M. Amernick
Chief, Value, Special Programs

Previous Ruling Next Ruling