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HQ 732615


June 6, 1990

MAR-2-05 CO:R:C:V 732615 RSD

CATEGORY: MARKING

Robert E. Ruggeri, Esq
Roger & Wells
1737 H Street, N.W.
Washington, D.C. 20006

RE: Country of Origin Marking of Surgical Instruments

Dear Mr. Ruggeri:

This is in response to your letter dated July 28, 1989, and subsequent correspondence in which you seek a ruling concerning the country of origin marking of surgical instruments. You are seeking confirmation that the countries of origin for the surgical instruments imported by your client are Pakistan and Hungary. In your subsequent correspondence dated April 12, 1990, you ask whether the marking "German Stainless-Made in Pakistan" would be acceptable.

FACTS:

Your client is a nationwide distributor of imported surgical instruments used in hospitals. The surgical instruments are hemostats (clamplike instruments used in surgery) and surgical scissors. In order to illustrate the manufacturing process of the surgical instruments, your client has submitted a ring containing physical samples of the eight stages of the hemostat's production.

The first three stages of production are done in West Germany. In West Germany, strip stainless steel is cut to rough size and forged. The raw forging, with trim removed, is then exported to Pakistan. The next 6 processing steps are completed in Pakistan. In Pakistan, the raw forging is milled. The ratchet, teeth, inside rings, and boxlock are milled on a milling machine. Male and female forgings are made and the male is inserted into the female part and the box pressed closed. A hole is drilled through the boxlock and joined by a pin or rivet. The instrument's shape is refined on a grinding wheel. The instrument is adjusted so the teeth mesh properly, and is straightened and aligned by an instrument maker using a hammer. The instrument is heat hardened and tumbled in an abrasive medium to further refine the finish of its surface. The hemostat is hand polished on a wheel and finally adjusted. The instrument is slightly blasted using sand or glass beads to create a non-glare surface. The final step is to polish or use a buffing wheel to produce a mirror like finish.

The scissors which your client imports, are made in the same manner, except that the forgings are sent from Germany to Hungary rather than Pakistan, for processing and then returned to Germany for export to the United States.

The value of the hemostat forging as it leaves Germany ranges from $1.25 to $1.30 for the small sizes and up to about $2.40 for the larger sizes. The value of the finished hemostat as it leaves Pakistan ranges from $4.00 to $9.50. The value of stainless steel forging for the surgical scissors as it leaves Germany ranges from $1.50 to $2.00. The value of the scissors as it leaves Hungary, where it is processed, ranges from $6.00 to $11.00.

In a subsequent letter dated April 12, 1990, you indicated that your client wants to mark the surgical instruments on one leg (the clamping portion of the hemostat and cutting portion of the scissors) "German Stainless" and on the other leg "Made in Pakistan" or alternatively "Made in Hungary."

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. Congressional intent in enacting 19 U.S.C. 1304 was that the ultimate purchaser should be able to know by an inspection of the marking on the 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." United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as 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 the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed.

Customs has ruled on several occasions on whether the processing of forged blanks into finished or semifinished instruments is a substantial transformation. In determining whether there is a substantial transformation, Customs has looked at the specific processing operations. In HRL 055703 (September 24, 1979), Customs ruled that a German forging sent to Malaysia for milling and machining, including widening the holes for joining matching pieces, machining small ridges for locking or gripping and machining to define the edges and surfaces, was substantially transformed into a surgical instrument whose country of origin was Malaysia. In HRL 553197 (February 11, 1985), Customs determined that the machining of forged blanks in the U.S., consisting of deburring, milling, assembly and riveting constituted a substantial transformation. In that same ruling we found that the subsequent rough polishing, hand shaping and curving, heat treatment and final polishing of the instruments in Pakistan was not a substantial transformation.

Recently, Customs ruled in HQ 732844, February 12, 1990, that surgical instruments which are quite similar to those involved in this case were substantially transformed when they were processed in Pakistan. In that ruling, we noted that while the U.S. made forgings resemble the size and shape of the finished articles, they are not yet machined to their actual dimensions and lack the essential characteristics such as the capacities to grip, close, lock in place and to be adjusted. Without the machining, bending, cutting, riveting, assembly and polishing operations which were performed in Pakistan, the articles cannot be used as surgical instruments and do not have the characteristics thereof. Customs concluded that for purposes of 19 U.S.C. 1304, the country of origin of the surgical instruments was Pakistan.

Similarly in this case, the raw forgings produced in West Germany, do not possess the essential characteristics of surgical instruments. The milling and the intricate series of cuts that create the ratchet, teeth, inside rings and boxlock are extensive operations. The machining, milling, heat treating, polishing, and other significant amount of processing done in Pakistan or Hungary results in articles that have new and different characteristics and give the surgical instruments their basic character. With guidance from our previous decisions, we find that the extensive processing done in either Pakistan or Hungary which refines crude raw forgings into finished surgical instruments capable of being used by hospitals constitutes a substantial transformation. In addition, the extensive value added by processing done in Pakistan or Hungary supports this conclusion. Therefore, for purposes of 19 U.S.C. 1304, the country of origin of the hemostats is Pakistan and the country of origin of the surgical scissors is Hungary.

With respect to the proposed marking of the surgical instruments "German Stainless" on one leg and marking on the other leg of the instrument "Made in Pakistan" or "Made in Hungary," we find that is acceptable so long as the requirements of section 134.46, Customs Regulations (19 CFR 134.46), are met. This section requires that when the name of any city or locality in the U.S., or the name of any foreign country or locality other than the name of the country or locality in which the article was manufactured or produced, appear on an imported article or its container, there shall appear, legibly and permanently, in close proximity to such words, letter, or name and in at least a comparable size, the name of the country of origin preceded by "Made in," "Product of," or other words of similar meaning. The purpose of this section is to prevent the possibility of misleading or deceiving the ultimate purchaser of the actual origin of the imported goods.

To satisfy the close proximity requirement of 19 CFR 134.46, the name of the country of origin must generally be on the same sides or surfaces as the other country name. Your proposed marking of the surgical instruments would satisfy the close proximity requirement if the words "Made in Pakistan" or Made in Hungary" on one leg appear near to the words "German Stainless" on the other leg and appear on the same surface of the instrument in a manner so that they can be seen at the same time. We note that the country of origin is preceded by the words "Made in." As long as the country name Pakistan or Hungary is legible and is in lettering in at least a comparable size to the words "German Stainless," we find that the proposed marking would be acceptable under 19 CFR 134.46.

HOLDING:

1) The processing of forged blanks as described above into hemostats or surgical scissors in Pakistan or Hungary is a substantial transformation. The country of origin for the hemostats is Pakistan and the country of origin for the surgical scissors is Hungary.
2) Assuming the conditions noted above are met, the proposed marking "German Stainless" on one leg of the surgical instrument, and "Made in Pakistan" or "Made in Hungary" on the other leg satisfies the requirements of 19 CFR 134.46 and is acceptable.

Sincerely,


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