HQ 0734252 - Country of origin marking requirements for imported cast iron spill protectors and ventilation boxes used in making domestic finished observation wells and ventilation boxes; castings; substantial transformation; ultimate purchaser; 19 CFR 134.35 - United States International Trade Commision Rulings

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HQ 734252

April 8, 1994

MAR 2-05 CO:R:C:V 734252 AT

CATEGORY: MARKING

Mr. Alex Todds
Vice President
General Foundries, Inc.
P.O. Box 151
Flushing, New York 11355

RE: Country of origin marking requirements for imported cast iron spill protectors and ventilation boxes used in making domestic finished observation wells and ventilation boxes; castings; substantial transformation; ultimate purchaser; 19 CFR 134.35

Dear Mr. Todds:

This is in response to your initial letter dated July 3, 1991, concerning the country of origin marking requirements for imported cast iron spill protectors and ventilation boxes used in making finished observation wells and ventilation boxes in the U.S. Additional correspondence has been received regarding this matter since that date. Samples of the spill protectors and ventilation boxes used to make the finished articles were submitted along with general information regarding the U.S. processing of the imported articles. We regret the delay in responding.

FACTS:

You state that General Foundries Inc. ("GFI") intends to import cast iron spill protectors and ventilation boxes, which are made in Brazil, into the United States. You also state that the spill protectors are manufactured and imported exclusively for Petroleum Equipment Manufacturing Co., Inc. ("PEMPCO"), whereas the ventilation boxes are manufactured and imported exclusively for C.P. Test Services-Valvco ("C.P. Test Services"). 2

Imported Cast Iron Spill Protectors

According to your submission, in the U.S., the spill protectors are processed and assembled by PEMCO with other plastic and/or rubber and/or fabricated steel to make complete units which are marketed as spill protectors/observation wells. Although this office has made numerous requests for information detailing the U.S. processing that is to be performed and the associated costs, time and skill involved, none has been submitted for our review. Accordingly, due to the lack of sufficient information, we cannot issue a ruling with respect to the country of origin marking requirements for the imported cast iron spill protectors. This ruling is limited to the country of origin marking requirements for the imported ventilation boxes that are to be processed in the U.S. in the manner described below.

Imported Cast Iron Ventilation Boxes

You state that once imported, the ventilation boxes (also referred to as castings) are delivered to C.P. Test Services to be further processed in the U.S. into finished ventilation boxes. After receiving the ventilation boxes, C.P. Test Services blow- molds noncorrosive acrylonitrile butadiene styrene (ABS) plastic pipe tube to fabricate a bell-shaped lower part into which another plastic pipe tube (the upper part) is inserted. Several dimples are impressed into the lower part to act as a locking mechanism and secure the lower part to the top part. The upper part is then dipped and coated with an adhesive substance by means of a proprietary process. The coated upper part is forced into the collar of the imported casting with the help of high pressure equipment to form a solid seal. The finished unit is sold by C.P. Test Services as a completed ventilation box which is installed in gas systems to prevent pressure build up of gases, air, fluid, or the gas accumulation that could result in explosions. You claim that the length of the completed unit extends some 36" or 48", while the imported casting takes up no more than 3" of the length. Also, you state that the ventilation boxes are imported and delivered to C.P. Test Services in either metal drums and/or wooden crates that are marked with the country of origin. In support, you have submitted a letter from C.P. Test Services, stating that the metal drums and/or metal/wooden crates in which the imported castings are received are clearly and legibly marked "Brazil".

The sample casting consists of two parts: a lid and a collar. Printed on the top of the lid are the words "Valvco", "Venti-Box", "Gas" and "Patented". No other markings appear on the lid. The collar is circular with 4 holes drilled on the side of the collar. An inner ring is formed on the bottom of the collar where the plastic tube is to be inserted. No markings appear on the collar.

On April 8, 1992, C.P. Test Services, at the request of this office, submitted additional information with respect to the U.S. processing consisting of cost data, photographs showing the various manufacturing procedures and cut sheets showing how the final product looks. The information indicates that the cost of the imported casting represents approximately 37 percent of the total cost to manufacture the finished article.

ISSUE:

What are the country of origin marking requirements for imported castings which are assembled with other domestic components by C.P. Test Services into completed ventilation boxes?

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 its 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; C.A.D. 104 (1940).

The country of origin marking requirements for the imported castings that are assembled by C.P. Test Services in the U.S. with domestic parts depend upon whether C.P. Test Services is the ultimate purchaser of the imported article.

The "ultimate purchaser" is defined generally as the last person in the U.S. who will receive the article in the form in which it was imported. 19 CFR 134.1(d). If an imported article will be used in domestic manufacture, the manufacturer may be the "ultimate purchaser" if [s]he subjects the imported article to a process which results in a substantial transformation of the article. However, if the manufacturing process is a minor one which leaves 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)(1) and (2). Substantial Transformation and Domestic Assembly Operations

For country of origin marking purposes, a substantial transformation occurs when an article loses its identity and becomes a new article having a new name, character or use. United States v. Gibson-Thomsen Co., 27 CCPA 267 (1940); National Juice Products Association v. United States, 10 CIT 48. Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article into a different article will be considered the "ultimate purchaser" of the imported article, and the article shall be excepted from marking. However, the outermost container of the imported article must be marked. 19 CFR 134.35. Whether a substantial transformation occurs is determined on a case-by-case basis.

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linen v. United States, 6 CIT 204, 573 F.Supp. 1149 (1983), aff'd, 2 Fed.Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D.'s 80-111, 89-110, 89-129, 90-51.

The issue involved in this case is whether the imported casting which is combined in the U.S. to form a completed ventilation box is substantially transformed into a new article having a new name, character or use.

You contend that the imported ventilation box is substantially transformed by C.P. Test Services as a result of the U.S. processing, making C.P. Test Services the ultimate purchaser. Therefore, the imported castings should be excepted from marking provided the outermost container which reaches the ultimate purchaser is marked with the country of origin "Brazil", as is the case here. We disagree.

In National Hand Tool Corp., v. United States, Slip Op. 92- 61 (April 27, 1992), aff'd, 989 F.2d 1201 (1993), the Court of International Trade held that imported hand tool components which were used to produce flex sockets, speeder handles and flex handles were not substantially transformed when further processed and assembled in the U.S. One of the factors considered by the court in reaching its conclusion was that the name of the imported components did not change as a result of the U.S. processing and assembling operations. The court found that the name of each article imported had the same name in the completed tool. In support of this conclusion, the court cited the following example:

"For example, when the lug or "G-head", component of a flex handle imported from Taiwan (Ex. E) was shown, plaintiff's witness called it a "G-head." When the government counsel asked the name of the part where the lug component is attached to a completed flex handle (Ex. J.), the witness also called it a "G-head."

The court also considered whether the use of the imported components changed as a result of the processing and assembling operations performed in the U.S. In finding that the use of the imported components did not change, the court stated that the use of the imported articles was predetermined at the time of importation; each component was intended to be incorporated in a particular finished mechanic's hand tool. Although the court recognized that only one predetermined use of imported articles does not preclude the finding of substantial transformation (See, Torrington Co., v. United States, 764 F.2d. 1563 (1985)), it went on to say that the determination of substantial transformation must be based on the totality of the evidence.

Similarly, based on the totality of the evidence in this case, we find that the U.S. operations do not change the name, character or use of the imported castings. Review of the sample, photographs and diagrams illustrating the completed ventilation box and unassembled components indicates that the imported casting is a completely finished article. No further processing needs to be performed to the individual casting in the U.S. except assembly with the domestic plastic tubing to make the completed article. In fact, the casting already has the requisite number of holes drilled into them to assure proper mounting. Like the hand tool components in National Hand Tool, an imported ventilation box has the same name after assembly. Although the ventilation box becomes an essential part of a completed ventilation box, it is still referred to as a ventilation box after assembly. Thus, none of the castings would change in name as a result of the U.S. operations. Likewise, as in National Hand Tool, the use of the imported castings is predetermined at the time of importation. Each casting is intended to be incorporated into a completed ventilation box. This is supported by the fact that the ventilation boxes are exclusively made for C.P. Test Services under that company's patent. Also, as you state, the castings will only be used in the manufacture of completed ventilation boxes by C.P. Test Services. Clearly, these imported castings do not change in character as a result of the assembly operation. After being assembled into a completed ventilation box the form of the casting retains its original shape and form. There is no change in the microstructure or chemical composition after assembly. See, Ferrostaal Metals Corp., v. United States, 11 CIT 470, 664 F.Supp. 535 (1987). In addition, there is no indication that the assembly operation is complex. The imported castings are assembled to the plastic upper part, which is dipped and coated with an adhesive substance, by forcing the collar of the casting into the upper part with the help of high pressure equipment to form a solid seal. Furthermore, the imported casting is not an insignificant component, but is an essential component, representing approximately 37 percent of the total cost to manufacture the completed product.

Accordingly, the cast iron ventilation boxes, which are also known as castings, are not substantially transformed when they are used to produce completed ventilation boxes. Therefore, C.P. Test Services is not the ultimate purchaser of the imported castings. Rather the ultimate purchaser is the person(s) who purchases the completed ventilation box in the U.S., and the imported ventilation boxes must be conspicuously, legibly and permanently marked to indicate the country of origin "Brazil" to such person(s).

In the alternative, the importer may seek approval of local Customs officials for a repacking operation conducted under Customs supervision as provided under 19 CFR 134.34. Section 134.34, Customs Regulations (19 CFR 134.34), provides that an exception may be authorized in the discretion of the district director under 19 CFR 134.32(d) for imported articles which are to be repacked after release from Customs custody under the following conditions: (1) The containers in which the articles are repacked will indicate the origin of the articles to an ultimate purchaser in the U.S.; and (2) The importer arranges for supervision of the marking of the containers by Customs officers at the importer's expense or secures such verification, as may be necessary by certification and the submission of a sample or otherwise, of the marking prior to the liquidation of the entry.

If approval is granted by the district director under 19 CFR 134.34, it would be acceptable to mark the finished article (or its container) with a single, centrally-located, country of origin marking that denotes the foreign casting as well as the U.S. components. For example, the completed ventilation box could be marked "Assembled in U.S. from Components Manufactured in Brazil and U.S." HOLDING:

The imported cast iron ventilation boxes are not substantially transformed when assembled with domestic components into a completed ventilation box in the U.S., and therefore, C.P. Test Services is not the ultimate purchaser of the imported articles. Accordingly, the imported ventilation boxes must be individually marked with their country of origin "Brazil", unless the district director at the port of entry approves marking after importation pursuant to 19 CFR 134.34.

Sincerely,

John Durant, Director

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