HQ 0734680 - Country of origin marking requirements for imported ductile iron castings used in making cultivators; castings; substantial transformation; ultimate purchaser; 19 CFR 134.35; HQ 734782 - United States International Trade Commision Rulings

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HQ 734680

April 28, 1994

MAR 2-05 CO:R:C:V 734680 AT

CATEGORY: MARKING

Mr. Phil Gilley
Vice President
Wasco Hardfacing Co., Inc.
2660 SO. East Ave.
Fresno, California 93706-5408

RE: Country of origin marking requirements for imported ductile iron castings used in making cultivators; castings; substantial transformation; ultimate purchaser; 19 CFR 134.35; HQ 734782

Dear Mr. Gilley:

This is in response to your letters dated June 3, 1992 and November 2, 1993, concerning the country of origin marking requirements for imported ductile iron castings used in making cultivators. A sample casting used for the cultivator, diagrams of the finished cultivator, cost information, and advertising brochure for the cultivator were submitted with your letters. We regret the delay in responding.

FACTS:

Wasco Hardfacing Co., Inc. ("Wasco") intends to import ductile iron castings (a.k.a. "spiders"), which are made in Brazil, into the United States. A majority of these castings are used by Wasco in the manufacture of various cultivating machines, however some are sold as single item replacement parts.

The sample casting has a round center from which 10 curved arms protrude from the center. A square hole extends through the center of the casting for mounting on the machine. No markings appear on the castings.

Wasco's production process consists of combining and assembling, with the castings hundreds of domestic components into the completed cultivator. Many castings are used in the manufacture of a completed machine. You state that it takes machine operators and welders approximately 12 hours to combine and assemble the castings with the domestic components into the completed cultivating machine. The approximate cost of the imported castings compared with the total cost of a completed machine ranges between 3 percent to 10 percent depending on how many castings are used.

You contend that individual marking of the castings should not be required and that Customs should grant a marking exception for the imported castings. You have also inquired as to whether castings which are used in the manufacture of finished cultivators in the U.S. are required to be marked if later exported to Australia.

ISSUE:

1. What are the country of origin marking requirements for imported castings which are to be used in the manufacture of finished cultivating machines in the U.S. in the manner described above?

2. What are the country of origin marking requirements for the imported castings which are to be sold as replacement parts in the U.S.?

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).

Marking Requirements For Castings Used In The Manufacture Of Cultivators In The U.S.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the 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 and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked (see section 134.35, Customs Regulations).

The first matter that must be analyzed is who is the ultimate purchaser of the imported castings. 19 CFR 134.1(d)(1) states 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 of the article. In HQ 734782 (December 2, 1993), Customs held that imported metal housings and plates which were to used with U.S. components in the manufacture of piston and rotary hand pumps were substantially transformed as a result of the U.S. operations and were excepted from individual marking pursuant to 19 CFR 134.35. Customs stated that the housings and cover plates were only one of many components (95 components for the piston pump and 75 components for the rotary pump) involved in making the finished hand pumps. Similarly, in this case, the castings are substantially transformed when they are used in the manufacture of cultivating machines. As in HQ 734782, the castings are only one of many components involved in making the completed machine. Reviewing the submitted drawings and assembly instructions, it appears that the assembly is complex, requiring skilled machine operators and welders approximately 12 hours to assemble hundreds of domestic components to make a finished cultivator. These castings, which are also known as spiders, are substantially transformed when they are used to produce various cultivating machines. Therefore, in accordance with 19 CFR 134.35, Wasco, is the ultimate purchaser of the castings. Accordingly, the imported castings are excepted from marking pursuant to 19 CFR 134.35 and only the outermost container in which the castings are imported must be marked with the country of origin of the castings.

Imported Castings Sold As Replacement Parts In The U.S.

The imported castings which are not used in the manufacture of cultivators but are sold in the U.S. as replacement parts are not substantially transformed in that there is no change in the name, character or use of the casting since it is being sold in the exact same condition in which it was imported. Thus, Wasco is not the ultimate purchaser of the imported castings, rather the person(s) who purchases the casting as a replacement part in the U.S. is the ultimate purchaser. Accordingly, the imported casting or its retail container must be marked to indicate "Brazil" as the country of origin of the casting to the ultimate purchaser of the replacement part.

We note that the marking requirements set forth in 19 U.S.C. 1304 and 19 CFR Part 134 do not apply to articles which are to be exported from the U.S. to another foreign country, but only apply to foreign articles imported into the U.S. Therefore, the marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134 are not applicable to the imported castings which are exported to Australia.

HOLDING:

Imported castings which are used by Wasco to manufacture cultivating machines in the U.S., in the manner described above, are substantially transformed as a result of the U.S. operations performed. Accordingly, pursuant to 19 CFR 134.35, Wasco is the ultimate purchaser of the castings and the imported articles are excepted from origin marking and only the outermost container in which the castings are imported and reaches Wasco must be marked with the country of origin of the castings.

The ultimate purchaser of imported castings which are sold in the U.S. as replacement parts is the person(s) in the U.S. who purchases the replacement part, not Wasco. Accordingly, the castings are not excepted from marking and the casting or its retail container must be marked to indicate "Brazil" as the country of origin of the casting to the ultimate purchaser.

Sincerely,

John Durant, Director

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