HQ 0735010 - Internal Advice request concerning the country of origin marking requirements for imported rubber dental dams; assembly of foreign rubber dental dams with domestic plastic frames; substantial transformation; 19 CFR 134.35 - United States International Trade Commision Rulings

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HQ 735010

August 4, 1993

Mar-2-05 CO:R:C:V 735010 AT

CATEGORY: MARKING

District Director of Customs
Key Tower Center
Seattle, Wa. 98174

RE: Internal Advice request concerning the country of origin marking requirements for imported rubber dental dams; assembly of foreign rubber dental dams with domestic plastic frames; substantial transformation; 19 CFR 134.35

Dear Sir:

This is in response to your memorandum dated February 19, 1993, requesting internal advice on the country of origin marking requirements for foreign dental dams imported by Aseptico Inc. ("Aseptico"), to be further processed in the U.S. A sample of the completed article as well as the individual components before assembly were submitted with your memorandum. We regret the delay in responding.

FACTS:

Aseptico imports foreign rubber dental dams (6" squares) to be further processed in the U.S. The company indicates that it also sells a portion of these foreign dental dams to dentists to be used in their imported condition. The dental dams which are sold to dentists in their imported condition are packaged in properly marked retail containers. Dental dams are used by dentists during oral surgery and are placed in a patient's mouth in order to isolate a patient's tooth/teeth and keep the area dry from saliva. The processing performed by Aseptico in the U.S. consists of individually gluing dental dam squares to domestic manufactured plastic frames, trimming of the excess material and punching. The finished dams are then repackaged 20 to a carton and sold to dentists under the name "Handidam". It is Aseptico's position that the imported dental dams are substantially transformed as a result of the U.S. processing, and therefore should be excepted from marking. In support, Aseptico states that the domestic components and assembly operation performed in the U.S. approximately quadruple, at cost, the value of the finished Handidam ($.43) versus the value of the rubber dam square ($.10). It argues that this increase in value constitutes a substantial transformation of the imported dental dam squares.

ISSUE:

What are the country of origin marking requirements of imported dental dams assembled by Aseptico in the U.S. with domestic plastic frames in the manufacture of Handidams in the manner described above?

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, C.A.D. 104 (1940).

The country of origin marking requirements of imported dental dams that are assembled by Aseptico in the U.S. with domestic plastic frames rests upon whether Aseptico is the ultimate purchaser of the imported dams.

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. Koru North America V. United States, 12 CIT 1120, 701 F. Supp. 229 (1988). 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 containers of the imported articles must be marked. 19 CFR 134.35. The question of when a substantial transformation occurs is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022 (1983).

The issue involved in this case is whether the imported dental dams which are assembled with domestic plastic frames in the U.S. to form completed Handidams are substantially transformed into a new article having a new name, character or use.

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.

Customs has held that operations, such as cutting to length, dyeing and gluing are merely finishing and assembly operations which do not result in a substantial transformation of the imported article. In HQ 734907 (May 12, 1993), Customs held that the bonding operation of gluing domestic foam to Canadian vinyl in the U.S. to manufacture foam bonded vinyl was a minor operation which did not constitute a substantial transformation of the foreign vinyl. In HQ 728269 (July 29, 1985), Customs held that operations performed on greeting cards, such as pressing out, folding and gluing, were minor and did not constitute a substantial transformation of the imported card.

Similarly, in this case, we find that the bonding operation of gluing imported dental dam squares to domestic plastic frames does not constitute a substantial transformation of the foreign dental dams. The operation is very simple and does not require a great deal of skill or time. The bonding of rubber dental dam squares to plastic frames only involves gluing the rubber square to the plastic frame by means of an adhesive material. The formation of the finished Handidam is made by this simple bonding operation. Furthermore, although the finished Handidam has a somewhat different appearance than the imported dental dam both are used essentially in the same manner by dentists. The addition of a plastic frame merely makes it easier to use (e.g. it does not have to be removed to take an X-ray of a patient's tooth during oral surgery). Though, as Aseptico claims, the U.S. operations increase the value of the finished Handidams significantly, determinations of substantial transformation based simply on an increase in value were recently rejected by the Court in National Hand Tool Corp. v. United States, Slip Op. 92- 61 (April 27, 1992). After careful consideration of the information presented, we conclude that the imported rubber dental dams are not substantially transformed as a result of the U.S. processing and are subject to the marking requirements set forth in 19 U.S.C. 1304. The outermost container in which the rubber dental dams are imported must be marked to indicate the foreign origin of the dental dams.

We note that since the imported dental dams are processed and then repacked into retail containers in the U.S. the certification requirements of 19 CFR 134.26 are applicable. 19 CFR 134.26 provides in part that:

If an article subject to these requirements is intended to be repacked in new containers for sale to an ultimate purchaser after its release from Custom custody, or if the district director having custody of the article, has reason to believe such article will be repacked after its release, the importer shall certify to the district director that: (1) If the importer does the repackaging, the new container shall be marked to indicate the country of origin of the article in accordance with the requirements of this Part: or (2) If the article is intended to be sold or transferred to a subsequent purchaser or repacked, the importer shall notify such purchaser or transferee,in writing, at the time of sale or transfer, that any repacking of the article must conform to these requirements.

HOLDING:

For purposes of 19 U.S.C. 1304, the domestic processing of imported rubber dental dams by gluing, trimming excess material, punching and packaging into finished Handidams does not constitute a substantial transformation. Accordingly, the repackaged Handidams are subject to the country of origin marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134 and Aseptico (importer) must follow the certification procedures of 19 CFR 134.26. The outermost container in which the dental dams are imported and the retail containers must be marked to indicate the foreign origin of the dental dams.

Sincerely,

John Durant, Director

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