HQ 0735506 - Country of origin marking requirements for metal components used to produce butterfly valves; ultimate purchaser; substantial transformation; false or misleading marking - United States International Trade Commision Rulings

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HQ 735506

August 28, 1994

MAR-2-05 CO:R:C:S 735506 BLS

CATEGORY: MARKING

Mr. David C. Soto
V. Alexander & Co.
P.O. Box 291929
Nashville, Tenn. 37229-1929

RE: Country of origin marking requirements for metal components used to produce butterfly valves; ultimate purchaser; substantial transformation; false or misleading marking

Dear Mr. Soto:

This is in reference to your letter dated February 9, 1993, requesting a ruling that a metal valve body assembly and steel butterfly valve shaft with black epoxy diaphragm utilized in the production of butterfly valves will be excepted from country of origin marking requirements upon importation into the U.S. Samples of the components and the finished butterfly valve have been submitted.

FACTS:

The butterfly valve is used to regulate the flow capacity of various materials in the chemical, power, paper, petroleum and refining industries. After importation from Korea, the valve body assembly and butterfly valve shaft, components which are manufactured in Korea, are combined (shaft positioned inside of valve body) with a snap ring, rubber gasket, bearing and a valve actuator or device that will either electronically or manually control the flow of various substances when the finished valve is placed on the requisite piece of equipment at the importer's facility. The actuator is bolted onto the valve body and the completed unit may go through a touch-up paint process due to chipping of existing paint occurring during the assembly process.

The valve body is imported solely for use in the assembly of the finished valve which is marketed by the importer, Dezurik, a unit of United Signal. You state that it is not sold in its imported state, nor will the valve body or shaft be sold as spare parts for repair goods. If defective or if the valve needs repair, Dezurik will replace the entire finished valve. Replacement parts are not sold to any customer. Once the assembly process is completed, a small metal plate (included as an exhibit) will be placed on the finished valve body. The plate carries the name of "Dezurik", with no reference to a geographical location. Upon completion of the assembly process, it is proposed that the
domestic packaging will have the following marking, "Dezurik - McMinnville, Tennessee." Dezurik will also have the Korean manufacturer indicate the country of origin on the outer carton at time of importation.

ISSUES:

1. Whether the valve body assembly and and butterfly valve shaft are substantially transformed in the U.S. so that the U.S. processor will be considered the ultimate purchaser of the constituent materials.

2. Whether the marking on the valve body with the name "Dezurik", and the marking on the domestic packaging "Dezurik, McMinnville, Tennessee", performed by the processor after the assembly process, is misleading to the ultimate purchaser of the imported components.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 304), 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 purchased, 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).

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 production 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 article is excepted from marking and only the outermost container of the imported article is required to be marked. See section 134.35, Customs Regulations (19 CFR 134.35). However, if the process is a minor one which leaves the identity of the 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).

The first issue which must be addressed is whether Dezurik is the ultimate purchaser of the imported metal components. Section 134.1(d)(1) provides that if an 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 the instant case, the operations in the U.S. involve combining the imported valve body and valve shaft with a snap ring, rubber gasket, bearing and a valve actuator, which is bolted onto the valve body. These operations appear to be simple, as opposed to complex, assembly operations, which generally will not result in a substantial transformation. See C.S.D. 85-25 dated September 25, 1984. Further, from an examination of the submitted sample, and a description of the finished product, we find that the essential character and identity of the constituent articles have not been transformed into new and different articles of commerce as a result of the processing. (In this regard, this case is distinguished from Headquarters Ruling Letter (HRL) 731307 dated February 23, 1990, cited in your letter, where we held that certain metal castings known as follower rings lost their identity during a manufacturing process and became integral parts of gate valves, butterfly valves and fire hydrants.)

Under the circumstances, we find that the consumer or user of the article after the processing in the U.S., and not Dezurik, will be considered the "ultimate purchaser." Therefore, the exception to country of origin marking under 19 CFR 134.35 is not applicable, and the imported articles must be marked to indicate Korea as the country of origin, in accordance with 19 U.S.C. 1304, as implemented by Part 134 of the Customs Regulations.

The next question to be resolved is whether, after completion of the processing involving the constituent components, Dezurik may mark the valve body with a metal plate inscribed with the name "Dezurik", and may mark the domestic packaging of the completed butterfly valve, "Dezurik, McMinnville, Tennessee."

Section 134.46, Customs Regulations (19 CFR 134.46) requires that when the name of the city or locality in which the article was
manufactured or produced, appears on an imported article or its container, there shall appear, legibly, and permanently, in close proximity to such words, letters 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 requirement is to prevent the possibility of misleading or deceiving the ultimate purchaser of an article as to the actual origin of the imported good.

The requested marking bearing the processor's name and U.S. location is acceptable, as long as the name of the country of origin, Korea, preceded by "Made in," "Product of," or other words of similar meaning, also appears on the domestic packaging, legibly and permanently, in letters of at least comparable size, and in close proximity to the processor's address. See 19 CFR 134.46. Affixing a metal plate to the valve body with the processor's name only is also acceptable.

HOLDING:

A Korean origin metal valve body assembly and steel butterfly shaft utilized in the production of butterfly valves will not be substantially transformed by the U.S. processor into new and different articles of commerce. Therefore, the U.S. processor is not considered the ultimate purchaser, and the imported articles must be marked to indicate Korea as the country of origin in accordance with 19 U.S.C. 1304 and the implementing regulations. Customs officials at the port of entry must be satisfied that such marking will be in compliance with all statutory and regulatory requirements. The words "Dezurik, McMinnville, Tennessee", may appear on the domestic packaging, bound for the ultimate purchaser. However, the name of the country of origin must also appear on the packaging, in close proximity to the U.S. geographic location of the processor, in compliance with the requirements of 19 CFR 134.46.

Sincerely,

John Durant, Director

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