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HQ 735241




May 10, 1995

MAR-05 R:C:S 735241 WAS

CATEGORY: MARKING

Thomas J. Lindmeier, Esq.
Suite 525, Regency One Building
10050 Regency Circle
Omaha, Nebraska 68114-5705

RE: Country of origin marking of ferrules; gas meter; 19 U.S.C. 1304(c); pipe; pipe fitting; Section 207 of the Trade and Tariff Act of 1984; substantial transformation

Dear Mr. Lindmeier:

This is in response to your letters dated June 25, 1993, and July 6, 1994, on behalf of your client, Central Plastics, concerning the country of origin marking requirements for ferrules which are imported from Korea and assembled into gas meters in the U.S. A sample and diagrams of the article were submitted for our review.

FACTS:

You state that the ferrules are made of a coated malleable iron. In their condition as imported, the ferrule will be fully threaded on the outside, fully dimensioned, and complete. The ferrule does not contain inside diameter threads. You claim that nothing will be done to the ferrule by Central Plastics Company after it is imported. Similarly, you state that the manufacturer who receives the ferrule will not do anything to it other than to assemble and epoxy it into a natural gas meter. You also submit that the ferrules range in size and are identified in accord with each manufacturer's identification system. Additionally, you state that the manufacturers of gas meters never sell a ferrule by itself without it being epoxied into a gas meter. Based on the sample and diagrams you have submitted, it appears that the production of the gas meter involves the assembly of approximately 90 individual components and entails numerous complex assembly operations.
ISSUE:

Whether the iron ferrules are excepted from the country of origin marking requirements?

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).

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. In U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), the court held 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 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).

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 Linens 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 85-25, 80-111, 85-25, 89-110, 89-118, 89-129 and 90-97.

In C.S.D. 90-51, 24 Cust.Bull. 417 (1990), we considered whether certain valve components, imported to be assembled with numerous U.S. components to make certain valves, were substantially transformed so as to make the importer/manufacturer the ultimate purchaser for purposes of country of origin marking. Finding that the imported components lost their separate identities in the finished valve products, we held that the imported components were substantially transformed by the assembly operation, and the imported components were excepted from individual country of origin marking requirements. However, we stated that even though the components themselves were excepted from marking, the outermost container of the imported components was required to be marked to indicate the country of origin of the components. See also C.S.D. 80-111 (foreign fan components not substantially transformed by domestic, 20-step, assembly-line operations, as the identity of the foreign components was not lost or physically altered, no skilled labor or specialized equipment was required, and the assembly costs were relatively low).

Furthermore, in Headquarters Ruling Letter (HRL) 712529 dated March 27, 1980, imported plastic housings and faceplates were found to be substantially transformed when domestically assembled with other components to make depth sounders, thus, rendering the manufacturer the ultimate purchaser of the imported components within the meaning of 19 U.S.C. 1304(a). See also, HRL's 732170 dated January 5, 1990 (distinguishing HRL 730515 dated June 29, 1987, and finding that the domestic assembly of imported backless television cabinets -- containing a tuner, speaker and circuit board -- with major U.S. components -- such as the color television picture tube, deflection yoke, etc.-- was more than a mere combining operation and caused all components to lose their respective identities and become integral parts of a new and different article of commerce, namely a color TV receiver; the assembly process also required technical skill); and HRL 733931 dated March 26, 1991 (domestic assembly of numerous domestic and foreign audio cassette components causes the foreign components to lose their separate identities as foreign articles; the foreign components are substantially transformed when fully assembled into completed cassette tapes).

Consistent with C.S.D. 90-51 and HRL's 712529, 732170 and 733931, we find that the foreign ferrules imported into the U.S. undergo a substantial transformation into a new and different article of commerce having a name, character and use that is different from that of the imported article when they are assembled into the completed natural gas meter. Based on information you have provided, the production of the gas meter involves approximately 90 different components and entails numerous complex assembly operations. These operations are required to be performed in a precise manner which necessitates a great deal of skill in order to allow the various parts to be mounted together to create an article differing in character and use from the component parts. As a result of the assembly process, the imported ferrules lose their separate identity and become integral parts of the gas meters. Prior to the assembly of the gas meter, it is clear that the individual ferrules do not possess the character or use of the finished article. It is only after the complex assembly operation that the individual ferrules are dedicated to a particular use as a gas meter. Thus, as a result of the assembly of the ferrules into the finished gas meter, the value of the individual components is increased and an article having a new and distinct commercial identity is created.

Special country of origin marking requirements are applicable to certain pipe and pipe fittings. Specifically, section 207 of the Trade and Tariff Act of 1984 (19 U.S.C. 1304(c)) requires that pipe and pipe fittings of iron or steel be marked to indicate the country of origin of the article by means of die stamping, cast- in-mold lettering, etching, or engraving. This provision further states that no exception from these marking requirements may be made under 19 U.S.C. 1304(a)(3) for pipe and pipe fittings. However, if, because of the nature of an article, it is technically or commercially infeasible to mark it by one of the four methods specified, the article may be marked by an equally permanent method of marking such as paint stencilling or, in case of small diameter pipe, tube, and fittings, by tagging the bundles (19 U.S.C. 1304(c)(2)). Accordingly, even if it is determined that an imported article has been substantially transformed by manufacture or processing in the U.S. such that it is no longer an article of foreign origin, 19 U.S.C. 1304(c) limits the authority of Customs to approve an exception from country of origin marking. In the instant case, if the ferrule is classified as a pipe or pipe fitting, it must be marked in accordance with the requirements of 19 U.S.C. 1304(c), even though it is otherwise eligible for a marking exception pursuant to section

Customs has determined that certain pipe and pipe fittings of iron or steel cannot be marked with the country of origin by any of the four methods prescribed in 19 U.S.C. 1304(c)(1) without rendering such articles unfit for the purpose for which they were intended or without violating applicable industry standards. Therefore, these categories of articles were exempted from these special marking requirements. See T.D. 86-15 which lists and describes the exempted articles and sets forth alternative acceptable methods for marking. The iron ferrules which are the subject of this ruling are not one of the categories of articles specifically exempted from the special marking requirements. Therefore, the ferrules must be marked by means of die stamping, cast-in-mold lettering, etching or engraving on the ferrule, unless it is shown that it is technically or commercially infeasible to do so.

The ferrules are provided for under subheading 7307.92.30, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Pipe fittings of iron or steel: Other: threaded elbows, bends and sleeves." It is the opinion of this office that you have not presented a sufficient case of technical or commercial infeasibility of marking the ferrules by either die stamping, cast-in-mold lettering, etching or engraving. Thus, it is our conclusion that the ferrules used to produce the gas meters are considered pipe fittings within the meaning of 19 U.S.C. 1304(c), and are subject to the special marking requirements. We do not construe this section to require, however, that the marking of the country of origin of a pipe or tube product remain on the article after it has reached the ultimate purchaser in the U.S. After processing in the U.S. which substantially transforms the fitting into a new and different article of commerce with a new name, character, and use, there is no remaining obligation on the part of the ultimate purchaser to preserve the markings. See U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); see also HRL 728693 dated November 5, 1985; and HRL 730416 dated May 11, 1987.

HOLDING:

Based on the information and sample submitted, it is our opinion that the processing in the U.S. results in a substantial transformation of the imported ferrules. However, the imported ferrules are classifiable as threaded elbows, bands and sleeves under subheading 7307.92.30, HTSUS, and as such are subject to the special marking requirements of 19 U.S.C. 1304(c).

A copy of this ruling should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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