HQ 559147 - Country of origin marking; orthodontic instruments; North American Free Trade Agreement (NAFTA); simple assembly; minor processing; shape; assemble; adjust; polish; sharpen; 19 CFR 102.11(d)(1); 19 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 1996 HQ Rulings > HQ 559032 - HQ 559296 > HQ 559147

Previous Ruling Next Ruling
HQ 559147

May 14, 1996

CLA-02 RR:TC:SM 559147 KKV

CATEGORY: CLASSIFICATION

Peter S. Herrick, Esq.
3520 Crystal View Court
Miami, Florida 33133

RE: Country of origin marking; orthodontic instruments; North American Free Trade Agreement (NAFTA); simple assembly; minor processing; shape; assemble; adjust; polish; sharpen; 19 CFR 102.11(d)(1); 19

Dear Mr. Herrick:

This is in response to your letter dated April 3, 1995, on behalf of Ikon Orthodontic Instruments (hereinafter "Ikon"), which requests a ruling under the Customs Regulations and the North America Free Trade Agreement (NAFTA) with regard to the country of origin marking of certain orthodontic instruments in conjunction with two separate proposed manufacturing scenarios. Photographs representative of the manufacturing stages described below have been submitted and, upon our request, samples of the forgings were subsequently submitted for our examination.

FACTS:

The importation of the initial components involved in the production of the orthodontic instruments, applicable to both of the proposed manufacturing scenarios, has been described as follows. Rough forgings for the orthodontic instruments, are imported into the U.S. from Germany and subsequently exported to Mexico. These forgings consist of a right and left side, which will ultimately make up a pair. Ikon also purchases screws in the United States which will be supplied by Ikon and used in the assembly process.

I. First Proposed Manufacturing Scenario:

The operations involved in the production of orthodontic instruments under the first proposed manufacturing scenario have been described as follows:

1). The rough forgings are shaped in Mexico.

2). The shaped forgings are returned to the United States where they are heat treated and then laser engraved.

3). The shaped forgings are returned to Mexico, where the forgings are assembled and adjusted, using the screws originating in the U.S. and supplied by Ikon.

4). The assembled forgings are returned to the United States for laser welding.

5). The assembled forgings are returned to Mexico, where they are polished and sharpened.

6). The assembled forgings are sent to Ikon in the United States, where Ikon provides the final quality control check of the instruments and the packaging.

II. Second Proposed Manufacturing Scenario:

The operations involved in the production of orthodontic instruments under the second proposed manufacturing scenario have been described as follows:

1). The rough forgings are shaped in Mexico.

2). The shaped forgings would be returned to the United States where they are heat treated and then laser engraved.

3). The shaped forgings are sent to another location in the U.S., where the forgings are assembled and adjusted, using the screws originating in the U.S. and supplied by Ikon.

4). The assembled forgings are sent to a location in the U.S. for laser welding.

5). The assembled forgings are sent to Mexico, where they are polished and sharpened.

6). The assembled forgings are sent to Ikon in the United States, where Ikon provides the final quality control check of the instruments and the packaging.

ISSUE:

Under the two proposed manufacturing scenarios presented, what is the country of origin of orthodontic instruments, the rough forgings of which were imported into the United States from Germany, and subsequently exported and re-exported to Mexico for processing, while also undergoing processing in the United States?

LAW AND ANALYSIS:

Section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304) provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article will permit, in such a manner as to indicate to the ultimate purchaser in the United States 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 county 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. Inc., 27 CCPA 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 1(b)), defines "country of origin" as:
the country of manufacture, production or growth of any article of foreign origin entering the United States. 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 this part; however, for a good of a NAFTA country, the NAFTA
Marking Rules will determine the country of origin.

Section 134.1(j) of the Customs regulations provides that the "NAFTA Marking Rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the interim regulations defines a "good of a

NAFTA country" as an "article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules." Section 134.45(a)(2) of the interim regulations provides that a "good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish."

Section 134.35(b), Customs Regulations (19 CFR 134.35(b)) states that

A good of a NAFTA country which is to be processed in the United States in a manner that would result in the good becoming a good of the United States under the NAFTA Marking Rules is excepted from marking.
Unless the good is processed by the importer or on its behalf, the outermost container of the good shall be marked in accord with this part.

I. First Proposed Manufacturing Scenario:

In order to determine the country of origin marking requirements of the orthodontic instruments under the first proposed manufacturing scenario, we must initially apply the NAFTA Marking Rules to determine whether the forgings imported into the United States from Mexico are goods of Mexico prior to being further processed in the United States. Part 102, Customs Regulations (19 CFR Part 102) sets forth the "Nafta Marking Rules." Section 102.11 of the interim regulations sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that, "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced;

(2) The good is produced exclusively from domestic materials; or

(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section
102.20 and satisfies any applicable requirements of that section, and all other requirements of these rules are satisfied."

Neither section 102.11(a)(1) or (2) is applicable to the instant case because the forgings imported from Mexico are originally forged in Germany. Because an analysis of sections 102.11(a)(1) and 102.11(a)(2) do not yield a country of origin determination, Customs examination continues to 102.11(a)(3).

Pursuant to 19 CFR 102.11(a)(3), the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in section 102.20. Section 102.20 of the interim rules sets forth the specific tariff classification changes and/or other operations, which are specifically required to occur in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. In the case before us, because the shaped forgings imported from Mexico are classified under subheading 9018.49, HTSUS, the change in tariff classification must be made in accordance with section 102.20(r), Section XVIII: Chapters 90 through 92, subheading 9018.41 - 9018.50, HTSUS, of the interim regulations, which requires, "[a] change to subheading 9018.41 through 9018.50 from any other subheading, including another subheading within that group."

Upon receipt from you by our office, the sample of the rough forging was forwarded to our Metals and Machinery Classification branch, which determined that the rough forging, in its condition as imported from Germany, does not have the essential shape of an orthodontic instrument, but could be manufactured into a number of different articles, e.g., pliers, cutters, and toenail clippers, which are classified under Chapter 82. Accordingly, it concluded that, upon importation into the U.S. from Germany and prior to exportation to Mexico for processing, the forgings are classifiable under subheading 7326.19.00, HTSUS, as other articles of iron or steel: forged or stamped, but not further worked...other. Not until the rough forgings are shaped in Mexico would the articles possess the essential shape of finished orthodontic instruments. Thus, the rough forgings, which are initially classified under 7326.19.00, HTSUS, and subsequently classified under subheading 9018.49.80, HTSUS, after having been shaped in Mexico, undergo the applicable tariff shift. Consequently, the country of origin of the shaped forgings imported into the U.S. is Mexico.

Having determined that the shaped forgings qualify as a good of Mexico when imported into the United States, the country of origin marking requirements of the finished orthodontic instruments will be based upon a determination as to whether subsequent processing in the U.S., at any of the listed stages of manufacturing, would result in the article becoming a good of the United States under the NAFTA Marking Rules.

Upon return to the U.S., th sahped forgings aresubsequently heat treated and laser engraved. To determine the effect of this processing on marking requirements, we return to 19 CFR 102.11(a), which sets forth the required hierarchy for determining country of origin for marking purposes.

Because the shaped, heat-treated, engraved forgings are neither wholly obtained or produced, within the meaning of the regulations, nor produced exclusively from domestic materials, 19 CFR 102.11(a)(1) and 102.11(a)(2) are inapplicable.

Umder 19 CFR 102.11(a)(3), because the shaped, heat-treated, engraved forgings are classified under subheading 9018.49, HTSUS, the change in tariff classification must be made in accordance with section 102.20(r), Section XVIII: Chapters 90 through 92, subheading 9018.41 - 9018.50, HTSUS, of the interim regulations, which requires, "[a] change to subheading 9018.41 through 9018.50 from any other subheading, including another subheading within that group."

In the case before us, the finished orthodontic instruments are classified under 9018.49.8040, HTSUS, as dental hand instruments, including parts and accessories thereof. The item will bear the same classification number at all stages of manufacturing (after the initial shaping in Mexico), and is unaffected by any amount of subsequent processing. Thus, there is no applicable change in tariff classification within the requirements of section 102.20, and country of origin of the good may not be determined in accordance with this section.

Because 19 CFR 102.11(a) (incorporating section 102.20), is not determinative of origin, the next step is section 102.11(b) of the interim regulations, which states:

Except for a good that is specifically described in the Harmonized Tariff
Schedule as a set, or is classified as a set pursuant to General Rule of
Interpretation 2, where the country origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good, or

(2) If the material that imparts the essential character of the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided under the
Appendix to part 181 of the Customs
Regulations.

Here, because section 102.11(b)(2) is not applicable in this case, the applicable rule that must be applied to determine the country of origin of the orthodontic instrument is section 102.11(b)(1), which states that the country of origin is the country of origin of the "single" material that imparts the essential character of the good. In the instant case, the orthodontic instrument is composed of two identical forgings from Mexico, which are assembled together with a screw of U.S. origin.

"Material" is defined in 19 CFR 102.1(1) of the interim regulations as "a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components." When determining the essential character of a good under section 102.11, Customs regulations, section 102.18(b)(2), provides that, "for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of a good."

Because there are no distinguishing features between these two forgings and they are classified in the same HTSUS provision, we find that, for purposes of section 102.11(b), the two identical forgings collectively constitute the "single" material from which imparts the essential character to the finished good. Accordingly, the country of origin of the orthodontic instrument after having been heat treated and laser engraved in the U.S. is Mexico.

After these U.S. operations, the shaped forgings are returned to Mexico, where they are assembled and adjusted, using screws originating in the U.S. supplied by Ikon. Subsequently, the assembled instrument is returned to the U.S. for laser welding. Because the instrument still qualifies as a good of Mexico when imported into the United States, we must apply the hierarchical rules of 19 CFR 102.11 to determine whether this subsequent processing in the United States transforms the article into a good of the United States.

The instrument is neither wholly obtained/produced nor is produced exclusively from domestic materials and therefore paragraphs (a)(1) and (a)(2) of section 102.11 cannot be used to determine the country of origin of the orthodontic instrument. There is no change in subheading during the manufacturing process, after the initial shaping. Therefore, the article does not undergo an applicable tariff shift and country of origin may not be determined under paragraph (a)(3) of section 102.11. Because section 102.11(a) is not determinative of origin, we continue to 102.11(b).

As previously discussed, under section 102.11(b)(1), country of origin of a good is the country or countries of origin of the single material that imparts the essential character of the good. Here, the essential character of the instrument is supplied by the shaped forgings, which remain a product of Mexico. Accordingly, the country of origin of the assembled instrument which has undergone laser welding in the United States is Mexico.

Subsequently, the instrument is returned to Mexico, where the article is polished and sharpened before its final importation into the U.S. for a quality control check and packaging. Because the instrument remains a good of a Mexico upon its final importation into the United States, and the subsequent processing in the U.S. does not result in the instrument becoming a good of the United States (by application of 19 CFR 102.11), the finished article is not excepted from marking.

II. Second Proposed Manufacturing Scenario:

In order to determine the country of origin marking requirements of the orthodontic instruments under the second proposed manufacturing scenario, we initially apply the NAFTA Marking Rules, as set forth in Part 102, Customs Regulations (19 CFR Part 102) to determine whether the forgings imported into the United States from Mexico are goods of a NAFTA country prior to being further processed in the United States. As set forth under our analysis of the first proposed manufacturing scenario, the shaped forgings are a product of Mexico by application of 19 CFR 102.11

Under the second manufacturing scenario, the shaped forgings are imported into the United States where they are heat treated and laser engraved. The shaped forgings are sent to another location in the U.S. where the forgings are assembled and adjusted, using screws originating in the United States supplied by Ikon. The assembled forgings are sent to another location in the U.S. where the article is laser welded.

Having determined that the shaped forgings qualify as a good of Mexico when imported into the United States, the country of origin marking requirements of the finished orthodontic instruments are based upon a determination as to whether any of the subsequent processing performed in the U.S., would result in a change of origin from Mexico to the United States, under the NAFTA Marking Rules. If so, the finished instruments are excepted from marking.

Neither section 102.11(a)(1) or (2) can be used to determine country of origin. Under 19 CFR 102.11(a)(3), the applicable change in tariff classification is found in section 102.20(r), Section XVIII: Chapters 90 through 92, subheading 9018.41 - 9018.50,

HTSUS, of the interim regulations, which requires, "[a] change to subheading 9018.41 through 9018.50 from any other subheading, including another subheading within that group."

The finished orthodontic instruments under consideration are classified under 9018.49.8040, HTSUS, as dental hand instruments. The item will bear the same classification number at all stages of manufacturing (after the initial shaping in Mexico), and is unaffected by any amount of subsequent processing in the United States. Thus, there is no applicable change in tariff classification within the requirements of section 102.20, and the analysis continues to 102.11(b).

As set forth above, section 102.11(b)(1) determines the country of origin of a good as the country or countries of origin of the single material that imparts the essential character of the good. Also as discussed above, the essential character of the instrument is supplied by the identical forgings, which are a product of Mexico. Accordingly, the country of origin of the shaped forgings which have been heat treated, laser engraved, assembled, adjusted and laser welded in the United States, is Mexico.

Subsequent to the above operations, the assembled article is exported to Mexico for polishing and sharpening before it is returned to the Untied States for a final quality control check and packaging. Because the instrument remains a good of a Mexico upon its final importation into the United States, and the subsequent processing in the U.S. does not result in the instrument becoming a good of the United States (by application of 129 CFR 102.11), the finished article is not excepted from marking.

HOLDING:

With regard to the first proposed manufacturing scenario, on the basis of the information presented, we are of the opinion that, pursuant to section 102.11(b)(1) of the Nafta Marking rules, the orthodontic instruments are considered to be a product of Mexico for purposes of country of origin marking.

With regard to the second proposed manufacturing scenario, on the basis of the information presented, we are of the opinion that, pursuant to section 102.11(b)(1) of the Nafta Marking rules, the orthodontic instruments are also a product of Mexico for purposes of country of origin marking.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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

Previous Ruling Next Ruling

See also: