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HQ 559432




April 19, 1996

MAR 02- RR:TC:SM 559432 KKV

CATEGORY: MARKING

Mr. Jay Shah, President
Assen Exports, Inc.
10902 Reierstown road
Suite 203
Owings Mills, MD 21117

RE: Country of origin marking; Steel split sleeve repair clamps; substantial transformation; predetermined use at time of importation

Dear Mr. Shah:

This is in response to your facsimile dated September 12, 1995, referencing a letter to Customs dated August 2, 1995, which requests a ruling regarding the correct country of origin marking and classification for certain steel split sleeve repair clamps. No sample has been received for our examination. Additional information was submitted by you in a letter dated March 26, 1996. We note your inquiry regarding the correct classification of the subject clamp was forwarded to our New York office, which has issued a binding ruling to you on this issue (NY 813392, dated August 29, 1995).

FACTS:

Assen Exports, Incorporated, a firm specializing in pipeline and petroleum handling equipment, is planning to manufacture split sleeve repair clamps in the U.S. The material used to manufacture and assemble the clamps will be imported from India. We are informed that, prior to its importation, the raw material will undergo the following manufacturing processes in India:

A. The metal plate will be cut to the required thickness and size.
B. The plate will be bent to the required shape, including a suitable inner radius.
C. The extension ends will be cut.
D. The outer edge will be chamfered for welding to the stiffener on the width side.

E. The stiffener will be aligned with the cut edge and tack welded.
F. The article will be welded at the joints on the entire length by proper low hydrogen electrode on each shell half.
G. The stiffener will be machined along the length and width.

The article, which consists of two half sections, will then be imported into the United States for additional processing. We are informed that, in its condition as imported, the above article will not be sold as a final article and has no use other than for finishing into the final article, a split sleeve repair clamp.

Once imported into the U.S. the article will undergo further processing, including machining, drilling, finishing, assembly, painting and hydro-testing, prior to shipping, as detailed in the following instructions:

H. Mark and drill holes for studs on each half of both stiffeners and pot face holes.
I. For heavy welded stiffeners, bolt both halves with suitable nut and bolt and place in furnace for stress relieving.
J. Machine inner diameter, groove diameters, groove width and depth on both halves, and on each face, to required length.
K. Dismantle both halves and make a longitudinal groove for seal on each stiffener to permit seal fixing.
L. Tack weld seal edge holding flats at both ends.
M. Clean inner and outer sides by wire brush/sand or shot blasting.
N. Chamfer all edges of stiffener for welding on all sides and remove any burrs resulting from machining.
O. Weld any required hinges or hooks.
P. Fix seal on both halves by placing end longitudinal edges first in each groove. At each end, fix peripheral/circumferential seal in wedge shaped by grooves, pressing out any projections.
Q. Assemble both halves together using studs and nuts, tightening as required.
R. Pressure test clamp, adjusting studs if necessary.
S. Dismantle both halves and paint with anti-rust primer. Re-assemble and pack for shipment.

ISSUE:

What are the country of origin marking requirements for imported shell and stiffener components which are to be used in the production of finished split sleeve repair clamps 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 United States 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 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 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, 302 (1940). Part 134 of the Customs Regulations implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), mandates that the ultimate purchaser in the United States must be able to find the marking easily and read it without strain.

"Country of origin" is defined in section 134.1(b), Customs Regulations, 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.

A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. Texas Instruments, Inc. v. United States, 631 F.2d 778, 782 (CCPA 1982). In determining whether the assembly 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. See, Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (CIT 1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983). 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. 80-111, C.S.D. 89-129, and C.S.D. 90-51.

In National Hand Tool v. United States, Slip Op. 92-61 (April 27, 1992, aff'd, 989 F.2d 1201 (1993), a country of origin marking case, certain hand tool components used
to make flex sockets, speeder handles, and flex handles, were imported from Taiwan. The components were cold-formed or hot-forged into their final shape prior to importation, with the exception of speeder handle bars, which were reshaped by a power press after importation. The grip of the flex handles were also knurled in the U.S., by turning the grip portion of the handle against a set of machine dies that formed a cross-hatched diamond pattern. The components were subject to heat treatment, which increased the strength of the components, sand-blasting (a cleaning process), and electroplating (enabling the components to resist rust and corrosion). After these processes were complete, the components were assembled into the final products, which were used to loosen and tighten nuts and bolts.

The Court of International Trade decided the issue of substantial transformation based on three criteria, i.e., name, character, and use. Applying these rules, the court found that the name of the components did not change after the post-importation processing, and that the character of the articles similarly remained substantially unchanged after the heat treatment, electroplating and assembly, as this process did not change the form of the components as imported. The court further pointed out that the use of the articles was predetermined at the time of importation, i.e., each component was intended to be incorporated in a particular finished mechanic's hand tool. The court dismissed as a basis for a substantial transformation the value of the processing, stating that the substantial transformation test utilizing name, character and use criteria should generally be conclusive in country of origin marking determinations, and that this finding must be based on the totality of the evidence. Based on this test, the court concluded that the processing in the U.S. did not effect a substantial transformation of the foreign hand tool components.

A similar finding was made in Superior Wire v. United States, 867 F.2d 1409 (Fed. Cir. 1989), where the appellate court affirmed the Court of International Trade's holding that no substantial transformation occurred from the multistage processing of drawing wire rod into wire. In that case, the court noted that the "end use of the wire rod is generally known before the rolling stage and the specifications are frequently determined by reference to the end product for which the drawing wire will be used." Accordingly, the court found that the character of the final product was predetermined and that the processing did not result in a significant change in either character or use of the imported material. While the wire rod and wire had different names and identities in the industry, the court concluded that they were essentially different stages of the same product.

Upon careful review of all relevant documentation, we find a similar conclusion must be reached with regard to the split sleeve repair clamp at issue. Like the hand tool
components in National Hand Tool and the wire rods in Superior Wire, the use of the imported repair clamp components is predetermined at the time of importation. Each component is intended to be processed into a repair clamp. Indeed, you state that the components have "no other use" than to be finished into the repair clamp. The conclusion that the imported components and the repair clamp are merely different stages of the same product is supported by the decision issued by the New York Area office, dated August 29, 1995, which classified the imported article under subheading 7326.90.8590, Harmonized Tariff Schedule of the United States as "other articles of iron or steel, other." Specifically, the New York office stated, "[t]he General Rules for Interpretation (GRI) 2(a) states that any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished. This includes articles imported unassembled or disassembled. Your merchandise falls into this category." Thus, the use of the imported components does not change as a result of the U.S. processing.

The imported casting does not change in character as a result of the U.S. processing. The overall shape and size of the finished repair clamp are essentially the same as the imported shell and stiffener component. After being assembled with the bolts, seals and hinges, where necessary, the shell and stiffener component retains its original shape and form. In addition, we note that the percentage of imported material utilized in the production of each clamp is significant. The shell and stiffener component as well as the studs, nuts, seals and hinges utilized in the manufacture of the finished clamp are all imported from India.

Further, while the processing undertaken in the U.S.may add value to the finished article they do not substantially transform the imported components, which have a predetermined use, into a new and different article. Therefore, based upon the totality of the evidence, it is our determination that the finished split sleeve repair clamp is a product of India and must be conspicuously, legibly and permanently marked to indicate India as the country of origin, pursuant to 19 U.S.C. 1304.

HOLDING:

Imported steel shell and stiffener components which have a predetermined use as, and the overall shape and size of, split sleeve repair clamps in the U.S., are not substantially transformed into a new and different article as a result of the U.S. operations which include machining, drilling, finishing, assembly, painting and hydro-testing. Therefore, the finished split sleeve repair clamp must be conspicuously, legibly and permanently marked to indicate India as the country of origin, pursuant to 19 U.S.C. 1304.

A copy of this ruling letter 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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