HQ 559437 - Country of origin marking for imported castings; water meters; substantial transformation; loss of separate identity; new and different article; 19 CFR 134.35; 19 CFR 134.32(d); - United States International Trade Commision Rulings

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HQ 559437

March 22, 1996

MAR-05 RR:TC:SM 559437 KKV

CATEGORY: MARKING

Mr. Roger A. Crater
Quality Assurance
Water Specialities Corporation
191 West Poplar Avenue
Porterville, CA 93257

RE: Country of origin marking for imported castings; water meters; substantial transformation; loss of separate identity; new and different article; 19 CFR 134.35; 19 CFR 134.32(d);

Dear Mr. Crater:

This is in response to your letter dated September 6, 1995, which requests a ruling regarding the correct country of origin designation for marking and duty purposes of certain imported castings. Although no sample has been submitted, a diagram depicting the parts and assemblies has been provided.

FACTS:

You indicate that your firm wishes to import certain castings for incorporation into water meters assembled in the United States. We are informed that the processes which take place in the United States to create the water meters are as follows:

Upon receipt, the castings are:

1. Inspected by a Quality Assurance representative;
2. Blast cleaned in a high pressure sand blasting facility;
3. Heated to approximately 250 degrees Fahrenheit and coated with a .060" thick 3M epoxy coating, cooled; and
4. Machined (reamed and tapped), sanded and touched up, if necessary.

Once the castings have undergone the processes referenced above, they are ready to be used in the assembly of a water meter. The following parts and assemblies are attached to the casting in various ways to complete the meter assembly, which we note is the standard Water Specialties Corporation meter. You state that this list does not reflect many items that would be installed on a more complex meter:

1). Register
2). Register Bonnet with Logo Lid
3). Serial Tag
4). Drive and Driven Gears
5). Gear Box
6). V-Shaft
7). Bearings
8). O-Rings
9). Miter Gear Frame
10). Separator and Spindle Assembly
11). Propeller Assembly
12). Meter tube.

In total, the standard propeller meter utilizes approximately 85 parts, other than the meter head (not including attaching hardware), for a complete, marketable assembly. We are informed that, with regard to these 85 parts, the meter tube and two end flanges are purchased domestically from vendors whose stock on hand may be of either domestic or foreign origin. The remainder of the parts are produced domestically by Water Specialties Corporation.

ISSUE:

Whether the imported castings are substantially transformed when they are combined in the U.S. with domestic components in the manufacture of water meters 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.

"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)

Section 134.35 implements the principles set forth in U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), which 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. In such circumstances the U.S. manufacturer is the ultimate purchaser. The imported article is excepted from individual marking provided the containers in which the article is imported are marked and such containers will reach the manufacturer properly marked.

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. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D.89-129 and C.S.D. 90-97.

In this case, the processing of the castings in the United States prior to their incorporation into water meters includes blast cleaning, heating, coating, machining and sanding, if necessary. Once thus prepared, the casting undergoes a complex assembly process utilizing approximately 85 separate pieces. Upon review, Customs finds that as a result of the foregoing operations, the subject imported castings lose their separate identity and are substantially transformed into a new and different article when incorporated into the water meters. Accordingly, the manufacturer of the water meters is the ultimate purchaser of the castings. Pursuant to section 134.32(d) of the Customs regulations (19 CFR 134.32(d)), the castings are exempted from individual country of origin marking, provided that the containers in which they are imported are properly marked with the country of origin and Customs officials at the port of entry are satisfied that these containers will reach the ultimate purchasers unopened.

HOLDING:

Imported castings which which lose their separate identity as a result of complex assembly processes performed in the United States are substantially transformed into a new and different articles when incorporated into water meters. Accordingly, the manufacturer of the water meters is the ultimate purchaser of the castings. Pursuant to section 134.32(d) of the Customs regulations (19 CFR 134.32(d)), the castings are exempted from individual country of origin marking, provided that the containers in which they are imported are properly marked with the country of origin and Customs officials at the port of entry are satisfied that these containers will reach the ultimate purchasers unopened.

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

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