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NY 802082

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October 4, 1994

MAR-2-87:S:N:N1:101 802082

CATEGORY: MARKING

Ms. Laura Guay
F.W. Meyers & Co., Inc.
33 West Service, P.O. Box 188
Champlain, New York 12919

RE: COUNTRY OF ORIGIN MARKING OF IMPORTED TIE ROD END FORGINGS

Dear Ms. Guay:

This is in response to your letter dated July 6, 1994 on behalf of Moog Automotive Inc. requesting a ruling on whether the proposed method of marking the container in which the forgings are imported with the country of origin in lieu of marking the article itself is an acceptable country of origin marking for the imported forgings. A marked sample container was not submitted with your letter for review.

You have stated that Moog Automotive Inc. is now considering the purchase and importation of an unfinished metal forging (part number 40912F), from India. A sample of the forging in condition at the time of importation has been enclosed. Currently, no country of origin markings appear on the forging and they will be imported in bulk. You state that the forgings will be imported in a raw unfinished condition and are not useable in their imported form. After importation, these forgings will be machined and assembled with other parts to form a finished tie-rod end which will be sold by Moog Automotive to various aftermarket service industries such as mechanics, local garages etc., who will utilize the finished product to repair certain Ford or Mercury automobiles.

After importation, Moog will perform several machining operations on the forging. The bowl (fat round end) is machined to exacting tolerances in a 7-station dial index cross machine. The shank of the forging (long cylindrical section), is then drilled and tapped in a separate machining operation on a six-station dial index Kingsbury machine. The specific dimensions and tolerances of these machining operations are shown on attached drawing 40912M.

After machining, the forgings will receive a black oxide coating to enhance the appearance of the part and impart a rust preventative finish. Enclosed is a sample of the forging after machining operations.

The finished machined part is now assembled by adding a cold headed stud, three stamping including a cover plate, sleeve bearing and a pressure plate and a spring to the bowl. Further processing then includes mechanically closing the bowl edge to permanently encapsulate the components in the bowl. Particular care is then given during this operation to guarantee the proper pre-load on the stud. Mechanics and service stations purchase the finished tie-rod end and bag containing additional parts as a kit.

You submit the following information relative to the cost of the original forging, additional parts and labor. You estimate that the landed cost CIF St. Louis, Missouri will be $ .51 per forging. Additional parts added will be approximately $ .99 per forging. Labor including machining, coating and processing will be approximately $2.91 each. The accumulative total cost per unit will be approximately $4.41 F.O.B., St. Louis, Missouri, not including profit.

Regarding the Law and Analysis of this issue, we quote directly from Headquarters Ruling 733288 Issued on September 5, 1990.

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. The Court of Interna- tional Trade stated in Koru North America v. United States, 701 F.Supp. 229, 12 CIT __ (1988), that: "In ascertaining what con- stitutes the country of origin under the marking statute, a court must look at the sense in which the term is used in the statute, giving reference to the purpose of the particular legislation involved. The purpose of the marking statute is outlined in United States v. Friedlaender & Co., 27 CCPA 297 @ 302, C.A.D. 104 (1940), where the court states that: 'Congress intended 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 by them, if such marking should influence his will.'"

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. An ultimate purchaser is defined in {134.1, Customs Regulations (19 CFR 134.1), as "generally the last person in the United States who will receive the article in the form in which it was imported." The regulation further provides that if an imported 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.

For classification purposes, a product may be deemed to be an unfinished form of an article if the product has been manufactured to the point where it is dedicated solely to the manufacture of that article, see Avins Industrial Products Co. v. United States, 62 CCPA 83 (1976). "The proper classification is not dispositive of whether the manufacturing process necessary to complete an article constitutes a substantial transformation from the original material to the final product." (emphasis supplied).

Torrington Co. v. United States, 3 CAFC 158 (1985). The test for substantial transformation is whether a new and different articleof commerce having a new name, character or use occurs as the result of a manufacturing process. Under {134.35, Customs Regulations (19 CFR 134.35), an imported article that is substantially transformed in the U.S. is excepted from individual country of origin marking and only the outermost containers of the imported article must be marked with the country of origin.

An article is described in U.S. v. Gibson-Thomsen Company, Inc., 27 CCPA 267 (1940), as being substantially transformed because it is "so processed in the U.S. that it loses its identity in a tariff sense and becomes an integral part of a new article having a new name, character and use."

Imported rough forgings made into flanges and fittings in the U.S. were found to be substantially transformed in the U.S. in Midwood Industries, Inc. v. United States, 64 Cust.Ct. 499, 313 F.Supp. 951 (1970). The court effectively overruled T.D. 68-57:

It is apparent from the evidence at bar that the processes to which the imported merchandise is subject- ed after entry are essentially the same as those the subject of the Bureau of Customs' ruling in T.D. 68-57, ibid., 956. The court found that the processes, namely, the cutting, boring, facing, spotfacing, drilling, tapering, thread- ing, bevelling, and heating and compressing, were manufacturing processes representative of a successive stage of manufacture. The court pointed out that the rough forgings had no commercial use in their imported condition because the forgings were used to connect pipes of a matching size, and in their imported state, the forgings had no connecting ends. The end result of the manufacturing processes was the transformation of the imported articles into different articles having a new name, character and use. The court concluded that the ultimate purchaser of the forgings was the manufacturer of the flanges and fittings.

In HQ 731572, July 1, 1988, Customs found that forgings imported in a rough condition with a significant amount of machining to be done to enable the finishing operations to be accomplished were substantially transformed, and the ultimate purchaser of such imported rough forgings was the U.S. processor. Even though the forgings resembled the size and shape of the finished articles, they had to be lathed, drilled to remove stock from the center to provide a cavity necessary for bolt and fastener clearance, and ground to make the outer wall a specified diameter and wall thickness. All of the foregoing was necessary and changed the fundamental character of the imported article from forgings to sockets, adapters and extensions and enabled the product to be used as socket wrenches. The imported forgings were substantially transformed into an article with a new name, character or use.

Customs ruled in HQ 732487 (September 20, 1989), that an imported rough forging made into a wrench in the U.S. was substantially transformed. The processes involved in the U.S. included: coining, shot blasting, polishing, grinding, stamping, tempering, chrome plating and calibrating both ends of the wrench. The U.S. processing constituted 55-60% of the total cost of the finished wrench.

Raw forgings for automotive master cylinders and automotive wheel cylinder castings were held to be substantially transformed in HQ 730123 (February 5, 1990). In that ruling, Customs pointed out that the imported parts were subjected to substantial processing which included: drilling, boring, reaming, tapping and assembly with other U.S.-made parts and which was costly and complex. The imported master cylinder casting was 25.5% of the finished product, and the imported wheel cylinder casting was 15.8%.

In T.D. 74-12(3), November 1, 1973, Customs determined that the processing of fully machined components of socket wrench sets did not result in a substantial transformation of the imported blank within the meaning of 19 CFR 134.35. This decision was affirmed in HQ 711320, March 6, 1981. The underlying rationale in both instances was that the U.S. processing was merely minor finishing operations that did not change the name, character or use of the imported blanks.

In HQ 732259, February 16, 1990, Customs found that imported unfinished adjustable wrench handles and adjustable wrench jaws further processed and combined with U.S. parts to make finished adjustable wrenches were substantially transformed.

Finally, in HQ 726172 (September 6, 1984), Customs found that universal joints imported in a solid hub configuration, and subjected to standard boring processing in the U.S., so that a rod or shaft could be inserted into the joint, were not substantially transformed. Customs found that, while the domestic machining was essential to making the imported joints into func- tional articles, the imported joint was far along to becoming a finished article as imported, and its identity was not fundamentally changed in the U.S. Customs noted that a substantial amount of machining and processing had already occurred prior to the boring process performed in the U.S.

As a result of the extensive machining operations, the addition of a significant number of domestic parts, and the cost breakdown of the finished product we find that the imported forging is substantially transformed into an article with a new name, character or use, namely a finished tie rod end.

Forgings which are imported in containers that are marked in the manner described above, are excepted from marking under 19 U.S.C. 1304 (a)(3)(D) and 19 CFR 134.32(d). The manufacturer of tie rod ends who uses imported steering linkage forgings in the manufacturing process is the ultimate purchaser of the imported articles. Accordingly, marking the container in which the forgings are imported and sold to the ultimate purchaser in lieu of marking the article itself is an acceptable country of origin marking for the imported forgings provided the district director is satisfied that the article will remain in the marked container until it reaches the ultimate purchaser.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 177).

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,

Jean F. Maguire

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