HQ 560441 - Country of Origin Marking on surgical and medical instruments; machined Hungary; Germany forgings; 19 CFR 134.32(c) and (o); 19 CFR 134.43(a) - United States International Trade Commision Rulings

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HQ 560441

November 18, 1997

MAR-2-05 RR:TC:SM 560441 MLR

CATEGORY: MARKING

Patricia M. Hanson, Esq.
Katten, Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693

RE: Country of Origin Marking on surgical and medical instruments; machined Hungary; Germany forgings; 19 CFR 134.32(c) and (o); 19 CFR 134.43(a)

Dear Ms. Hanson:

This is in reference to your letters of April 29, and November 5, 1997, requesting a ruling on behalf of Allegiance Healthcare Corp. ("Allegiance"), concerning the country of origin marking on certain surgical and medical instruments.

FACTS:

It is stated that Allegiance purchases medical and surgical instruments from an unrelated supplier in Hungary. It is stated that the Hungarian supplier crafts the finished instruments from German forgings made from German steel. The German rough forgings are sent to Hungary for machining, assembly, and finishing processes that remove a layer of impurities from the forgings, and the forgings are cut down to the shape of the instrument. For two-component instruments, the refined pieces are assembled by putting a rivet in the boxlock to connect the two components together to form the instrument. The instruments are further cut and machined to refine the tips. The two-component instruments are aligned and set so that they are capable of gripping, closing, and locking in place. Then, the instruments are cleaned, rough polished, heat treated, and cleaned. It is stated that 50 percent of the value of the finished instrument is added in Hungary, and inclusive of the Hungarian manufacturer's profit, the value added is approximately 70 percent. The instruments are then shipped to the U.S.

It is stated that the Hungarian processor will not mark the finished instruments as a product of Germany and has notified Allegiance in a letter dated July 11, 1996 that it does not have "the right to etch Made in Germany' on the surgical instruments manufactured by itself." Submitted as support, you have supplied a copy of the pertinent provisions of the Hungarian law, Act C. 1995. In your letter dated November 5, 1997, it is stated that the Hungarian manufacturer has agreed to mark the finished instruments exported from Hungary "German Stainless". After importation into the U.S., it is stated that Allegiance will sell the finished instruments in polybags and that the marking "German Stainless" will be visible through the bag. Additionally, it is stated that Allegiance will place a label on the polybag bearing its name and its U.S. address, and the following language: "NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES".

ISSUE:

Whether the proposed marking consisting of "German Stainless" on the finished instruments and Allegiance's name, U.S. address, and the words "NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES" on the polybag in which the instruments are sold satisfies the marking requirements of 19 U.S.C. 1304.

LAW AND ANALYSIS:

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) 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. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and 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.

For country of origin marking purposes, a substantial transformation of an imported article occurs when it is used in the manufacture, which results in an article having a name, character, or use differing from that of the imported article. On the other hand, if the manufacturing or combining process is merely a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred and an appropriate marking must appear on the imported article so that the consumer can know the country of origin. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).

In National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), the court considered sockets and flex handles which were either cold formed or hot forged into their final shape prior to importation, speeder handles which were reshaped by a power press after importation, and the grip of flex handles which were knurled in the U.S. The imported articles were then heat treated which strengthened the surface of the steel, and cleaned by sandblasting, tumbling, and/or chemical vibration before being electroplated. In certain instances, various components were assembled together which the court stated required some skill and dexterity. The court determined that the imported articles were not substantially transformed and that they remained products of Taiwan. In making its determination, the court focused on the fact that the components had been cold-formed or hot-forged "into their final shape before importation", and that "the form of the components remained the same" after the assembly and heat-treatment processes performed in the U.S. Although the court stated that a predetermined use would not preclude the finding of a substantial transformation, it noted that the determination must be based on the totality of the evidence. However, no substantial change in name, character or use was found to have occurred as a result of the processing performed in the U.S.

You cite Headquarters Ruling Letter (HRL) 558747 dated January 20, 1995, as support that the finished instruments in this case are a product of Germany. HRL 558747 involved the same type of processes as in this case, except that the German forgings were shipped to the U.S. (rather than Hungary alone) for assembly, cutting, and scaling down and then to Russia or Hungary for heat treatment, a final cleaning, and plating. Although all of the finishing processes and assembly operations in this case are performed in Hungary, we find that pursuant to National Hand Tool, there is no substantial transformation of the forgings in Hungary, and the country of origin of the finished instruments for marking purposes is Germany.

However, it is claimed that the Hungarian manufacturer will not mark the finished instruments as made in Germany because 50 percent of the value of the instruments is added in Hungary. In fact, it is claimed that the Hungarian manufacturer is required to mark its goods. The Hungarian Act C. Of 1995, subsection (3) states:

Unless an international convention provides otherwise, processing or working to a sufficient extent ... shall mean the processing or working, as a result of which an increase in excess of fifty percent occurs in the value of the goods....

It is stated that under Hungarian law, the value of the materials is based on the customs value and the value of good is based on the value to be paid to the last manufacturer, i.e., on the ex-works price (including the profit of the manufacturer), provided that the price includes all the costs of products used during the processing. There is no indication, however, that this law applies to exports from Hungary (such as involved in this case) as opposed to imports into Hungary. In any case, notwithstanding the Hungarian law cited, the U.S. country foreign marking statute, 19 U.S.C. 1304, will still be applicable to foreign articles imported into the U.S., and as determined above, the finished instruments are a product of Germany.

In your letter dated November 5, 1997, it is stated that the Hungarian manufacturer has agreed to mark the finished surgical instruments with the words "German Stainless." After importation in the U.S., it is stated that Allegiance will sell the finished instruments in polybags which are marked with its name and U.S. address. Allegiance proposes to place the following words "NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES" beside its name and U.S. address.

Treasury Decision ("T.D.") 97-62, was published (62 FR 44211, August 20, 1997) amending section 134.46, Customs Regulations (19 CFR 134.46), to ease the requirement that whenever words appear on imported articles indicating the name of a geographic location other than the true country of origin of the article, the country of origin marking must appear in close proximity and in comparable size lettering to those words preceded by the words "Made in", "Product of", or other words of similar meaning. The effective date of the final rule was September 20, 1997. The revised section 134.46 provides that:

In any case in which the words "United States," or "American," the letters "U.S.A.," any variation of such words or letters, or the name of any city or location in the United States, or the name of any foreign country or locality other than the country or locality in which the article was manufactured or produced appear on an imported article or its container, and those words, letters or names may mislead or deceive the ultimate purchaser as to the actual country of origin of the article, there shall appear legibly and permanently in close proximity to such words, letters or name, and in at least a comparable size, the name of the country of origin preceded by "Made in," "product of," or other words of similar meaning.

Accordingly, under the revised section 134.46, it must first be determined whether the marking on the polybag may deceive or mislead the ultimate purchaser regarding the country of origin of the finished instruments. In several rulings, Customs has ruled that the presence of a U.S. address triggers the requirements of 19 CFR 134.46. For example in HRL 559388 dated February 13, 1996, various surgical instruments marked by means of an adhesive label on the containers of the surgical instruments which contained the U.S. address of United States Surgical Corporation, "Norwalk, Connecticut", triggered the requirements of 19 CFR 134.46, and country of origin was required to appear on the same label and in equal size print as the U.S. address, preceded by the words "Made In". However, Customs has also ruled that geographic names appearing in connection with imported articles do not necessarily trigger the requirements of 19 CFR 134.46. For example, in HRL 732329 dated July 29, 1989, Customs held that an address on a warranty card did not pose a risk of confusion or deception to ultimate purchasers.
The basis of this ruling was that while the name and address, taken alone, would be the kinds of potentially confusing information addressed by 19 CFR 134.46, their context was such that the address information would not mislead or confuse the ultimate purchaser as to the country of origin of the article.

Additionally, Customs under certain circumstances has allowed importers to place a marking on the exterior container instructing the ultimate purchaser to view the actual article to determine its country of origin. For example, in HRL 734469 dated September 22, 1992, Customs ruled that hang tags which were affixed to conspicuously marked sunglasses and marked with the words "Country of Origin Indicated On Sunglasses" in close proximity and in at least a comparable size to the non-origin geographical reference "Dallas, TX U.S.A." satisfied the country of origin requirements of 19 CFR 134.46.

In this case, we find that the words, "German Stainless" are sufficient to indicate Germany as the country of origin of the surgical instruments. In addition, while the U.S. address alone would trigger the requirements of 19 CFR 134.46, we find that in conjunction with the words "NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES", the ultimate purchaser in the U.S. will not be misled to believe that the finished surgical instruments are products of the U.S. Accordingly, since the non-origin address will not mislead or deceive an ultimate purchaser as to the country of origin of the imported article, we find that the special marking requirements of 19 CFR 134.46 are not triggered. Therefore, provided the marking "German Stainless" is etched permanently, legibly, and conspicuously onto the finished surgical instruments and the polybags containing the finished instruments will be marked with the U.S. address along with the words "NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES", the requirements of 19 U.S.C. 1304 will be satisfied.

HOLDING:

Based upon the information provided, we find that provided the imported surgical instruments are permanently, legibly, and conspicuously etched with the marking "German Stainless" and the polybags in which the instruments will be sold in the U.S. contain the U.S. address with the words "NOT A PRODUCT OF THE UNITED STATES" or "MANUFACTURED OUTSIDE OF THE UNITED STATES", the requirements of 19 U.S.C. 1304 will be satisfied.

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
Commercial Rulings Division

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