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HQ 560512

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October 27, 1997

MAR-2-05 RR:TC:SM 560512 MLR

CATEGORY: MARKING

Lawrence R. Pilon, Esq.
Hodes & Pilon
33 North Dearborn
Suite 2203
Chicago, IL 60602-3109

RE: Country of Origin Marking of hydraulic tie rod cylinder components; substantial transformation

Dear Mr. Pilon:

This is in reference to your letter of June 11, 1997, requesting a ruling on behalf of Energy Manufacturing Company ("Energy"), concerning the country of origin marking on certain hydraulic tie rod cylinders. A diagram and program literature were submitted with your request.

FACTS:

It is stated that four machined cast iron components, a base clevis, piston, rod guide, and rod clevis, will be imported from China. It is stated that Energy will subject the components to cleaning and finishing operations and combine them with U.S. origin components in the manufacture of completed hydraulic tie rod cylinders. Each tie rod cylinder consists of 18 parts, four of which are from China. Five different tie rods cylinders will be built ranging from two to four inches in diameter for use in heavy machinery.

It is stated that Energy will import the Chinese components only for use in manufacturing tie rod cylinders, and that they will not be sold independently as spare or replacement parts.

ISSUE:

Whether the imported components are substantially transformed in the U.S., so that Energy is the ultimate purchaser thereof under 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 U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. If such substantial transformation occurs, then the manufacturer is the "ultimate purchaser" of the imported article; such article is excepted from individual marking and only the outermost container in which the U.S. manufacturer receives the article is required to be marked. See 19 CFR 134.35. 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).

The question in this case is whether the combination of the four foreign components in the U.S. with the other U.S. components to form hydraulic tie rod cylinders constitutes a substantial transformation into a new article having a new name, character or use. In this case, based upon the information submitted, the tie rod cylinders are comprised of 18 parts, four of which are from China.

In Headquarters Ruling Letter (HRL) 734566 dated June 25, 1992, Customs considered the manufacture of water pumps which generally consisted of a casting, bearing, impeller, hub, seal, gasket, and in certain circumstances a backplate. Depending on quality and cost, it was stated that various sources were used and, therefore, all parts could either be all foreign or domestic, or both. In HRL 734566, it was determined that a water pump is comprised of four essential components, the casting, bearing, impeller and hub, and in determining the origin of the finished water pumps, the focus was upon these four components. Relying on National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed.Cir. 1993), where the Court of International Trade held that imported hand tool components which were used to produce flex sockets, speeder handles and flex handles were not substantially transformed when further processed and assembled in the U.S., in HRL 734566 it was held that none of the essential components of the water pumps was substantially transformed when assembled in the U.S.

In HRL 734566, Customs also reexamined and revoked HRL 732940, dated July 5, 1990, which also considered the assembly of a water pump. The rationale for revoking HRL 732940 was because, in one instance, a Taiwanese-origin casting was used to produce the water pump, which remained visible after assembly.

In this case, as noted from the diagram and product literature, the hydraulic tie rod cylinders consist of a foreign piston that moves in a closed U.S.-origin cylinder. The piston is attached to a U.S.-origin rod that extends from one end of the cylinder to provide the mechanical output. Accordingly, in this case, it is our opinion that the most important components are the foreign piston and domestic cylinder. Unlike HRL 734566 where the foreign casting remained visible after assembly, the piston in this case will not be visible after it is assembled into a finished tie rod cylinder. Furthermore, the tie rod which is of U.S. origin is important in allowing the piston to transmit motion. Additionally, the U.S. origin rings that fit inside the piston provide a seal to prevent leakage. We also note that the imported clevis may be used in articles other than tie rod cylinders. Therefore, it is our opinion that since the finished tie rod cylinder is largely comprised of U.S. origin components, one of the most important components is of U.S. origin, and the tie rod cylinder is assembled in the U.S., the foreign components will undergo a substantial transformation in the U.S. into an article with a different name, character, and use, such that the finished hydraulic tie rod cylinders will not be subject to the marking requirements of 19 U.S.C. 1304.

HOLDING:

Based upon the information provided, it is our opinion that the imported components will undergo a substantial transformation in the U.S., as the finished tie rod cylinder is mainly comprised of U.S. origin components, one of the most important components is of U.S. origin, and the tie rod cylinder is assembled in the U.S. Therefore, the finished hydraulic tie rod cylinders will not be subject to the marking requirements of 19 U.S.C. 1304. However, the Federal Trade Commission should be contacted regarding the use of any U.S. origin claims.

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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