United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 2000 HQ Rulings > HQ 561660 - HQ 961050 > HQ 561747

Previous Ruling Next Ruling
HQ 561747

---

July 20, 2000

MAR-2-05 RR:CR:SM 561747 CW

CATEGORY: MARKING

Port Director of Customs
Chicago, Illinois 60607

RE: Revocation of HRL 700022; country of origin marking of elbows; substantial transformation; Midwood

Dear Port Director:

This is in reference to Headquarters Rulings Letter (HRL) 700022 dated October 27, 1972, which was issued to your office regarding the country of origin marking of certain elbow fittings imported by Weldbend Corporation.

We have reviewed HRL 700022 and believe that the holding therein is incorrect. For the reasons set forth below, this ruling revokes HRL 700022.

Pursuant to section 625(c), Tariff Act of 1930, as amended (19 U.S.C. 1625(c)), notice of the proposed revocation of HRL 700022 was published on June 7, 2000, in the Customs Bulletin, Volume 34, Number 23.

FACTS:

A shipment of unfinished welding fittings was imported at the port of Chicago under entry No. XXXXXX, dated November 17, 1971. You enclosed copies of the complete file on this matter, including a letter dated August 1, 1972, from Weldbend Corporation, stating that the forgings in question were received by them in the original packaged form and were processed by them to make finished elbows, by bevelling, painting, and marking them. The marking refers to the name “Weldbend” and not the country of origin of the forgings, namely, Germany.

In reviewing this matter, it appears that each elbow was die stamped “Germany” on the extreme end where it was machined off in the process of finishing the elbow, and, in addition, the containers of the elbow forgings were marked to indicate the country of origin of the elbows. The evidence submitted also seems to be sufficient to indicate that the elbows were in fact imported in a rough forged condition and finished by Weldbend by finishing processes
substantially similar to those described in the case of Midwood Industries, Inc. v. United States 64 Cust. Ct. 499, C.D. 4026, 313 F.Supp. 951 (1970). The invoice described the goods as “Siekmann” seamless carbon steel welding fittings to ASA B 16.9 and ASTM A-234, WPD, unmachined and unmarked, only die stamped with “Germany” on the edge of each elbow, size of letters about ca. 2mm.

ISSUE:

What are the country of origin marking requirements applicable to the finished elbows?

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.

Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. In order for the country of origin of imported articles to be considered the U.S., and excepted from marking, the work or material added to the articles in the U.S. must effect a substantial transformation. 19 CFR 134.1(b).

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. In such circumstances, the manufacturer or processor in the U.S. who converts or combines the imported article into the different article will be considered the “ultimate purchaser” of the imported article, and the article is excepted from marking and only the outermost container is required to be marked. See 19 CFR 134.35(a).

In Midwood, imported rough steel forgings were subjected to several processes by the U.S. importer/processor. Excess material was removed, the forgings were faced, bored, threaded or beveled, and drilled and spot faced. In certain instances, the flanges were subject to both heating and reducing one end in size and diameter by compression.

The court noted that the imported forgings were made as close to the dimensions of the ultimate finished form as possible. Nevertheless, the court stated that the products remained forgings unless and until converted by some manufacturer into consumers’ goods, that is, flanges and fittings. The court held that the imported forgings and the fittings and flanges made therefrom were different articles of commerce, and the importer/processor was the ultimate purchaser of the forgings.

In HRL 700022, Customs found that the machining operations performed on the imported forgings in the U.S. to create the finished elbows were substantially similar to those involved in Midwood, and determined that the U.S. processing resulted in a substantial transformation. Thus, it was determined that the U.S. processor (Weldbend) was the ultimate purchaser of the imported forgings.

The Customs Service has on a number of occasions expressed its views with respect to the decision in Midwood. More recently, on March 14, 2000, following notice and comment, Customs stated, "It is Customs opinion that based on subsequent court decisions applying substantial transformation analysis, Midwood would be decided differently today". Accordingly, we announced that we would no longer be following the analysis in Midwood.

In view of the foregoing, we conclude that the issue of substantial transformation in this case must be decided in accordance with the facts presented applying the reasoning employed by the court in a number of decisions in this area, namely whether a change in name, character or use has occurred. See Uniroyal, Inc. v. United States, 542 F. Supp. 1026 (CIT 1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983); National Hand Tool Corp. v. United States, 16 CIT 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993); Superior Wire v. United States, 669 F. Supp. 472 (CIT), aff’d, 867 F. 2d 1409 (Fed. Cir. 1989); National Juice Products Ass’n v. United States, 628 F. Supp. 978 (CIT 1986); Ferrostaal Metals Corp. v. United States, 664 F. Supp. 535 (CIT 1987).

With respect to the change in name, we note in this case that the imported articles are variously referred to as “forgings” or as “unfinished welding fittings.” This is also confirmed in Midwood, where the imported articles were referred to as “unfinished flange forgings,” “unfinished 180 degree elbow,” “flange in the rough,” or as “semi-finished articles.” Thus, while a change in name by itself is the least persuasive factor and is insufficient by itself to support a holding that there is a substantial transformation, the evidence of such a change in name is equivocal in this case. See Superior Wire, 867 F.2d at 1414.

With respect to the change in use and character, we note that the imported articles are at all times intended for use as elbows and imported in dimensions that are close to their finished form. These factual conclusions are in accord with the facts as adduced by the court in Midwood. While the unfinished forgings must be machined to final dimension, we do not believe that such operations amount to a change in use or character in the article.

Since we do not find a change in name, character or use, it is our opinion that the importer/U.S. processor is not the ultimate purchaser. Therefore, we find that the elbows processed from imported foreign forgings, as described above, will be required to be marked with the country of origin of the forgings.

HOLDING:

Based upon the information provided, Customs finds that no substantial transformation results from the U.S. processing of the imported forgings to produce the finished elbows. Accordingly, elbows processed from imported foreign forgings, as described above, will be required to be marked with the country of origin of the imported forgings. Consistent with this ruling, HRL 700022 dated October 27, 1972, is hereby revoked.

In accordance with 19 U.S.C. 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.

Sincerely,

John Durant, Director
Commercial Rulings Division


Previous Ruling Next Ruling