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 > 2002 HQ Rulings > HQ 561827 - HQ 562175 > HQ 562038

Previous Ruling Next Ruling
HQ 562038

---

February 22, 2002

MAR-05 RR:CR:SM 562038 NL

CATEGORY: MARKING

Area Port Director
2350 N. Sam Houston Parkway East
Suite 1000
Houston, TX 77032

RE : Internal Advice – Country of Origin Marking for Flow Control Valves; Substantial Transformation.

Dear Port Director:

This is in reply to your memorandum dated January 31, 2001, forwarding a request for internal advice on behalf of the KF Industries division of CIRCOR International, Inc., of Oklahoma City, OK. Counsel for KF Industries advises that the company is importing certain finished steel valve components from various countries for its use in manufacturing finished valves in the United States. Counsel maintains that the imported components undergo a substantial transformation when processed by KF industries in the United States, such that both the components and the finished valves are not required to be marked with a country of origin pursuant to section 304 of the Tariff Act of 1930, as amended (19 USC §1304).

FACTS :

KF Industries uses imported valve components in the production of three types of valves: trunnion ball valves (as described in Exhibit 1 of its submission); floating ball valves (as described in Exhibit 2 of its submission); and needle valves (as described in Exhibit 3 of its submission).

The principal imported components consist of valve bodies or parts thereof, valve bonnets, and stems with or without balls. The parts of U.S. origin consist of bearings, pins, seals, seats, O-rings, carbon/fiber rope, wave springs, ball check valves, bleeder valves, and various screws. In some cases the bonnet, ball, and/or stem may be of U.S. origin.

The three types of finished valves are assembled at KF Industries’ U.S. facilities in accordance with the technical process sheets appended to each above-referenced exhibit.

Production of the trunnion ball valves entails the assembly of 40 parts, including the imported valve body and in some cases the ball and stem. The technical process sheet indicates that at least 11 separate assembly steps are required, exclusive of inspection and testing.

With respct to the floating ball valves, imported valve bodies, valve bonnets and in some cases balls or stems are assembled with at least 13 other parts. The technical process sheet indicates that the assembly requires at least 15 separate steps, exclusive of inspection and testing.

To produce the needle valves the imported valve body, after preparation, is combined with approximately 11 to 13 U.S.-origin parts, depending upon the model. The assembly requires a minimum of 10 separate steps.

The company seeks a ruling that it subjects the imported valve components to a substantial transformation in the United States, such that KF Industries is the ultimate purchaser of the imported valve components which are excepted from country of origin marking at the time of importation.

ISSUE :

Whether the imported valve components used to produce finished trunnion ball valves, floating ball valves and needle valves are substantially transformed in the U.S. such that the imported components are excepted from country of origin marking.

LAW & ANALYSIS :

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), provides that every article of foreign origin (or its container) 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 an ultimate purchaser in the United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the requirements and exceptions of 19 U.S.C. §1304.

Section 134.35, Customs Regulations (19 CFR 134.35), implementing the principle of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98), provides that an article 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 will be considered substantially transformed, and therefore 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 within the contemplation of 19 U.S.C. §1304(a). Accordingly, the article shall be excepted from marking. However, in accordance with 19 U.S.C. §1304(b) and §134.22, Customs Regulations (19 CFR 134.22), the outermost container of the imported article shall be marked to indicate the country of origin of the article.

The requester is of the view that previous Customs Headquarters decisions analogously have found imported valve components to have been substantially transformed within the meaning of 19 CFR §134.35 when used in the manufacture of finished valves. The rulings cited are HRL 729335 (April 18, 1986); HRL 731828 (January 30, 1990); and HRL 558008 (November 16, 1994).

In HRL 729335 Customs found that a substantial transformation had taken place when finished body castings and bonnet castings were combined in the U.S. with valve stems, discs, disc screws and handwheels to produce complete plumbing valves. In HRL 731828 it was determined that the production of ball valves using foreign valve bodies and bonnets combined with U.S. origin balls, seats, stems, and various seals and washers effected substantial transformation of the foreign materials. Finally, in HRL 558008 Customs considered the assembly of water system valves using imported valve body castings and other internal components. It was concluded that an assembly entailing the installation of various subassemblies, gaskets, bolts, seals and other parts resulted in substantial transformation of the imported components.

It is our conclusion that the assembly operations carried out by KF Industries on the imported components are closely comparable to those considered in the rulings cited. The number of parts assembled, including significant numbers of U.S.-origin parts, and the relative complexity of the operations carried out, indicate that the imported components have undergone a substantial transformation by reason of the operations carried out in the United States. KF Industries, as the entity carrying out the substantial transformation, may be considered the ultimate purchaser of the imported merchandise within the meaning of 19 CFR 134.35.

HOLDING :

Based on the facts presented, imported valve components are excepted from individual country of origin marking when used by the requester to manufacture finished trunnion ball valves, floating ball valves, and needle valves in the United States. The outermost containers of the components must be marked in accordance with 19 CFR §134.22 to indicate the country of origin of their contents.

This holding will be valid to the extent that Customs officers at the port of importation are satisfied that the U.S. manufacturing operations to produce finished valves are being performed as set forth in the requester’s submission.

This internal advice should be mailed by your office to the requester no later than 60 days from the date of this letter. On that date, the Office of Regulations & Rulings will take steps to make the decision available to Customs personnel and to the public on the Customs Home Page on the World Wide Web at www.Customs.gov, by means of the Freedom of Information Act and other means of public distribution.

Sincerely,

John Durant
Director

Previous Ruling Next Ruling