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HQ 562658

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April 25, 2003

MAR-2-05 RR:CR:SM 562658 KSG

CATEGORY: MARKING

Lara A. Austrins, Esq.
Rodriguez O'Donnell Ross
Fuerst Gonzalez & Williams, P.C.
20 North Wacker Drive
Suite 1416
Chicago, Illinois 60606

RE: Country of origin of surgical instruments; substantial transformation

Dear Ms. Austrins:

This is in reference to your letter of January 31, 2003, on behalf of Medco Instruments, Inc., requesting a binding ruling concerning the country of origin and the country of origin marking of certain surgical instruments. Samples of the surgical scissors were submitted with your request.

FACTS:

This case involves eight types of surgical instruments: 1) scissors; 2) haemostatic forceps; 3) tweezers; 4) towel clamps; 5) sponge clamps; 6) needle holders; 7) speculums; and 8) retractors. These are finished surgical and professional instruments used in hospitals, clinics, laboratories and dentist and physician offices. The instruments are imported in sealed bags.

German stainless steel is forged to the final shape of the specific surgical instrument in Germany. Raw stainless steel is cut to rough- sized blanks. The blanks are heated and hammer forged into forgings. The forgings are trimmed to remove the excess material. Then the forgings are machine-filed to the size and shape of the final instrument. The value of the surgical instrument forgings as they leave Germany ranges from $5.00 to $12.00.

The forgings are then shipped to Pakistan where the following processing is performed: 1) the inside and outside edges of the forgings undergo milling, grinding and filing operations and the holes for pins or screws are drilled and set; 2) the forgings undergo heat treatment, including tempering; 3) the forgings are acid bathed which removes residual debris and oil stains from the surface of the forgings; 4) the forgings are assembled and the initial setting is completed; 5) the instruments undergo further grinding operations with abrasive belts; 6) the instruments undergo electroplating and are partially polished and brushed; and 7) the instruments undergo final setting and adjustment operations. The instruments are placed into a passivation bath solution and ultrasonically cleaned to remove all remaining deposits and polished. Finally, the instruments are checked and inspected. Each instrument is to be marked "German Stainless" using electro-etching machines. The finished surgical instruments are packaged separately in a sealed clear plastic bag, which is labeled "German Stainless."

ISSUES:

What is the country of origin of the surgical instruments manufactured as described above?

Does the marking "German Stainless" satisfy the requirements of 19 U.S.C. 1304?

LAW AND ANALYSIS:

Section 304 of the 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
article occurs when it is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. However, if the manufacturing or combining process is merely a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. 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. The court also found that there was no change in use as a result of the processing performed in the U.S. Although the court stated that a predetermined use would not necessarily preclude a finding of a substantial transformation, it noted that such determination must be based on the totality of the evidence. The court then concluded that no substantial change in name, character or use occurred as a result of the processing performed in the U.S.

In HRL 559847, dated January 2, 1997, Customs considered U.S.-origin stainless steel sheets cut into strips of suitable width, which were further cut into surgical instrument blanks. The blanks were then heated and hammer forged into their final shape and size. The forgings were annealed and trimmed, and cold stamped to straighten the trimmed forgings. The forgings, produced as described above in the U.S., were then shipped to Pakistan where they underwent milling operations to cut the box, ratchet, and jaw serrations into the forceps; assembled; ground; filed; heat treated, including tempering and testing for hardness; acid pickled; polished; chemical cleaned; and buffed. It was held that inasmuch as the forgings resembled the shape and size of the completed instruments upon importation into Pakistan, the operations performed in Pakistan did not substantially transform the forgings into a new and different article of Pakistani origin. Accordingly, the origin of the finished instruments was determined to be the U.S.

In HRL 560441 dated November 18, 1997, it was held that German rough forgings of surgical and medical instruments sent to Hungary where they were machined, assembled, rough polished, heat treated and cleaned, did not undergo a substantial transformation in Hungary. Similarly, in HRL 561189, dated November 5, 1998, Customs concluded that surgical instruments forged in Germany and processed into completed articles in Pakistan were a product of Germany.

We find the finishing processes performed in Pakistan in this case to be similar to those considered in HRL 559847, HRL 560441 and HRL 561189. Accordingly, pursuant to those rulings and National Hand Tool, we find that the forgings do not undergo a substantial transformation in Pakistan, and therefore, the country of origin of the finished instruments will be Germany--the country of origin of the forging. We note that, prior to the operations performed in Pakistan, each forging has the final shape of the finished surgical instrument. Consistent with the holdings in HRL 560441, HRL 561189 and HRL 559847, the surgical instrument forging is not changed in Pakistan to such a degree as to result in a new and different article with a new name, character or use.

Customs held in HRL 561189, dated November 5, 1998, that the phrase "German Stainless" was an acceptable marking for purposes of 19 U.S.C. 1304. We find that the term "German Stainless" is not confusing or potentially misleading regarding the country of origin of German products. Therefore, the phrase "German Stainless" is acceptable for purposes of 19 U.S.C. 1304.

You ask if marking the outside containers of the surgical instruments would satisfy 19 U.S.C. 1304. Surgical instruments are required by 19 CFR 134.43(a) to be marked "legibly and conspicuously by die stamping, cast-in-the-mold lettering, etching (acid or electrolytic), engraving or by other means of metal plates." However, Customs stated in HRL 559588, dated March 6, 1996, that:

Customs has determined that articles such as surgical instruments which are subject to the special marking requirements of 19 CFR 134.43(a), may be excepted therefrom if the marking of their containers will satisfy the requirements of 19 CFR 134.32(d). Nineteen CFR 134.32(d) provides a marking exception for 'articles for which the marking of the containers will reasonably indicate the origin of the articles.'

Based on the above, we find that if the articles will be packaged in a properly marked container which will reach the ultimate purchaser unopened, the surgical instruments may be excepted from the special marking requirements of 19 CFR 134.43(a).

HOLDING:

Based on the facts and samples presented, we find that the country of origin of the finished surgical instruments is Germany. The phrase "German Stainless" is an acceptable marking for the purposes of 19 U.S.C. 1304. Marking the containers of the surgical instruments will satisfy the marking requirements of 19 U.S.C. 1304.

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,

Myles B. Harmon, Director
Commercial Rulings Division

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