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HQ 562735

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July 17, 2003

MAR-05 RR:CR:SM 562735 DCC

CATEGORY: MARKING

Mr. Loenard L. Fleisig
Troutman Sanders LLP
901 9th Street, N.W.
Washington, D.C. 20004-2134

RE: Country of Origin Marking of Cast Iron Meter Boxes; Substantial Transformation

Dear Mr. Fleisig:

This is in response to your letter, dated April 11, 2003, requesting a binding ruling on behalf of the Mueller Co. (“Mueller”), regarding the country of origin of certain imported iron castings that are assembled into water meter boxes in the United States. Although no samples were submitted, you provided photographs of the imported castings, U.S. manufactured parts, and finished boxes.

FACTS:

You state that Mueller imports iron castings for use in the assembly of water meter boxes. The imported castings include a lid, box collar section, and a base tray. In addition, some boxes include a cast iron extension section. The imported castings are fitted with U.S.-manufactured components including brass piping and valves, stainless steel fasteners, and a brass latch. Water meters are added to the box assemblies after they are sold by Mueller. You state that Mueller purchases the castings from an unrelated manufacturer located in India. You also state that the castings are packed in boxes that are individually marked “Made in India.”

The following description of Mueller’s manufacturing is based on your submission. Upon receipt, Mueller unpacks and inspects the imported iron castings. The castings are then assembled with U.S. manufactured components to form finished
cast iron water meter boxes. According to your submission, the boxes are assembled in the following manner:

A brass latch is attached to the cast iron box lid.

Brass piping, valve parts and various hardware are assembled and bolted onto the cast iron base tray.

After removing rust and applying corrosion resistant paint, the box collar section is bolted to the assembled base tray.

For boxes fitted with an extension, the box extension section is fastened to the box collar section with stainless steel screws that are screwed into pre-drilled holes of the extension section.

The assembled box lid is inserted into the box collar section or, if the box is fitted with an extension, the lid is inserted into the box extension section.

You provided a bill of materials that shows the cost of the imported castings represents less than 20 percent of the total costs of materials and labor for a completed box.

ISSUE:

Whether the imported iron castings are substantially transformed when they are assembled in the United States with domestically manufactured components to produce water meter boxes.

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 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 the ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting Section 304 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 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., 27 C.C.P.A. 297, 302 (1940). Title 19, Part 134 of the Code of Federal Regulations (19 C.F.R. § 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. “Country of origin” is defined in section 134.1(b), as:

[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 this part. . . .

You contend that the imported castings are substantially transformed by Mueller as a result of the assembly with the U.S. manufactured stainless steel screws, and brass latch, piping, valves and hardware. In support of this claim you cite Headquarters Ruling Letter (“HRL”) 732940 (July 5, 1990). Although HRL 732940 was subsequently revoked by HRL 734566 (June 25, 1992), you contend that the reasoning of the earlier ruling remains valid and cite several rulings that rely on HRL 732940. In HRL 732940, Customs and Border Protection (“CBP”) held that imported iron castings were substantially transformed when they were assembled with domestic components to produce water pumps. You argue that in both the present case and HRL 732940, the imported cast iron containers do not assume the fundamental properties of their final assemblies until assembled with more technical parts. The ultimate use of the imported castings is not determined and, you note, the iron containers could be used in other applications such as water pumping. You also state that the imported castings account for less than 20 percent of the completed water meter boxes.

In United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940), the court held that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed. In such circumstances, the U.S. manufacturer is the ultimate purchaser. The imported article is excepted from individual marking provided the containers in which the article is imported are marked and such containers will reach the manufacturer properly marked.

In determining whether the assembly of parts or materials constitutes a substantial transformation, the issue is whether the parts lose their identity and become an integral part of the new article as a result of the operations performed. See, Uniroyal Inc. v. United States, 542 F. Supp. 1026 (Ct. Int’l Trade 1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See, C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D.89-129 and C.S.D. 90-97.

In National Hand Tool Corp. v. United States, 16 CIT 308, (1992) aff’d, 989 F.2d 1201 (Fed. Cir. 1993), 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 United States. One of the factors considered by the court in reaching its conclusion was whether the use of the imported components changed as a result of the processing and assembly operations performed in the United States. Although the court recognized that a predetermined use for imported articles does not preclude a finding of substantial transformation, the court noted that the use of the imported articles was predetermined at the time of importation; each component was intended to be incorporated in a particular finished mechanic’s hand tool.

In HRL 734566, CBP considered the manufacture of water pumps which consisted of the basic assembly of various foreign and domestic parts including a casting, bearing, impeller, hub, seal, gasket, and, in certain circumstances, a back plate. In that ruling, CBP held that none of the essential components of the water pumps were substantially transformed when assembled in the United States. In addition, HRL 734566 reexamined and revoked HRL 732940, which held that imported castings were substantially transformed when assembled with domestic components to create a water pump. The rationale for revoking HRL 732940 was that the Taiwanese-origin casting used to produce the water pump, remained visible after assembly. Similar to HRL 734566, in which the foreign casting remained visible after assembly, the imported castings in this case remain visible after assembly.

Additionally, in HRL 561297, dated June 2, 1999, CBP considered whether a substantial transformation resulted when imported raw castings were processed in the United States into receivers, which were then assembled into rifles. The U.S. processing of the raw castings to produce receivers included machining, heat treatment, drilling four holes, sandblasting, dipping the casting into a hot caustic solution causing it to turn black (a chemical treatment known as “bluing”), stamping, and final inspection. The receivers were then assembled into rifles. CBP noted that the raw castings had the shape, character, and predetermined use of the finished receivers and merely required intermediate finishing operations. Accordingly, CBP held that the processing of the raw castings into receivers in the United States did not result in a substantial transformation. CBP also ruled that the processing of the raw castings into receivers that were then assembled with other components to create finished rifles in the United States resulted in a substantial transformation. The factors considered were the complexity of the assembly operation, number of parts involved, and need for trained technicians to meet exacting specifications.

In light of the above, one must conclude that the imported castings in the instant case are not substantially transformed as a result of their assembly with stainless steel screws and brass hardware to form water meter boxes. Although the imported castings are cleaned and refinished, if necessary, with corrosion resistant paint, this processing is relatively minor and does not alter the chemical composition alteration of the imported castings. In addition, the imported castings have pre-drilled holes for attaching the base tray and lid to the collar and are treated for rust before exportation. Consequently, aside from minor touching up to treat for rust, the imported castings are not physically altered or substantially transformed in the United States.

Furthermore, as stated in Customs Service Decision (C.S.D.) 80-111, C.S.D. 89-129, and C.S.D. 90-51, assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. In the present case, assembly of the water meter boxes is a simple operation that involves assembling the cast iron lid, base tray and collar with screws to form the box, and attaching brass hardware to the assembled box. There is no evidence to suggest that this assembly operation is complicated or requires technical skills.

We therefore determine that the country of origin of the imported castings does not change as a result of being assembled to form a water meter box. The castings remain a product of India for country of origin marking purposes. Consequently, the imported castings must be conspicuously, legibly and permanently marked to indicate the country of origin as being India. Furthermore, the country of origin marking requirements cannot be satisfied by marking the containers in which the castings are imported.

Finally, we understand that that the imported castings may indicate the city and state of Mueller in large block lettering on the lid of the imported cast iron box, i.e., “ALBERTVILLE, AL.” If this is the case, please be advised that in order to avoid the ultimate purchaser from being mislead or deceived as to the actual country of origin of the imported castings, there must appear legibly and permanently and in close proximity to this designation, at least in a comparable size, the name of the country of origin for the castings preceded by “Made in,” “Product of,” or other words of similar meaning. See 19 C.F.R. § 134.46, and HRL 708994, dated April 24, 1978.

HOLDING:

The country of origin of the imported iron castings for country of origin marking purposes is India. Accordingly, the imported castings must be conspicuously, legibly and permanently marked to indicate the country of origin as such.

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 CBP officer handling the transaction.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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