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HQ 734167

September 13, 1991

MAR-2-05 CO:R:C:V 734167 NL


Michael H. Greenberg, Esq.
Sharretts Paley Carter & Blauvelt, P.C.
67 Broad Street
New York, NY 10004

RE: Country of Origin Marking - Impact Socket Blanks; Substantial Transformation; 19 CFR 134.32(m); C.S.D. 89-121.

Dear Mr. Greenberg:

This is in response to your letter of May 13, 1991, in which you request a prospective ruling concerning the country of origin marking requirements for certain impact socket blanks.


The articles in question are high strength steel impact sockets measuring from 1" to 14" in diameter. The manufacturing operations are to be conducted by your client, Subcon Products, Inc. (SPI). In the U.S., stainless steel bar stock will be used to produce socket blanks. These U.S. operations will consist of cutting the bars to length, machining the shapes to precise length and outside diameter, centerizing (machining most of the material from the center of the blank, precisely concentric with its outside diameter), and inspecting. SPI proposes then to transport the blanks to Israel for further processing as follows: 1) a proprietary electro chemical machining (ECM) process will be used to make the square drive hole and hexagon of the socket to precisely fit bolts and nuts; 2) an automatic drilling machine is used to drill two holes to acommodate the retaining pin; and 3) the pieces are washed and oiled. The pieces are then returned to the U.S. for finishing. These steps include roll marking with the piece's brand name, catalog number, and size, heat treatment and tempering, coating with black oxide, and final inspection.

It is your position that the processing of the impact socket blanks in Israel does not change their status as articles of U.S. origin for country of origin marking purposes. As exported to Israel they have already been manufactured to their inside and outside diameters and length. While ECM is an important process for creating the square and hexagonal configurations, it does not result in changes in the shape or form of the unfinished sockets exported from the U.S. You assert that throughout all the processing steps there is no change in the article's classification under the Harmonized Tariff Schedule of the United States (HTSUS); subheading 8204.20.00 is the applicable provision whether the sockets are unfinished, semifinished, or finished. Finally, you represent the value of the article added in the U.S. (both before and after processing in Israel), as accounting for at least 75% of the value of the finished impact socket. Accordingly, you urge a finding that the semifinished impact socket, as imported from Israel, is eligible to be excepted from country of origin pursuant to 19 CFR 134.32(m), as a product of the U.S. exported and returned.


Does the processing in Israel of the impact socket blank produced in the U.S. effect a change in its country of origin?


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 U.S. shall be marked in a conspicuous location 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 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. Section 134.1(b) provides in general that an article's country of origin is the country in which it was manufactured, produced, or grown. 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. A substantial transformation is said to occur if, within the principle of the case of United States v. Gibson- Thomsen Co., Inc. 27 C.C.P.A. 267 (C.A.D. 98)(1940), an article emerges from processing having a new name, character, or use. See, 19 CFR 134.35.

Section 134.32(m), Customs Regulations (19 CFR 134.32(m), provides that articles which are products of the U.S. exported and returned are excepted from the requirement of country of origin marking. In this case, unless the unfinished sockets produced in the U.S. are considered to have been substantially transformed by processing in Israel, the semifinished sockets will be eligible for exception from country of origin marking pursuant to 19 CFR 134.32(m).

Upon consideration of the changes effected by the processing steps in both the U.S. and Israel, it is the opinion of this office that the unfinished impact socket does not acquire a new name, character, or use as a result of processing in Israel. At the time of its exportation to Israel the blank has already achieved its fundamental name, character, and use as a socket, having been sawed, turned, and centerized in the U.S. to its essential dimensions, particularly with respect to outside diameter and length. The processing in Israel does not change the status of the article as a product of the U.S.

While the imparting of the square and hexagonal shapes in the socket blank in Israel by ECM cannot be dismissed as insignificant, or as mere finishing, this processing does not effect a change sufficient to qualify as a substantial transformation. The shaping effected by ECM and drilling is essential to the functioning of the impact socket, but is not sufficient to create an article with a new name, character, or use. As pointed out in the submission, the conversion of the socket blank from a producer's good to a consumer's good (the finished socket) requires additional processing upon return of the article to the U.S.; i.e., heat treatment and tempering, black oxide coating, and final inspection. A complete conversion of the socket blank into the finished impact socket in Israel would be necessary to bring this article within the scope of Midwood Industries v. United States, 313 F. Supp. 951 (Cust. Ct. 1970), which held that a manufacturer who effects such a conversion is the ultimate purchaser of the producer's good within the meaning of 19 U.S.C. 1304. The Midwood analysis does not apply in this case.

The instant case is distinguishable also from a previous ruling, HQ 731572 (July 25, 1989), published as C.S.D. 89-121, 23 Cust. Bull. & Dec. No. 45 (November 8, 1989), in which this office evaluated the consequences for marking of certain operations performed on forgings for sockets, socket wrench extensions, and adapters. In that decision we ruled that forgings which were subjected after importation to lathing, drilling, centerless grinding, marking, heat treatment, sand blasting, tumbling, plating, and painting, among other processes, were substantially transformed such that the processor in the U.S. was the ultimate purchaser of the forgings. Accordingly, the forgings were excepted from country of orgin marking pursuant to 19 CFR 134.35. We reasoned that the lathing, drilling, and grinding, in particular, changed the imported rough forgings into finished sockets by imparting essential characteristics and enabling their use as sockets.

The critical operations at issue here, sawing, turning, and centerizing, are those which create the unfinished article from bar stock, and are conducted in the U.S. Only after this has been accomplished does ECM and drilling take place in Israel. Thus the extent of critical machining done is Israel is significantly less that that considered in HQ 731572 which was found to effect a substantial transformation. Moreover, as previously found, this processing in Israel is performed on an article which has already attained its essential character as a socket. We are satisfied, in short, that there is no inconsistency between our finding here and the conclusion reached in HQ 731572, inasmuch as the extent of processing in the instant case is substantially less, does not affect the fundamental dimensions of the article, and results in no change in its name, character, or use. As contended in the submission, an unfinished socket is sent for processing in Israel into a semifinished socket, and finally returned to the U.S. for conversion into the finished article.


Processing in Israel of the impact sockets does not change their status as products of the U.S., and they may be excepted from country of origin marking upon their return from Israel pursuant to 19 CFR 134.32(m).


John Durant
Director, Commercial

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