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HQ 558009




November 10, 1994

MAR-2-05 CO:R:C:S 558009 WAS

CATEGORY: MARKING

Brian J. O'Shea, Esq.
McKenna & Cuneo
1575 Eye Street, N.W.
Washington, D.C. 20005

RE: NAFTA country of origin marking of Aerochamber aerosol therapy device; Article 509; Annex 311; 19 CFR 134.34; 19 CFR 134.46

Dear Mr. O'Shea:

This is in reference to your letter dated July 14, 1994, on behalf of Monaghan Medical Corporation, concerning the country of origin marking of a certain aerosol therapy device under the North American Free Trade Agreement ("NAFTA"). You have enclosed samples of the Aerochamber with FLOWSIGnal, the Aerochamber with Mask and a container with your ruling request for our review.

FACTS:

You state that the subject merchandise consists of parts and components for an aerosol therapy device which is marketed under the trademark "Aerochamber." According to your submission, the Aerochamber is an FDA-approved medical device that is used with a metered dose inhaler ("MDI") to deliver aerosol medication. It was designed to simplify delivery of medication to patients suffering from asthma who are unable to properly coordinate an MDI (due to age or ill-health), to reduce undesirable side effects that result from use of a MDI alone in the delivery of medication, such as oral candidiasis, and to enhance the therapeutic value of the medication.

The device is described as a temporary holding chamber for MDI-dispersed medication. You state that the basic model ("Aerochamber with FLOWSIGnal") is in the shape of a tube measuring approximately 4 1/2 inches in length and 1 1/2 inches in diameter. At one end of the holding chamber is a plastic mouthpiece containing a one-way silicone inhalation "flapper" valve and exhalation ports. At the other end of the device is a rubber end cap with a port into which a standard MDI may be inserted. Imbedded in the rim of the end cap is what you refer to as a FLOWSIGnal, a plastic whistle-like device, which sounds if the patient fails to inhale at a slow and even pace. You state that, except for the silicone flapper valve, the Aerochamber is made entirely of plastic.

You submit that a second model Aerochamber, which is referred to as Aerochamber with Mask, is nearly identical to the basic model, but is fitted with a permanently-attached silicone mask. This model is particularly designed for infants and the infirm who may not have the strength or ability to hold the device and coordinate inhalation and delivery of the medication.

You state that Monaghan Medical does not import finished Aerochambers. Rather, the company imports the component parts of the device, which it then assembles, tests, and packages at its facility in Plattsburgh, New York. All of the imported components are of Canadian origin.

You submit that in Headquarters Ruling Letter (HRL) 089937 dated November 18, 1991, Customs classified the Aerochamber under subheading 9019.20.00, HTSUS, which provides for "Ozone therapy, oxygen therapy, aerosol therapy, artificial respiration or other therapeutic respiration apparatus; parts and accessories thereof."

The Aerochamber with FLOWSIGnal consists of the following six components: mouthpiece cap, mouthpiece, die-cut silicon diaphragm valve, aerochamber body, thermoplastic MDI-end, and polycarbonate reed whistle. All of the components of the Aerochamber with FLOWSIGnal are classified in subheading 9019.20.00, HTSUS. The Aerochamber with Mask consists of the following seven components: die-cut silicon diaphragm valve, aerochamber body, thermoplastic MDI-end, polycarbonate reed whistle, silicon mask, mask adaptor, and mask lock ring. All of the components of the Aerochamber with Mask are classified in subheading 9019.20.00, HTSUS.

You state that the assembly of the Aerochamber with FLOWSIGnal is a multi-stage process in which approximately 40 employees are directly involved, not including quality control and parts handling employees. You have described the assembly of the Aerochamber with FLOWSIGnal as follows:

(1) The Aerochamber body is silk-screened with instructions for use, Monaghan Medical's name, and address, and an origin designation.
(2) In a subassembly, the polycarbonate reed whistle is fitted into MDI-end cap by means of a mechanical press. (3) The Aerochamber body is inspected for physical and silk-screen defects.
(4) The diaphragm valve is placed on posts extending from Aerochamber body. The valve is then visually inspected to ensure precision of fit on body; stretched valves are rejected.
(5) The mouthpiece of the device is installed on the Aerochamber body, over the diaphragm valve, after ensuring that it is properly aligned with silk-screening on the body. The locking tabs of the mouthpiece are permanently snapped into place on the body with a mechanical press.
(6) The mouthpiece is then inspected for proper fit, and checked for loose flash at the locking tabs. This mouthpiece/valve/body subassembly is then placed on conveyor for lot coding.
(7) The mouthpiece/valve/body subassembly is printed with lot code by an ink jet printer.
(8) The body is checked for loose flash at locking tabs. If any flashing is found, the body is set aside for deflashing procedure, in which flash is removed by exacto knife or equivalent tool, and then returned to the assembly line.
(9) The mouthpiece/valve/body subassembly is vacuumed inside and out of both ends to remove all foreign material.
(10) The MDI-end/whistle subassembly is aligned and joined to the mouthpiece/valve/body subassembly. This is done by stretching the "rubberized" end over the open end of Aerochamber body.
(11) The protective mouthpiece cap is then slipped onto the MDI-end.
(12) The assembled Aerochamber is visually inspected and packaged for delivery.

You state that the assembly of the Aerochamber with Mask generally follows the same above-listed steps. However, a mouthpiece is not used with this model (step 6), and certain of the smaller models of Aerochamber with Mask do not have a whistle installed in the MDI-end of the device (step 2). Instead, the Aerochamber with Mask models require attachment of a mask-subassembly and mask to the Aerochamber body. This subassembly consists of a lock ring and mask adaptor, which are permanently attached to each other by means of a mechanical press. The mask-subassembly is then permanently snapped, also by means of a mechanical press and locking tabs, to the Aerochamber body. The base of the rubberized silicon mask is then stretched to fit over the mask-adaptor end of the device.

You state that Monaghan Medical packages the finished Aerochambers for delivery to hospitals in the U.S. According to the information provided, each individual Aerochamber is packaged in a plastic pouch that is marked with Monaghan Medical's name and address, in compliance with FDA regulations. You submit that Monaghan Medical than packages the pouched Aerochambers in quantities of either 10 or 50 in a cardboard box, which is sealed for delivery to hospitals. The box is marked with the product name, Monaghan Medical's name and address and, on the same side and directly below Monaghan Medical's name and address, a country of origin statement.

You submit that Monaghan Medical's sales of the Aerochamber are made to hospitals through medical supply distributors to hospitals in the U.S. According to your submission, the distributors deliver the product to hospitals in Monaghan Medical's packaging; none of the distributors repackage the Aerochambers sold to hospitals.

You claim that the imported Aerochamber parts and their containers are excepted from country of origin marking because Monaghan Medical, the importer, is the ultimate purchaser and will "reasonably know" the origin of the imported articles. Alternatively, you argue that the Aerochamber is excepted from individual marking because it will be delivered to ultimate purchasers in the U.S. -- the hospitals -- in properly marked containers.

ISSUE:

What are the country of origin marking requirements applicable to the imported Aerochamber parts?

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 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.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in T.D. 94-4 (adding a new Part 102, Customs Regulations). The marking requirements for these goods are set forth in T.D. 94-1 (interim amendments to various provisions of Part 134, Customs Regulations).

Section 134.45(a)(2) of the interim regulations, provides that "a good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish. Section 134.1(g) of the interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.

The interim NAFTA regulations provide an exception from marking for a good of a NAFTA country which is to be processed in the U.S. in a manner that would result in the good becoming a good of the U.S. under the NAFTA Marking Rules. See 19 CFR 134.35(b). The outermost container of an article which qualifies for this exception must be marked with the article's origin, unless the good is processed by the importer or on its behalf. For purposes of this ruling, we are assuming that the component parts of the Aerochambers imported from Canada are goods of Canada under the NAFTA Marking Rules.

Part 102 of the interim regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied."

Neither section 102.11(a)(1) or (2) are applicable to the facts at issue in this case. Pursuant to section 102.11(a)(3), the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Section 102.20 of the interim rules, sets forth the specific tariff classification changes and/or other operations, which are specifically required in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good. In the instant case, as the Aerochamber devices are classified in 9019.20.00, HTSUS, the change in tariff classification must be made in accordance with section 102.20(r), Section XVIII: Chapters 90 through 92, subheading 9019.20, HTSUS, of the interim regulations, which states in part that:

A change to subheading 9019.10 through 9019.20 from any other subheading, including another subheading within that group.

Therefore, each imported Canadian material incorporated in the Aerochamber device must come from a different subheading than 9019.20, HTSUS. In the instant case, all of the imported components are classified in subheading 9019.20, HTSUS, which is the same subheading as the finished good. Thus, a change in tariff classification does not occur.

However, section 102.16(a)(2) of the interim regulations states that "[i]f a good is produced in one country but one or more of the foreign materials incorporated into the good do not undergo an applicable change in tariff classification provided in section 102.20 because:

(2) The heading for the good provides for both the good itself and its parts and is not further subdivided into subheadings, or the subheading for the good provides for both the good itself and its parts, the country of origin of a good is the country in which the good was produced provided that the production of the good results in a substantial transformation of those parts.

"Production" is defined in section 102.1(n) of the interim regulations as "growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good." "Substantial transformation" is defined in section 102.1(p) of the interim regulations as "production which results in a new and different article, with a new name, character, and use."

In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linen v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff'd, 2 Fed. Cir. 105, 741 F.2d 1368 (1984). Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D.'s 80-111, 89-110, 89-129, 90-51; see also C.S.D. 85-25, which held that the process of incorporating a significant number of component parts onto a printed circuit board subassembly constituted a processing sufficiently complex to result in the subassembly being considered a substantially transformed constituent material of the final article for purposes of the Generalized System of Preferences (GSP). The focus of C.S.D. 85-25 was a PCBA which was produced by assembling in excess of 50 discrete fabricated components (e.g., resistors, capacitors, diodes, transistors, integrated circuits, sockets, and connectors) onto a printed circuit board. Customs determined that the assembly of the PCBA involved a large number of components and a significant number of different operations, required a relatively significant period of time as well as skill, attention to detail, and quality control, and resulted in significant economic benefit to the GSP country from the standpoint of both value added to the PCBA and the overall employment generated thereby. In addition, Customs found in this case that the PCBA represented a distinct article, different from both the components from which it was made and the matrix printer into which it was incorporated and, therefore, the assembled PCBA constituted a substantially transformed intermediate article within the meaning of 19 CFR 10.177(a).

In the present case, based on the above-referenced C.S.D.'s, we are of the opinion that joining the six components of the Aerochamber with FLOWSIGnal (mouthpiece, silicon valve, body, MDI-end, reed whistle, and mouthpiece cap) and the eight components of the Aerochamber with Mask (mouthpiece, silicon valve, body, MDI-end, reed whistle, silicon mask, mask adaptor, and mask lock ring) by means of a mechanical press or slipping or stretching a component or subassembly over another component or subassembly does not constitute a complex and meaningful operation, and therefore, does not result in a substantial transformation. The final assembly does not appear to significantly affect the character of the Aerochamber body or any of the other components so as to cause the components to lose their separate identities.

Therefore, it is our determination that the Aerochamber devices do not become goods of the U.S. pursuant to section

Since the country of origin is not determined by section 102.11(a) (incorporating section 102.20) of the interim regulations, the next step in the country of origin interim regulations hierarchy is section 102.11(b). Section 102.11(b) of the interim regulations states as follows:

Except for a good that is specifically described in the Harmonized Tariff Schedule as a set, or is classified as a set pursuant to General Rule of Interpretation 2, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good. . .

"Material" is defined in section 102.1(1) of the interim regulations as "a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components." Pursuant to section 102.18(b)(2), "for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of the good."

Therefore, taking into account only those domestic and foreign materials that are classified in a tariff provision for which a change in tariff classification is not allowed in the rule for the good under section 102.20, we are of the opinion that no single material of either the Aerochamber with Mask or the Aerochamber with FLOWSIGnal imparts the essential character of the good. Each of the components of the Aerochamber devices plays an important role in the operation of the devices. Moreover, there is no single component of the Aerochamber devices which can be said to constitute the essential character on the basis of either the bulk, quantity, weight, or value of the material in relation to the other components. Therefore, it is our opinion that, as no single component of the Aerochamber devices imparts the essential character of the good, the country of origin of these devices cannot be determined on the basis of section 102.11(b).

As the medical devices are not specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3, section 102.11(c), is not applicable.

Therefore, the next step in the country of origin interim regulations hierarchy is section 102.11(d). Pursuant to section 102.11(d):

Where the country of origin of a good cannot be determined under paragraphs (a) through (c), the country of origin of the good is:

(1) The last country in which the good underwent production, other than by simple assembly or minor processing.

"Simple assembly" is defined in section 102.1(o) as "the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing. "Minor processing" is defined in section 102.1(m) as including, in part, the mere dilution with water or another substance, cleaning, application of preservative or decorative coatings, trimming, filing, or cutting off of small amounts of excess materials, unloading, reloading, putting up in measured doses, packing, repacking, testing, marking, sorting, or grading, ornamental or finishing operations incidental to textile good production.

The assembly of the Aerochamber with Mask and Aerochamber with FLOWSIGnal devices does not constitute a "simple assembly" operation as defined in section 102.1(o) above. The Aerochamber with Mask consists of seven foreign components and the Aerochamber with FLOWSIGnal consists of six foreign components. These devices are assembled by means of snapping components together with a mechanical press and stretching rubberized components to fit together which is more than a minor processing operation. Therefore, as the Aerochamber devices undergo a final assembly operation in the U.S., the country of origin of these devices is the U.S., pursuant to section 102.11(d). Accordingly, these products are excepted from country of origin marking pursuant to section 134.35(b), and the outermost containers of the good need not be marked with the country of origin of the parts as the good is processed by the importer in the U.S.

In the alternative, you argue that the finished medical devices that Monaghan Medical sells in the U.S. are eligible for a container-marking exception under 19 CFR 134.34. You claim that the Aerochamber parts imported by Monaghan Medical, which will be assembled and repacked after importation into sealed containers that will be delivered to hospitals in the U.S. are eligible for this exception from marking. You also state that the sealed containers into which the articles will be repacked will be clearly and conspicuously marked "Assembled in the USA of Canadian Components." As we have already determined that the medical devices as well as the outermost containers of the devices are excepted from marking, this issue will not be addressed.

HOLDING:

Based on the information and samples submitted, we are of the opinion that Aerochamber devices become goods of the U.S. pursuant to section 102.11(d), and therefore, the goods are excepted from marking pursuant to section 134.35(b), and as the good is processed by the importer, the outermost container of the good is also excepted from marking under this provision.

Sincerely,

John Durant, Director

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