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HQ 735048

October 27, 1993

MAR 2-05 CO:R:C:V 735048 LR


Mr. Peter L. Flemister
Assistant General Counsel
Allied Tube & Conduit Corporation
16100 South Lathrop Avenue
Harvey, Illinois 60426

RE: Country of origin marking; couplings; pipe fitting; cutting; threading; bevelling; coating; attachment to conduit pipe; assembly; substantial transformation

Dear Mr. Flemister:

This is in response to your request for a ruling submitted on behalf of Canvil, Ltd. ("Canvil") and Allied Tube & Conduit Corporation ("Allied") regarding the proper country of origin marking for certain conduit couplings which are to be partially manufactured in the U.S. and Canada. Samples were submitted.


Allied plans to have couplings partially fabricated in Canada by Canvil from American raw materials and then returned to the United States for final manufacturing. The sequence of events necessary to complete this process, as stated in your letter, are as follows.

Allied will purchase semifinished twenty-two (22) foot length raw and galvanized conduit shells from American manufacturers. The special carbon chemistry of these shells is such that they can only be used to manufacture couplings as opposed to conduit. These shells will be shipped to Canvil in Canada where they will be cut to the proper length to serve as conduit couplings. Depending upon the sizes of the couplings, between eighty (80) and one hundred (100) couplings will be made form each length of conduit shell.

The unfinished couplings will be threaded in Canada on the inner diameter only, and then bevelled. The unfinished couplings will then to returned to the United States to be electro-galvanized or plated on the outer diameter into an acceptable finished couplings. The finished couplings will only be sold by Allied already coupled to ten (10) foot lengths of electrical conduit. Allied will not sell the finished couplings alone. Throughout this process Allied will retain legal title to the couplings.

You ask what is the proper country of origin for these couplings when they arrive in the United States and also when they are sold by Allied as a finished product coupled to ten (10) foot lengths of electrical conduit.


1. Whether the U.S. conduit shells are substantially transformed in Canada as a result of cutting, threading and beveling so as to render Canada the country of origin of the couplings at the time of importation.

2. Whether the imported couplings are subject to the special pipe marking requirements.

3. Whether Allied substantially transforms the couplings after importation so as to render it the ultimate purchaser.


1. Are the conduit shells substantially transformed by the processing performed in Canada so as to render Canada the country of origin at the time of importation?

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires, subject to certain specified exceptions, that every article of foreign origin imported into the U.S. shall be marked to indicate the country of origin to the ultimate purchaser in the U.S. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Country of origin is defined in 19 CFR 134.1(b) as the 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.

By definition, only merchandise which is "of foreign origin" is subject to the requirements of 19 U.S.C. 1304. In other words, products of U.S. origin are not required to be marked with their country of origin. With certain exceptions not applicable here, Customs has consistently ruled that since 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 U.S. product sent abroad for processing remains a product of the U.S. and is not subject to the requirements of 19 U.S.C. 1304 upon its reimportation unless the article is first substantially transformed into an article of foreign origin. In the present case, the first issue presented is whether the U.S. materials are substantially transformed into articles of Canadian origin as a result of the operations performed in Canada.

A substantial transformation occurs when articles lose their identity and become new articles having a new name, character or use. See United States V. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940), National Juice Products Association v. United States, 10 CIT 48, 628 F.Supp. 978 (CIT 1986); Koru North American v. United States, 701 F.Supp 229, 12 CIT 1120 (CIT 1988). The question of when a substantial transformation occurs is a question of fact to be determined on a case-by-case basis. Uniroyal Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026 (1982), aff'd, 1 Fed.Cir. 21, 702 F.2d 1022 (1983).

In Midwood Industries v. United States, 64 Cust. Ct. 499, C.D. 4026, 313 F. Supp. 951 (1970), a case involving the country of origin marking requirements of imported steel forgings, the Customs Court considered whether they were substantially transformed by processing performed in the U.S. The processes involved in finishing the imported articles included, cutting, boring, facing, spotfacing, drilling tapering, threading, bevelling, heating and compressing. The court found that the processing substantially transformed the imported forgings into fittings and flanges. Although the court based its decision in part on the fact that the processing changed a producer's forgings to a consumer's flange, the decision makes clear that numerous machining operations were performed in the U.S. which imparted essential characteristics to the forgings that enabled them to be used as fittings and flanges. For example, there was testimony that the rough forgings have no connecting ends and therefore, cannot be used to connect pipes of matching size, the essential purpose of fittings.

In C.S.D. 89-121, July 25, 1989, Customs construed Midwood as requiring significant machining operations which change the fundamental character of imported forgings for a finding of substantial transformation. Operations such as lathing, drilling and grinding were distinguished from cosmetic or minor processing operations such as identification marking, and blasting, tumbling and plating.

In the instant case, the operations performed in Canada include cutting the conduit shells into 2-3 inch lengths, threading the inner diameter and bevelling the ends. Although there are some rulings involving one or more of these operations, we have not previously ruled on whether these operations taken together constituent a substantial transformation.

In Treasury Decision 87-46, Customs determined that threading operations alone do not substantially transform pipe fittings so as to change their country of origin. Customs found that threading does not change the name, character or use of a fitting, and that the operation is insubstantial in relation to the nature of the operations needed to manufacture a fitting. In Headquarters Rulings Letter ("HRL") 734186, October 24, 1991, Customs determined that cutting steel pipe to lengths of between 12 inches and 120 inches is not a substantial transformation. The decision notes that lengths of pipe cut to 12 inches or more are considered pipe for classification purposes. However, substantial transformation was found where additional machining (including bevelling) was performed. In HRL 734883, August 1, 1990, Customs determined that unfinished malleable cast iron components of pipe fittings which as imported have no threading, bevelled edges or other features beyond their rough shape and cannot be joined together as pipe fittings were substantially transformed in the U.S. Numerous machining operations were performed to achieve the final shape. In HRL 700022, October 27, 1972, Customs determined that based on Midwood, certain unfinished fittings were substantially transformed by bevelling, painting and marking them, rendering the U.S. processor the ultimate purchaser.

In this case, based on these prior decisions, we find that the coupling stock is substantially transformed in Canada as a result of three operations performed there taken together. Prior to such processing, the product lack those features which characterize it as couplings, namely its proper dimensions, finished ends, and threading. We find that taken together these operations substantially transform the U.S. raw shells into couplings which are products of Canada. We note that unlike the pipe in HRL 734186 which was cut into lengths of greater than 12 inches and thus remained pipe for classification purposes, here, the conduit is to be cut into lengths of approximately 2-3 inches and results in a more significant change. In addition, the processing involved here exceeds the processing that was involved in HRL 700022.

2. Are the imported couplings are subject to the special pipe marking requirements?

Section 207 of the Trade and Tariff Act of 1984 (19 U.S.C. 1304(c)), requires that all imported steel pipes and fittings of foreign origin be marked with their country of origin by means of die stamping, cast-in-mold lettering, etching or engraving. Where it is technically or commercially infeasible to mark by one of these methods, the article may be paint stencilled. Imported articles which are classifiable as pipe fittings must be marked in accordance with the requirements of 19 U.S.C. 1304(c). Iron or steel tube or pipe fittings (for example, couplings, elbows, sleeves) of iron or steel are classified under Heading 7307, Harmonized Tariff Schedule of the United States. It appears that the couplings in question would be classified under this heading; if so, they would be subject to the special marking requirements of 19 U.S.C. 1304(c).

3. Who is the ultimate purchaser of the imported couplings?

An ultimate purchaser is defined in section 134.1, Customs Regulations (19 CFR 134.1), as "the last person in the U.S. who will receive the article in the form in which it was imported." The regulation further provides that if an imported article will be used manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation. However, if the manufacturing process is merely a minor one which leaves the identity of the imported article intact, 19 CFR 134.1(d)(2) provides that the consumer or user of the article, who obtains the article after the processing will be regarded as the ultimate purchaser. Where a U.S. manufacturer substantially transforms an imported article, such article is generally excepted from individual marking; only the outermost container is required to be marked. See 19 U.S.C. 1304(a)(3)(D), section 134.32(d) and 134.35, Customs regulations (19 CFR 134.32(d) and 134.35).

However, this exception is not applicable to imported steel pipe fittings. 19 U.S.C. 1304(c) provides that, with two exceptions not applicable here, "no exception from marking may be made under 19 U.S.C 1304(a)(3) with respect to . . . pipe fittings of steel, chrome-moly steel, or cast and malleable iron each of which shall be marked with the country of origin by means of die stamping, cast-in-mold lettering, etching, or engraving (emphasis added). Although no marking exceptions apply, we have ruled that if the importer is the ultimate purchaser, the marking may appear in a location where it will be obliterated during the U.S. processing. See HRL 728693, November 5, 1985.

In this case, after importation Allied will electro- galvanize or plate the outer diameter into an acceptable finished coupling. No details regarding the coating processes were submitted. A substantial transformation may result where a coating process changes the chemical composition of the product, but not where the coating is only for the prevention of corrosion and there is no such change. See National Hand Tool Corp. v. United States, Slip Op. 92-61 (CIT April 27, 1992) (Taiwanese hand tool components did not undergo a substantial transformation when they were assembled and further processed in the U.S. by heat treatment, electroplating with nickel and chrome, and other processing. The court concluded that the character of the articles remained unchanged after such processing. Neither the heat treatment nor the plating changed the chemical composition of the material); Ferrostaal Metals Corp.v. United States, 11 CIT 470 (1987); (cold-rolled steel sheet from Japan annealed and galvanized in New Zealand by a process known as "continuous hot dip galvanizing" was a product of New Zealand. Such processing changed the character of the sheet by creating a mixed zinc-steel surface which changed the chemical composition of the sheet and by providing corrosion resistance).

In the present case, no information was submitted demonstrating that the coating process to which the couplings are subjected change the chemical composition of the fittings or otherwise change their fundamental character.

In addition to coating, Allied attaches the coupling to ten foot electrical conduit. You have advised us by telephone that the couplings are merely threaded onto the conduit rather than permanently attached. We find that the coupling does not lose its separate identity when it is attached in a nonpermanent fashion to electrical conduit.

Based on the information submitted, we find that the U.S. processing does not substantially transform the couplings. As such, we find that Allied is not the ultimate purchaser of the couplings within the meaning of 19 CFR 134.35. Therefore, the imported couplings must be marked with their country of origin (Canada) in a manner which remains visible to subsequent purchasers. Both at the time of importation and at the time of sale by Allied, the couplings are considered products of Canada.


For purposes of 19 U.S.C. 1304, the processing in Canada substantially transforms the raw coupling stock into couplings of Canadian origin. Assuming the couplings are classified as pipe fittings of iron or steel, they are subject to the special pipe marking requirements of 19 U.S.C. 1304(c) and must be marked by one of the specified methods. Based on the information submitted, we conclude that the domestic processing does not render Allied the ultimate purchaser; as such, the name of the country of origin (Canada) must remain visible to subsequent purchasers.


John Durant, Director

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