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HQ 559236

October 26, 1995

CLA-2 R:C:S 559236 kbr


George O. Shecter, Phd.
6925 Canby Avenue
Suite 102
Reseda, CA 91335

RE: Country of origin marking of steel surgical instruments; substantial transformation; 19 CFR 134.35

Dear Dr. Shecter:

This is in response to your letters of March 6, 1995 and July 26, 1995, and a meeting held on October 17, 1995, requesting a ruling on behalf of ALTOMEC, regarding the country of origin marking of certain steel surgical instruments forged in Germany, sent to Pakistan for further processing and returned to Germany for final processing and exported to the U.S. Samples of the surgical instruments as they appear after processing in each country were submitted with your request.


You have described the operations involved in producing the surgical instruments as follows. Forgings or "blanks" of two blades of one instrument are made in Germany from German stainless steel. In the meeting held on October 17, 1995, you stated that the slot, or "box lock" through which one blade of the instrument is inserted is part of the forging made in Germany. You also stated that the teeth in the ratchet part of the handle by the finger holes were cut in Germany. The ratchet teeth define the increments at which the instrument holder's grasp can be adjusted. The serrations of the functional end of the instrument are done in Germany. These serrations must be made to exactly meet the counterparts on the opposite blade so as not to tear the flesh. The blades are then sent to Pakistan where they are hardened, polished and assembled to each other with screws and pins also made in Germany. The assembled instrument is returned to Germany where it is tested, marked and labeled.


Whether the surgical instruments are substantially transformed by the assembly process in Pakistan.


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 imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article 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 the 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. See HQ 558747 (January 20, 1995).

In C.S.D. 90-101 (June 6, 1990), a case involving surgical scissors and other surgical instruments, Customs ruled that the milling and the intricate cutting of forged blanks that create the ratchet, teeth, inside rings, and box lock on surgical instruments were extensive operations that "give the surgical instruments their actual dimensions and essential characteristics such as the capacities to grip and close" and that these operations coupled with heat treating and polishing gave the surgical instruments their basic character and resulted in a substantial transformation.

In contrast, in Headquarters Ruling Letter (HRL) 733565 (September 11, 1990), Customs ruled that unfinished household scissors exported to Pakistan for further processing including grinding, polishing, nickel plating, heat treating, and assembly did not constitute a substantial transformation. It was determined that these processes were nothing more than finishing operations which did not alter the basic character of the shears.

In HRL 732844 (February 12, 1990), Customs ruled that U.S.-made forgings not machined to their actual dimensions and which lacked the capacities to grip, close, lock in place, and to be adjusted, were substantially transformed into surgical instruments by extensive machining, bending, cutting, riveting, assembly, and polishing operations performed in Pakistan. It was noted that these operations gave the surgical instruments their basic characteristics. In HRL 734904 (April 30, 1993), Customs considered strip stainless steel forged in Germany and exported to Pakistan, where the forgings were milled, machined, or forged. The parts were then assembled into surgical instruments, riveted, adjusted, heat treated, annealed, polished, passivated, stamped or marked, ultrasonically cleansed, and packaged. It was determined that these operations performed in Pakistan constituted a substantial transformation, so that the country of origin was Pakistan.

In HRL 553197 (February 11, 1985), however, steel forgings were machined in the U.S., mainly consisting of deburring, swagging, and broaching. These articles were then exported to Pakistan, where they were rough polished, hand shaped and curved, subjected to a heat treatment, and final polished. In that case, it was held that because the key machining operations occurred in the U.S., and the processes in Pakistan were finishing operations, the instruments would be exempt from individual marking pursuant to 19 CFR 134.32(m).

Finally, in HRL 734835 (February 3, 1993), shear blade castings from Taiwan were imported into the U.S., where a hole was further drilled; the rough surface from the casting was ground off; a cutting edge was made; various polishing operations were performed which resulted in a rough finish; the blades were racked and nickel plated by moving the blades through six consecutive liquid solutions; the blade edges and points on the blades were ground and sharpened; the rivet was inserted; the finger and thumb pieces were assembled; the scissors were buffed; a process called "Japanning" was performed which consisted of dipping, racking, and baking; and lastly, the scissors were tested and oiled. It was held that the imported castings were substantially transformed in the U.S. as a result of the further processing in the U.S., and therefore became a product of the U.S.

In a recent ruling, HQ 558747 (January 20, 1995), Customs cited the court's decision in National Hand Tool Corp. v. United States, Slip Op. 92-61 (CIT April 27, 1992), aff'd, 92-1407 (CAFC February 3, 1993), as establishing the criteria for determining whether there has been a substantial transformation. Specifically, Customs stated that the criteria set forth in National Hand Tool, to be applied "based on the totality of the evidence," include:

[1] whether the tool forging has the same name as the finished tool,

[2] whether the tool forging has a predetermined use, and

[3] whether the tool forging has the essential character of the finished tool.

In National Hand Tool, sockets and flex handles were either cold formed or hot forged into their final shape, speeder handles were reshaped by a power press after importation, and the grip of the flex handles were knurled in the U.S. The imported parts 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 components were not substantially transformed by the strengthening, cleaning, and assembly performed in the U.S.; therefore, 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. Although the court stated that a predetermined use would not preclude the finding of a substantial transformation, the determination must be based on the totality of the evidence and, therefore, no substantial change in name, character or use was found. Slip. Op. 92-61, at 7, 8.

In a recent ruling discussing both C.S.D. 90-101 and National Hand Tool, Customs found that after the surgical instrument forgings were exported from Germany, the additional work of assembling the surgical instrument, cutting the ratchet teeth and the scaling down operations were not extensive enough operations to effect a substantial transformation, pursuant to National Hand Tool. See HRL 558747 (January 20, 1995).

In regard to the facts of this case, we find that ALTOMEC's surgical instruments are a product of Germany. Since the forgings are made in Germany, the box lock is part of the original forging made in Germany, and the cutting of the ratchet teeth and serrations is done in Germany, we find that the final shape and essential characteristics of the instruments are imparted by the operations performed in Germany. The hardening, polishing and assembly of the two pieces in Pakistan does not effect a substantial transformation under either C.S.D. 90-101 or National Hand Tool. Therefore, the German country of origin must be marked on the finished surgical instruments.


Based upon the information provided, we find that for purposes of 19 U.S.C. 1304, the processing in Pakistan of the surgical instrument forgings imported from Germany in the manner set forth above does not constitute a substantial transformation; therefore, the finished surgical instruments are products of Germany.

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.


John Durant, Director

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