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HQ 560239

June 17, 1997

MAR-2-05 RR:TC:SM 560239 MLR


John P. Donohue, Esq.
Donohue and Donohue
232 South Fourth Street
Philadelphia, PA 19106

RE: Country of Origin Marking on surgical instruments; steel forgings; boxlock pin; finish grinding; beveling; bending; heat treating; cleaning; substantial transformation.

Dear Mr. Donohue:

This is in reference to your letters of December 11, 1996, January 13, 1997, and May 1, 1997, requesting a ruling on behalf of Pilling Weck Company ("Pilling") and R.T.P., concerning the country of origin marking on certain surgical instruments. Samples of the articles in their imported and finished condition were submitted on May 8, 1997.


It is stated that "raw forgings", sourced from either Germany or the U.S., are sent to Pakistan where some machining and rough surface grinding is performed. From the samples submitted, the ratchet, teeth, and boxlock are created in Pakistan. It is then stated that Pilling imports the "semi-manufactured" forgings into the U.S., where they are made into finished stainless steel surgical instruments. It is stated that the semi-manufactured forging parts are received and sent to the assembly department where the boxlock pin is inserted in the hinge joint and the pin is put in place to obtain a well-defined meshing of the teeth. Next, finish grinding is performed over the entire length of the instrument to obtain a uniform grit finish. The jaw and teeth area is beveled to remove all sharp edges, and the jaw is bent and curved to specification and setting requirements. The instrument is then placed on a heat treatment rack and placed in a heat treating hardening furnace to obtain the proper hardness and temper. The final hard setting and alignment function are then performed. Next, the final polishing operation is performed with a buffing machine to obtain the desired final finish. The instrument is then stamped and etched with a logo. Lastly, the instruments are placed into a passivation bath solution, the instruments are ultrasonically cleaned to remove all manufacturing chemicals and residue, and the instrument is inspected and packaged. Two sets of needle-holder samples were submitted. One set consists of the "raw forging" from Germany or the U.S., the "semi-manufactured forging" after processing in Pakistan, and the finished surgical instrument.


Whether the surgical instruments are substantially transformed in the U.S., and thereby excepted from country of origin marking.


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 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 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 imported article occurs when it is used in the U.S. in manufacture, which results in an article having a name, character, or use differing from that of the imported article. If such substantial transformation occurs, then the manufacturer is the "ultimate purchaser" of the imported article, and the article is excepted from marking and only the outermost container is required to be marked. See 19 CFR 134.35. On the other hand, if the manufacturing or combining process is merely a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred and an appropriate marking must appear on the imported article so that the consumer can know the country of origin. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).

It is contended that the forgings are substantially transformed in the U.S. As support, Torrington Co. v. United States, 596 F. Supp 1083 (CIT 1983), aff'd 764 F.2d 1563 (Fed. Cir. 1985), is cited where the Court of International Trade held that an article has undergone a substantial transformation when its semi-manufactured state has changed from a producer good to a consumer good. Midwood Industries v. United States, 313 F. Supp. 951 (1970), is also cited where the court noted that the imports were producers' goods and the flanges were consumers' goods and had undergone a substantial transformation. It is also state that Headquarters Ruling Letter 734835 dated February 3, 1993, is similar to the facts in this case.

In Torrington, the Federal Circuit found that swage needles were an intermediate "new and different" article because they were more refined, and possessed a definite size and shape suitable for further manufacturing into needles, while having lost the identifying characteristics of wire. 764 F.2d at 1568-1569. However, we note that Torrington has been limited to the specific factual situation found therein. See T.D. 86-7, 20 Cust. Bull. (1986).

Additionally, in Uniroyal, supra, the court did not rely on the producer versus consumer goods comparison. In Uniroyal, when the court applied Midwood, in analyzing the attachment of a shoe upper to an outsole, it was determined that the complex assembly process of making the upper was easily distinguishable from the minor assembly process of attaching the sole. 3 CIT at 226. Accordingly, the importer/processor who attached the sole was not the ultimate purchaser of the upper. The court stated:

[T]o consider attachments of this kind to be a substantial transformation' would be to open the door wide to frustration of the entire purpose of the marking statute. Thus in the present case it would be misleading to allow the public to believe that a shoe is made in the United States when the entire upper - which is the very essence of the completed shoe - is made in Indonesia and the only step in the manufacturing process performed in the United States is the attachment of an outsole. Id. at 224.

Furthermore, since the decisions of Torrington and Midwood, in National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), the court considered sockets and flex handles which were either cold formed or hot forged into their final shape prior to importation, speeder handles which were reshaped by a power press after importation, and the grip of flex handles which were knurled in the U.S. The imported articles 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 articles were not substantially transformed and that 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, it noted that the determination must be based on the totality of the evidence. No substantial change in name, character or use was found to have occurred as a result of the processing performed in the U.S.

It is also our opinion that the processing performed in the U.S. will not amount to a substantial transformation of the imported forgings. The forgings as imported are substantially complete articles and the processing done in the U.S. is minor compared to the manufacturing that previously took place abroad. We are also not persuaded that Headquarters Ruling Letter (HRL) 734835 is applicable. In HRL 734835 shear blade castings 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.

However, in HRL 734835, we note that at least a cutting edge was made in the U.S. In this case, on the other hand, the shape of the finished surgical instrument is apparent in the raw forging. Additionally, the instrument exported from Pakistan already contains its ratchets and teeth. While bending may occur in the U.S., we note that the reshaping of the speeder handles in National Hand Tool did not result in a substantial transformation. In light of the court's decision in National Hand Tool, it's holding takes precedence over a prior ruling, i.e., HRL 734835, especially if the prior ruling does not involve the same articles and procedures followed in this case.

Therefore, since the insertion of the boxlock pin is not a complex assembly, and the finished grinding, beveling, bending, heat treating, and cleaning do not result in a substantial transformation, the finished surgical instruments will not be exempt from country of origin marking. Rather, it is our opinion that the country of origin of the finished surgical instrument is the country in which the raw forging is made (in this case either Germany or the U.S.). See HRL 559847 dated January 2, 1997, where it was determined that stainless steel forgings which had been hot forged into the final shape of surgical instruments were not substantially transformed into a new and different article by additional milling, assembly, heat treating, cleaning and polishing and inspection operations. See also HRL 558747 dated January 20, 1995, which held that the additional work of assembling a surgical instrument, cutting ratchet teeth, and scaling down were not extensive enough to result in a substantial transformation. Accordingly, based upon the facts presented, the finished surgical instruments made from German forgings should be marked "Germany" and no marking under 19 U.S.C. 1304 will be required on the finished surgical instruments made from U.S. origin forgings. However, we suggest that you contact the Federal Trade Commission regarding the use of U.S. origin claims.


Based upon the information provided, it is our opinion that the imported "semi-manufactured" forgings do not undergo a substantial transformation in the U.S., where the boxlock pin is inserted and the forgings are finish ground, beveled, bent, heat treated, and cleaned. Rather, the country of origin of the finished surgical instrument is the country of origin of the raw forging, in this case either "Germany" or the "U.S." However, the Federal Trade Commission should be contacted regarding the use of U.S. origin claims.

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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