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HQ 560303

August 19, 1997

MAR-2-05 RR:TC:SM 560303 MLR


Patricia M. Hanson, Esq.
Katten, Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693

RE: Country of Origin Marking on surgical and medical instruments; United States; Germany; handle; function-specific component; substantial transformation

Dear Ms. Hanson:

This is in reference to your letter of February 5, 1997, requesting a ruling on behalf of Allegiance Healthcare Corp. ("Allegiance"), concerning the country of origin marking on certain surgical and medical instruments. Samples of the articles in their unfinished and finished forms were submitted on June 5, 1997.


It is stated that various types of medical/surgical instruments, such as a "cottle rasp", "yankauer suction tube", "joseph periosteotomes", etc., are crafted and machined in the U.S. from two-piece forgings or two components. It is stated that one forging/component is imported from Germany for the handle of the instrument, while the other forging/component is of U.S. origin which is for the working or function-specific end of the instrument.

Some of the imported handles are stated to be solid and some are hollow. The hollow handles are stated to consist of two pieces that are welded together prior to importation, and they bear a seam where they have been welded together. In the U.S., the seam is ground down and the handle appears to be made of one piece. Thereafter, the handles are put into inventory, along with the solid handles, for subsequent processing and combining with the component for the functional end of a medical instrument. The handles are stated to be interchangeable, in that the same handle may be combined with any one of a number of different function-specific component pieces. The function-specific component of each instrument is stated to be completely forged in the U.S. from bar stock, 12 feet in length (or stamped from sheet stock). The bar stock is cut to length, approximately four to six inches long. These pieces go through a lathe, by which the pieces are shaped. The tips of the pieces are then further shaped by one of two processes: either they are forged or they are machined and hand-ground. After the function-specific end of the instrument is finished, the piece is welded to an imported handle. This is accomplished by heating filler material and fusing the two parts together. The completed instrument (function-specific piece and attached handle) then undergoes blending and grinding with finishing wheels and belts. The instruments also undergo several other manufacturing operations, such as a heat treatment for hardening and passification in a nitric acid solution for corrosion prevention. Lastly, the instruments are polished, cleaned, and laser-etched with the proper product code. The instruments are stated to be sold in the U.S.


Whether the imported handle components are substantially transformed in the U.S., such that the finished surgical/medical instruments are 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).

In this case it is contended that the component which has the same name and predetermined use as the finished instrument is the function-specific component which is of U.S. origin and that the imported handle component has neither the same name nor the predetermined use as the finished medical instrument. It is claimed that the handle component is merely the forging or base piece of a handle and has the predetermined use only of a handle, and since the imported handle forgings are never dedicated to any one instrument and may be combined with one of a number of different types of function-specific forgings, they never possess the essential characteristics of any one instrument.

Furthermore, it is stated that the crafting and processing operations in the U.S. give the instruments their actual dimensions and essential characteristics. The essential characteristics of the instrument are located on the function-specific end of the instrument, which is stated to be completely forged (or stamped from sheet stock), crafted and finished in the U.S.

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. However, no substantial change in name, character or use was found to have occurred as a result of the processing performed in the U.S.

In this case, based upon the information and samples presented, all of the components from which the finished instruments are made are not imported as in National Hand Tool, and the processing performed in the U.S. involves more than just assembly, bending, and finished operations. Rather, in this case, the "function-specific" component of the instrument is stated to be crafted out of bar stock which is lathed and further shaped in the U.S. by being forged or machined and hand-ground.

In Uniroyal, supra, 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.

Accordingly, pursuant to Uniroyal, it is our opinion that the crafting of the function-specific portion of the instrument is more complex than the assembly of the handle to the function-specific portion. While complex operations may have also been performed abroad to make the handle, it is our opinion that the most complex operations are performed in the U.S. especially when the additional assembly and finishing operations are considered. Additionally, the handle's name, character, and use are changed in the U.S. when finished and assembled into a specific instrument because it is possible to use the same handle for various instruments. Accordingly, we find that the finished instruments are products of the U.S. and no marking under 19 U.S.C. 1304 will be required on the finished surgical instruments. However, we suggest that you contact the Federal Trade Commission regarding the use of U.S. origin claims.


Based upon the information provided, we find that the imported handles undergo a substantial transformation in the U.S., and the handle's name, character, and use are changed in the U.S. as a result of the operations performed in the U.S. to make the finished assembled instrument. Accordingly, no marking under 19 U.S.C. 1304 will be required on the finished surgical instruments. 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
Tariff Classification Appeals

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