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HQ 561141

November 2, 1998

MAR-2-05 RR:CR:SM 561141 MLR


Stuart E. Benson, Esq.
Farkas & Manelli, PLLC
2000 M Street, N.W.
7th Floor
Washington, D.C. 20036-3307

RE: U.S. Government Procurement; Final Determination; Country of origin of Surgical Instruments; forging; substantial transformation; Title III, Trade Agreements Act of 1979 (19 U.S.C. 2511); 19 CFR 177.21

Dear Mr. Benson:

This is in reference to your letter of September 9, 1998, requesting a final determination under Subpart B of Part 177, Customs Regulations 19 CFR 177.21 et seq.). Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 2411 et seq.), the Customs Service issues country of origin advisory rulings and final determinations on whether an article is or would be a product of a designated foreign country or instrumentality for the purpose of granting waivers of certain "Buy American" restrictions in U.S. law or practice for products offered for sale to the U.S. Government. Samples were submitted with your request.

This final determination concerns the country of origin of certain surgical instruments made by Aesculap AG (hereinafter "AAG") in Germany and imported by Aesculap, Inc. (hereinafter "AIC"), a U.S. company, and which AIC supplies under a Federal Supply Schedule contract with the Department of Veterans Affairs. Accordingly, AIC is a party-at-interest within the meaning of 19 CFR 177.22(d)(1), and is entitled to request this final determination.


AIC requests this final determination for the prospective importation of certain hand-held surgical instruments. The instruments are forged at AAG's facility in Germany
from stainless steel made in Germany. Strips of steel are sheared off in appropriate sizes and heated in a blast furnace. They are then forged, which entails hot-stamping or pressing the steel over a mold. The forged parts are annealed, which entails heating and then cooling slowly to prevent brittleness. Excess metal (flashing) is then removed by stamping. The German forgings are then shipped to Malaysia.

In Malaysia, for parts requiring teeth, the jaw parts are milled. For curved instruments, the parts are shaped. For instruments consisting of one piece, such as blade handles, the parts are machined. For instruments with two pieces (such as scissors or forceps), ratchets are milled and shanks are shaped; male box locks are milled; female box locks are broached and filed; female box locks are cold-stretched and filed; male box locks are fitted into place; the two parts are pressed together, adjusted and aligned; holes for the pins are drilled, and the pins are press-fitted and finished flat and smooth with the boxes. The instruments then undergo a quality-assurance check for compliance with dimensions and material integrity. The instruments are then tempered in a vacuum furnace, adjusted and aligned (two piece instruments only) and polished.

Most of the instruments are then shipped to Germany for quality assurance checks of their dimensions, material integrity, function and uniform finish. They then undergo marking, packaging, and labeling before shipment to the U.S. Some instruments undergo final quality assurance, marking, packaging and labeling in Malaysia.

It is stated that some forgings are used by AAG to make just one type of instrument. However, some parts are used to make a limited number of forms of a type of instrument. For example, one particular forging can be used to produce four different types of delicate tissue forceps that are five inches in length: (1) Semken delicate forceps without teeth, (2) Semken delicate forceps with 1x2 teeth, (3) Semken delicate forceps with 2x3 teeth, and (4) Waugh delicate forceps with 1x2 teeth. It is stated that "Semken" and "Waugh" are names of instrument patterns. "Teeth" are placed at the very tip of the instrument. Instruments with 1x2 teeth have one tooth on one side and two on the other so that the single tooth fits between the two on the other side. Instruments with 2x3 teeth have two on one side and three on the other. Teeth are different from serrations, which are the lateral grooves found in some instruments from the tip to the box lock. It is stated that the delicateness and number of teeth vary according to the specific use in surgery. It is also stated that some forgings are shortened slightly by machining, for example to produce 5 1/2 inch forceps and 5 1/4-inch needle holders.


Whether the surgical instruments are products of Germany or Malaysia.


As prescribed under Title III of the Trade Agreements Act, the origin of an article not wholly the growth, product, or manufacture of a single country is to be determined by the rule of substantial transformation. 19 U.S.C. 2518(4). Such an article is not a product of a country unless it has been substantially transformed there into a new and different article of commerce with a name, character or use different from that of the article or articles from which it was transferred.

AIC claims that the surgical instruments are products of Germany based specifically on National Hand Tool Corp. v. United States, 3 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993), and Headquarters Ruling Letter (HRL) 558747 dated January 20, 1995; HRL 559847 dated January 2, 1997; and HRL 560239 dated June 17, 1997.

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 necessarily preclude a finding of a substantial transformation, it noted that such determination must be based on the totality of the evidence. The court then concluded that no substantial change in name, character or use occurred as a result of the processing performed in the U.S.

In HRL 559847 January 2, 1997, Customs considered U.S.-origin stainless steel sheets cut into strips of suitable width, which were further cut into blanks. The blanks were then heated and hammer forged. The forgings were annealed and trimmed, and cold stamped to straighten the trimmed forgings. The forgings were then shipped to Pakistan where they underwent milling operations to cut the box, rachet, and jaw serrations into the forceps; assembled; ground; filed; heat treated, including tempering and testing for hardness; acid pickled; polished; chemical cleaned; and buffed. It was held that inasmuch as the forgings
resembled the shape and size of the completed instruments upon importation into Pakistan, the operations performed in Pakistan did not substantially transform the forgings into a new and different article of Pakistani origin. Accordingly, the origin of the finished instruments was the U.S. See also HRL 560441 dated November 18, 1997 (no substantial transformation when German rough forgings were machined, assembled, rough polished, heat treated, and cleaned in Hungary).

Although HRL 558747 dated January 20, 1995, involved the same type of processes as in this case, the German forgings in that case were shipped to the U.S. for assembly, cutting, and scaling down and then to Russia or Hungary (rather than just to Malaysia alone) for heat treatment , a final cleaning, and plating. However, it was also held that the processing in the U.S. did not substantially transform the surgical instrument forgings and neither did the finishing processes performed in Russian or Hungary. Therefore, the surgical instruments were required to be marked as products of Germany. A similar finding was made in HRL 560239.

We find the processes in this case to be similar to the ones considered in HRL 559847 and HRL 560441. Accordingly, pursuant to those rulings and National Hand Tool, we find that there is no substantial transformation of the forgings in Malaysia, and the country of origin of the finished instruments will be Germany. While we also note that some raw part forgings may be shortened to either make 5 1/2 inch forceps or 5 1/4-inch needle holders, in National Hand Tool, the reshaping of the speeder handle was not extensive enough to result in a substantial transformation. Therefore, in this situation, too, we find that the country of origin of the finished surgical instruments will be Germany.


Based on the facts and samples presented, we find that the processing in Malaysia does not result in a substantial transformation of the German forgings. Therefore, the country of origin of the finished surgical instruments is Germany.

Notice of this final determination will be given in the Federal Register as required by 19 CFR 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 CFR 177.31, that Customs reexamine the matter
anew and issue a new final determination. Any party-at-interest may, within 30 days after publication of the Federal Register notice referenced above, seek judicial review of this final determination before the Court of International Trade.


Stuart P. Seidel

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