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HQ 562896

January 28, 2004

MAR-2-05 RR:CR:SM 562896 DCC


Mr. Stuart E. Benson
Manelli Denison & Selter PLLC
2000 M Street, N.W., 7th Floor
Washington, DC 20036-3307

RE: Country of Origin of Surgical Instruments; Forging; Substantial Transformation

Dear Mr. Benson:

This is in response to your letter of October 29, 2003, requesting a binding ruling letter on behalf of Aesculap, Inc. (“Aesculap”). Your request concerns the country of origin marking requirements applicable to imported surgical instruments. In addition to your written submission, you provided descriptions, photographs and samples of the instruments and forgings.


Aesculap manufactures and imports into the United States stainless steel surgical instruments that are produced in Germany and Malaysia. The initial step in Malaysia involves shearing strips of stainless steel into “blanks” that are sized according to the general dimensions of the finished instrument. These blanks are then heated in a blast furnace and forged, which entails hot-stamping or pressing the blanks over a mold. Excess metal, known as flashing, is then removed by stamping. The forged part is then sandblasted and a part number is assigned, in this case, BH812003.

The forgings are then shipped to Germany where they are machined according to the specifications of the finished instrument. Each instrument is made from two forgings. In Germany, a hole is drilled into the center of two forgings where a box joint will be formed. For some instruments, teeth may be milled into the jaw of the instrument, and for all the sample instruments provided, grooves will be cut near the handle to form a locking ratchet. To form the box joint, one forging is milled to create a casing, or female part and the second forging is milled to form a piercing, or male part. For assembly, two milled forgings are connected at the box joint, which is then secured with a rivet. The combined forgings are bent by hand to form the prescribed curve, aligned, and adjusted. If required, the jaw may be cut to a specified length. The instrument is heat treated to harden the instrument and tempered to reduce tension in the metal. Finally, the instrument is honed, polished, passivated by chemical galvanization, and marked with its article number and other information.

Part BH812003 is used to produce 21 models of surgical instruments, including forceps, clamps, needle holders, and clips. In addition, Aesculap has used part BH812003 to produce 22 special order instruments. Each of the 21 standard instruments is designed to be used for specific medical procedures. The use of the finished instrument determines the length, width and curvature of the jaw, and the shape of the shank. The cost of the operations performed in Malaysia is estimated to represent 12% of the total cost of manufacture.

You claim that the finished surgical instruments are products of Germany based on National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993), and United States v. Gibson-Thompsen Co., 27 C.C.P.A. 267 (C.A.D. 98).


Whether the finished stainless steel surgical instruments are products of Germany or Malaysia.


Section 304 of the 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 United States 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 United States 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., 27 CCPA 297, 302, C.A.D. 104 (1940).

Part 134, Customs Regulations (19 C.F.R. § Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” 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” 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. However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).

You assert that forgings from Malaysia undergo a change in name, character and use when further processed in Germany. In particular, you note that because a single forging can be used to produce various surgical instruments, there is no predetermined use for the forgings at the time they are shipped to Germany. You also argue that the processing operations in Germany determine the character in terms of the size, structure and features of each finished article. Finally, you note that there is a change in name when the raw forgings are made into finished surgical instruments.

In National Hand Tool Corp., 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 United States. 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 in National Hand Tool Corp. 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 United States. The court also found that there was no change in use because of the processing performed in the United States. Although the court stated that a predetermined use would not necessarily preclude a finding of a substantial transformation, it noted that such a finding 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 United States.

In HRL 559847, dated January 2, 1997, Customs and Border Protection (“CBP”) considered U.S.-origin stainless steel sheets cut into strips of suitable width, which were further cut into surgical instrument blanks. The blanks were heated and hammer forged into their final shape and size. 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, ratchet, 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 determined to be the United States.

In HRL 560441, dated November 18, 1997, CBP held that German rough forgings of surgical and medical instruments sent to Hungary for further processing did not undergo a substantial transformation in Hungary. In Hungary, the forgings were machined, assembled, finished to remove a layer of impurities from the forgings, and cut to the shape of the instrument. For two-component instruments, a boxlock was installed on the finished parts, which were aligned to enable griping, closing, and locking in place. Finally, the instruments were cleaned, rough polished, and heat treated in Hungary before they were shipped to the United States.

Similarly, in HRL 561189, dated November 5, 1998, CBP determined that German stainless steel forgings that were sent to Pakistan for further processing did not undergo a substantial transformation when manufactured into surgical instruments. The processing in Pakistan included milling, assembly, bending the jaws, grinding and filing, hardening and annealing, polishing and buffing, electro-polishing, etching, and cleaning. Although one forging could be used to produce instruments with different lengths or shapes, CBP concluded that the lengthening or bending of the forgings was not extensive enough to constitute a substantial transformation of the raw parts.

Finally, you may recall HRL 561141, dated November 2, 1998, which was also issued to Aesculap. In that ruling, Aesculap produced stainless steel forgings in Germany that were subsequently shipped to Malaysia for further processing, which including milling teeth in the jaws and ratchets near the handles, shaping the shanks, installing box locks, adjusting and aligning the parts, and tempering the instruments in a vacuum furnace. That ruling also considered the situation where one forging was used to produce four forceps with various teeth patterns. CBP concluded that the further processing in Malaysia did not result in a substantial transformation of the forgings from Germany.

We find the finishing processes performed in Germany in this case to be similar to the further processing addressed in HRLs 559847, 560441, and 561189. In each of those ruling letters, as in the instant case, the forgings underwent various operations including milling, grinding, drilling, installation of the box joint, cutting serration in the jaws, assembly, heat treating, and surface finishing to produce finished surgical instruments.

In addition, CBP has previously considered the situation where a single forging was used to manufacture instruments with different lengths (HRL 561189) or multiple forms of a particular instrument (HRL 561141). In those rulings, CBP determined that there was no substantial transformation despite the fact that a particular forging could be used to produce multiple instruments with different shapes or characteristics.

Finally, we note that the shape of the forging is similar to that of the finished article. Each forging and finished surgical instrument has circular finger grip handles, long mid section shank, section for the box joint, and section for the jaws of the device. Furthermore, after processing in Germany, each of the various instruments will have a similar function in that all will be used for gripping or clasping other items and all appear to have a ratchet mechanism.

Accordingly, pursuant to those rulings and National Hand Tool, we find that the forgings do not undergo a substantial transformation in Germany, and therefore, the country of origin of the finished instruments will be Malaysia—the country of origin of the forging. We note that, before the operations performed in Germany, each forging has the approximate shape of the finished surgical instrument. Although the length and shape of the working end of the forgings may be altered in Germany, we find that such processing is analogous to the reshaping operations that the court in National Hand Tool found not to be extensive enough to result in a substantial transformation of the unfinished good. Therefore, the forging is not changed in Germany to such a degree as to result in a new and different article of commerce.


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

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.


Myles B. Harmon, Director
Commercial Rulings Division

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