Revocation of NY A81309; Country of origin marking for dental instruments

HQ H278602 April 4, 2017 CLA-2 OT:RR:CTF:TCM H278602 PJG Category: Marking Eric R. Rock Rock Trade Law LLC 77 W. Washington Street, Suite 400 Chicago, Illinois 60602 Re: Revocation of NY A81309; Country of origin marking for dental instruments Dear Mr. Rock: This is in response to your request for reconsideration dated June 20, 2016, of New York Ruling Letter (“NY”) A81309, dated April 19, 1996, issued to Mr. Herb Simon, on behalf of Hu-Friedy Manufacturing Company, LLC (“Hu-Friedy”). In NY A81309, U.S. Customs and Border Protection (“CBP”) considered the country of origin marking of a dental instrument wherein the handle was imported from Pakistan and it was assembled in the United States with the United States’ manufactured working end. CBP determined that after the light manufacturing processes undertaken in the United States, the handle retained its own identity and therefore the country of origin for marking purposes of the handle was Pakistan. We have reviewed NY A81309 and find it to be in error. For the reasons set forth below, we hereby revoke NY A81309. Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. No. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed action was published on February 8, 2017, in Volume 51, Number 6, of the Customs Bulletin. No comments were received in response to this notice. FACTS: The merchandise at issue is described in NY A81309 as follows: The samples you furnished consist of one finished Elevator, one finished and two unfinished handles. The Elevator is a dental instrument used to loosen a tooth from the periodontal ligament and ease extraction. It consists of a handle and a blade. The blade is referred to in your catalog as a shank with working end.The finished Dental Elevator sample you furnished measures 5 5/8 inches in overall length. The hollow handle is 3 3/4 inches long with a tapered body from 3 1/8 to 2 1/8 inches in circumference. It has been polished and sandblasted for a non-slip grip. The 1 7/8 inch long blade (measured on a straight line) has a curved and flattened tip.Of the three handles furnished, one is completely finished, another has been polished but not sandblasted, and the third grip has been neither polished nor sandblasted. All three handles have pre-formed holes to receive the blade shank.The blade is to be manufactured entirely in the United States, but you plan to import the handle from Pakistan either completely finished or semi-finished as described above and attach the blade by gluing. In NY A81309, CBP determined that “the light manufacturing processes undertaken in the U.S. would not change the character of the handle which retains its own identity. ‘Handle made in Pakistan’ die stamped or engraved in the handle would be an acceptable form of marking.”     The manufacturing and assembly scenario that you describe in your request for reconsideration is as follows: Hu-Friedy purchases semi-manufactured steel components called turnings from a vendor in the United States. The turnings consist of steel bar stock that has been cut to length and tapered at one end. The bar stock used by the vendor as the input material in the turnings is manufactured in the United States from U.S. steel. The turnings are machined and punched to form a specific shape and, depending on the elevator model, are bent to exacting dimensions to form the working ends of the elevators. The working ends are heat-treated to retain their hardness. The heat treating operations are either performed by Hu-Friedy in its manufacturing facility in Chicago or performed by a third-party vendor in the United States. After heat treatment, the ends are burnished through a ‘speed shine’ process and/or electro-polished to form a smooth shine. At this point, the working ends are ready to be assembled to the imported handles. The assembly process is outlined below: The handles are imported with a hole at one end to receive the working ends. A bonding agent is inserted into the hole. The bonding agent serves as both a sealant to prevent moisture from entering the hole where the working end is assembled and an adherent to the working end. The handle is placed into an arbor press and press fit to the working end. At this time, the handle and working end are irreversibly joined. There is no expectation that the components would be subsequently separated by the end-user. The assembled elevator is laser marked with a part code, date code and Hu-Friedy’s logo. The elevator is cleaned, and any excess material is removed. The elevator is placed into an oven to cure the bonding agent and seal the assembly joint. After curing, the elevator is buffed to make it shine, polished to make the final working end sharp, and cleaned again. You submitted three samples with your request and we note that the “function-specific working end, or ‘point’” to the handles are marked “MADE IN U.S.A.” and there are no country of origin markings on the handles. In your submission, you note that “these items did not have handles sourced in Pakistan, and were manufactured in the U.S. from U.S. materials.” ISSUE: Whether substantial transformation occurs when dental instrument handles that are imported from Pakistan are assembled in the United States with working ends that are manufactured in the United States from United States’ steel, thereby excepting the components from country of origin marking. LAW AND ANALYSIS: The marking statute, Section 304, Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), provides that unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, and permanently as the nature of the article (or 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. Part 134 of Title 19 of the Code of Federal Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.14(a) and (c) (19 C.F.R. § 134.14(a) and (c)) provide as follows: Articles combined before delivery to purchaser. When an imported article is of a kind which is usually combined with another article after importation but before delivery to an ultimate purchaser and the name indicating the country of origin of the article appears in a place on the article so that the name will be visible after such combining, the marking shall include, in addition to the name of the country of origin, words or symbols which shall clearly show that the origin indicated is that of the imported article only and not that of any other article with which the imported article may be combined after importation. * * * (c) Applicability. This section shall not apply to articles of a kind which are ordinarily so substantially changed in the United States that the articles in their changed condition become products of the United States. An article excepted from marking under subpart D of this part is not within the scope of section 304(a)(2), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)(2)), and is not subject to the requirements of this section. Section 134.35(a) of the C.F.R. (19 C.F.R. § 134.35(a)) states as follows: Articles other than goods of a NAFTA country. An article used in the United States in manufacture which results in an article having a name, character, or use differing from that of the imported article, will be within the principle of the decision in the case of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98). Under this principle, the manufacturer or processor in the United States who converts or combines the imported article into the different article will be considered the “ultimate purchaser” of the imported article within the contemplation of section 304(a), Tariff Act of 1930, as amended (19 U.S.C. 1304(a)), and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with this part. Section 134.41(b) (19 C.F.R. § 134.41(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. In order to satisfy the requirements of 19 U.S.C § 1304, a dental instrument must be legibly marked with the name of the country of manufacture of the dental instrument in a conspicuous place. In addition, section 134.43(a) (19 C.F.R. § 134.43(a)), places special marking requirements on certain products, including dental instruments. In pertinent part, 19 C.F.R. § 134.43(a), states as follows: articles of a class or kind listed below shall be marked legibly and conspicuously by die stamping, cast-in-the-mold lettering, etching (acid or electrolytic), engraving, or by means of metal plates which bear the prescribed marking and which are securely attached to the article in a conspicuous place by welding, screws, or rivets: knives, forks, steels, cleavers, clippers, shears, scissors, safety razors, blades for safety razors, surgical instruments, dental instruments, scientific and laboratory instruments, pliers, pincers, nippers and hinged hand tools for holding and splicing wire, vacuum containers, and parts of the above articles. (emphasis added) Two court cases have considered whether imported parts combined in the U.S. with domestic parts were substantially transformed for country of origin marking purposes: United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940), and Uniroyal, Inc. v. United States, 3 Ct. Int’l Trade 220 (1982), aff’d 702 F.2d 1022 (Fed. Cir. 1983). In Gibson-Thomsen, the court held that imported wood brush block and toothbrush handles which had bristles inserted into them in the United States lost their identity as such and became new articles having “a new name, character and use.” 27 C.C.P.A. at 273. However, in Uniroyal, imported shoe uppers were found to be the "essence of the completed shoe" and, therefore, were not substantially transformed when combined with domestic soles in the United States. 702 F.2d at 1022. In National Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308, 309, the court determined that mechanics’ hand tool components which “it used to produce flex sockets, speeder handles, and flex handles” were imported from Taiwan and “processed and assembled in the United States” were not substantially transformed in the United States and therefore were not excepted from the country of origin marking requirements of 19 U.S.C. § 1304. Specifically, the court found “that the name, character or use of the merchandise did not change by post-importation processing, and no substantial transformation occurred.” Id. In National Hand Tool Corp., most of “[t]he components were cold-formed or hot-forged in Taiwan into their final shape before importation …. [t]he grip components of flex handles … were knurled in the United States…. [s]ome of the articles … were heat-treated in the United States while others … underwent heat treatment in Taiwan”, similarly, “[s]ome articles … were electroplated in the United States while other articles … were electroplated in Taiwan.” The manual assembly of the components occurred in the United States. Id. at 310. Ultimately, “[t]he Court found that pre-importation processing of cold-forming and hot-forging required more complicated functions than post-importation processing.” Id. The Court found that “the name of each article as imported has the same name in the completed tool,” the heat treatment, electroplating and assembly did not alter the character of the articles, and “the form of the components remained the same since each component was either hot-forged or cold-formed into its final shape in Taiwan, except for the speeder handle bars,” and finally, “[t]he use of the imported articles was predetermined at the time of importation.” Id. at 311. Importantly, the court notes that “the determination of substantial transformation must be based on the totality of the evidence.” Id. at 312. You argue that “the manufacturing processes that define the finished product are the processes of forming the elevator points” because of the skill and precision involved in that process. You also note that each of the elevators is used for a particular purpose depending on their form and argue that the instruments “must be carefully shaped to exacting specification in order to perform their intended function.” You further argue that “the process of manufacturing the working ends of the dental elevators is the process that defines the name, character, and use of the finished product” rather than handles or the final assembly and that the “handles themselves lose their separate identity as handles when assembled to the functional ends.” You claim that “the handles do not have a predestined use with any specific model of dental elevator at the time of importation” and that they “do not contribute to the functionality of the working elevator points.” You also state that “[t]he finished product is identified by the working point, regardless of what kind of handle is assembled to that point.” In support of your arguments, you cite to HQ 560303, dated August 19, 1997, and HQ H229158, dated November 14, 2012. In HQ 560303, CBP considered whether welded handles were imported from Germany to be combined with function-specific ends of medical/surgical instruments underwent a substantial transformation in the United States. In that ruling, CBP held that the imported handles underwent a substantial transformation in the United States, and the handle’s name, character, and use are changed in the United States as a result of the operations performed in the United States. In HQ H229158, CBP considered several scenarios to determine whether the assembly of imported parts and subassemblies to parts of U.S. origin in the United States would amount to a substantial transformation in the United States. CBP also considered whether imported subassemblies that were “entirely operational” underwent substantial transformation in the United States. With regard to Scenario A, CBP found that the merchandise was substantially transformed in the United States when it was assembled into finished tools because the imported parts and components were “unfinished and lack essential components of tool assemblies, namely one of the fully-functional core components.” CBP held that “[s]ince the components have no independent functionality, they lose their separate identity by incorporation into the U.S. assembly operations.” With regard to the Scenarios B through F, CBP found that “the most complex function-specific operations are performed abroad, clearly impact the essential character to the finished tool” and that “the assembly operations …in the U.S. …mainly attaching and threading unto one another – are not sufficiently complex to change the name, character or use of the imported parts.” You argue that these two rulings should have resulted in a revocation of NY A81309. The instant dental instruments’ manufacturing process closely resembles the brushes in Gibson, the surgical tools in HQ 560303, and Scenario A of HQ H229158. Like these products, there is a change to the name, character, and use of the subject imported article. After the “handle” is imported into the United States and assembled with the “working end”, the complete article is called a “dental instrument,” or as you refer to it, a “dental elevator.” Like the merchandise in Scenario A of HQ H229158, the handles lack the essential components of the dental instrument – the working end. The imported handles alone are not functional and their use is determined after they are attached to the working end as a result of the U.S. assembly operation. Unlike the tools in National Hand Tool Corp. and the merchandise in Scenarios B through F of H229158, the processing performed in the United States involves more than just assembly and finishing operations. The bar stock used to develop the function-specific ends is purchased in the United States and is bent, heat-treated, polished, and finished in the United States. Considering the totality of the facts, we find that substantial transformation occurred in the United States. Pursuant to 19 C.F.R. § 134.35(a), Hu-Friedy is the ultimate purchaser of the handles, and so the handles are excepted from marking. Only the outermost containers of the imported handles are required to be marked at importation. With regard to merchandise whose origin is the United States, 19 U.S.C. § 1304 is inapplicable and no country of origin marking is required by the provision. The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the phrase "Made in the U.S.A.," or similar words denoting U.S. origin. Consequently, any inquiries regarding the use of such phrases reflecting U.S. origin should be directed to the FTC, at the following address: Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. HOLDING: The imported handles are substantially transformed in the United States when they are combined with the U.S. manufactured function-specific working ends as described above. Therefore, Hu-Friedy is the ultimate purchaser of the handles and the handles are excepted from marking. The outermost container in which the handles ordinarily reach the ultimate purchaser must be marked in accordance with 19 C.F.R. § 134.22, 134.24(d)(1) and 134.35(a). EFFECT ON OTHER RULINGS: NY A81309, dated April 19, 1996, is hereby REVOKED. In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division