The country of origin marking of tube nuts from Taiwan

N125417 October 29, 2010 MAR-2-73:OT:RR:NC:1:117 CATEGORY: Marking Mr. Craig Schau Manager International Trade Compliance Parker Hannifin Corporation Corporate Logistics & Transportation 6035 Parkland Blvd. Cleveland, OH 44124 RE: The country of origin marking of tube nuts from Taiwan Dear Mr. Schau: This is in response to your letter dated September 24, 2010 requesting a ruling on whether the tube nuts you are importing could be exempt from country of origin marking. The items to be imported are described as tube nuts that are assembled with components manufactured in the U.S. by your company to connect tube to each other or tubing to a piece of equipment. You are seeking a marking exception under 19 CFR 134.35 for the imported tube nuts which will be used only for the purpose of assembly of U.S. manufactured fittings. You state that your tube or pipe fitting customers have been misled about the country of origin of the final U.S. manufactured fitting when there is a Taiwan marking on what you describe as the de minimis value tube nuts. The tube nut is said to compose 10% to 20% of the cost of the complete item. You further state that the tube nuts are currently imported marked as required by the statute and that you are not seeking an exemption for those nuts that will be sold loose to your customers rather than assembled into the finished fitting. Those tube nuts will continue to be marked with country of origin when imported. 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. 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. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed.The standard for determining the ultimate purchaser of an article used in manufacture is set forth in section 134.35, Customs Regulations (19 CFR 134.35), which provides that the manufacturer or processor who converts or combines the imported article into an article having a name, character or use differing from that of the imported article is considered the ultimate purchaser. Under such circumstances, the imported article is substantially transformed and the article itself need not be individually marked. Under those circumstances only the outermost container in which the article is imported must be marked. Two court cases have considered the issue of whether imported parts combined in the U.S. with domestic parts were substantially transformed for country of origin marking purposes. In the first case, Gibson-Thomsen, the court held that imported wood brush block and toothbrush handles which had bristles inserted into them in the U.S. lost their identity as such and became new articles having a new name, character and use. One of the factors considered by the court in reaching its conclusion was that the domestic bristles used were "by far the most valuable element." Also, the court looked at whether the imported article loses its identity as such when combined with other articles. In that case, the court concluded that wood handles were material to be used in the manufacture of toothbrushes and hairbrushes. The court was also concerned that when an imported article was combined with a domestic material, that the ultimate purchaser not be confused into thinking that the domestic article was made in a foreign country. Therefore, the court concluded that a mere material to be used in the manufacture of a new article having a new name, character and use and which, became an integral part of the new article would not be required to be marked. In contrast to the imported handles in Gibson-Thomsen, the imported tube nuts involved here cannot be considered to be "mere materials" used in the manufacture of the finished articles. To the contrary, the tube nuts are important elements of the finished tube or pipe fittings in that without the tube nuts an ultimate purchaser would not be able to perform the operations of connecting tubes or pipes with the finished fitting, which is the essential purpose why the fitting is purchased. Also, when the imported tube nuts are combined with other domestic components making up the finished fitting they do not lose their individual identity of being a tube nut. Therefore, since there is no change in the name, character or use of the imported tube nuts once combined, there is no substantial transformation. The second case involved imported shoe uppers which were combined with domestic soles in the U.S. The imported uppers were held in Uniroyal, Inc., v. U.S., 542 F.Supp. 1026, 3 CIT 220 (CIT 1982), to be the "essence of the completed shoe" and therefore, not substantially transformed. The court decided that the attachment of the outsole was a minor manufacturing or combining process which leaves the identity of the upper intact. This case is like Uniroyal because the imported tube nuts are not only important to the finished fitting, but also the fitting could not perform the critical functions of connecting pipes and tubes without these tube nuts, making them essential to the fittings total performance. Further, upon being assembled by the consumer, the tube nuts are not permanently attached to the fitting and their character still remains the same, as that of being tube nuts. In HQ 731432 (June 6, 1988), Customs set forth some factors to be considered in determining whether imported goods combined in the U.S. with domestic products were substantially transformed for country of origin marking purposes. The following six factors were considered: 1) whether the article is completely finished; 2) the extent of the manufacturing process of combining the imported article with the domestic article as compared with the manufacturing of the imported article; 3) whether the article is permanently attached to its counterparts; 4) the overall importance of the article to the finished product; 5) whether the article is functionally necessary to the operation of the finished article, or whether it is an accessory which retains its independent function; and 6) whether the article remains visible after the combining. These factors are not exclusive and there may be other factors relevant to a particular case and no one factor is determinative. See, HQ 728801 (February 26, 1986). In this case, the tube nuts are completely finished articles when imported into the U.S. There is no extensive manufacturing process of combining the tube nuts with its other domestic counterparts. Placing the tube nuts with the domestically made components of the fitting is not a complex operation. The tube nuts are not permanently attached to the fitting during the combining process nor are they permanently attached once assembly of the fitting is completed. There is no doubt that the tube nuts are functionally necessary to the use of the finished fittings. As stated above, the tube nuts are important to the operation of the unit in that one could not perform the operations of connecting pipes or tubes without the tube nuts. Regarding your assertion of the de minimis value of the tube nuts as 10% to 20% of the final value note that in HQ 730066 (January 16, 1987), that a detachable cord set manufactured in Taiwan and imported into the U.S. together with an electric coffeemaker manufactured in Hong Kong was excepted from country of origin marking but in that case the cord set only represented 3 percent of the total cost of the unit. However, in this case, the cost of the tube nuts as compared to the total cost of the fitting represents approximately 10% to 20% of the total cost of the fitting. This definitely is significant to the total value of the fitting, unlike the detachable cord set. (See also, HQ 734046, May 10, 1991; base unit, headset, headset cord and telephone cord imported from different countries and packaged together in the U.S. as a telephone set were not substantially transformed and each had to be marked with its country of origin). Based on our consideration of all these factors, we conclude that these imported tube nuts are not substantially transformed in the U.S. as a result of combining them with other domestic components. Therefore, your company would not be considered the ultimate purchaser of the imported tube nuts under 19 CFR 134.35. Since the imported tube nuts are not substantially transformed, they are not considered to undergo a change in their imported form. Therefore, the retail purchaser of the imported tube nuts is the ultimate purchaser and the tube nuts must be individually marked with their country of origin of Taiwan. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Mary Ellen Laker at (646) 733-3020. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division