## Facts

- National Hand Tool Corp. imported nine types of steel components for mechanics’ hand tools from Taiwan.
- The imported components were used to produce flex sockets, speeder handles, and flex handles for tightening and loosening nuts and bolts.
- Most components were cold-formed or hot-forged in Taiwan into essentially their final shape; speeder handle bars were reshaped in the United States using a power press.
- Some components were heat-treated in Taiwan; others were heat-treated in the United States through carburizing, oil-quenching, and tempering to meet strength specifications.
- U.S. operations included heat treatment (when not done abroad), cleaning, electroplating, knurling of grip portions, and assembly into finished tools.
- Customs denied the importer’s protest and required marking the components with “Taiwan” under 19 U.S.C. § 1304.
- The importer sued under 28 U.S.C. § 1581(a), arguing the U.S. processing substantially transformed the components into U.S. products exempt from foreign-origin marking.

## Issues

1. Whether the U.S. processing and assembly changed the imported components’ name, character, or use so as to constitute a substantial transformation for purposes of 19 U.S.C. § 1304.
2. Whether the importer rebutted the presumption of correctness attached to Customs’ country-of-origin marking determination.

## Decision

- The Court of International Trade entered judgment for the United States.
- The court held the imported Taiwanese components were not substantially transformed in the United States.
- The court sustained Customs’ requirement that the merchandise be marked to indicate Taiwan as the country of origin.

## Legal Principles

- An article is substantially transformed only if processing results in a new article with a new name, character, or use.
- Finishing operations and assembly that leave imported parts recognizable as the same components, and that do not alter their predetermined end use, generally do not amount to substantial transformation.
- Heat treatment and surface finishing may alter metallurgical or surface properties yet still fail to change the character of the article as a tool component.
- Country-of-origin marking determinations by Customs are presumed correct; the importer bears the burden of proving error.
- Value added in the United States is not the governing test for substantial transformation; the inquiry focuses on changes in name, character, or use.

## Conclusion

The court upheld Customs’ determination that the Taiwanese hand-tool components, imported largely in near-final form and subjected in the United States to heat treatment, finishing, and assembly, did not undergo a substantial transformation; therefore, Taiwan remained the required country of origin for marking under 19 U.S.C. § 1304.


National Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308 (1992)