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CBP Rules on Substantial Transformation of Certain Medical Devices

Thursday, February 28, 2019
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued a final determination concerning the country of origin of various stimulating probes that may be offered to the U.S. government under undesignated government procurement contracts. Any party-at-interest may seek judicial review of this determination by April 1. CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. government.

Processing of the probes in the U.S. consists of engineering and design work as well as manufacturing of the probes from U.S. origin steel. The engineering and design phase includes research and development; design control; intellectual property generation; regulatory clearances; specifications; engineering drawings; work instructions; tooling, fixtures, and equipment designs; functional verification testing; and sterilization, packaging, sterile barrier, shelf life, and process validations.

Manufacturing operations performed in the U.S. entail cutting raw stainless steel rods to a specified length to meet specific tolerances and grinding the rods to a precise diameter on a precision lathe. The lathe is also used to create a taper on a portion of one end of the rod to narrow the diameter to half of the original diameter of the tip. The probes resulting from this manufacturing process are subject to passivation and are then packaged and shipped to China for further processing.

In China, the probes are attached to a leadwire of Korean origin using Chinese solder and covered with a heat shrink from China, Japan, or the U.S. The probes are attached to a hand grip consisting of a U.S.-origin handle insert and a Korean origin plastic handle. The finished probes are inserted into a protective cover from the U.S. and packaged for shipment to the U.S. Upon return to the U.S, the probes are subjected to a 30-hour sterilization process and undergo a randomized sampling and testing protocol. One of the probes has a removable handle consisting of three functional components and is only packaged in China with all parts unattached.

In ruling HQ H300744, consistent with several previous rulings, CBP concludes that the processing of the probes that occurs in China does not change the name, character, or use of the probes. As a result, CBP determines that the U.S. is the country of origin of these products for purposes of government procurement. In the case of the probe with a removable handle that is only packaged in China, CBP concludes that the individual parts retain their origin because packaging of the components in China does not effectuate a substantial transformation.

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