MAR-2-05 OT:RR:CTF:VS H047362 EE
Daniel B. Berman, Esq.
Hancock & Estabrook, LLP
1500 AXA Tower I
100 Madison Street
Syracuse, NY 13202
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. § 2511); Subpart B, Part 177, CBP Regulations; Country of Origin Marking; Ground Fault Circuit Interrupter
Dear Mr. Berman:
This is in response to your correspondence of November 20, 2008, requesting a final determination on behalf of Pass & Seymour, Inc. (“P&S”), pursuant to subpart B of part 177, Customs and Border Protection (“CBP”) Regulations (19 CFR § 177.21 et seq.). Under the pertinent regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), 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 purpose of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.
This final determination concerns the country of origin of a ground fault circuit interrupter (“GFCI”). We note that P&S is a party-at-interest within the meaning of 19 CFR § 177.22(d)(1) and is entitled to request this final determination.
You also request a country of origin marking determination.
FACTS:
You describe the pertinent facts as follows. The business of P&S includes the design, manufacture, and distribution of GFCIs in the U.S. for residential and commercial use in electrical circuits of less than 1,000 volts. The GFCIs are electrical components, designed for permanent installation in electrical circuits, which are able to detect small imbalances in the circuit’s current caused by leakages of current to ground. When leakage is detected, the GFCI opens the electrical circuit, stopping the flow of current. Legrand, the parent company of P&S, produces the components of the GFCI in China through another subsidiary, Rocom Electric Co. Ltd. (“Rocom”). Rocom plans to ship the components to a facility in Mexico where thirty-two of the components will be assembled in a forty-two step process into a Printed Circuit Board subassembly (“PCB”), which will in turn be assembled, with twenty-nine other components, into the GFCI in a forty-three step process. The GFCI will be tested and packaged at the same facility. Upon completion of assembly, testing, and packaging, the GFCI will be imported into the U.S. by P&S for sale and distribution.
The components from China include the following: cover, reset button, test button, light pipe, strap assembly, assembly terminals, contact, separator, springs, latch block top, spark gap blades, assembly screw terminals, armature, spring assembly, term assemblies, resistors, capacitors, diodes, LEDs, latches, solenoids, wires, back body, miswire cap, screws, and labels. A complete list of the sixty-one components was included with your submission. You have provided six exhibits, which include schematics, photographs, and the step-by-step assembly process of the GFCI in Mexico. Exhibit G shows phase one (the assembly of the PCB), which is comprised of forty-two discreet steps and thirty-two parts, takes approximately twelve minutes. Exhibit D shows phase two (the assembly of the GFCI from components including the PCB), which is comprised of forty-three discrete steps and thirty parts, takes approximately ten minutes. You claim that each step, unless otherwise noted, is completed by skilled workers who undergo an extensive training process.
PCB assembly process:
Apply adhesive to PCB (in three-up array).
2-25. Place surface-mount electronic components onto foil-side of PCB: fourteen resistors; nine capacitors; integrated circuit.
Cure adhesive in oven.
27-32. Place leaded electronic components onto top-side of PCB: two
jumper wires; Medal Oxide Varistor; Diode; Silicon Controlled Rectifier; Light Emitting Diode.
33-34. Assemble bobbin solenoid subassembly – bobbin, latch block, latch, spring and auxiliary contact (two pcs). Fit subassembly into corresponding holes in PCB.
35. Place spring over solenoid plunger and insert into hole in solenoid.
36. Fit toroid subassembly into corresponding holes in PCB.
37. Place leaded resistor through hole in toroid subassembly into PCB.
38. Send PCB subassembly (still in array) through wave solder machine.
39. Visually inspect solder side of PCB after wave solder, touch-up as required.
40. Hand solder in miswire link between resistors R9 and R15.
41. Send assembly through in-circuit test for component verification and measurement.
42. Place array in press and singulate individual PCB subassemblies from array.
GFCI assembly process:
1. Place back body into date code fixture/stamping-press and press button to apply date code on side of back body.
2. Remove back body from date code fixture. Place hot terminal-screw/pressure-plate assembly into back body cradle on line end.
3. Place neutral terminal-screw/pressure-plate assembly into back body cradle on line end.
4. Place PCB subassembly into back body, capturing terminal-screw/pressure-plate subassemblies under line terminals.
5. Place hot terminal-screw/pressure-plate subassembly into back body cradle on load end.
6. Place neutral terminal-screw/pressure-plate subassembly into back body cradle on load end.
7. Place hot load terminal subassembly into back body, over load screw/pressure plate subassembly.
8. Place neutral load terminal subassembly into back body, over load screw/pressure plate assembly.
9. Place two break springs into latch block.
10. Place latch block with springs onto line contacts, aligning leg of latch block over auxiliary switch on PCB.
11. Drop separator over device, aligning test resistor lead through hole in separator. Snap separator onto back body.
12. Place strap subassembly into center channel of separator.
13. Place hot-side load contact into slot in separator.
14. Bend test resistor lead over with finger to test blade slot.
15. Press test blade leg into slot in separator, capturing test resistor lead in slot on bottom leg of test blade.
16. Place neutral-side load contact into slot in separator.
17. Place light pipe into hole/slot in separator.
18. Place reset button/pin/make spring subassembly into hole through strap/separator.
19. Set two shutter subassemblies into pockets in device cover/test button subassembly.
20. Place cover/test-button subassembly on top of device, fitting over reset button subassembly and light pipe.
21. Turn device over. Place four assembly screws in holes at corners of back body.
22. Run assembly screws in and torque down with driver.
23. Place device in automated final tester fixture.
24. Short circuit test.
25. False trip test.
26. Trip level test in forward polarity, full load.
27. Trip level test in reverse polarity, full load.
28. Grounded-neutral test.
29. Test-button test.
30. Dielectric test.
31. Response time test with 500 ohm fault resistor.
32. If device passes all tests, hand solder link across solder bridge on bottom of PCB to activate miswire circuit.
33. Depress reset button on device and place device in automatic miswire-function tester. Push button to initiate test to verify device trips.
34. If device passes, snap plastic cap into back body, covering miswire solder bridge.
35. Remove miswire label from roll and apply across back body and load terminal screws.
36. Remove UL label from roll and apply to neutral side of device, overlapping back body, separator and cover.
37. Place cardboard protector over face of device.
38. Place wallplate subassembly with captive screws over cardboard protector and face of device.
39. Take stack of three pre-folded instruction sheets and fuse box label and place under device.
40. Remove product box label from roll and place on flap of individual box.
41. Assemble individual box, closing flap on one end.
42. Slide device, protector, wallplate and instruction sheets into individual box and close flap.
43. Place individual box into carton for shipping.
ISSUES:
1. What is the country of origin of the GFCI for the purpose of U.S. government procurement?
2. What is the country of origin of the GFCI for the purpose of marking?
LAW AND ANALYSIS:
Government Procurement
Pursuant to subpart B of part 177, 19 CFR § 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), 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.
Under the rule of origin set forth under 19 U.S.C. § 2518(4)(B):
An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.
See also, 19 CFR § 177.22(a).
In rendering advisory rulings and final determinations for purposes of U.S. government procurement, CBP applies the provisions of subpart B of part 177 consistent with the Federal Acquisition Regulations. See 19 CFR § 177.21. In this regard, CBP recognizes that the Federal Acquisition Regulations restrict the U.S. Government’s purchase of products to U.S.-made or designated country end products for acquisitions subject to the TAA. See 48 CFR § 25.403(c)(1). The Federal Acquisition Regulations define “U.S.-made end product” as:
…an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed.
48 CFR § 25.003.
In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one which 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 (1982), aff’d 702 F. 2d 1022 (Fed. Cir. 1983).
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing
renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, extent and nature of post-assembly inspection and testing procedures, and the degree of skill required during the actual manufacturing process may be relevant when determining whether a substantial transformation has occurred. No one factor is determinative.
In a number of rulings (e.g., HQ 735608, dated April 27, 1995 and HQ 559089 dated August 24, 1995), CBP has stated: “in our experience these inquiries are highly fact and product specific; generalizations are troublesome and potentially misleading. The determination is in this instance ‘a mixed question of technology and Customs law, mostly the latter.’” Texas Instruments, Inc. v. United States, 681 F.2d 778, 783 (CCPA 1982).
In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), CBP held that for purposes of the Generalized System of Preferences, the assembly of a large number of fabricated components onto a printed circuit board in a process involving a considerable amount of time and skill resulted in a substantial transformation. In that case, in excess of 50 discrete fabricated components (such as resistors, capacitors, diodes, integrated circuits, sockets, and connectors) were assembled. In HQ 711967, dated March 17, 1980, CBP held that television sets which were assembled in Mexico with printed circuit boards, power transformers, yokes and tuners from Korea and picture tubes, cabinets, and additional wiring from the U.S. were products of Mexico for country of origin marking purposes. The U.S. and Korean parts were substantially transformed by the processing performed in Mexico and all the components lost their individual identities to become integral parts of the new article--a television. In HQ 561734, dated March 22, 2001, CBP held that certain multifunctional machines (consisting of printer, copier, and fax machines) assembled in Japan were a product of that country for the purposes of U.S. government procurement. The multifunctional machines were assembled from 227 parts (108 parts obtained from Japan, 92 from Thailand, 3 from China, and 24 from other countries) and eight subassemblies, each of which was assembled in Japan. In finding that the imported parts were substantially transformed in Japan, CBP stated that the individual parts and components lost their separate identities when they became part of the multi-functional machine. See also HQ 561568, dated March 22, 2001.
This case involves sixty-one components manufactured in China which are proposed to be assembled in Mexico in a two phase process, largely by skilled workers using sophisticated equipment. The first phase is the assembly of the PCB and involves a forty-two step process which will take approximately twelve minutes. After a careful consideration of the pertinent facts and authorities, we find that the assembly of the PCB, which consists of inserting all active and passive components into a bare printed circuit board and soldering all components necessary for the completion of the subassembly, is technically complex. Further, the PCB has all the major components necessary for the GFCI to fulfill its function. These components include the active and passive components, the solenoid bobbin assembly with both coils/inductors, hot and neutral “Line” terminals, test, trip and reset contacts. Therefore, the PCB imparts the essential character of the GFCI.
In the second phase, the PCB will be assembled with twenty-nine other components, into the GFCI in a forty-three step process which will take approximately ten minutes. Under the described two-phase assembly process, the foreign components lose their individual identities and become an integral part of a new article, the GFCI, possessing a new name, character and use. Based upon the information before us, we find that the components that are used to manufacture the GFCI, including the technically complex PCB assembled in Mexico, are substantially transformed as a result of the assembly operations performed in Mexico, and that the country of origin of the GFCI for government procurement purposes is Mexico.
Country of Origin Marking
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such 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, CBP Regulations (19 CFR § 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 CFR § 134.1(b)), defines the country of origin of an article 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 for country of origin marking purposes; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Section 134.1(j), CBP Regulations provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g), CBP Regulations defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.
Part 102, CBP Regulations (19 CFR § 102), sets forth the “NAFTA Marking Rules” for purposes of determining whether a good is a good of a NAFTA country. Section 102.11, CBP Regulations (19 CFR § 102.11) sets
forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a), CBP Regulations provides that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
“Foreign Material” is defined in section 102.1(e), CBP Regulations as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.”??
Section 102.11(a)(1) and (2) do not apply to the facts presented in this case because the GFCI, assembled in Mexico from Chinese components, is neither wholly obtained or produced, nor produced exclusively from domestic (i.e., Mexican) materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3) to determine whether the foreign materials incorporated in the GFCI undergo an applicable change in tariff classification (or other applicable requirement) under section 102.20. The GFCI is classified in subheading 8536.30.80, Harmonized Tariff Schedule of the United States (“HTSUS”). The applicable tariff shift rule found in section 102.20(o) provides as follows:
8536.10-8536.90 A change to subheading 8536.10 through 8536.90 from any other subheading, including another subheading within that group.
In this case, the foreign materials incorporated in the GFCI are classified in subheadings other than subheading 8536.30, HTSUS. Since the components are classified in a different subheading than the GFCI, the requisite tariff shift rule is met. Therefore, pursuant to 19 CFR § 102.11(a)(3), the country of origin of the GFCI is Mexico.
With regard to the marking requirements, section 134.43(e), CBP Regulations (19 CFR § 134.43(e)), provides, in pertinent part that:
Where an article is produced as a result of an assembly operation and the country of origin of such article is determined under this chapter to be the country in which the article was finally assembled, such article may be marked, as appropriate, in a manner such as the following:
(1) Assembled in (country of final assembly);
(2) Assembled in (country of final assembly) from components of (name of country or countries of origin of all components); or
(3) Made in, or product of, (country of final assembly).
The GFCI was the result of an assembly operation and was finally assembled in Mexico within the meaning of 19 CFR § 134.43(e). Therefore, we find that the GFCI may be marked “Made in Mexico,” “Assembled in Mexico,” or “Product of Mexico.”
HOLDINGS:
The components that are used to manufacture the GFCI are substantially transformed as a result of the assembly operations performed in Mexico. Therefore, the country of origin of the GFCI for government procurement purposes is Mexico.
Pursuant to 19 U.S.C. § 1304, the country of origin of the GFCI for country of origin marking purposes is Mexico.
The GFCI may be marked “Made in Mexico,” “Assembled in Mexico,” or “Product of Mexico.”
Notice of this final determination will be given in the Federal Register, as required by 19 CFR § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 CFR § 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 CFR § 177.30, any party-at-interest may, within 30 days after publication of the Federal Register notice referenced above, seek judicial review of this final determination before the Court of International Trade.
Sincerely,
Sandra L. Bell
Executive Director,
Office of Regulations and Rulings,
Office of International Trade