OT:RR:CTF:VS H303753 JK
[ ]
RE: Country of Origin of Vacuum Sealing System
Dear [ ]:
This is in response to your letter, dated February 10, 2019, requesting a prospective ruling on behalf of [ ] regarding the country of origin of the [ ] vacuum sealing system (hereinafter, Vacuum Sealing System). You provided a sample with your request. In reaching our decision, we have also considered additional information provided in your supplemental letter, dated August 2, 2019, and in emails sent on August 30, 2019 and September 27, 2019 in response to our questions.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in your request will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The subject merchandise, known as the [ ], is a vacuum sealing system used to preserve food with an air tight seal. The primary function of the system is to vacuum the air from a plastic storage bag and seal the bag to prevent air from accessing the food within the bag. The Vacuum Sealing System consists of the following main components: a printed circuit board assembly (PCBA), a pump assembly, and the sealing components. The remaining components of the Vacuum Sealing System work in conjunction to support the main components and include structural panels and covers, a holder for the PCBA, hinges, hoses, knobs, valves, buttons, connectors and a variety of fasteners.
The function of the PCBA is to receive alternating current (AC) and convert it into a direct current (DC) with an isolated and safe voltage. The PCBA also functions to supply power to pumping and sealing components, as well as to detect whether the desired vacuum level is achieved. The pump assembly is made of the motor and pump components, which include molded plastic parts, screws and pistons. The pump achieves air extraction and exhaust by piston movement which results in a vacuum effect on the storage bag. Once the storage bag is vacuumed, the sealing components, which consist of a heater wire assembly and thermal fuse, function together to melt the plastic bag and create a seal.
[ ], the Vacuum Sealing System will be assembled by a third party manufacturer in one of three countries—Taiwan (Scenario 1), Myanmar (Burma) (Scenario 2) or Indonesia (Scenario 3)—and imported into the United States. Due to differences in the sourcing and manufacturing processes among the third party manufacturers, the precise manner of the Vacuum Sealing System’s production, including where components are sourced, the amount of time and workers involved in the manufacturing and assembly process, and where certain subassemblies are made, will vary depending on where the Vacuum Sealing System is assembled.
In all three scenarios, the pump assembly will be assembled with a Chinese origin motor and four main primary subcomponents (pump bracket base, pump bracket, pump body and pump cover) that will be injection molded in the country of final assembly. For the PCBA, under Scenarios 1 and 2 (Taiwan and Myanmar (Burma), respectively), a Chinese origin blank printed circuit board (PCB) will be processed and surface mounted with various subcomponents in the country of final assembly. In contrast, under Scenario 3 (Indonesia), the PCBA will be completely manufactured and assembled in China before being incorporated into the Vacuum Sealing System. The sealing components will be sourced from China under Scenarios 1 and 2 (Taiwan and Myanmar (Burma), respectively), but sourced from the country of final assembly under Scenario 3 (Indonesia). Under each scenario, the body of the Vacuum Sealing System, including all of its external plastic components, will be designed and molded in the country of final assembly.
Specifically, the three proposed manufacturing scenarios for the Vacuum Sealing System are described as follows:
Scenario 1 (Taiwan)
Under Scenario 1, the assembly of the Vacuum Sealing System will take place in Taiwan. The subcomponents of the PCBA, the motor for the pump assembly, and the sealing components will be of Chinese origin. Two components will be of Korean origin components, which include the vacuum bags and integrated circuit (IC).
Under Scenario 1, the PCB will be populated in Taiwan. The manufacturing process for the pump assembly will involve 8 subcomponents, which will include a Chinese origin motor, while the remaining subcomponents will be of Taiwanese origin. In Taiwan, the process will begin with injection molding plastic and silicone parts which include the pump cover, gasket, pump body, piston shaft, bracket, bearing, tubes, and caps. Next, the pump cover will then be placed on top of the silicone and over the pump body and secured. The cam will be connected to the piston and the bracket and the diaphragm will then be secured to the pump body. Next, the motor will be affixed to the pump. The connection wires will be welded into the motor and the two silicone hoses will be attached to the pump fixture.
Subsequently, the Vacuum Sealing System will undergo a final assembly process in Taiwan that involves the following steps: first, the PCBA and the shock absorber will be affixed to the body of the Vacuum Sealing System. The shock absorbing sheet and the pump assembly will be connected to the body of the Vacuum Sealing System with screws. The power cord for the motor will be placed into the main housing of the Vacuum Sealing System and welded into place. The heater will be inspected and placed into the main housing and mounted into place. Next, the knob set, axis and micro switch will be connected with screws and silicone to the main body of the Vacuum Sealing System. A thermal conductivity coating will be applied and the relief valve will be mounted with brackets to the body of the Vacuum Sealing System. The air tube will then be assembled by securing it with screws into the body. The plug-in terminal, power line terminal and clip terminal will be fastened to the body. The top cover will then be assembled with the vacuum connector and the sealing strip holder by mechanical fastening. Sealing foam will then be placed on the top cover and the cover will be tested to ensure it is airtight. The power cord winding frame will be screwed into the body of the Vacuum Sealing System and the top and bottom cover will be placed on the body and welded into place. The feet of the Vacuum Sealing System will be attached by mechanical fastening and glue.
Scenario 2 (Myanmar (Burma))
Under Scenario 2, the assembly of the Vacuum Sealing System will take place in Myanmar (Burma). The subcomponents of the PCBA, the motor, power cords, wire, fasteners, and the sealing components will be of Chinese origin. Fifteen components will be of Myanmarese (Burmese) origin. Five components will be of Korean origin, which include the zipper bags and bag roll. Finally, 33 components will be of Taiwanese origin, which include the raw injection material for the pump assembly, connectors, covers, buttons and brackets.
Under Scenario 2, the PCBA will be manufactured in Myanmar (Burma) using the same process as described in Scenario 1. The manufacturing process for the pump assembly will involve 9 subcomponents, 4 of which will be of Myanmarese (Burmese) origin, including the pump bracket base, pump bracket, pump body, and pump cover, and 5 of which will be of Chinese origin, including the motor, pump diaphragm, motor shock pad and screw. In Myanmar (Burma), the process will begin with injection molding plastic parts, after which all of the parts will be assembled using the same process as described in Scenario 1.
Subsequently, the Vacuum Sealing System will undergo a final assembly process in Myanmar (Burma) as in Scenario 1.
Scenario 3 (Indonesia)
Under Scenario 3, the assembly of the Vacuum Sealing System will take place in Indonesia. Of the total Vacuum Sealing System components, 92 components will be injection molded in Indonesia (including the major components of the pump assembly) from raw material originating in various countries. The sealing components will be sourced in Indonesia as well.
The finished PCBA will be sourced and fully manufactured in China before being imported to Indonesia to be incorporated into the Vacuum Sealing System. As for the pump assembly, the manufacturing process will involve 15 subcomponents, 4 of which will be of Indonesian origin, including the pump bracket base, pump bracket, pump body, and pump cover, and 11 of which will be of Chinese origin, including the air pump foot valve, cam, pin, piston diaphragm, fasteners, felt, motor and grease. In Indonesia, the process will begin with injection molding plastic parts, after which all of the parts will be assembled using the same process as described in Scenario 1.
Subsequently, the Vacuum Sealing System will undergo a final assembly process in Indonesia as in Scenario 1.
ISSUE:
For each scenario, what is the country of origin of the Vacuum Sealing System for purposes of marking?
LAW AND ANALYSIS:
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 a manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was that the ultimate purchaser should be able to know by an inspection of the markings on the imported goods the country of which the good is the product. "The evident purpose is to mark the goods so at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, Customs and Border Protection (CBP) Regulations (19 C.F.R. 134), implements the country of origin marking requirements and exceptions of 19 U.S.C.
§ 1304. Section 134.1(b), CBP Regulations (19 C.F.R. 134.1(b)), defines "country of origin" 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" within the meaning of [the marking regulations]. . . .” A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982).
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. No one factor is determinative.
Scenario 1:
In this scenario, final assembly of the Vacuum Sealing System occurs in Taiwan, as does the assembly processes for the PCBA and the pump assembly, which along with the sealing components constitute the main components of the Vacuum Sealing System. In assembling the PCBA, a Chinese-origin blank printed circuit board will be shipped to Taiwan, where it will be cut to size and undergo chemical etching, printing and baking, and then mounted with originating and non-originating fabricated components. For the pump assembly, a Chinese-origin motor will be assembled with various plastic and silicone parts that are injection molded in Taiwan. Finally, the PCBA and the pump assembly will be assembled together in Taiwan with mostly originating components which include the housing to form the finished Vacuum Sealing System.
You claim that as a result of the assembly operations performed in Taiwan, the blank PCB and motor from China, as well as the rest of the non-originating components, undergo a substantial transformation, such that the finished Vacuum Sealing System becomes a product of Taiwan. You cite Headquarters Rulings Letter (HQ) H282391, dated March 16, 2017; HQ 561232, dated April 20, 2004; and HQ 555772, dated January 14, 1991, among others, in support of your position.
In HQ H282391, CBP determined that the country of origin of a gear motor was the United States because the assembly process in the United States amounted to a substantial transformation. The gear motor was comprised of two subassemblies, a gear box and a motor. The assembly of the gear motor consisted of assembling together 131 unique parts, and at least a total of 200 parts. These parts were imported from various origins and were used to first assemble the gear box and motor subassemblies, and then to assemble the complete gear motor through a complex operation with specialized skill and expertise. CBP noted that the complex operations involved at least 27 steps and took approximately 2 hours. CBP also considered the worker experience and training, stating that the workers were hired with previous experience and underwent additional training in order to reach proficiency in the assembly process. CBP thereby concluded that the foreign components lost their individual identities and became an integral part of a new article, the gear motor, and possessed a new name, character and use, amounting to a substantial transformation as a result of the assembly operations.
In HQ 561232, CBP determined that a PCBA for an imported automobile FM tuner underwent a substantial transformation. The assembly process for the PCBA involved attaching in excess of 80 components to a bare PCB, wave soldering, cleaning and removal of all residual sealant and testing. CBP found that this assembly process created a new and different article of commerce with a new name, character and use different from that possessed by the individual components incorporated therein. In making this determination, CBP cited Customs Service Decisions (C.S.D.) 85-25, 19 Cust. Bull. 844 (1985), where under similar facts CBP found that the assembly of a large number of fabricated components onto a printed circuit board was “complex and meaningful” and resulted in a substantial transformation.
In addition to these rulings, CBP has held that whether an assembly process is sufficiently complex to rise to the level of substantial transformation is determined upon consideration of all of the operations that occur within that country, including any subassembly processes that take place in that country. For example, in HQ H303529, dated June 6, 2019, the subject merchandise was an incomplete postage meter, which functioned as a specialized printer in a mail handling system. While one of the major subassemblies was made in Malaysia, the remaining subassemblies were made in China, and the final assembly process of connecting the subassemblies also occurred in China. CBP found that the assembly process that occurred in China was sufficiently extensive and complex as to substantially transform the components into a product of China. In doing so, CBP noted that the question of the complexity of the assembly process which occurred in China was not limited to an examination of the assembly of the various subassemblies to one another, but included an examination of all the assembly processes involved in China in the production of the incomplete postage meter. See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (“case law…indicates that a determination of substantial transformation must be based on a totality of factors”) (citing National Hand Tool Corp. v. United States, 16 C.I.T. 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993) and Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121 (1996)).
You also cited HQ 555772 for the proposition that the molding of plastic into a specific shape is considered a substantial transformation. In that ruling, appliance parts were manufactured from phenol molding compound in powder form, by heating the compound, converting it into a plastic mass, and then feeding the plastic mass into a molding machine. CBP held this molding process constituted a substantial transformation, citing prior rulings by CBP. See HQ 555149, dated May 11, 1989 (melting and molding of plastic resin into plastic parts constitutes a substantial transformation); HQ 055611, dated October 13, 1978 (injection molding of plastic pellets to form parts of toy pistols constitutes a substantial transformation); and HQ 051198, dated April 18, 1977 (injection molding of plastic to form parts of motors constitutes a substantial transformation).
In Scenario 1, although several important components will originate in China, including the PCB and the motor, we find that the subassembly processes involved in manufacturing the PCBA and the pump assembly will substantially transform these components into a new article with a new name, use and identity. Applying the principle in HQ 561232, the PCB will be substantially transformed in Taiwan when it undergoes surface mounting, dip soldering and cleaning to populate it with subcomponents that allow it perform its functions within the Vacuum Sealing System. Likewise, the motor for the pump, which you state is a general use motor that can be used with a variety of small electronics, will be substantially transformed when assembled together with the components that constitute the pump assembly, which has a different name, character and use from the non-originating motor.
These subassemblies and the components will then undergo further assembly in Taiwan to form the finished Vacuum Sealing System. The final assembly process will involve over 300 components, 33 assembly stations and take 40 minutes to complete, as well as require 33 workers who must undergo a training program specific to production of the Vacuum Sealing System. You assert that this final assembly process is similar to the assembly operations described in HQ H282391, where we found such operations to be sufficiently complex as to result in a substantial transformation. On that particular position, we disagree, noting that the assembly operations in HQ H282391 were significantly more complex than the final assembly process described here, involving a longer duration and requiring workers with specialized skill and expertise. We do note, however, that in addition to the final assembly process that occurs in the Taiwan, the subassembly of the PCBA and the pump assembly will also occur in Taiwan, closely resembling the process described in HQ H303529, where most of the subassemblies and the final assembly process also took place in one country. We also note that the injection molding of the pump assembly parts will be performed in Taiwan and the ratio of Taiwanese origin components to non-originating components is relatively high. When considering the totality of the circumstances, we find that the processes that will occur in Taiwan, taken as a whole, are sufficiently complex and meaningful as to result in a substantial transformation, such that the non-originating components lose their individual identities and become an integral part of a new article, possessing a new name, character and use. As a result, under the manufacturing process described under Scenario 1, we find that the country of origin of the Vacuum Sealing System is Taiwan.
Scenario 2:
In this scenario, the final assembly of the Vacuum Sealing System occurs in Myanmar (Burma). As in Scenario 1, and the subassembly of the PBCA and the pump assembly also occur in the country of final assembly. In assembling the PCBA, a Chinese origin blank printed circuit board will be shipped to Myanmar (Burma), where it will be cut to size and undergo chemical etching, printing and baking, and then mounted with Chinese origin fabricated components. For the pump assembly, a Chinese origin motor, along with other Chinese origin parts, will be assembled together with four main components of the pump assembly (i.e., the pump bracket base, pump bracket, pump body and pump cover) that are injection molded in Myanmar (Burma) using Taiwanese origin raw plastic material. Finally, the PCBA and the pump assembly will be assembled together in Myanmar (Burma) with mostly Chinese origin components to form the finished Vacuum Sealing System.
While the final assembly and subassembly processes that will occur in Myanmar (Burma) are similar to Scenario 1, due to sourcing and manufacturing differences in the third party manufacturer, Scenario 2 presents a closer case than Scenario 1 in determining whether or not the Vacuum Sealing System is substantially transformed in Myanmar (Burma). Unlike Scenario 1, most of the components used in Scenario 2 will be Chinese origin, including key components such as the PCB and the pump motor. However, 15 components will be of Myanmarese (Burmese) origin, which include the four main components of the pump assembly, which will be injection molded in Myanmar (Burma) to substantially transform the raw plastic into Myanmarese (Burmese) origin components. See HQ 555772. We also note that the amount of time, the number of assembly stations and the number of workers involved in producing the Vacuum Sealing System differ between Scenarios 1 and 2, although these differences are not significant for the purposes of our analysis.
On balance, applying the principle set forth HQ H303529 that we must consider the totality of the circumstances, we conclude that the processes that will occur in Myanmar (Burma) under Scenario 2, which include the final assembly, the subassemblies for the PCBA and the pump assembly, as well as the injection molding of the main pump assembly components, are sufficiently complex and meaningful as to result in a substantial transformation in Myanmar (Burma). Through these processes, it is our view that the non-originating components will be substantially transformed into a product with a new name, character and use. Accordingly, under the manufacturing process described under Scenario 2, we find that the country of origin of the Vacuum Sealing System is Myanmar (Burma).
Scenario 3:
In this scenario, the final assembly of the Vacuum Sealing System occurs in Indonesia. As in Scenarios 1 and 2, the pump assembly process will also occur in the country of final assembly. In this scenario, however, the PCBA will be fully sourced and manufactured in China before being imported to Indonesia to be incorporated into the Vacuum Sealing System. For the pump assembly, a Chinese origin motor, along with other Chinese origin parts, will be assembled together with four main components of the pump assembly (i.e., the pump bracket base, pump bracket, pump body and pump cover) that are injection molded in Indonesia. Finally, the PCBA and the pump assembly will be assembled together in Indonesia with various other originating and non-originating components to form the finished Vacuum Sealing System.
Unlike in Scenarios 1 and 2, the PCBA will be of Chinese origin due to it being sourced and manufactured in China. The PCBA plays an essential function in the Vacuum Sealing System, as it contributes to the vacuum function by triggering the vacuum process and measuring the pressure inside the vacuum bag to shut off the vacuum process once complete. It also supplies power to the pumping and sealing components, without which the device would not be able to function.
As in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the PCBA will have a pre-determined end-use as a component of the Vacuum Sealing System when imported into Indonesia, and therefore it will not undergo a change in use once being incorporated into the finished Vacuum Sealing System in Indonesia. In addition, we note that with the PCBA being manufactured in China, the processes that take are to place in Indonesia are not as extensive as those that will occur in Taiwan and Myanmar (Burma). We further note under this scenario, 204 out of 382 total components, including 11 of the pump assembly parts as well as its motor, will be of Chinese origin. While we recognize that 92 components will be of Indonesian origin as a result of being injection molded in that country, according to your own submission, the value of the Chinese origin components (USD $[ ]) will in fact exceed the value of the Indonesian origin components (USD $[ ]). We also note that while the amount of time and the number of workers involved in the final assembly process is significantly higher than in Scenarios 1 and 2, we do not believe that this indicates that the process is more complex or meaningful, but that the discrepancy can likely be contributed to variances among the manufacturing practices of the third party manufacturers used in each country.
Considering the totality of the circumstances, it is our view that given the pre-determined end-use of the Chinese origin PCBA, the number and value of Chinese origin components, and the less extensive nature of the processing that will occur in Indonesia, the country in which the last substantial transformation will occur is China. Accordingly, under the manufacturing process described under Scenario 3, we find that the country of origin of the Vacuum Sealing System is China.
HOLDING:
Based on the facts of this case, we find that under Scenarios 1 and 2, the country of origin of the Vacuum Sealing System is Taiwan and Myanmar (Burma), respectively. Under Scenario 3, the country of origin of the Vacuum Sealing System is China.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch