MAR-2-05 R:C:S 559089 AT
Frank R. Samolis, Esq.
Christy L. Gherlein, Esq.
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, D.C. 20037-1350
RE: U.S. Government Procurement; Final Determination -
concerning the country of origin of electrical raceways;
Substantial Transformation; Title III, Trade Agreements Act
of 1979, as amended (19 U.S.C. 2511 et seq.); Subpart B,
Part 177, Customs Regulations (19 CFR 177.21 et seg.)
Dear Mr. Samolis:
This is in response to your requests dated March 10 and July 7, 1995, for a final
determination under Subpart B of Part 177, Customs Regulations (19 CFR 177.21 et seq.).
Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as
amended (19 U.S.C. 2511 et seq.), the Customs Service issues country of origin advisory rulings
and final determinations as to whether, 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, an article is or would be a product of a designated foreign country or
instrumentality.
This final determination concerns the country of origin of electrical raceways which are to
be offered to the United States Government under a undesignated government procurement
contract. You are counsel to Wiremold Canada Inc. ("Wiremold"), a Canadian company that will
manufacture the electrical raceways in question. Accordingly, Wiremold is a party-at-interest
within the meaning of 19 CFR 177.22(d)(1), and is entitled to request this final determination. Contained in your submission is material which you claim as business proprietary
information and request that Customs make no public disclosure of this information. We have
agreed to your request. The confidential information is bracketed and will not be disclosed in
copies of this final determination made available to the public. Should other persons request
public disclosure of the information under the Freedom of Information Act or otherwise, this
office will provide you with the opportunity to defend your interests in confidential treatment.
FACTS:
According to your submission, Wiremold intends to manufacture various types of
electrical raceways (wireways and busways, cable trays, surface and underfloor raceways, and
boxes; cut-out, junction, and pull) in Canada. The primary material that will be used in the
manufacture of the raceways is sheet metal. Specifically, cold rolled steel, as well as galvanized,
satin-coat, and stainless steel are used and range in thickness from 20 to 10 gauge (0.036 to 0.135
inches). Electrical raceways may also be manufactured of aluminum, also ranging in thickness
from 20 to 10 gauge (0.032 to 0.0102 inches). Fittings which may accompany these raceways are
constructed of steel, aluminum or brass. You state that the stainless steel that is to be used to
manufacture the raceways will be of either Canadian or [] origin. The aluminum sheet metal will
be of either Canadian or foreign origin. All non-stainless steel sheet metal that is to be used in the
manufacture of the electrical raceways is of Canadian origin. You further state that in most
instances, all other materials, such as nuts, bolts and other small parts, which are to be used in the
manufacture of the electrical raceways, will be of Canadian origin. However, foreign materials
may be used in the manufacture of the electrical raceways when Canadian materials are not
available.
You state that the manufacturing processes used in the production of the electrical
raceways in Canada involve approximately 25 workers and consist of the following operations:
The sheet metal is sheared according to the gross dimensions of the part to be constructed.
The sheared metal piece is then formed using a press break to bend the material into the required
shapes (i.e., 90 degrees, 45 degrees, etc. bends or flanges). If holes, louvers, hinges, plates,
flanges, gaskets or other features are required, the material is passed through a punch press or
other machine to create these features. Once all bending and punching operations are completed, assembly of the electrical
raceways begins. Primary stages of assembly may include spot, mig or tig welding and powder
coating (painting) of the components. The powder coating process involves a wash rinse, and
drying of the work pieces, followed by the powder paint application and finally curing of the
coating in a bake oven. Once coated, the components are fitted together (i.e., attachment of lids,
clasps, etc.) to form the final product by means of tapping, screw installation, and/or clasping.
The finished electrical raceways are then packaged for delivery to the U.S.
ISSUE:
Do the processing operations performed in Canada as described above effect a substantial
transformation of the foreign components such that the electrical raceways may be considered as
products of Canada?
LAW AND ANALYSIS:
Pursuant to Title III, Trade Agreements Act of 1979, as amended (19 U.S.C. 2511-2518),
Customs has the authority to issue country of origin advisory rulings and final determinations as
to whether, 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, an article is or would be a
product of a designated foreign country or instrumentality under the Agreement on Government
Procurement and the North American Free Trade Agreement ("NAFTA").
19 U.S.C. 2515(b)) provides:
(1) Advisory rulings and final determinations.--For
purposes of this subchapter, the Secretary of the
Treasury shall provide for the prompt issuance of
advisory rulings and final determinations on whether,
under section 2518(4)(B) of this title, an article is
or would be a product of a foreign country or
instrumentality designated pursuant to section 2511(b)
of this title.
19 U.S.C. 2511 (b), Designation of eligible countries and
instrumentalities, states:
The President may designate a foreign country or
instrumentality for purposes of subsection(a) of this
section only if he determines that such country or
instrumentality - (1) is a country or instrumentality which (A) has
become a party to the Agreement or the North American
Free Trade Agreement, and (B) will provide appropriate
reciprocal competitive government procurement
opportunities to United States products and suppliers
of such products. (Emphasis added).
Pursuant to 48 CFR 25.401, Canada is a designated country under the NAFTA. Since
Canada is a NAFTA country, the standard set forth in 19 U.S.C. 2518(4)(B) must be used to
determine whether an article is a product of Canada. Section 2518(4)(B) provides that:
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.
(Emphasis added).
The inquiry must resolve whether, under the facts presented in this case, the processing
performed in Canada results in an article having a new name, character or use. A secondary,
supporting inquiry is whether the operations are complex, require skill, entail expense, or add
value; these findings are ordinarily corroborative of the new name, character or use finding. 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 (C.C.P.A. 1982).
In making this final determination, we must rely upon the judicial and administrative
precedents that have considered the issue of substantial transformation.
As stated in your submission, foreign materials consisting of stainless steel, aluminum
sheeting and other small parts will be further processed, assembled and used in the manufacture of
electrical raceways in Canada. Thus, the critical issue that must be addressed in determining the
country of origin of the electrical raceways is whether the foreign materials are substantially
transformed as a result of the operations performed in Canada. That is, does the name, character
or use of the foreign materials change as a result of the processing and assembly operations performed to
manufacture the electrical raceways in Canada.
Customs has previously considered the issue of whether the processing and assembly of
electronic components into a finished article results in a substantial transformation of the
individual components.
In HQ 730952 (May 18, 1988), Customs held that electrical components consisting of
coils, capacitors and cases were substantially transformed as a result of being assembled into plug-in adapters (e.g., rectifiers). Customs stated that the individual parts lost their separate identities
as a result of the assembly operation in that they became integral parts of a new article--a plug-in
adapter. In HQ 732350 (June 23, 1989), Customs held that foreign transducers which were
assembled with U.S. components to make hearing aids in the U.S. were substantially transformed
as a result of the U.S. operations. Customs stated that the transducers lose their separate identity
as a result of the assembly operation in that they become a integral part of a new article of
commerce--a hearing aid--with a new, name, character and use. In HQ 735346 (February 23,
1995), Customs held that Taiwanese DC to DC converters which were imported into the U.S.
(Scenario 1) or the Netherlands (Scenario II) and which were processed and assembled with other
domestic components (e.g., power interface board assembly, power distribution board assembly,
cigarette adapter cable, computer adapter cable), to make auto/marine adapters were substantially
transformed as a result of the operations performed in either of the two countries. Customs stated
that the processing performed in the U.S. or the Netherlands results in an article that has a new
name, that of a auto/marine adapter, a new character that is visibly different than the DC to DC
converter, and a new use in that it can be a power source for automatic data processing machines.
Based on the totality of the circumstances of this case and consistent with the Customs
rulings cited above, we find that the foreign materials consisting of stainless steel sheeting,
aluminum sheeting and other small parts that are used in the manufacture of electrical raceways in
Canada in the manner described above are substantially transformed as a result of the operations
performed in Canada. The name, character and use of the foreign materials change as a result of
the processing and assembly operations performed in Canada. Like the electrical components in
HQ 730952, the foreign materials lose their separate identity and become an integral part of an
electrical raceway as a result of the assembly operations. The character and use of the foreign
materials are changed as a result of the assembly operations performed in that the finished article, an electrical raceway, is visibly different
than any of the individual foreign materials, acquiring a new use, which is a conduit for electricity.
We also take notice of the fact that, in this case, essential foreign materials are not only
assembled in Canada into a finished article, but are fabricated before being assembled. For
example, the stainless steel and aluminum sheeting are cut, pressed, and bent into various shapes
(i.e., 90 degrees, 45 degrees, etc. bends or flanges), prior to being assembled into electrical
raceways. Customs has consistently held that cutting, or bending materials to defined shapes or
patterns suitable for use in making finished articles, as in this case, constitutes a substantial
transformation. See, HQ 556215 (October 18, 1991) (Customs held that the cutting, shearing,
boring and bending of U.S. stainless steel coils and sheets in Brazil to specific shapes and sizes
suitable for use as components for the manufacture of railway passenger car body shells
constituted a substantial transformation of the U.S. steel); HQ 557159 (January 11, 1994)
(Customs held that four cutting operations, consisting of straight cuts, miter cuts to 45 degree
angles, miter cut to an angle other than 45 degrees and notch cut or 90 degree cutting, of U.S.
extruded aluminum in Mexico and the subsequent bending to shape of the aluminum to form
louver and grille frames as well as the shearing and bending to shape of U.S. sheet material to
form louver and grill components constituted a substantial transformation of the extruded
aluminum and sheet material).
Based on the reasons stated above, we find that the foreign materials (stainless steel,
aluminum sheeting and other small parts) which are further processed and assembled into
electrical raceways in Canada, in the manner described above, are substantially transformed as a
result of the Canadian operations. Accordingly, the country of origin of the electrical raceways is
Canada.
HOLDING:
Based on the facts presented, foreign materials consisting of stainless steel, aluminum
sheeting and other small parts, which are further processed and assembled into electrical raceways
in Canada, in the manner described above, are substantially transformed as a result of the
Canadian operations. Accordingly, the country of origin of the electrical raceways is Canada. 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 Customs reexamine the matter anew and issue a new
final determination.
Pursuant to 19 CFR 177.30, any party-at-interest, as defined at 19 CFR 177.22(d), 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,
Harvey B. Fox, Director
Office of Regulations and Rulings