OT:RR:CTF:VS H303773 CMR
Ms. Margie Hsieh
Willis Electric Co., Ltd.
8F No. 310, Sec. 4 Zhongxiao
East Road Da’an District
Taipei N/A 10694
Taiwan
RE: Incandescent string lights; Generalized System of Preferences
Dear Ms. Hsieh:
This is in response to your request on behalf of your company, Willis Electric Co., Ltd., for a determination of whether the incandescent string lights qualify for preferential duty treatment under the Generalized System of Preferences (GSP).
FACTS:
You reference five items in your ruling request: (1) 150-count Incandescent Steady-on Miniature Christmas Net Lights – Clear (#779320); (2) 150-count Incandescent Steady-on Miniature Christmas Net Lights – Multicolor (#779319); (3) 300-count Incandescent Steady-on Miniature Christmas Icicle Light String – Clear (#3752); (4) 25-count Incandescent Steady-on C9 Christmas Light String – Clear (#99506); and, (5) 25-count Incandescent Steady-on C9 Christmas Light String – Ceramic Multicolor (#99505). The production process for all of the string lights is substantially similar and incorporates components from Cambodia and China. Underwriters Laboratories (UL) labels from the United States are attached to each string light after assembly.
The production process for the various string lights begins in Cambodia with inserting Chinese-origin polypropylene pellets into an injection molding machine to produce lamp bases, lamp holders, and wire clips by melting the polypropylene and forming the components. After the lamp base and lamp holder components are produced, Chinese-origin bulbs are inserted into them. The insulated copper wire, which is obtained from both China (80%) and Cambodia (20%), is cut to length, peeled as necessary, and brass terminals, imported from China on spools, are attached at the ends of the wire. The light bulbs in lamp bases and lamp holders are assembled with the processed insulated wire to create incomplete light strings. Insulated copper wire is cut, peeled as necessary, and brass terminals are attached to the ends to create plug wires. Plugs, which are obtained from both China (40%) and Cambodia (60%), are attached to the plug wires. The wires undergo twisting. The plug wires are connected to incomplete light strings. The wires are combined to form the icicle light string, or linked with wire clips and PVC wire (which is source from China (20%) and Cambodia (80%)) to form net strings. The completed string lights are tested, inspected, labeled with UL labels and caution labels, and packaged in Cambodian-origin packaging materials with a Cambodian produced instruction manual and a packet of replacement parts (spare fuse, spare bulbs, plastic bag) imported from China.
The C9 string lights differ slightly in their production. After the lamp bases and lamp holders are produced in Cambodia, the insulated copper wire undergoes wire cutting, peeling and connection to the plug. The lamp holder contains the terminal, which is assembled inside the lamp holder and then connected to the insulated copper wire. The C9 bulbs are screwed into the lamp holders on the string light. The string light is packaged using a plastic bulb holder (produced in Cambodia). The string light is tested, labeled and packaged.
ISSUE:
Whether the incandescent string lights are eligible for duty-free treatment under the GSP.
LAW AND ANALYSIS:
Under the GSP, eligible products the growth, product, or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the U.S. qualify for duty-free treatment if the sum of (1) the cost or value of the material produced in a BDC, plus (2) the direct costs involved in processing the eligible article in the BDC, is not less than 35 percent of the appraised value of the article at the time it is entered into the U.S. See Section 10.176(a), Customs and Border Protection (CBP) Regulations (19 CFR 10.176(a)).
As stated in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS), Cambodia is a designated BDC. In addition, items 1, 2, and 3 are classifiable under subheading 9405.40.84, HTSUS, which provides for "[l]amps and lighting fittings
. . .: Other electric lamps and light fittings: Other: Other." Items 4 and 5 are classifiable under subheading 9405.30.00, HTSUS, which provides for “Lamps and light fittings . . .: Lighting sets of a kind used for Christmas trees. Articles classified under these subheadings are eligible for duty-free treatment under the GSP provided that they are a "product of" Cambodia, are "imported directly" and satisfy the 35 percent value-content requirement.
The cost or value of materials which are imported into the BDC to be used in the production of the article, as in this case, may be included in the 35 percent value-content computation only if the imported materials undergo a double substantial transformation in the BDC. That is, the non-Cambodian components must be substantially transformed in Cambodia into a new and different intermediate article of commerce, which is then used in Cambodia in the production of the final imported article – the incandescent string lights. See Section 10.177(a), CBP Regulations (19 CFR 10.177(a)), and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989).
The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (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. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative.
In Headquarters Ruling Letter (HQ) 557796, dated June 3, 1994, this office considered the country of origin of Christmas tree light sets imported from Macau. As a part of the production of the light sets in Macau, the bulbs were formed from three-inch glass tubes, and the lamp bases and lamp supports (holders) were formed by injection molding.
In this case, as in HQ 557796, certain components are formed from plastic pellets into components of the light set. These plastic components, namely, the lamp bases, lamp holders, and wire clips, were substantially transformed into products of Cambodia as a result of the injection molding process performed in Cambodia. However, unlike the glass tubes made into bulbs in HQ 557796, the Chinese origin bulbs in this case retain their origin.
As in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the bulbs have a pre-determined end-use as parts and components of the light set when imported into Cambodia and do not undergo a change in use due to the assembly process in Cambodia. As the string light sets at issue, produced as described herein, have not been determined to be a product of Cambodia, they are not eligible for duty-free treatment under the Generalized System of Preferences (GSP) program.
HOLDING:
The string light sets at issue are not products of Cambodia. With the exception of the lamp holders, lamp bases, and wire clips, which became products of Cambodia through the processing of the Chinese-origin plastic pellets in Cambodia, the bulbs of the light set are not substantially transformed in Cambodia and retain their origin. Therefore, the light sets will not be eligible for preferential tariff treatment under the GSP.
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 & Special Classification Branch