OT:RR:CTF:VS H313089 UBB
Laurence J. Lasoff
Melissa M. Brewer
Kelley Drye & Warren LLP
Washington Harbour, Suite 400
3050 K Street, NW
Washington, DC 20007
RE: Country of origin of a pump end; Section 301 trade remedy; 9903.88.01, HTSUS
Dear Mr. Lasoff, Ms. Brewer:
This is in response to your request, dated July 14, 2020, filed on behalf of your client Sulzer Pump Solutions, Inc. (“Sulzer”), regarding the country of origin of a “pump end” also referred to as a “bowl assembly.” In your letter, you request a binding ruling on the applicability of Section 301 trade remedies to proposed transactions involving this pump end.
FACTS:
The subject merchandise are vertical pumps that are used in a variety of applications to move a liquid. The pumps are usually made-to-order and are customized to the particular customer’s needs. You state that Sulzer has a wide range of vertical pumps and approximately 175 models. However, while specifications are customizeable, the raw material inputs and the production process for a vertical pump do not vary by specification and remain nearly identical. In your ruling request, you provide brochures and information for three examples of the vertical pumps that Sulzer manufactures.
According to your ruling request, the vertical pumps are comprised of four main components: the motor, the discharge head, the column, and the pump end or bowl assembly. It is only the pump end that is the subject of this inquiry. The pump end is manufactured in Canada using the following thirteen (13) raw material inputs: suction bell, pump shaft, impeller, bowl, bowl bearing, impeller seal ring, stationary wear ring, thrust ring, thrust ring retainer, suction bell bearing, a locking collet, adaptor flange (for some smaller models), and often a suction strainer. Of these, the bowl, impeller(s) and suction bell are sourced from China. The remaining inputs are sourced from Canada. You also provide brief descriptions of the material inputs, including their function in the pump end:
Suction bell: point of entry for the water; guides the fluid being displaced into the suction pipe;
Pump shaft: the impeller is mounted on the pump shaft and it holds the impeller in place;
Impeller: the bladed member of a rotating assembly of the pump, which imparts the force to the liquid being pumped;
Bowl: the housing for the pump that holds the various parts of the pump end;
Bowl bearings: hold the shaft in place;
Impeller wear ring: reduce wear on the impeller while assuring minimum recirculation of fluid in the pump (also reduces maintenance costs);
Stationary wear ring: attached inside the bowl opposite the impeller wear ring to allow limited clearance for liquid between the impeller and the pump casing to prevent unwanted recirculation of the liquid being displaced (also reduces maintenance costs);
Thrust ring: used to ensure that the movement forces of the pump are evenly distributed;
Thrust ring retainer: secures thrust ring in place;
Suction bell bearing: secures suction bell in place and provides stability for the pump shaft;
Locking collet: a ring that is pressed between the impeller hub and the shaft to fix the impeller in place;
Adapter flange (for smaller pump models): allows connection of the column to the bowl assembly;
Suction strainer: prevents unwanted articles from entering the pump.
The manufacturing process in Canada is as follows: Sulzer first trims the impeller. The impeller is the component of the pump that forces the liquid to move upwards. The impeller is imported into Canada in template form and as such is capable of displacing water but is not functional to meet the specific customer needs for the pump. It is trimmed, filed and balanced to meet customer specifications. The trimming process refines the form and shape of the impeller by removing excess metal from the template form impeller. Once the impeller is trimmed, the suction bell is mounted to the production table for stabilization. Prior to assembly, an internal coating is applied to all cast items except the impeller if the pump end is to be used for potable water applications. The suction bowl is then bolted to the suction bell. The pump shaft is placed inside the suction bell. The impeller is then slid into the shaft and is positioned and fixed in place with a locking collet. If the pump end is to be a multi stage configuration, a second bowl is placed over the shaft and impeller and bolted into position. An impeller is then slid into the second shaft, positioned and fixed in place with a locking collet. These steps are repeated according the job requirements (i.e. depending on how many bowls are required for the pump end per customer specifications). Once all required bowls have been locked into place and the impellers positioned and fixed, an adaptor flange is slid over the shaft and bolted to the top bowl. The adaptor flange is necessary to connect the pump end to the next piece.
The first time all these steps are completed a temporary pump end is created which is tested by being attached to a temporary test column section, discharge head and certified lab motor. The temporary pump is lowered into a test pit and run to secure measurements that are then analyzed. The temporary pump and pump end are then disassembled for further processing, including the impeller which may need further trimming, filing and balancing to the customer’s requirements. The pump end and pump are then reassembled as above and undergo further testing. This process may be repeated as needed to perfect the requirements. Once finished, the exterior of the pump end is painted or coated (if a coating is required for corrosion or wear resistance).
ISSUE:
What is the country of origin of the pump end for the purposes of applying Section 301 trade remedies?
LAW AND ANALYSIS:
There is no dispute that the instant pump end is classified under subheading 8413.91.90 of the Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Pumps for liquids, whether or not fitted with a measuring device…: Parts: Of pumps; Other; Other.” The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(b), HTSUS. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 8413.91.90, HTSUS.
When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. See Headquarters Ruling Letter (“HQ”) 563205, dated June 28, 2006. See also HQ H301619, dated November 6, 2018. The test for determining whether a substantial transformation will occur 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 C.C.P.A. 151 (1982). In order to determine whether a substantial transformation has occurred, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. CBP has stated that a new and different article of commerce is an article that has undergone a change in commercial designation or identity, fundamental character, or commercial use. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article. This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). 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).
The Court of International Trade more recently interpreted the meaning of “substantial transformation” in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016). Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. All of the components of the flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States and assembled into the finished Generation II flashlight. The Energizer court reviewed the “name, character and use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc., 3 C.I.T. at 226, that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp.
Similarly, CBP has found that a simple assembly process, for example, an assembly that involves press fitting parts into each other, does not rise to the level of substantial transformation. See, HQ H303864, dated December 26, 2019. In examining assembly operations, CBP has looked to the nature of the assembly, as well as the origin of the component that imparts “essential character” to the end product. In HQ H303864, a pump assembly consisting of pump housing, a seal, a terminal connector housing, an impeller and an electric motor was press fit together, performance and leakage tested, and then cleaned, labeled and visually inspected. All parts except for the electric motor originated in Mexico, the electric motor was imported into Mexico from China and it was the most expensive and substantive part of the finished pump assembly. The assembly took place in Mexico. CBP found that the electric motor imparted the “very essence” of the pump assembly, as it turned the impeller and moved the fluid through the pump. CBP found the finished product was a product of China. Similarly, NY N303043, dated April 18, 2019, involved a centrifugal pump manufactured by completing various processes that produced subassemblies. The production processes were all completed in Serbia using components imported from China and other countries, and involved processes described as stamping, curing, winding, crimping, soldering and injection molding to make the stator subassembly, followed by a production process to create the rotor subassembly using components from various countries and involving magnetization and molding of a rotor housing and press fitting a Serbian-sourced impeller to the rotor. The stator and motor subassemblies then underwent an assembly process to form the electric motor. The motor was then attached to the volute, which was molded in Serbia. CBP found that the impeller and volute were the main components of a pump assembly that displaced fluid, and as they were formed in Serbia and then combined with foreign components that were subject to complex operations in Serbia, the completed pump assembly was a product of Serbia.
In the instant case, the bowl, impeller, and suction bell from China are to be assembled with the pump shaft, bowl bearing, impeller seal ring, stationary wear ring, thrust ring, thrust ring retainer, suction bell bearing, a locking collet, adaptor flange (for some smaller models), and sometimes a suction strainer, from Canada. The question presented is whether the discrete parts from China are substantially transformed when they are assembled into a finished pump end in Canada.
The assembly is rather simple. It involves fitting, locking and bolting the parts into each other. The requestor describes the items as being slid into place, locked into place, and bolted. With the exception of the impeller (discussed in more detail below), the Chinese inputs are assembled with the Canadian inputs as-is. Moreover, the imported Chinese raw materials have a pre-designated end-use, and while the ruling requestor argues that none of the materials impart the pump end with its essential character, it is notable that the Chinese imports are functionally the more important raw material inputs. The suction bell is the point of entry for the water and guides the fluid being displaced into the suction pipe. The impeller actually imparts the force necessary to move the liquid. And, the bowl is the housing which holds the various parts of the pump end. In comparison, the majority of Canadian inputs mostly serve the purpose of sealing and joining the materials constituting the pump end together: the pump shaft holds the impeller in place; the bowl bearings hold the shaft in place; the thrust ring retainer secures the thrust ring in place; the suction bell bearing secures the suction bell in place and provides stability for the pump shaft; the locking collet fixes the impeller in place; and, the adaptor flange connects the column to the bowl assembly. Even though the remainder of the Canadian sourced materials appear to have a more functional role (the impeller wear ring reduces wear on the impeller and assures minimum recirculation of fluid in the pump; the stationary wear ring allows limited clearance for liquid between the impeller and pump casing in order to prevent unwanted recirculation of liquid being displaced; and, the thrust ring ensures the movement of the forces of the pump are evenly distributed) they make up the minority of the Canadian sourced inputs and are still less critical to the functioning of the pump end than the Chinese inputs which actually house the pump end, direct the liquid and provide the force to move the liquid. Thus, the Chinese inputs play a far more functional role in the pump end.
Of the materials imported from China, only the impeller undergoes any processing in Canada. It is notable that, of the thirteen listed material inputs, the impeller is by far the most costly. The impeller is also the material input that provides the force necessary to displace liquid and therefore causes the pump end to function as a pump. For that reason, CBP determines that the impeller imparts the “essential character” of the pump end. However, based on the information provided, the processing that the impeller undergoes in Canada is relatively minimal. According to the ruling requestor, the impeller is trimmed and balanced to match customer specifications, although the impeller is capable of displacing liquid, and is therefore able to function, in its untrimmed form. As such, CBP finds that the impeller is not substantially transformed in Canada and retains its Chinese origin.
As the assembly of the Chinese origin parts with the Canadian sourced parts does not result in a substantial transformation of the Chinese origin parts (the impeller, the suction bell and the bowl), and the key material input that imparts the “essential character” to the pump end is a product of China, the subject merchandise pump end is also a product of China. Products of China classified under subheading 8413.91.90, HTSUS, unless specifically excluded, are subject to the additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.01, in addition to subheading 8413.91.90, HTSUS, listed above.
HOLDING:
The country of origin of the pump assembly for the purposes of the application of subheading 9903.88.01, HTSUS is China. As the merchandise will be a product of China, Section 301 measures will apply.
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 this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch