OT:RR:CTF:VS H313371 RSD
Mr. Jinhyeok Ha
LG Electronics, Inc.
322 Gyeongmyeong-daero Seo-gu
Incheon 22744
South Korea
RE: Country of Origin of Rotor-Stator Assemblies for Electric Vehicle Motors for purposes of the Applicability of Trade Remedy Duties under Section 301.
Dear Mr. Ha:
This is in response to your request for a binding ruling dated August 14, 2020, on behalf of LG Electronics concerning the application of Section 301 trade remedy duties for your product: a rotor-stator assembly for an electric vehicle motor.
FACTS:
You describe the product as a stator-rotor assembly for an electrical vehicle motor. In your email of March 1, 2021, you have indicated that the ruling request was submitted for the purposes of determining whether the products under consideration would be subject to trade remedy duties under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). You have presented four different assembly scenarios of the stator and rotor assemblies for use in the production of electric vehicle motors. You submitted a bill of materials with diagrams displaying pictures of the components that are used in making the products. Based on this information, the production of the stator-rotor assemblies consists of multiple steps, where subassemblies are created and combined with each other to form other subassemblies, which in turn are all put together to make the stator-rotor. The components used in making the rotor and stator assemblies will come from various countries, as set forth below, and the assemblies will be manufactured in either China, Mexico, or Korea.
ISSUE:
What is the country of origin of the rotor-stator assemblies for the purposes of the application of the Section 301 trade remedy duties for goods under subheading 9903.88.01, HTSUS in each of the four presented scenarios?
LAW AND ANALYSIS:
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20(r), HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(s)(i), HTSUS.
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. 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, 681 F.2d 778 (CCPA 1982). In deciding 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. See Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (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. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight, under the TAA. All the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight.
The court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 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. v. United States, 16 C.I.T. 308, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
In reaching its decision in Energizer, the court expressed the question as one of whether the imported components retained their names after they were assembled into the finished Generation II flashlights. The court found “[t]he constitutive components of the Generation II flashlight do not lose their individual names as a result [of] the post-importation assembly.” The court also found that the components had a pre-determined end-use as parts and components of a Generation II flashlight at the time of importation and did not undergo a change in use due to the post-importation assembly process. Finally, the court did not find the assembly process to be sufficiently complex as to constitute a substantial transformation. Thus, the court found that Energizer’s imported components did not undergo a change in name, character, or use because of the post-importation assembly of the components into a finished Generation II flashlight. The court determined that China, the source of all but two components, was the correct country of origin of the finished Generation II flashlights under the government procurement provisions of the TAA.
In New York Ruling Letter (NYRL) N308827, dated January 21, 2020, the country of origin of three electric motors was under consideration. The stator assembly was comprised of the wound stator core and the stator housing. The rotor assembly was comprised of the laminated stack, aluminum, and the flanges. The wound stator core and rotor lamination stacks were manufactured in China, while the stator housing and flanges were sourced from France. In Hungary, the rotor lamination stack was injected with molten aluminum. In addition, a Hungarian origin shaft was inserted, and the rotor mass was machined and balanced. Once the rotor was fabricated, the motor was constructed, including inserting the stator core into the housing to form a stator assembly; attaching the flanges to the rotor to form a rotor assembly; inserting the rotor assembly into the stator assembly; making electrical connections; testing, painting, and packaging. Regarding the origin of the motors, it was noted that the assembly operations which consisted of placing the rotor and stator assemblies into a housing to produce a functioning electric motor was not a complex operation. Further, the ruling explained that no single subassembly described was dispositive in determining the essence of a fully assembled electric motor because the rotor assembly and the stator assembly merited equal consideration. Accordingly, the country of origin of the motors was Hungary, as the manufacture and assembly included, in part, some of the rotor production in Hungary.
In NYRL N316151 dated December 18, 2020, CBP considered a product known as the Shaded Pole Synchronous AC Motor. The motor consisted of three subassemblies that were identified as the bobbin coil subassembly, the stator subassembly, and the rotor subassembly. As part of the motor production, the stator subassembly was also produced in Mexico by stamping individual laminations from slitted silicon steel sheet, stacking, and pressing the laminations to form a stator stack and a yoke stack. The two lamination stacks were joined together with the bobbin coil subassembly and machine pressed, then annealed copper wire was wrapped around the laminations to form a shaded coil for the stator. Again, because some of the production of the motor included making the stator in Mexico, CBP found that the manufacturing and assembly operations, in sum, resulted in the motor being a product of Mexico. Significantly, the ruling pointed out that the rotor and stator were the dominant components of a finished electric motor.
NRYL N305251 dated August 1, 2019, concerned a product identified as an electric stepper motor. The stator and the rotor were manufactured in one of three countries by stamping the steel slits from coils that were then pressed into a stator and rotor stack. The ruling explained that the stator and rotor imparted the essence of the finished stepper motor. Based on the described assembly operations, the ruling held that the stator and rotor were not substantially changed by the assembly of the remaining motor components, nor were the assembly operations complex enough to transform the stator and rotor into a new article.
In accordance with these cited rulings, it is generally CBP’s position that the country of origin of an electric motor will be determined by where the two most essential components of an electric motor, the rotor and the stator, are made. Furthermore, in turn, the country of origin of the stator and rotor will often be based upon the country where the cores of these components are made.
In this case, various components are imported into either China, Mexico, or Korea, depending on the scenario, where they will be assembled into the stator-rotor assemblies for use in the production of an electric motor. The individual components have a pre-determined end-use and do not undergo a change in their use due to the assembly process to make them into the stator-rotor assemblies. Although in each of the four scenarios presented, there are notable components produced in several different countries, the most essential components of the stator-rotor assemblies will still be the stator cores and the rotor cores. Similarly, based on the information provided, it appears that the assembly may involve more than merely inserting and attaching parts together. We, nevertheless, still find that the production process involved in making the stator-rotor assemblies for the motors will not result in a substantial transformation of the various components and subassemblies. Consequently, the country of origin of the stators-rotor assemblies for use in the electric motors will be determined by where the stator cores and the rotor cores are produced. In this case, we note that for each of the four scenarios presented, both the stator cores and rotor cores will be produced in the same country.
Accordingly, we find that in Scenario 1, for purposes of determining the applicability of 301 trade remedy dutes, since both the rotor core and stator core are of Chinese origin, the country of origin of the stator-rotor assembly will be China. In the second scenario, since both the stator core and the rotor core are produced in Korea, the country origin of the stator-rotor assembly will be Korea. In the third scenario, since the rotor core and stator core are produced in China, the country of origin of the stator-rotor assembly will be China. Finally, in the fourth scenario, because the rotor core and the stator core are made in Korea, the country of origin of the stator-rotor assembly will also be Korea.
HOLDING:
The country of origin of the stator-rotor assemblies that will be used for electric vehicle motors in the four scenarios for purposes of Section 301 trade remedy duties is as follows: 1) for Scenario 1, the country of origin is China; 2) for Scenario 2, the country of origin is Korea; 3) for Scenario 3, the country of origin is China; and 4) for Scenario 4, the country of origin is Korea. Therefore, the section 301 trade remedy duties will be applicable to the stator-rotor assembly in scenarios 1 and scenario 3 and will not be applied to the stator-rotor assemblies in scenarios 2 and 4.
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