• HQ H314637
• Mar 02, 2021

• Type : Origin • HTSUS :
•  Related:   H290528; H302252; W563456   

OT:RR:CTF:VS H314637 JMV

Jeremy R. Page
Page-Fura PC
939 W. North Avenue, Suite 750
Chicago, IL 60642

RE: Country of origin of an Automotive Rear Seat Frame; Section 301 trade remedy; Marking

Dear Mr. Page:

This is in response to your request, dated October 3, 2020, filed on behalf of your client Yanfeng Seating Mexico S.A. de C.V. (“YFS”). In your letter, you request a binding ruling on the applicability of Section 301 trade remedies and country of origin marking for an automotive rear seat frame. FACTS:

The product at issue is an automotive rear seat frame identified by YFS as part number 8079846 produced in Mexico from parts of United States, Mexican and Chinese origin. Production of the rear seat frame consists of assembling 52 distinct components (21 of Chinese origin, one of U.S. Origin, the rest of Mexican Origin) and starts with the production of eight subassemblies:

A bracket recliner assembly consisting of five components of Mexican origin and one of U.S. origin. These six components are arc welded together to create the bracket recliner assembly. A bracket stiffener assembly made up of four components of Mexican origin that are joined by arc welding. A second bracket stiffener assembly made up of three components of Mexican origin that are joined by arc welding. A bracket assembly, which consists of a bracket, a pivot brushing, and an EZE interlocking pin, all of Mexican origin. These parts are joined together with rivets. A second bracket assembly, which consists of a bracket and nut, both of Mexican origin, joined together by arc welding. A left hand bracket assembly, consisting of a Mexican origin bracket stiffener and seat back pillar joined by arc welding. A tube assembly, again produced through arc welding that consists of a tube of Chinese origin and two (2) cushion pan support brackets of Mexican origin. A center retractor bracket assembly produced from two: a center retractor bracket of Mexican Origin and a center latch striker of Chinese origin. These two parts are combined through arc welding.

These subassemblies will then be combined with additional parts to create higher-level subassemblies. First, the cushion welding assembly is produced by arc welding 16 distinct components together: six of the subassemblies above, three components of Mexican origin, and seven components of Chinese origin. The bracket recliner assembly, the two bracket stiffener assemblies, a tube assembly, two bracket assemblies and an ISOFIX tube assembly are welded together to produce the foundational structure for the seat frame. Next, the pivot shaft and torsion springs are assembled with the plastic sleeve, which are later joined to the seat frame as a unit. The pivot bracket welding assembly and the pivot tube bracket are welded to the structure. Finally, two ISOFIX wires are welded to produce the cushion welding assembly.

The second major assembly is the upper back frame, which will be produced from seven components, including the center retractor bracket assembly and the bracket left hand assembly already produced by YFS in Mexico. The frame will also include five components of Chinese origin: a retractor guide, top tether wire, a cross tube, head rest tube, and left hand stock frame. The left hand stock frame is arc welded to the left hand bracket assembly and the cross tube. The top tether wire is then joined, followed by the retractor bracket assembly. The two headrest tubes and the retractor guide wire are welded to the back frame resulting in the upper back frame assembly.

Finally, the cushion welding assembly and the upper back frame and nine additional components, seven of Chinese origin, two of Mexican origin, are combined to produce the finished rear seat frame though four final steps. First, a bracket is welded to the structure. Second, two latches are joined to the frame with a bolt and torque gun. Then, the torque gun is used to attach the arbor and clock spring to the frame. Finally, the upper back frame and cushion welding assembly are married to one another with the M12 Bolt. As a final step, an e-coating is added to the complete assembly.

The automotive seat back frame is classified under subheading 9401.90.10 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Eight of the parts are also classified under subheading 9401.90.10, HTSUS and 24 of the parts are classified under 8302.30, HTSUS. The remainder are classified in various subheadings of chapters 39, 73, and 84, HTSUS.

ISSUE:

What is the country of origin of the automotive rear seat frame for purposes of applying Section 301 trade remedies?

What is the country of origin of the automotive rear seat frame for marking purposes?

LAW AND ANALYSIS:

Section 301 Duties

The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 7.5% 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”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(s), HTSUS. Among the subheadings listed in U.S. Note 20(s) of Subchapter III, Chapter 99, HTSUS, is 9401.90.10, 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, 69 C.C.P.A. 151 (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. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 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. Uniroyal, Inc. v. United States, 3 C.I.T. 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. v. United States, 16 C.I.T. 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).

Similarly, when processing consists primarily of assembly, CBP is hesitant to find that a substantial transformation occurred. In HQ H290528, dated February 21, 2018, CBP considered whether aluminum panels, which were used as an architectural finish, were substantially transformed by processing in the United States. The panels consisted of three main parts imported from Italy: the casing, core and mounting brackets. In the United States, workers cut some of the cores to size; drilled holes into the casing and core; and extruded, machined, bent, and cut-to-size the mounting blades. Workers then inserted the core into the casing and secured the mounting blades to the panel. CBP found that the U.S processing of the panels was minimal and did not alter the character of the casing and core. CBP noted that the pre-importation processing was significantly more complicated than the post-importation processing, which essentially consisted of some cutting and assembling of parts. See also National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992) (finding no substantial transformation occurred because components had been cold-formed or hot-forged “into their final shape before importation”, and that "the form of the components remained the same" after the assembly and heat-treatment processes performed in the United States) and HQ H302252, dated February 27, 2019 (CBP determined that the U.S.-origin steel tube was not substantially transformed after undergoing assembly operations in Mexico, which “involve[d] welding a flange to the bottom of the tube, powder coating the tube and flange, and soldering a steel cap on the end of the tube”).

In some instances, however, CBP has found that a substantial transformation occurred when the processing involved consisted largely of assembly. 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 Headquarters Ruling Letter (“HQ”) W563456, dated July 31, 2006, CBP held that certain office chairs assembled in the U.S. were products of the United States for purposes of U.S. government procurement. The office chairs were assembled from 70 domestic and foreign components. The imported components alone were insufficient to create the finished chairs and substantial additional work and materials were added to the imported components in the United States to produce the finished chairs. In finding that the imported parts were substantially transformed in the United States, CBP stated that the components lost their individual identities when they became part of the chair as a result of the U.S. assembly operations and combination with U.S. components. Notably, CBP mentioned that the majority of components were of U.S. origin.

In this case, while the welding together of the various parts does not otherwise alter their shape, the Chinese origin components alone are insufficient to create the automotive rear seat frame and the majority of the components are of Mexican origin. The welding of Chinese components to components of Mexican and U.S. origin make them an integral part of the rear seat frame. Therefore, although the processing here consists of assembly alone, the individual components of Chinese origin lose their identity when incorporated into the automotive rear seat frame in Mexico with components of mostly Mexican origin. We find the Chinese components are substantially transformed by the processing in Mexico and the country of origin of the rear seat frames is Mexico for purposes of Section 301 remedies.

Marking

Section 304(a) of the Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), 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 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 marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that 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, 302 (1940); American Burtonizing Co. v. United States, 13 Ct. Cust. 652, 654 (Ct. Cust. App. 1926).

To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:

(a)(1) The good is wholly obtained or produced;

The good is produced exclusively from domestic materials; or

Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. . . .

Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the automotive rear seat frames are neither wholly obtained or produced or produced exclusively from “domestic” (Mexican, in this case) materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). “Foreign material” is defined in section 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The applicable tariff shift requirement in section 102.20 for the automotive seat frames of subheading 9401.90.10, HTSUS, is “[a] change to subheading 9401.90 from any other heading, except from subheading 9403.90.” Since seven components of foreign origin (tube assembly, retractor guide wire, top tether wire, left hand stock frame, pivot shaft, recliner, and ISO fix wire) are also classified under heading 9401, HTSUS, the tariff shift requirement of section 102.11(a)(3) is not met. Since an analysis of section 102.11(a) has not produced a country of origin determination, we turn to section 102.11(b) of the regulations. Section 102.11(b)(1) provides as follows:

(b) Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:

(1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good, or . . .

When determining the essential character of a good under 19 C.F.R. § 102.11, 19 C.F.R. § 102.18(b)(1) provides that only domestic and foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good shall be taken into consideration. In this case, the materials that do not undergo the applicable tariff shift are the tube assembly, retractor guide wire, top tether wire, left hand stock frame, pivot shaft, recliner, and ISO fix wire. All of these parts, other than the recliner, are of Chinese origin. The recliner is of U.S. origin.

Section 102.18(b)(2), Customs Regulations (19 C.F.R. § 102.18(b)(2)), provides:

For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following:

The nature of each material, such as its bulk, quantity, weight or value; and

The role of each material in relation to the use of the good.

Of the parts that do not undergo the applicable tariff shift requirement, you assert, and we agree, that no single item imparts the automotive rear seat frame with its essential character. None of these parts individually contribute significantly to the purpose of an automotive rear seat frame. Therefore, 19 C.F.R. § 102.11(b) cannot be used to determine the country of origin of the automotive seat frames.

The country of origin of the automotive seat frames cannot be determined by application of 19 C.F.R. § 102.11(c), as the automotive seat frames are not specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture, or composite good pursuant to General Rule of Interpretation 3. Accordingly, we next consider section 102.11(d) of the hierarchical rules, which provides:

Where the country of origin of a good cannot be determined under paragraph (a), (b), or (c) of this section, the country of origin of the good shall be determined as follows:

(1) If the good was produced only as a result of minor processing, the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good;

(2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of origin of the good is the country of origin of those parts; or

(3) If the country of origin of the good cannot be determined under paragraph (d)(1) or (d)(2) of this section, the country of origin of the good is the last country in which the good underwent production.

19 C.F.R. § 102.11(d).

“Minor processing” is defined in 19 C.F.R. § 102.1(m) as including, in part, the mere dilution with water or another substance, cleaning, application of preservative or decorative coatings, trimming, filing, or cutting off small amounts of excess materials, unloading, reloading, putting up in measured doses, packing, repacking, packaging, repackaging, testing, marking, sorting, or grading, ornamental or finishing operations incidental to textile good production, repairs and alterations, washing laundering, or sterilizing. “Simply assembly” is defined in section 102.1(o) as “the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing.

Based on the facts provided, we find that the operations performed in Mexico constitute more than “minor processing” and exceed a “simple assembly,” as defined in 19 C.F.R. 102.1(o). Therefore, subparagraphs (1) and (2) of 19 C.F.R. § 102.11(d) are inapplicable. Consequently, by application of 19 C.F.R. § 102.11(d)(3), the country of origin of the automotive seat frames is the last country in which the goods underwent production. The term “production,” as defined in 19 C.F.R. § 102.1(n), includes manufacturing, processing, and assembling a good. The operations performed in Mexico constitute production. Accordingly, we find that the country of origin of the automotive rear seat frames is Mexico for marking purposes.

HOLDING:

The country of origin of the automotive seat frames for the purposes of both marking and the application of Section 301 measures will be Mexico.

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