OT:RR:CTF:VS H315299 JMV
Jeremy R. Page
Page-Fura PC
939 W. North Avenue, Suite 750
Chicago, IL 60642
RE: Country of origin of an Automotive Power Seat Cushion Frame for Section 301 trade remedy and Marking
Dear Mr. Page:
This is in response to your request, dated October 26, 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 power seat cushion frame.
FACTS:
The product at issue is an automotive power seat cushion frame classified under subheading 9401.90.10 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The automotive power seat cushion will be produced from 67 to 73 components under five different sourcing scenarios. In each scenario, assembly will take place in Mexico from components of Mexican and Chinese origin. The assembly operations for the subject manual cushion frames under each scenario are largely the same:
Production Scenario One
Under the first production scenario proposed by YFS, the automotive power seat cushion frame will be manufactured from 68 distinct components of Mexican origin, including two motors, and four components of Chinese origin. The components of Chinese origin are a motor, a hose, and two shafts.
The first step in the production process is to create the side bracket subassemblies by welding and riveting together a stamped side bracket, one or two bushings, a stamped linkage/bracket and a flat rivet.
The next subassembly is the actuating tube assembly, which will work with the frame to support the power seat adjustment. To create the actuating tube assembly, YFS workers will combine a cross tube, two washers, and two stamped linkage brackets with a Gas Metal Arc Welding (“GMAW”) process.
The third step is to create a cross tube subassembly to create additional structural integrity to the finished power seat cushion frame. YFS will join three components of Mexican origin – an assignment tube, a toothed linkage and a stamped linkage/bracket. YFS will rivet the toothed linkage to the bracket with a specifically designed fixture. Once riveted, YFS will weld the toothed linkage, bracket, tube and another linkage together.
After any required painting and quality control processes, YFS will then combine these four subassemblies (two side bracket subassemblies, an actuating tube assembly, and a cross tube assembly) with 17 additional components of Mexican origin with rivets to create the cushion frame skeleton subassembly. The additional parts of Mexican origin are two plastic bushing bearings, a plastic bushing, two spring clips, two collar headed screws, a bolt, a flanged locknut, a power drive unit/motor, three plastic screws, and a ZB drive unit/motor. Cushion frame skeleton subassembly incorporates the structural components and motors required for the directional (horizontal and vertical) movement of the final power seat cushion frame.
YFS will also produce a motor memory subassembly, which incorporates the only parts of Chinese origin: a plastic hose, two flexible shafts and a motor round. These Chinese parts will be manually assembled to a plastic bracket of Mexican origin to produce the complete subassembly.
Finally, YFS will assemble the cushion frame skeleton subassembly and the motor memory subassembly with an additional 34 components of Mexican origin to produce the complete power seat cushion frame. Those components consist of the stamped cushion pan that forms the foundation for the cushion and eventual frame use; the spring mat seat that creates the support/“bounce” of the seat; two stamped tracks for purposes of the mounting of the finished frame in the motor vehicle; a stamped riser mount and bracket track mounting also used to create further structural integrity/framing for the finished assembly; a stamped bracket for mounting of the motor memory subassembly; and numerous fasteners and movement-related components, including screws, nuts, springs, bushings, and bushing bearings.
YFS assembles two stamped tracks to the motor memory subassembly. YFS then assembles the cushion frame skeleton subassembly to the track assembly with four mounting screws. YFS will insert and screw the cushion pan along with the spring mat seat into place. YFS will apply a lubricant to the inner surface of the cross tube and plug a torsional spring into the cross-tube subassembly. YFS will assemble a height-adjust motor, which enables the adjusting and locking mechanism, to the growing structure with three specifically designed fasteners. Finally, the stamped riser mount and bracket track mounting will then be manually affixed to create the finished frame. In this first scenario, no parts of Chinese origin are also classified in 9401.90, HTSUS.
Production Scenario Two
Under YFS’s second proposed production scenario, all sourcing and production operations from scenario one will remain the same. However, in addition to sourcing the four components incorporated into the motor memory subassembly (the plastic hose, two flexible shafts and a motor round) from China, YFS would also source the left hand inner and outer stamped side brackets from China as well. These brackets would then still undergo further production at YFS to produce the complete Side Bracket Subassemblies. The assembly operations and other sourcing from Mexico discussed above would remain as is.
In this second scenario, no parts of Chinese origin are also classified in subheading 9401.90, HTSUS.
Production Scenario Three
Under the third proposed scenario, YFS will source all 73 components from Mexico, except the ZB drive unit/motor, which is incorporated into the cushion frame skeleton subassembly. The assembly operations would remain as the first production scenario. In this third scenario, no parts of Chinese origin are also classified in subheading 9401.90, HTSUS.
Production Scenario Four
Under the fourth proposed production scenario, the number of sourced components will be reduced from 73 to 67 with the actuating tube subassembly and cross tube subassembly sourced as complete subassemblies from China. The remaining 65 components will be of Mexican origin. In addition, YFS will continue all other processing outlined above in Mexico. In this fourth scenario, the actuating tube subassembly and cross tube subassembly from China and 14 other parts from Mexico are also classified in subheading 9401.90.10, HTSUS.
Production Scenario Five
Finally, under YFS’s last proposed production scenario, the left-hand outer and inner stamped side brackets referenced in scenario two would again be sourced from China with all other components sourced from Mexico. This again results in a bill of materials comprised of 73 components, with 71 of those of Mexican origin. In this fifth scenario, no parts of Chinese origin are also classified in subheading 9401.90, HTSUS.
ISSUE:
What is the country of origin of the automotive power seat cushion frame in each of the five scenarios for purposes of applying Section 301 trade remedies?
What is the country of origin of the automotive power seat cushion 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 closely examines what that assembly entails. In Headquarters Ruling Letter (“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.
On the other hand, CBP has found that a substantial transformation may occur when the processing involved consists largely of assembly in combination with domestic materials. 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 the operations that occur within that country, including any subassembly processes that take place in that country. For example, in 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. However, 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.
More recently, in HQ H314637, dated March 2, 2021, CBP considered the welding of various parts of Mexican, U.S. and Chinese origin to create an automotive rear seat frame in Mexico. CBP noted that the welding did not otherwise alter the shape of the various parts involved, but also noted that the non-Mexican origin components alone were insufficient to create the automotive rear seat frame and most of the components were of Mexican origin. The welding of the non-Mexican components to the components of Mexican origin made them an integral part of the rear seat frame. Therefore, although the processing consisted of assembly alone, CBP found that the imported components lost their identity when assembled with components of mostly Mexican origin and there was a substantial transformation by the processing in Mexico to create the automotive seat frame. See also HQ H315296, dated July 30, 2021 (finding that production in Mexico results in a substantial transformation because the Chinese origin components alone were insufficient to create the automotive seat back frame and most of the components are of Mexican origin).
However, in prior decisions, CBP has concluded that the country of origin of a motor is the country of origin of the final product. For example, in Headquarters Ruling (“HQ”) H304126, dated February 13, 2020, the country of origin of a dishwasher pump assembly was determined to be Serbia based on the manufacturing and assembly processes of the motor in Serbia. In HQ H304126, the majority of the discrete parts were sourced from China and then shipped to Serbia to be manufactured into the rotor subassembly and the stator subassembly, and then combined to form the finished centrifugal dishwasher pump. The assembly of the motor involved magnetization of the rotor, pneumatic pressing of multiple components, ultraviolet glue curing, and induction soldering. CBP held that the assembly was complex and, as such, the country of origin of the motor, which is the essence of the pump assembly, was determined to be Serbia. Therefore, the origin of the pump assembly was also Serbia.
In all scenarios currently under consideration, while the assembly of the various components of Chinese origin will not not alter the shape of the components, the Chinese origin components alone will be insufficient to create the automotive power seat cushion frame and a majority of the components in each scenario will be of Mexican origin. When combined with the Mexican components, the Chinese components will lose their individual identities and become an integral part of automotive power seat cushion frame. Although CBP generally considers the origin of a motor to be an important factor and scenarios 1, 2, and 3 include an assembled or unassembled motor from China, each of these scenarios also include two motors from Mexico. Therefore, we find that the Chinese components will be substantially transformed by the processing in Mexico and the country of origin of the automotive manual cushion frame in all production scenarios will be 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).
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported 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 manual cushion 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 manual cushion frames of subheading 9401.90.10, HTSUS, is “[a] change to subheading 9401.90 from any other heading, except from subheading 9403.90.” In manufacturing scenarios 1,2, 3 and 5, none of the components are classified in heading 9401.90 or 9403.90, HTSUS. Therefore, the assembly of the various components in Mexico meets the requisite tariff shift and the country of origin for marking purposes in scenarios 1, 2, 3 and 5 is Mexico.
Since two components of foreign origin in scenario four 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 scenario four, 18 components of both Mexican and Chinese origin will not undergo the applicable tariff shift.
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 power seat cushion frame with its essential character. None of these parts individually contribute significantly to the purpose of an automotive power seat cushion frame. Therefore, 19 C.F.R. § 102.11(b) cannot be used to determine the country of origin of the automotive power seat cushion frame.
The country of origin of the automotive power seat cushion frame cannot be determined by application of 19 C.F.R. § 102.11(c), as the automotive power seat cushion frame is 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 will 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 power seat cushion frame 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 will constitute production. Accordingly, we find that the country of origin of the automotive power seat cushion frame will be Mexico for marking purposes in all manufacturing scenarios.
HOLDING:
The country of origin of the automotive power seat cushion frame for the purpose of Section 301 measures will be Mexico under all five production scenarios. The country of origin of the automotive power seat cushion frame for the purposes of marking under all five scenarios 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