OT:RR:CTF:VS H321630 JMV
Jared Wessel
Hogan Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, D.C. 20004
RE: Country of origin of Faucets; Section 301 trade remedy
Dear Mr. Wessel:
This is in response to your request, dated September 22, 2021, filed on behalf of your client Spectrum Brands, Inc. (“Spectrum”). In your letter, you request a binding ruling on the country of origin marking and Section 301 application for three types of faucets.
FACTS:
Spectrum is considering importing faucets assembled in China from parts of Chinese and Vietnamese origin. In Vietnam, Spectrum will manufacture the valve cartridges and end bodies, which will be assembled into the valve bodies (essentially, as stated by Spectrum, the parts that are beneath the sink and wall). Spectrum will then test the valve bodies before shipping them to China for final assembly. Final assembly in China will consist of adding the handles, spouts, and other parts depending on the model. The products in question are three models of Pfister faucets: Glenfield, Ladera, and Jaida. These faucets will be imported under subheading 8481.80.10 of the Harmonized Tariff Schedule of the United States (“HTSUS”).
Glenfield
The Glenfield model faucet is a two-handle faucet assembly, which will be packaged for retail with a side spray assembly, and side spray mounting assembly. The side spray controls the flow of water by means of a plug valve.
The faucet valve cartridges, and the valve body—which are generally located under the sink, and start, slow, or stop the flow of water—will be manufactured in Vietnam while the remaining components will be manufactured in China. Assembly of the valve cartridges will occur in Vietnam and begin with the application of grease onto the upper plate. The upper and lower plates will be installed into the appropriate machine for assembly purposes. A gasket and seal will then be assembled to the base. A disc will be assembled to the stem, which will then be inserted and assembled to the housing. The stem assembly will be connected to the base assembly. A ring will be assembled to the stem, which is then assembled to the sleeve. O-rings will be installed, then finally, the completed valve cartridge will be subjected to testing.
The valve body end assembly will also be manufactured in Vietnam by brass sizing, forging, and screwing. The top nut will be forged and machined from brass material and the inner puck will be formed using an injection molding process. The components of the valve body will then be connected to a Vietnamese-made raceway with two retaining nuts. The valve cartridge and valve end body will be joined to each other, then connected to the line waterways for testing and inspections before they will be shipped to China
Two handles, a deck plate, a base plate, and spout assembly will be manufactured in China. The final assembly will begin by press-fitting the diverter into the Vietnamese raceway of the Vietnamese valve assembly. The escutcheon will be press-fitted over the valve body. The spout tube will be press-fitted into the spout base hub assembly, which will be screwed into place. The two handle assemblies will then be press-fitted over the Vietnamese cartridge valves and the handle hubs will be screwed to the hand adaptors. The completed faucet will be subjected to inspection and testing. It will be packed with the spray and spray head, including the spray valve body, which will be of Chinese origin. However, the faucet will require additionally assembly by the ultimate purchaser when installed in a sink.
Ladera
The Ladera model faucet consists of a two-handle faucet assembly with wing nuts, which will be packaged for retail with a push and seal assembly. The valve bodies will be manufactured in Vietnam and the remaining components will be manufactured in China.
Assembly of the two cartridge valves—which are generally located under the sink, and start, slow, or stop the flow of water— occurs in Vietnam. Cartridge assembly will begin when the bonnet, sleeve, stem, and base will be injection molded and then assembled. O-rings will then be installed into the Vietnamese sleeve. A disc from China will be installed to the Vietnamese stem, which afterwards will be inserted into the sleeve. The completed valve cartridge will then be subjected to testing.
The valve end body assembly will also be manufactured in Vietnam by brass sizing, forging, and screwing. The top nut will be forged and machined from brass material and the inner puck will be formed using an injection molding process. The components of the valve sub-assembly will be connected using a Vietnamese-made raceway. The completed valve assembly will then be tested and inspected before it will be shipped to China for final assembly.
The two handles, a desk plate, a base plate, and spout assembly will be manufactured in China. Final assembly will start with placing the escutcheon over the valve assembly and locking it into place with nuts. The two handle set assemblies will then be placed over the cartridges and screwed into place. The spout housing will be assembled to the outlet tube by screwing it to the valve assembly with lock screws. The aerator will then be screwed into the outlet tube of the spout. The faucet will be subjected to inspection and testing. The faucet will be packaged with the push and seal assembly of Chinese origin. However, the faucet will require additionally assembly by the ultimate purchaser when installed in a sink.
Jaida
The Jaida model faucet consists of a spout body, a single handle assembly, a Y-connector, a valve body assembly, inlet adapters, and installation hardware. Assembly of the valve cartridge—which are generally located under the sink, and start, slow, or stop the flow of water—will occur in Vietnam. Valve cartridge assembly will begin with the application of grease onto the upper plate. The upper and lower plates will be installed into the appropriate machine for assembly purposes. A gasket and seal will then be assembled to the base. A disc will be assembled to the stem, which will then be inserted and assembled to the housing. The stem assembly will then be connected to the base assembly. A ring will be assembled to the stem, which is then assembled to the sleeve and O-rings will be installed. The cartridge unit, which will be installed into the valve sub-assembly, will then be subjected to testing.
The valve end body will be manufactured in Vietnam by brass sizing, forging, and screwing. The top nut will be forged and machined from brass material and the inner puck will be formed using an injection molding process. The components of the valve body will then be connected using a Vietnamese inner puck and brass nut, which will be assembled to a Chinese shank. The valve cartridge and valve end body will be connected to each other and the line waterways for testing and inspections before they are shipped to China for final assembly.
The two handles, a Y-connector and spout assembly are manufactured in China. Final assembly will start in China when the valve bodies and handles are connected. The trough spout will be assembled and screwed to the spout base. The flow tube will be screwed into the spout and a screen filter will be press-fitted to the spout. The completed faucet will be tested, inspected, and packaged with the push and seal assembly of Chinese origin for retail sale. However, the faucet will require additionally assembly by the ultimate purchaser when installed in a sink.
ISSUE:
Whether the country of origin of the subject faucets is Vietnam or China for marking and Section 301 purposes.
LAW AND ANALYSIS:
The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. § 1304), 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 a manner as to indicate to the 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. Friedlander & Co., 27 C.C.P.A. 297, 302; C.A.D. 104 (1940).
Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of the marking laws and regulations.
Additionally, 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, HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), HTSUS. Therefore, when determining the country of origin for purposes of both marking and applying trade remedies under Section 301, the substantial transformation analysis is applicable.
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, and use which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments, Inc. v. United States, 681 F.2d 778, 782 (1982). 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).
In Uniroyal, the U.S. Court of International Trade (“CIT”) concluded that a finished shoe upper was not substantially transformed when it was combined with the shoe’s outer sole. 3 C.I.T. at 220. The CIT noted that the process of attaching the shoe upper—which consisted of relasting the leather upper, applying cement to the bottom of the upper, pressing the outsole to the upper, removing the last, then stitching the outsole to the upper—was a minor manufacturing or combining process which left the identity of the upper intact. Id. at 222, 224. Specifically, the CIT stated that “the upper -- which in its condition as imported is already a substantially complete shoe as it is readily recognizable as a distinct item apart from the outsole to which it is attached.” Id. at 224. The CIT added that the uppers were the very essence of the finished shoe. Id. at 227.
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).
When considering the origin of faucets, CBP has found the country of origin of the valve to be significant. In New York Ruling Letter (“NY”) N309562, dated March 4, 2020, a lavatory faucet was assembled in Vietnam from Vietnamese cartridge valve components and valve bodies. The cartridge valve components were manufactured using an injection molded process and afterwards, the components were assembled to a Chinese metal plate to produce each faucet’s valve cartridges. Two threaded brass pipes were injection molded together to make a valve body in which the interior lining of each brass tube was coated with plastic and connected with a continuous plastic tube raceway to the spout. The valve body was then assembled with parts from China, which included an escutcheon, bonnet, handles, housed aerator, cover plate, and base plate. In finding the country of origin to be Vietnam, CBP stated that “the Vietnamese valve bodies and cartridge valves that control the flow of hot and cold water [were] combined with less significant Chinese components,” which lost their separate identities to become a new article, i.e., a lavatory faucet body.
Similarly, in NY N313302, dated August 4, 2020, the assembly of a faucet occurred in Vietnam. The faucet was composed of a cartridge valve, a small plastic side body, an escutcheon, and a faucet handle from Vietnam; copper tubes, fittings, O-rings, plastic clips, two adapter bolts, a plastic washer, and an aerator-housing from China; two sealing washers, a sealing spring, a stainless-steel ball, and springs from Taiwan; and a German aerator. CBP found that the operations performed in China, Taiwan, and Germany were not complex or meaningful. CBP noted that the manufacturing of the valve body and the assembly processes in Vietnam, in which less significant components were combined with the Vietnamese valve body, resulted in the individual parts losing their separate identities to become a new article, i.e., a kitchen faucet. As such, the country of origin for the single handle kitchen faucet was Vietnam.
In this instant case, the valve body and its components are manufactured, assembled, and tested in Vietnam. For this reason, the importer argues that the country of origin of the subject faucets is Vietnam. The importer states that the valve bodies perform the essential function of the faucet, i.e., starting and stopping the flow of hot and cold water, while the faucet spout and handles are merely decorative.
We note that the valve assemblies as exported from Vietnam to China do have a pre-determined use to make finished faucets and that the valves do perform the essential function of starting and stopping the flow water. However, the handles and spout also play a functional role to enable the user to open and close the valves with ease so that water is delivered to the sink basin in a controlled manner. Additionally, the spout and handles are an important factor in the consumer decision making process of choosing which faucet to purchase, as the design of these elements will generally influence the final purchaser’s decision based on the color, style, and size, and whether the faucet will fit physically and stylistically into a particular space. Additionally, the manufacturing process to make the handles and spout in China cannot be ignored in considering where the last substantial transformation occurs. While Uniroyal did not describe the manufacturing process of the soles and focused on the process of attaching the soles to the upper, by implication in finding the upper to be the essence of the finished shoe, it considered where the upper to be made to be the last substantial transformation. Here arguably, a finished faucet may need two countries of origin especially since some of the faucet components are received loose for installation at the point of use. Nonetheless, on balance, as the spout and handles serve more of a decorative purpose and the valve bodies impart more of the essence of the finished faucet, we find the country of origin of the faucets in the instant case to be Vietnam.
HOLDING:
The country of origin of all three faucets for the purpose of Section 301 measures will be Vietnam. Additionally, the country of origin of all three faucets for the purposes of marking will be Vietnam.
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