OT:RR:CTF:VS H322161 AP
Center Director
U.S. Customs and Border Protection
Consumer Products & Mass Merchandising CEE
157 Tradeport Dr., Suite B
Atlanta, Georgia 30354
Attn.: Heather Scott, CBP Supervisory Import Specialist
RE: AFR of Protests Nos. 2301-20-100059 and 2301-20-100060; Actuator Cable Assembly; Origin; Section 301; Post Summary Corrections; Reliquidations; 19 U.S.C. § 1501
Dear Center Director:
The following is our decision regarding the Applications for Further Review (“AFRs”) of Protests Numbers 2301-20-100059 (190 entries) and 2301-20-100060 (12 entries), timely filed on February 11, 2020, on behalf of Kongsberg Automotive, Inc. (“importer”). The protests concern the origin of an actuator cable assembly made of various components from China, Mexico, Taiwan, and the United States, and assembled in Mexico, for purposes of Section 301 measures. The importer also seeks a refund of Section 301 duties on the 12 entries covered by Protest No. 2301-20-100060, which your office reliquidated. On November 30, 2022, a meeting was held with counsel for the importer and representatives from the U.S. Customs and Border Protection (“CBP”) Consumer Products and Mass Merchandising Center of Excellence and Expertise (“CPMM CEE”) and Kongsberg Automotive, Inc.
FACTS:
The subject actuator cable assembly of subheading 8501.10.60, Harmonized Tariff Schedule of the United States (“HTSUS”) is a remotely powered electromechanical system featured in the second row seating of sports utility vehicles. The actuator assembly operates by having customers push a remote push-button, which sends an electric signal to a printed circuit board assembly (“PCBA”) to power up and instruct a motor to pull a cable with a specific amount of force to activate certain functions in the vehicle. The functions performed by the actuator assembly consist of changing the seating arrangement in a vehicle by folding a seat, tumbling a seat, and retracting the headrest of a seat.
The actuator cable assembly is an electrical motor from China equipped with the following additional components: a PCBA assembled in Mexico; a cable subassembly and housing subassemblies manufactured in Mexico; gear components including face gear and composite gear, shaft, pinion gear, pulley gear, return spring and label from the United States; and enclosure screws, motor attachment screws and mounting fasteners from Taiwan. The PCBA communicates with the motor, directs which mechanism to activate, and manages the motor speed, run-time, and current. The motor generates power to rotate the gears and pull the cable. The face gear, composite gear, pulley gear, and pinion gear transfer the power generated from the motor into a pull force that pulls and moves the cable. The cable subassembly manufacturing process includes cutting cable and conduit materials to length, and assembling these components with plastic fittings molded in Mexico. The housing subassemblies are manufactured by injection molding with use of resin and colorant materials.
The assembly operation in Mexico involves installing all the individual components together into a final actuator cable assembly. The final assembly consists of 11 assembly stages and at least 106 individual steps. You requested confidential treatment on the specific steps during the assembly process but this information is essential for the understanding of the assembly operation. The individual steps include installing the shaft and mounting fasteners into the housing; assembling the spring into the pulley gear and installing the pulley gear into the housing; installing the cable subassembly into the pulley gear; placing the motor into a fixture nest and installing the pinion gear into the motor; rotating the pinion gear for proper orientation on the motor, and verifying proper installation with various sensors; installing the motor and pinion into the plastic housing, and automated verification that the assembly was done correctly; installing the composite gear and face gear into the housing; placing the cover into a fixture and inserting the brass inserts into the cover; configuring the PCBA to the motor within the housing and installing the cover onto the housing; placing the components on a fixture sensor; installing the cover to the housing with screws, and automated verification that the assembly was done correctly; placing the completely assembled actuator into the end-of-line tester (“EOLT”), and removing the actuator from the EOLT; labeling; and, packaging the actuator.
Protest No. 2301-20-100059 covers 190 entries of actuator cable assemblies entered as originating from China on dates ranging between September 3, 2018 to March 23, 2019. Between May 23, 2019 to June 20, 2019, the importer filed post summary corrections (“PSCs”) to correct the country of origin from China to Mexico with regard to the 190 entries. Some of the entries liquidated as originating from Mexico on August 30, 2019, and September 6, 2019. On November 22, 2019, CBP subsequently corrected those entries and reliquidated those entries as originating from China, which was within 90 days of liquidation. With regard to the remaining entries, between September 20, 2019, and November 22, 2019, CBP corrected the entry summaries and liquidated the entries as merchandise originating from China. Those entries were not reliquidated.
Protest No. 2301-20-100060 covers 12 entries of actuator cable assemblies that were entered between August 23 and August 30, 2018, as originating from China. On May 21 and 22, 2019, the importer filed PSCs on those 12 entries to correct the origin from China to Mexico. On August 16, 2019, two of the 12 entries liquidated as originating from Mexico. On November 13, 2019, CBP corrected the two entry summaries to reflect a country of origin of China instead of Mexico. The remaining ten entries liquidated as originating from Mexico on August 23, 2019, and between October 30 and November 13, 2019, CBP corrected the entries summaries to reflect a country of origin of China. All 12 entries were reliquidated on November 22, 2019, more than 90 days from the dates of the original liquidations.
CBP’s CPMM CEE determined that the electric motor from China, which was a key component of the actuator cable assembly, had a predetermined end-use and was not substantially transformed as a result of the assembly in Mexico and remained a product of China.
ISSUES:
What is the origin for the subject actuator cable assembly for purposes of Section 301 measures under both protests?
Whether CBP failed to reliquidate the 12 entries covered by Protest No. 2301-20-100060 within the 90-day statutory deadline for reliquidation.
LAW AND ANALYSIS:
Country of Origin of the Actuator Assembly for Purposes of Section 301
We first note that the matter protested is protestable under 19 U.S.C. § 1514(a)(1) as a decision on the value of merchandise. Both protests were timely filed, within 180 days of liquidation for the entries. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further review of the two protests is properly accorded to the importer pursuant to 19 C.F.R.
§ 174.24(b) because the issues protested involve questions of law or fact, which have not been ruled upon.
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent 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(d), HTSUS. Among the subheadings listed in U.S. Note 20(d) of Subchapter III, Chapter 99, HTSUS, is 8501.10.60, HTSUS. When determining the country of origin for purposes of applying current 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). The substantial transformation determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). CBP considers factors such as the nature of the operation (including the number of components assembled) and the number of different operations involved. 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 & C.S.D. 90-97.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (CIT 2016), the importer imported a partially assembled lens head, with four of the five light emitting diodes (“LEDs”) pre-attached and pre-cut wires soldered to the head printed circuit board (“PCB”). The partially assembled lens head and remaining components were then assembled into a flashlight. The U.S. assembly involved assembling, screwing, connecting and soldering approximately 50 components, many of which were simple attaching mechanisms. The court concluded that “[n]one of these factors suggest an assembly process that is complex.” Id. at 1324. The court explained that the assembly operations constituted a “fitting together of parts” and that the components were “imported with a pre-determined end-use and arrive[d] ready for assembly” and the process was “not sufficiently complex to give rise to a substantial transformation.” Energizer Battery at 1324-25, 1326. The court noted, citing Uniroyal, 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.” The court further noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Id. at 1319, citing Nat’l Hand Tool (hand tool components intended to be incorporated in a finished hand tool were cold-formed or hot-forged into their final shape prior to their importation into the U.S.).
When the manufacturing or combining process is a minor one, which leaves the identity of the article intact, a substantial transformation does not occur, and the character of the article is considered. See Uniroyal, Inc. v. United States, 3 CIT 220 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (holding that imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and were not substantially transformed into a product of the United States).
According to the importer, the subject actuator cable assembly is a product of Mexico for purposes of Section 301 measures because the foreign components assembled in Mexico were purportedly substantially transformed into a product of Mexico. The importer states that, “the motor and other components from China account for approximately 33 percent of the material cost. The US-origin components, including the gear, account for the majority of the components by quantity, representing at least 50 percent of the components at final assembly, and closer to 67 percent when considering the subassemblies manufactured by KA in Mexico.” The importer claims that no one component by itself performs the function of the actuator and the “complex assembly” in Mexico with “Mexican-origin major components” transformed the individual components into an actuator assembly of Mexican origin. The importer asserts that CBP mistakenly relied on Headquarters Ruling Letter (“HQ”) H303140, dated Apr. 19, 2019, and did not make an assessment under the totality of the circumstances and consistent with the importer’s interpretation of the court holding in Energizer Battery that a “pre-determined end use” finding is not fatal to a substantial transformation analysis.
As the importer points out, in HQ H303140, CBP considered an actuator assembly, consisting of a plastic enclosure, a PCBA, and an electric motor, which was used to remotely operate valves by the application of electricity to the electric motor. The assembly was uncomplicated and involved mounting a Chinese origin electric motor within a plastic cover/housing along with a PCBA, testing, and packaging for export to the United States. The electric motor was “a key component of the actuator assembly, [had] a predetermined end-use and [did] not undergo a change in use due to the assembly process in Mexico.” Based on these factors, the electric motor was not substantially transformed as a result of the assembly operations performed in Mexico and remained a product of China.
Similarly, in HQ H303864, dated Dec. 26, 2019, the electric motor was not substantially transformed when it was assembled into a finished product in Mexico and the final centrifugal pump assembly remained a product of China. The pump assembly was designed for use in automotive windshield washer systems and consisted of a pump housing, a seal, a terminal connector housing, an impeller, and an electric motor. The motor was manufactured in China and then shipped to Mexico to be assembled together with the remaining parts, all of which were manufactured in Mexico. The final assembly involved press fitting the parts into each other. The electric motor was the most expensive and substantive part of the finished assembly and imparted the character of the pump assembly, as it turned the impeller and moved the fluid through the pump.
The importer further cites to the summary judgment court order in Cyber Power Sys. (USA) Inc. v. United States, 560 F.Supp. 3d 1347 (CIT 2022), arguing that the totality of the evidence should be considered without applying the “essence” test because per the importer the PCBA is more important than the motor and is the only component with a pre-determined function, and the separate major components need to be integrated to perform the function of the actuator.
It should be noted that the summary judgment order did not overrule prior U.S. Court of International Trade (“CIT”) decisions applying the ”essence” and “pre-determined use” tests but rather cautioned that these were one of many factors in a substantial transformation analysis. In its opinion in Cyber Power Sys. (USA), Inc. v. United States, No. 20-00124 (CIT Feb. 27, 2023), the CIT explained that “a change in name, character, or use turns on the nature of the potentially transformative processing, considered in the context of the particular kind of merchandise being manufactured.” The court emphasized that determination of the resulting character and use of the merchandise requires careful analysis of the material facts and the court would look at the totality of the evidence.
The court concluded that one of the uninterruptible power supplies (“UPS”) models in Cyber Power was substantially transformed in the Philippines because the PCBA originated in the Philippines and most of the manufacturing (multi-phase assembly of the PCBA’s main board, assembly and testing of the finished UPS device) occurred in the Philippines. The court observed that to be functional, each UPS device required other components in addition to the main PCBA and without such components the PCBA could not individually perform the function of the UPS. With respect to the remaining four UPS devices and the single surge voltage protector (“SVP”) device, the court found that the majority of their components, including the main PCBAs, were manufactured in China and the importer had failed to produce evidence to show that these five devices were substantially transformed in the Philippines under the name, character or use test.
The importer asserts that the PCBA plays a special role because it communicates with the motor, directs which mechanism to activate, and manages the motor speed, run-time, and current. However, the PCBA is one of the additional components added to the motor and cannot individually perform the function of the actuator assembly. In HQ H309758, dated June 8, 2020, which involved a hair curling iron comprised of more than 40 components manufactured and assembled in both China and Vietnam, the PCBA played a subsidiary role to the metal barrel, flipper, and the heating element, and the country of origin of the PCBA assembly did not determine the origin of the finished product.
The instant actuator assembly classified as “electrical motors and generators” under heading 8501, HTSUS, is an electric motor equipped with additional components such as the PCBA. The motor converts electric energy into mechanical force while the additional components complement this function by directing the motor’s force for specific automotive applications. The motor generates power to rotate the gears and pull the cable. See Uniroyal; HQ H303140; HQ H303864. The motor prompts the cable to activate the mechanism that folds and tumbles the vehicle seat, and retracts the headrest of the seat. Without the motor, the PCBA and the final assembly are both non-functional. Just like the partially assembled lens head with LEDs in Energizer Battery had a pre-determined use and was ready to be assembled into a flashlight, the instant Chinese motor does not lose its separate identity and undergo a change in its pre-determined use as a result of the assembly in Mexico. The motor’s character does not change either – the Chinese motor remains a motor after the PCBA subassembly, the housing subassembly, and the cable subassembly are attached to it in Mexico unlike the regulator in
HQ H075667, dated Jan. 21, 2010, which lost its individual identity and became an integral part of the alternator. Since the assembly process in Mexico leaves the identity of the instant Chinese electric motor intact and the finished actuator assembly is an electrical motor with additional components, the finished actuator is not substantially transformed into a product of Mexico.
Finally, the importer cites to a number of cases, all of which we find distinguishable because the motor and the final product into which the motor in these cases was incorporated were manufactured in the same country. See HQ 555797, dated Feb. 15, 1991 (the electrical motor of an orbital waxer/polisher and the final orbital waxer/polisher were produced in Mexico); HQ 556103, dated Oct. 7, 1991 (the motor assembled to a baler housing unit was of U.S. origin and the final assembly took place in the United States). Unlike in HQ 555797 and HQ 556103, the motor in the instant matter was not manufactured in the same country where the final assembly occurred. We concur that the motor of the instant actuator cable assembly was substantially transformed in China where it was manufactured similar to the motor in New York Ruling Letter (“NY”) N302707, dated Mar. 18, 2019, which was substantially transformed in Mexico where it was manufactured.
Therefore, based on the totality of the evidence, the origin of the final actuator assembly for purposes of Section 301 remedies is China, where the motor was manufactured.
Reliquidation of the 12 Entries Covered by Protest No. 2301-20-100060
The importer argues that CBP failed to reliquidate the entries covered by Protest
No. 2301-20-100060 within the 90-day statutory deadline and that CBP should reliquidate these entries as products of Mexico and cancel their supplemental duty bill.
The statute on voluntary reliquidation, 19 U.S.C. § 1501, provides, in relevant part:
A liquidation made in accordance with section 1500 or 1504 of this title or any reliquidation thereof made in accordance with this section may be reliquidated in any respect by U.S. Customs and Border Protection, notwithstanding the filing of a protest, within ninety days from the date of the original liquidation ….
CBP has the authority to reliquidate entries within 90 days from the dates they were liquidated. See also 19 C.F.R. § 173.3. Two of the 12 entries covered by Protest No. 2301-20-100060 were liquidated on August 16, 2019, and the remaining 10 were liquidated on August 23, 2019. All 12 entries were reliquidated on November 22, 2019, more than 90 calendar days from the date of the original liquidations, and are therefore untimely and voidable.
Accordingly, the reliquidation of the 12 entries should be as liquidated in the original liquidations as originating from Mexico.
HOLDING:
Based on the information provided, the final actuator cable assembly subject to Protests Nos. 2301-20-100059 and 2301-20-100060 is a product of China for purposes of Section 301 measures. The 190 entries covered by Protest No. 2301-20-100059 were properly and timely liquidated and/or reliquidated as products of China, and Protest No. 2301-20-100059 should be DENIED. However, since the reliquidation of the 12 entries covered by Protest No. 2301-20-100060 was untimely and voidable, these 12 entries should be as liquidated in the initial liquidations as products of Mexico and Protest No. 2301-20-100060 should be GRANTED.
You are instructed to notify the protestant of this decision, through the protestant’s counsel, no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the CBP website at https://www.cbp.gov and other methods of public distribution.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division