OT:RR:CTF:VS H342414 JH
Cheryl Wynn
Customs Manager
100 Mission Ridge
Goodlettsville, TN 37072
RE: Accent Touch Lamp; Country of Origin; Substantial Transformation; Generalized System of Preferences
Dear Ms. Wynn,
This is in response to your September 24, 2024 ruling request, filed on behalf of Dollar General (the “importer”), regarding: (1) the country of origin of a certain accent touch lamp (“Lamp”), and (2) the eligibility of the merchandise for duty-free treatment under the Generalized System of Preferences (“GSP”) when imported into the United States from Cambodia.
FACTS:
The merchandise at issue is an accent touch lamp used for household purposes. The lamps will be manufactured in Cambodia with parts imported from China and sourced locally in Cambodia. For purposes of this ruling request, we will assume that the locally sourced parts will be of Cambodian origin. A complete listing of the components with photographs was submitted with your request. The provided manufacturing process scenario shows that the lamp base, midsection and the lampshade are made in Cambodia, and the lamp head (E26 plastic socket), tube for the metal neck, touch switch, and power cord are sourced from China.
The manufacturing process includes the following:
Cutting, attaching, and welding the fabric to the lamp wire to create the lamp shade which includes:
Shaping the adhesive fabric to a round shape
Cutting iron wire to size for the lamp frame
Welding iron wire to join shade frame and top ring
Welding iron wire to join shade frame to bottom ring
Powder coating shade frames in white
Sewing and attaching fabric and shade’s iron frame together
Machine sawing and shaping the metal to make the midsection and the lamp base, including:
Machine sawing and shaping the metal materials for screws, threaded pipe, and metal neck
Vacuum metalizing the metal neck and metal panel to gold color
Cutting to shape the material for the metal lamp base and panel
Machine shaping the lamp base
Powder coating the lamp base
Assembly, packing, and labeling of product in production line
When assembled, the lamp is directly imported to the United States from Cambodia and is classifiable under subheading 9405.29.60 of the Harmonized Tariff Schedule (“HTSUS”).
ISSUES:
What is the country of origin of the accent touch lamp?
Whether the accent touch lamp qualifies for the duty exemption under the GSP when imported from Cambodia into the U.S.?
LAW AND ANALYSIS:
Country of Origin of the Accent Touch Lamp
Section 304 of the 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 its 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.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (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].” A substantial transformation occurs when, as a result of manufacturing process, a new and different article emerges, having a distinct name, character or use, which is different from that originally possessed by the article or material before being subjected to the manufacturing process. See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments, Inc. v. United States, 69 C.C.P.A. 142, 681 F.2d 778 (1982). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982) aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
In Headquarter Ruling (“HQ”) H311970, dated Oct. 14, 2020, CBP ruled that a manufacturing process that produced a mixed greenery wreath with gold leaves in Cambodia with local material and imported material from China, was more than a minor assembly process and resulted in a substantial transformation. The materials from China included polyvinylchloride (“PVC”) sheets on rolls, PVC pine needles, polyethylene (“PE”) pellets, galvanized iron wire, epoxy resin, black iron wire, natural pinecones, and a battery-operated LED light set, and the remaining materials from Cambodia included gold paint, flexo print packing, and a brown master carton. The processing included cutting, shaping, welding, attaching, and binding to produce the final article. In that ruling, CBP noted how the various configurations and attachments caused the individual materials to lose their identity and became integral pieces of the finished product. See also HQ 562558, dated Dec. 31, 2002 (noted that the assembly of a lamp qualified as a substantial transformation)
In this case, the manufacturing process includes cutting and welding the wires and sewing and attaching fabric to the iron wire frame to make the lampshade. Further, the process includes machine sawing and shaping (including the vacuum metalizing and power coating) the metal to make the midsection and the lamp base. Through this process, the materials are configured and altered and lose their individual identities as we see in HQ 562558 and HQ H311970, to then become integral parts of the finished article. Accordingly, we find that the components have undergone more than a minor assembly process and that they will be substantially transformed in Cambodia. Accordingly, the country of origin of the lamp for marking purposes will be Cambodia.
GSP Eligibility of the Accent Lamp imported from Cambodia
Under the GSP, eligible articles, which are the growth, product, or manufacture of a designated beneficiary developing country (“BDC”) and are imported directly into the customs territory of the U.S. from a BDC, may receive duty-free treatment if the sum of: (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C.
§ 2463(a)(2)(A).
Pursuant to General Note (“GN”) 4(a), HTSUS, Cambodia is a designated BDC for GSP purposes and may be afforded preferential tariff treatment if the imported accent lamp is classified in a GSP-eligible provision containing SPI Code A. The accent lamp imported from Cambodia is classified under subheading 9405.29.60, HTSUS, which is a GSP eligible provision.
The first issue is whether the accent lamp is a “product of” Cambodia. To receive duty-free treatment under the GSP, an article must be a “product of” the BDC. A good is considered to be a “product of” a BDC if it is wholly the growth, product, or manufacture of a BDC, or has been substantially transformed in the BDC into a new or different article of commerce. See 19 U.S.C. § 2463(a)(3); 19 C.F.R. § 10.176(a).
As determined in the previous section concerning country of origin marking, the materials will undergo a substantial transformation in Cambodia. The same analysis applies for purposes of the GSP, and therefore the accent lamp may be considered a “product of” Cambodia.
Next, to be eligible for duty-free treatment under the GSP, the accent lamp must also satisfy the 35 percent value-content requirement. If an article consists of materials that are imported into a BDC, as in the instant case, the cost or value of these materials may be counted toward the 35 percent value-content requirement only if they undergo a double substantial transformation in the BDC. See 19 C.F.R. § 10.177(a)(2). Materials imported into the BDC must first be substantially transformed into a new and different article of commerce which becomes “material produced” and these materials produced in the BDC must then undergo a second substantial transformation into a new and different article of commerce (the final article). See Drexel Chem. Co. v. United States, 27 CIT 804 (2003) (a double substantial transformation occurred when a dichloro diphenyl dimethyl urea cake was air milled into fine particles because the physical and chemical changes to the cake resulted in a usable herbicide).
Thus, we need to determine whether the E26 socket, metal neck tube, touch switch, and power cord undergo a double substantial transformation in Cambodia when they were used to make the accent lamp and therefore, may be counted toward the 35 percent value-content requirement.
In determining whether a substantial transformation has occurred in the processing of metals, CBP has generally held that cutting or bending materials to defined shapes or patterns suitable for use in making finished articles, as opposed to mere cutting to length or width which does not render the article suitable for a particular use, constitutes a substantial transformation. For example, in HQ 055684, dated August 14, 1979, CBP held that components of a water cooler gas absorption refrigeration unit which were formed by cutting to length, cleaning and bending imported steel tubes into the component shapes and configurations, or by cutting to length, flattening, and drilling holes into imported tubing, substantially transformed constituent materials for GSP purposes, while those imported tubes which were simply cut to length and assembled into the final articles were not. See also HQ 555811, dated March 20, 1992 (die cutting, stamping and shaping operations substantially transform aluminum flat stock into new and different articles of commerce).
In this case, only the metal neck, which is formed from metal tubing, is a new and distinct intermediate article of commerce with a new character and use. The machine sawing and shaping transforms the material into the metal neck, a distinct article of commerce with a new character and new use used to make the midsection for the accent lamp. Furthermore, the additional assembly of this piece into the finished accept lamp constitutes the second substantial transformation. However, the other Chinese components only undergo assembly to make the accept lamp, and therefore, they do not undergo a double substantial transformation, and their cost may not be included in the 35 percent value-content requirement.
In your submission you provided a component list that details the price of the materials used, and the cost of the production process of the accent lamp. From what is displayed on the list, the value of the materials from Cambodia, including the metal neck from China, and the cost of manufacturing the lamp in Cambodia is around 66 percent of the total cost, satisfying the 35 percent value-content requirement. Nonetheless, upon importation from Cambodia into the U.S., the importer will need to submit satisfactory evidence that the value-content requirement has been met.
Lastly, for purposes of GSP eligibility, upon importation the importer should be prepared to provide evidence that the lamps are imported directly from Cambodia. Such information can be, but isn’t limited to, shipping records, bill of lading, invoices, and/or any other evidence that individually or cumulatively establishes compliance with the “import directly” requirement.
The “imported directly” requirement is defined in 19 C.F.R. § 10.175, in pertinent part, as follows:
(a) Direct shipment from the beneficiary country to the United States without passing through the territory of any other country; or
(b) If the shipment is from a beneficiary developing country to the U.S. through the territory of any other country, the merchandise in the shipment does not enter into the commerce of any other country while en route to the U.S., and the invoice, bills of lading, and other shipping documents show the U.S. as the final destination; or
(c) If shipped from the beneficiary developing country to the United States through a free trade zone in a beneficiary developing country, the merchandise shall not enter into the commerce of the country maintaining the free trade zone…
or
(d) If the shipment is from any beneficiary developing country to the U.S. through the territory of any other country and the invoices and other documents do not show the U.S as the final destination, the articles in the shipment upon arrival in the U.S. are imported directly only if they:
(1) Remained under the control of the customs authority of the intermediate country;
(2) Did not enter into the commerce of the intermediate country except for the purpose of sale other than at retail, and the Center director is satisfied that the importation results from the original commercial transaction between the importer and the producer or the latter’s sales agent; and
(3) Were not subjected to operations other than loading and unloading, and other activities necessary to preserve the articles in good condition.
HOLDING:
Based on the information provided, the country of origin of the accent lamp for marking purposes is Cambodia.
The accept lamp imported into the U.S. from Cambodia is eligible for preferential tariff treatment under the GSP, provided the 35 percent value-content and the “imported directly” requirements are met at the time of entry.
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.”
Additionally, please be aware that legal authorization for the GSP program expired on December 31, 2020, and to date it has not been renewed by Congress. To obtain current information on GSP, check our Web site at www.cbp.gov and search for the term “GSP.” However, this office still makes determinations on GSP eligibility should the program be renewed, and retroactive duties paid.
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