CLA-2-85:OT:RR:NC:N2:220
Thomas Keating
Hodes Keating & Pilon
134 North LaSalle Street
Suite 1300
Chicago, Illinois 60602
RE: The application of Section 301 remedies for electric motors from Mexico
Dear Mr. Keating:
In your letter dated January 9, 2019 you requested a determination on the applicability of certain trade remedies under Section 301 for an electric motor on behalf of your client, Johnson Electric North America. The subject motor was previously ruled upon in NY N301975. However, this office did not provide you with a decision on the application of the Section 301 duties, which you are requesting herewith.
The electric motor under consideration is identified as PN 1999-1031206 which you previously described as a brushed permanent magnet direct current motor with a peak output power of 42.4 watts. You stated the motor is manufactured in Mexico from components that originate in Mexico, the United States, China, and Japan. In NY N301975 we determined that the motor was classified under 8501.31.2000, Harmonized Tariff Schedule of the United States (HTSUS), and considered a product of Mexico by qualifying for preferential treatment under the North American Free Trade Agreement (NAFTA) because all components made the requisite tariff shift per General Note 12. The question remains, pursuant to this request, as to whether or not the Chinese components used in the production of the electric motor are substantially transformed for the purposes of determining the application of the trade remedies under 9903.88.01, HTSUS.
When considering a product that may be subject to antidumping, countervailing, or other safeguard measures, the substantial transformation analysis is applied to determine the country of origin. See 19 C.F.R. § 102.0; HQ 563205, dated June 28, 2006; see also Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (finding that “the term ‘product of’ at the least includes manufactured articles of such country or area” and that substantial transformation “is essentially the test used…in determining whether an article is a manufacture of a given country”). In accordance with 19 C.F.R. § 102.0, the 102 marking rules are applicable for the limited purposes of: “country of origin marking; determining the rate of duty and staging category applicable to originating textile and apparel products as set out in Section 2 (Tariff Elimination) of Annex 300–B (Textile and Apparel Goods); and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2 (Tariff Elimination).” The 102 marking rules do however continue to be applicable for purposes of country of origin marking of NAFTA goods, as defined in 19 C.F.R. § 134.1.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), 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, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
Referencing HQ H300226, dated September 13, 2018, we would note that the electric motor under consideration therein was built in Mexico from three Chinese subassemblies where the production process was simple and lacking any significant complexity. Because the three Chinese components assembled in Mexico had a predetermined use and the production was simple, the motor in HQ H300226 did satisfy the NAFTA Marking Rules and was considered a product of Mexico but remained subject to the Section 301 trade remedies under 9903.88.01, HTSUS.
Contrary to the assembly circumstances in HQ H300226, the manufacturing processes conducted with the instant electric motor consists of component-level production of the subassemblies, the assembly of the motor, and the final testing, all of which are performed in Mexico. After a thorough review of the bill of materials and the production process described in NY N301975, we are of the opinion that the manufacturing operations that produce the motor substantially transforms the raw materials and various components into the electric motor. As such, the electric motor, PN 1999-1031206, is not subject to additional duties enumerated in U.S. Note 20(b), HTSUS, referenced in subheading 9903.88.01, HTSUS.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Karl Moosbrugger at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division