OT:RR:NC:N2:220
Thomas Keating
Rock Trade Law, LLC
134 N. LaSalle St., Suite 1800
Chicago, IL 60602
RE: The country of origin of an electric motor and the applicability of certain trade remedies under Section 301
Dear Mr. Keating:
In your letter dated February 15, 2021 you requested a country of origin ruling on behalf of your client, Johnson Electric North America, Inc., and request a confirmation that Section 301 remedies do not apply to the subject motor upon importation.
The merchandise under consideration is identified as the Brushless Direct Current Motor (motor), PN 1999-5YY1117-0000EN, that is typically used in automotive cooling fan applications. You state the motor has a maximum power output of 728.8 Watts, and suggest a tariff classification of subheading 8501.31.4000, Harmonized Tariff Schedule of the United States (HTSUS). We agree.
You describe the manufacturing process performed in Mexico as consisting of four substantial assembly steps, identified as the stator subassembly production, the rotor subassembly production, the electromechanical subassembly production, and the motor final assembly. In Mexico, the stator subassembly is produced at your client’s facility by stamping coiled silicon steel sheet into individual laminations. The laminations are arranged, compressed, and thermoplastic resin applied to form a lamination stack. A spacer and terminal connector are inserted, and copper wire is mechanically spun around the lamination stack to form a shaded coil for the stator. Based on the information provided, the sheet steel is sourced from China, while the copper wire is sourced from Mexico.
The rotor subassembly operation at your client’s facility in Mexico consists of press fitting a T-washer, shaft, and ball bearing into a rotor housing. Ferrites are attached to the inside of the rotor housing with epoxy glue and once cured, the rotor assembly undergoes a magnetization process. The final production step for the rotor assembly is to balance and perform inspection. Based on the information provided, the rotor housing, shaft, and ferrites are sourced from China, while the bearing is sourced from Mexico.
The electromechanical subassembly production performed at your client’s facility in Mexico consists of fitting a die cast enclosure base with a ball bearing, attaching electrical connections and a bearing cover, and joining the terminal block to the die cast support with three screws. The stator assembly is screwed to the die cast support along with terminal holder to produce a finished stator. The rotor is fitted together with a spring washer, ball bearing and the finished stator to produce the electromechanical subassembly. Based on the information provided, the die cast enclosure base, which you refer to as the support, is sourced from China, while the bearing is sourced from Mexico.
The final assembly operation performed at your client’s facility in Mexico consists of soldering a fuse, capacitors, and an inductor onto the power frame. The power frame and a controller printed circuit board assembly (PCBA) are soldered together and attached to the electromechanical subassembly. A wiring harness is attached to the terminal block and a heat sink is secured to the PCBA by three screws. After final assembly, the completed motor is treated to harden applied gap filler, and the motor is tested. Based on the information provided, the power frame, the heat sink, and the wiring are sourced from China, while the controller PCBA is sourced from Serbia.
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 (or its container) imported into the U.S. 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 U.S. the English name of the country of origin of the article.
The “country of origin” is defined in 19 CFR 134.1(b) 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 this part.”
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). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods 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:
(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 subject motors are neither wholly obtained or produced or produced exclusively from “domestic” 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 electric motor of heading 8501, HTSUS, is:
A change to subheading 8501 from any other heading.
The foreign material in this case consists of the rotor, the shaft, the wire, the steel sheet, the bracket frame, the bearing, and the plastic resin. As the none of the components that make up the motor are classified under heading 8501, HTSUS, the tariff shift requirement of section 102.11(a)(3) is met. As such, we find that the motors are products of Mexico.
Regarding the applicability of Section 301 remedies, in our view, the stator and rotor are the dominant components of a finished electric motor. The manufacturing of the stator subassembly is significant, where the laminations are stamped, pressed together, and the individual subassemblies are joined and further processed by winding wire, etc. In our view, the stator assembly operations transform the individual components into a stator of Mexican origin.
The rotor housing, which originates from China, is also further processed. However, we are of the opinion that the insertion of the shaft and gluing magnets is not complex assembly. While the rotor housing is further worked, it is not substantially transformed as a result of the assembly operations described in your request and the rotor subassembly remains a product of China.
Lastly, it is our opinion that the soldering in Mexico of the fuse, capacitors, and inductor onto the power frame base creates a power frame subassembly of Mexican origin. The control PCBA, which consists of various capacitors, resistors, integrated circuits, etc., is a product of Serbia that is joined with the power frame subassembly and is merely attached to the motor base. The balance of the manufacturing steps, while important to the assembly of a final product, do not substantially transform the stator or the rotor as a result of screwing, soldering, etc.
Based on the facts presented, it is the decision of this office that the manufacturing and assembly operations, in sum, substantially transform the individual components into a new and different article of commerce with a changed name, character, and use. In our view, the stator is a product of Mexico. The rotor, which is further worked, remains a product of China. However, it is the opinion of this office that the manufacturing and assembly processes performed in Mexico, taken collectively, result in a substantial transformation of the non-Mexican components and the motor is a product of Mexico. Therefore, the motor will not be subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation.
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 Customs Service 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.”
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