CLA-2 OT:RR:NC:N1:102
Yuka Miura
Nachi America Inc.
715 Pushville Road
Greenwood, Indiana 46143
RE: The country of origin of transmission bearings assembled in Mexico, and USMCA
Dear Yuka Miura:
In your letter dated March 8, 2021, you requested a ruling on the country of origin of transmission bearings. A description of the assembly process was submitted for our review.
The articles under consideration are referred to as 33BC and 50BC transmission ball bearings. The radial ball bearings are made of steel and are designed for use in transmissions of automobiles. Each ball bearing consists of inner and outer races, a retaining cage assembly, and a single row of balls. The 33BC ball bearings feature an outside diameter that measures 48 mm, and a width that measures 7 mm. The 50BC ball bearings feature an outside diameter that measures 68 mm and a width that measures 7 mm.
In your submission, you suggest that the finished transmission bearings are classified under subheading 8482.10.5052, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Ball or roller bearings, and parts thereof; Ball bearings; Other: Radial Ball Bearings; Single row Bearings; Other bearings have an outside diameter of Over 52 mm but not over 100 mm. We agree that the 50BC transmission bearings meet the terms of the subheading. However, based on the measurement of the outside diameter, the 33BC bearings do not meet the terms of the subheading and therefore, are classified in an alternative 8482 subheading.
The applicable subheading for the 33BC transmission bearings will be 8482.10.5048, HTSUS, which provides for Ball or roller bearings, and parts thereof; Ball bearings; Other: Radial Ball Bearings; Single row Bearings; Other bearings have an outside diameter of Over 30 mm but not over 52 mm. The general rate of duty is 9 percent ad valorem.
The applicable subheading for the 50BC transmission bearings will be 8482.10.5052, HTSUS, which provides for Ball or roller bearings, and parts thereof; Ball bearings; Other: Radial Ball Bearings; Single row Bearings; Other bearings have an outside diameter of Over 52 mm but not over 100 mm. The general rate of duty is 9 percent ad valorem.
In your letter, you describe three country of origin scenarios. In all three scenarios, the bearings are assembled in Mexico.
Prior to the assembly process the inner and outer races are forged in China. Raw steel rod is subjected to a forging process to form the inner and outer races. The forging process consists of cold-rolling processes and rough grinding processes. The forged rings are then turned to be formed into a ring shape in either China or Japan. Afterwards, the rings are subjected to a heat-treating process in either China or Japan, and then exported to Mexico.
As previously mentioned, the processes that occur in between the forging and assembly processes take place in either China or in Japan. In scenario one, the races are turned, and heat treated in China. In scenario two, the races are turned in China and heat treated in Japan. In scenario three, the races are turned, and heat treated in Japan.
In Mexico, the inner and outer races are subjected to surface grinding processes, where material is removed from the horizontal surfaces of the races to create a flat surface. The races then undergo a honing process and final grinding processes that remove material from the raceways of races, allowing the races to feature precision raceways with the required depths and required performance tolerances to perform as anti-friction ball bearings used in the transmission of an automobile.
During the final assembly process in Mexico, the balls, which are manufactured in either Indonesia or China are inserted into the inner and outer races. Afterwards, the retaining cages produced in Japan are installed to form a retaining cage assembly. Each completed ball bearing is subjected to demagnetization, a clean processing, degreasing, various inspections, is labeled and packaged for importation.
With regard to your request for the appropriate country of origin of the ball bearings, 19 C.F.R. § 134.1(b) provides in pertinent part as follows: Country of origin means 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. As stated in HQ 735009, dated July 30, 1993, “The country of origin is the country where the article last underwent a ‘substantial transformation’ that is, processing which results in a change in the article's name, character, or use.”
The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, and 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).
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, all factors such as the components used to create the product and manufacturing processes that these components undergo are considered in order to determine whether a product with a new name, character, and use has been produced. No one factor is decisive, and assembly operations that are minimal will generally not result in a substantial transformation.
In the three scenarios, the assembly of the inner and outer races, the retaining cage assembly, and balls in Mexico would not entail the type of processing required to meet the substantial transformation test. The assembly processes that occur in Mexico involve processes such as inserting and installing components to each other. The assembly of the ball bearings is considered simple assembly, and the Japanese, Chinese, or Indonesian components are not “substantially transformed” by the assembly operations that occur in Mexico.
Instead, the country of origin of the races, which are the essence of a ball bearing, are considered when determining the country of origin of ball bearings for the purpose of applying 301 trade remedies. In this instance, the inner and outer races are forged and undergo an initial grinding process in China and are later subjected to surface and finishing grinding processes in Mexico.
Headquarters (HQ) ruling 562528, dated December 10, 2002, discusses the country of origin of a ball bearing, and states that the fundamental character and use of the bearings is determined after the steel rings are ground and finished into races with precision raceways and they are no longer considered steel rings. This rational is also discussed in HQ rulings 731968, March 19, 1990, and 731969, dated March 19, 1900, where rings are heat treated and polished in one country and the races are created, and superfinishing occurs in the second country. In these rulings, the country of origin of the bearings was determined to be the country in which the rings become races with precision raceways.
Likewise, in these three scenarios, the rings of the ball bearings become races with precision raceways for anti-friction ball bearings in Mexico, as the final grinding and honing processes occur in Mexico. The final grinding and honing processes in Mexico substantially transform the rings, which were forged and subjected to an initial grinding in China, into precision races for ball bearings. The simple assembly processing of the ball bearings performed in Mexico is not sufficient to be a substantial transformation; it is the additional processing also performed in Mexico consisting of honing and final grinding that substantially transforms the rings into the races with precision raceways and makes the ball bearings products of Mexico.
Therefore, the country of origin of the 33BC and the 50BC transmission bearings in all three scenarios, for the purposes of 301 trade remedies, is Mexico. As such, the 33BC and 50BC transmission bearings are not subject to the Section 301 trade remedies.
In regard to marking, 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 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. Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
CBP continues to utilize the marking rules 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 of Mexico and Canada. Title 19, C.F.R. § 102.11(a) provides that the country of origin of a good is the country in which:
a (1) The good is wholly obtained or produced;
a (2) The good is produced exclusively from domestic materials; or a (3) 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.
“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 ball bearings in question are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the ball bearings, and paragraph (a)(3) must be applied next to determine the origin of the finished article. The tariff shift requirement in Section 102.20 for the ball bearings at issue states:
A change to subheading 8482.10 through 8482.80 from any other heading or
A change to subheading 8482.10 through 8482.80 from any other subheading, including another subheading within that group, except from inner or outer races or rings classified within subheading 8482.99.05, 8482.99.15 or 8482.99.25
In the three scenarios, the ball bearings are made up inner and outer races, classified within subheading 8482.99.05, and foreign components, i.e., the balls and retaining cages. However, in considering that the inner and outer races are from Mexico and a rule specifies that the tariff shift can occur from any other subheading, the tariff shift rule is met for all three scenarios.
You have also requested for consideration under the USMCA trade agreement. General Note (GN) 11 of the HTSUS implements the USMCA, and GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA.
GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o));
Since the ball bearings consist of non-originating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and GN 11(b)(ii). We must next determine whether the ball bearings qualify under GN 11(b)(iii). The applicable rule is stated as follows:
The applicable change in tariff classification under subdivision (o) for goods of subheadings 8482.10.5048 and 8482.10.5052 is a change to subheadings 8482.10 through 8482.80 from any subheading outside that group, except from tariff items 8482.99.05, 8482.99.15 or 8482.99.25; or
In recognizing that the inner and outer races of the bearings, which are classified within subheading 8482.99.05, are from Mexico, and a tariff shift can occur from any other subheading outside that group, the non-originating material of the ball bearings meets the requisite tariff shift rule in all three scenarios. Accordingly, the ball bearings in all three scenarios qualify as USMCA originating goods.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. Part 177).
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. You should also be aware that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
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 Sandra Martinez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division