OT:RR:NC:N4:433
Mr. Jeremy Page
Page Fura, P.C.
939 W. North Avenue, Suite 750
Chicago, IL 60642
RE: The United States-Mexico-Canada Trade Agreement (USMCA), country of origin marking, and the applicability of Section 301 trade remedy of an automobile seat component.
Dear Mr. Page:
In your letter dated April 21, 2023, on behalf of Keiper Seating Mechanisms Co., Ltd., you request a USMCA and country of origin marking binding ruling for an automobile seat recliner assembly. The request also seeks confirmation that the recliner assembly is not subject to China Section 301 duties. In lieu of samples, illustrative literature, a product description, and manufacturing processes were provided. The item subject of this ruling request is constructed of foreign sourced raw materials. A description of the item immediately follows.
The “T3000 Automobile Seat Recliner Assembly” is a seat component constructed of metal and plastic that will enable the user to pivot and adjust the forward and back incline and decline of a motor vehicle seat backrest. The recliner assembly contains no upholstery, no cushions, no seat base, legs, or armrests. The recliner assembly will be incorporated into the driver and front passenger captain seat frames of motor vehicles according to Original Equipment Manufacturer (OEM) specifications.
The applicable subheading for the subject merchandise will be 9401.99.1085, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: Parts: Other: Of seats of a kind used for motor vehicles: Other.” Sourcing Scenario: The ruling request outlines an operation where (7) metal components (gear rim, bearing, gear wheel, clamping ring, wedges, omega spring assembly, cam ring) and (3) plastic components (cam, cover, ring) are sourced from China. In China, these components were produced through fine-blanking, bush forming, injection molding, powder metallurgy, and spring forming manufacturing operations. The components are shipped and exported to Mexico. No additional components are sourced in Mexico. Collectively, each recliner assembly unit is constructed of 10 discrete components comprising 10 total pieces. The production process follows.
The first step in production involves the joinder of the gear rim to the bearing. This joinder is accomplished via a press that has been calibrated to provide the appropriate degree of pressure without causing any damage to the bearing’s Teflon layer or the overall structural integrity of the assembly itself. Once assembled, grease is added to reduce the risk of undue friction and prepare the subassembly for the next step in production.
The gear wheel is attached to the subassembly, which again requires the use of a calibrated press.
The clamping ring is added to the assembly; the ring acts as an external “seal” to the gear rim/bearing/gear wheel subassembly in order to secure those components in place.
Once joined, the subassembly is subject to a laser welding operation in order to permanently secure the clamping ring overall.
The subassembly is then put through a restriking operation to ensure uniformity of height/dimensions for purposes of its intended application.
An additional bead of grease is then added to the internal ring before precision drops of additional grease are added to support insertion and placement of the wedges used to control the rotational movement of the overall assembly.
The next phase of production involves the addition of another bead of grease in anticipation of the incorporation of the omega spring assembly. The spring assembly is added after first ensuring proper alignment of the wedges.
Further greasing is next performed in anticipation of the addition of the cam unit subassembly. This reflects a three-stage, standalone operation through which the cam, cover and cam ring are joined together prior to integration into the subassembly. The first step in this operation is placement of the cam into a dedicated fixture to ensure proper positioning for purposes of further assembly.
The cover is pressed into the cam.
The cam ring is inserted into the center of the cam/cover assembly.
With the cam unit subassembly complete, joinder to the larger subassembly through a further pressing operation occurs next.
After confirmation through use of a displacement sensor that the cam unit assembly has been properly placed within the larger subassembly, joinder of the last component – the ring – through a pushing/pressing operation takes place.
With the subassembly complete, final testing in the form of a “push out” test (to monitor stroke v. force), functional testing and a delivery position check to verify overall component placement is then performed before the recliner assembly is laser marked and prepared for packaging and onward to shipment to Keiper's customer.
Each unassembled component is integrated in a specific sequence using jigs, a calibration press, displacement sensors, and other tools; each operation results in a more complex subassembly. The final article is a unified seat recliner assembly component. Information provided states, “… approximately one year of overall time was required from a R&D and product engineering perspective” and “each recliner assembly unit requires approximately 13 seconds of production time.”
Eligibility for preferential treatment under the USMCA: The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act1. General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA.
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1 USMCA Implementation Act - Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511 (a)).
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 -
i. the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
ii. the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
iii. 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)); or…
The subject merchandise contains non-originating materials, therefore it is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the subject merchandise is not a good produced entirely in Mexico, exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o). The applicable rule of origin for merchandise under subheading 9401.99 HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part: Chapter 94
…2. A change to subheading 9401.90 from any other heading.2
As an initial matter, the following “Compiler’s Note” is identified in part on page 2 of the General Notes (GN) of the HTSUS (2023) (Rev. 4):3
“COMPILER’S note: Multiple sets of changes to the Harmonized System have caused heading and subheading numbers and product coverage in some rules of origin for free trade agreements to be inconsistent with those in current tariff schedule chapters. Negotiations are required to enable agreement partners to update each text, plus domestic actions to implement agreed changes. As a result, the rules of origin provisions for certain United States free trade agreements have NOT been updated since major changes to the HTS were proclaimed. Where not updated for HS changes, be aware that the rule you try to apply may contain HTS numbers as in effect in 2002, 2007 or 2012. You can find U.S. proclamations updating rules in the Federal Register (see annexes for operative language). Changes in rules of origin reflecting HS 2022 modifications are generally not yet negotiated and proclaimed for FTAs.”
Based on the documentation submitted, a tariff shift occurs with 7 of the foreign origin Chinese material components; they are classified in a subheading other than 9401.99, HTS, at the time of importation into Mexico. A tariff shift does not occur with 3 of the foreign origin Chinese material components; they are
classified in subheading 9401.99, HTS, at the time of importation into Mexico. Therefore the requisite tariff shift rule under GN 11(o), Rule 2 to Chapter 94, HTSUS, is not met. In view of these facts, the subject
_________________________ 2 GN11(o) – See CSMS #43215543 - US-Mexico-Canada Agreement (USMCA) Implementing Instructions (Final) – June 30, 2020. Additionally, USMCA GN 11(o) product specific rule (PSRs) #2 says “A change to subheading 9401.90 from any other heading” but 9401.90 is now 9401.91 “Parts: Of wood.” and 9401.99. “Parts: Other.”
3 “Compiler’s Note” - See HTSUS (2023) (Rev. 4), General Note, page 2.
merchandise described above does not qualify for USMCA preferential tariff treatment.
Country of Origin Marking: The marking statute, Section 304(a), Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), 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 container) will permit in such manner as to indicate to an 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 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.”4 Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported 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. § 102.21.5 Applied in sequential order, the required hierarchy establishes 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 section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
As the subject merchandise is not wholly obtained or produced in a single country, Rule (1) of § 102.11(a)(1) is inapplicable. As the subject merchandise is not produced exclusively from domestic materials, Rule (2) of § 102.11(a)(2) is inapplicable. Accordingly, Rule (3) applies. Section 102.20 sets forth specific rules by tariff classification. The pertinent tariff shift rule for subheading 9401.99, states: A change to subheading 9401.91 through 9401.99 from any other heading, except from
subheading 9403.91 through 9403.99.6 The subject merchandise incorporates 3 discrete components (wedges, cam, cam ring) of Chinese origin classified in heading 9401, HTSUS, therefore the tariff shift requirement of section 102.11(a)(3) is not met.
As Section 102.11(a) has not produced a country of origin determination, we turn to section 102.11(b) of the
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4 Marking – United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940).
5 Country of origin for marking purposes – see 19 C.F.R. § 102.11.
6 Ch. 94 tariff classification revisions amended for General Note 11(o) per Federal Register Vol. 87, No. 219 (Nov. 15, 2022): “…2. A change to subheading 9401.91 through 9401.99 from any other heading, except from subheading 9403.91 through 9403.99.”
regulations.
Section 102.11.(b) provides: Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section: (1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good, or
When determining the essential character of a good under 19 C.F.R. § 102.11, 19 C.F.R. § 102.18(b)(1) provides that only domestic and foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good shall be taken into consideration. In this case, the materials that do not undergo the applicable tariff shift are the wedges, cam, and cam ring components of Chinese origin.
Section 102.18(b)(2), Customs Regulations (19 C.F.R. § 102.18(b)(2)), provides:
For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following:
(i) The nature of each material, such as its bulk, quantity, weight or value; and
(ii) The role of each material in relation to the use of the good.
Information provided by your office state, “No, there is not a single component that provides essential character. These components are instead integrated together and it is only through the total assembly process that the functional end product is created.” We concur. Of the parts that do not undergo the applicable tariff shift requirement, no single item imparts the essential character. None of these parts individually contribute significantly to the purpose of the subject merchandise. Therefore, 19 C.F.R. § 102.11(b) cannot be used to determine the country of origin, we turn to section 102.11(c) of the regulations.
Section 102.11.(c) provides: Where the country of origin cannot be determined under paragraph (a) or (b) of this section and the good is specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3, the country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the good.
Plastic and metal are the materials that merit equal consideration; however, they do not aid in a determination of the essential character of the good. The subject merchandise cannot be determined by application of 19 C.F.R. § 102.11(c), as it is not specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture, or composite good pursuant to General Rule of Interpretation 3. Accordingly, we turn to section 102.11(d) of the regulations. Where the country of origin of a good cannot be determined under paragraph (a), (b), or (c) of this section, the country of origin of the good shall be determined as follows:
(1) If the good was produced only as a result of minor processing, the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good;
(2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of origin of the good is the country of origin of those parts; or
(3) If the country of origin of the good cannot be determined under paragraph (d)(1) or (d)(2) of this section, the country of origin of the good is the last country in which the good underwent production.
“Minor processing” is defined in 19 C.F.R. § 102.1(m). “Production” is defined in 19 C.F.R. § 102.1(n). “Simply assembly” is defined in 19 C.F.R. § 102.1(o).
In view of the facts provided, the operations performed in Mexico constitute more than “minor processing” and exceed “simple assembly,” therefore Rule (1) and Rule (2) of § 102.11(d) is inapplicable. Mexico is the last country in which the subject merchandise underwent manufacturing, processing, and assembly; these operations constitute production. In accordance with 19 C.F.R. § 102.11(d), Rule (3), the country of origin of the “T3000 Recliner Assembly” for origin and marking purposes is Mexico. Section 301 Trade Remedy: The substantial transformation analysis is applicable when determining the country of origin for purposes of applying Section 301 trade remedies.7 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.8 This determination is based on the totality of the evidence.9
In the instant case, the foreign Chinese components lose their identity in Mexico and undergo a substantial transformation, thereby, taking on a new name, character, and identity. The joining, pressing, assembly, attaching, greasing, loading, laser welding, restriking, insertion and placement, alignment, and positioning of individual components into more substantial subcomponents that are then integrated into a larger more complex subassembly is distinguishable from the individual components sourced from China. After final assembly manufacturing operations, the complete recliner assembly is then laser marked. The recliner assembly is manufactured to an extent that none of the individual components alone can perform the pivot, incline, and recline functionality. Only through the integration of the material components into a more substantial subassembly is the functional end product created. In view of these facts, the recliner assembly is not subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
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 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).
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 19 C.F.R. § 177.9(b)(1). In the event that
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7 Substantial Transformation – See HQ H301494 (Oct. 29, 2019), HQ H301619 (Nov. 6, 2018); and Belcrest Linens v. Unites States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (stating 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”).
8 Substantial Transformation – See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (1940) (setting forth the three main factors for a substantial transformation determination).
9 Substantial Transformation – See National Hand Tool Corp. v. United States 16 Ct. Int’l Trade 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
the facts or merchandise are modified in any way, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and you should resubmit for a new ruling in accordance with 19 C.F.R. § 177.2. 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 Dharmendra Lilia at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division