CLA-2-87:OT:RR:NC:N2:206
John Kenkel
International Trade Law Counselors, PLLC
8647 Richmond Highway, Suite 623 Alexandria, VA 22309
RE: The tariff classification and country of origin of half-shafts
Dear Mr. Kenkel:
In your letter dated December 1, 2023, you requested a tariff classification and country of origin determination ruling on behalf of your client GSP Automotive Malaysia Sdn Bhd.
The articles under consideration are five models of half-shafts, also referred to as CV axles (Model Numbers NCV11159, NCV10641, NCV53912, NCV69051, and NCV69167), which are designed to be used with passenger vehicles. The half-shafts are composed of the following components: outer CV joint (housing, cage, steel balls, inner race), intermediate shaft, boot, inner CV joint (spidor, housing) and accessories. The primary function of the half-shafts is to transmit the torque generated by the engine to the vehicle's wheels, propelling the vehicle forward. Since the vehicle's suspension system and wheels need to move up and down and turn, the design of the CV joints allows the half-shafts to accommodate these various movements without affecting the smooth transfer of power. As a result, the half-shafts not only provide reliable driving force but also contribute to ensuring the proper operation of the vehicle's suspension system.
The applicable subheading for the CV axles (Model Numbers NCV11159, NCV10641, NCV53912, NCV69051, and NCV69167) will be 8708.50.8500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Parts and accessories of the motor vehicles of headings 8701 to 8705: Drive-axles with differential, whether or not provided with other transmission components, and non-driving axles; parts thereof: Parts: For vehicles of heading 8703: Other: Other Half-shafts.” The general rate of duty will be 2.5% ad valorem.
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.
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.”
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 HQ 563205, dated September 16, 1996 (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").
The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (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). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
According to the information provided with your request, the intermediate shaft, inner and outer CV joint assemblies are produced in Malaysia, while the spidor assembly, boots, and other accessories (clips, clamps, and nuts) are products of China, which are imported to Malaysia for final assembly. In Malaysia, the ABS ring and/or retaining ring is pressed onto the inner and/or outer CV joint, the axle is laser marked, the accessories are added, the spidor is press-fitted into the axle and then into the inner CV joint. After that, the inner and outer CV joints are clamp locked, and the product is tested, cleansed and coated with a rust-preventive oil, and packed ready for shipment.
Although the processes in Malaysia do not substantially transform the components, the main parts of the half-shafts, such as the intermediate shaft and CV joints are produced in Malaysia. Furthermore, the cost of the Malaysian components and labor averages from 80 to 93 percent of the total cost for each half-shaft. Thus, the Chinese components lose their separate identity once they are attached to the shaft and become a new article of commerce, the half-shafts, with a new name, character, and use. As a result, it is the opinion of this office that the country of origin for the five models of half-shafts will be Malaysia.
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 of 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. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection 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, please contact National Import Specialist Liana Alvarez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division