MAR-2-05 R:C:S 559089 AT

Frank R. Samolis, Esq.
Christy L. Gherlein, Esq.
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, D.C. 20037-1350

RE: U.S. Government Procurement; Final Determination - concerning the country of origin of electrical raceways; Substantial Transformation; Title III, Trade Agreements Act of 1979, as amended (19 U.S.C. 2511 et seq.); Subpart B, Part 177, Customs Regulations (19 CFR 177.21 et seg.)

Dear Mr. Samolis:

This is in response to your requests dated March 10 and July 7, 1995, for a final determination under Subpart B of Part 177, Customs Regulations (19 CFR 177.21 et seq.). Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 2511 et seq.), the Customs Service issues country of origin advisory rulings and final determinations as to whether, for the purpose of granting waivers of certain "Buy American" restrictions in U.S. law or practice for products offered for sale to the U.S. Government, an article is or would be a product of a designated foreign country or instrumentality.

This final determination concerns the country of origin of electrical raceways which are to be offered to the United States Government under a undesignated government procurement contract. You are counsel to Wiremold Canada Inc. ("Wiremold"), a Canadian company that will manufacture the electrical raceways in question. Accordingly, Wiremold is a party-at-interest within the meaning of 19 CFR 177.22(d)(1), and is entitled to request this final determination. Contained in your submission is material which you claim as business proprietary information and request that Customs make no public disclosure of this information. We have agreed to your request. The confidential information is bracketed and will not be disclosed in copies of this final determination made available to the public. Should other persons request public disclosure of the information under the Freedom of Information Act or otherwise, this office will provide you with the opportunity to defend your interests in confidential treatment.

FACTS:

According to your submission, Wiremold intends to manufacture various types of electrical raceways (wireways and busways, cable trays, surface and underfloor raceways, and boxes; cut-out, junction, and pull) in Canada. The primary material that will be used in the manufacture of the raceways is sheet metal. Specifically, cold rolled steel, as well as galvanized, satin-coat, and stainless steel are used and range in thickness from 20 to 10 gauge (0.036 to 0.135 inches). Electrical raceways may also be manufactured of aluminum, also ranging in thickness from 20 to 10 gauge (0.032 to 0.0102 inches). Fittings which may accompany these raceways are constructed of steel, aluminum or brass. You state that the stainless steel that is to be used to manufacture the raceways will be of either Canadian or [] origin. The aluminum sheet metal will be of either Canadian or foreign origin. All non-stainless steel sheet metal that is to be used in the manufacture of the electrical raceways is of Canadian origin. You further state that in most instances, all other materials, such as nuts, bolts and other small parts, which are to be used in the manufacture of the electrical raceways, will be of Canadian origin. However, foreign materials may be used in the manufacture of the electrical raceways when Canadian materials are not available.

You state that the manufacturing processes used in the production of the electrical raceways in Canada involve approximately 25 workers and consist of the following operations:

The sheet metal is sheared according to the gross dimensions of the part to be constructed. The sheared metal piece is then formed using a press break to bend the material into the required shapes (i.e., 90 degrees, 45 degrees, etc. bends or flanges). If holes, louvers, hinges, plates, flanges, gaskets or other features are required, the material is passed through a punch press or other machine to create these features. Once all bending and punching operations are completed, assembly of the electrical raceways begins. Primary stages of assembly may include spot, mig or tig welding and powder coating (painting) of the components. The powder coating process involves a wash rinse, and drying of the work pieces, followed by the powder paint application and finally curing of the coating in a bake oven. Once coated, the components are fitted together (i.e., attachment of lids, clasps, etc.) to form the final product by means of tapping, screw installation, and/or clasping. The finished electrical raceways are then packaged for delivery to the U.S.

ISSUE:

Do the processing operations performed in Canada as described above effect a substantial transformation of the foreign components such that the electrical raceways may be considered as products of Canada?

LAW AND ANALYSIS:

Pursuant to Title III, Trade Agreements Act of 1979, as amended (19 U.S.C. 2511-2518), Customs has the authority to issue country of origin advisory rulings and final determinations as to whether, for the purpose of granting waivers of certain "Buy American" restrictions in U.S. law or practice for products offered for sale to the U.S. Government, an article is or would be a product of a designated foreign country or instrumentality under the Agreement on Government Procurement and the North American Free Trade Agreement ("NAFTA").

19 U.S.C. 2515(b)) provides:

(1) Advisory rulings and final determinations.--For purposes of this subchapter, the Secretary of the Treasury shall provide for the prompt issuance of advisory rulings and final determinations on whether, under section 2518(4)(B) of this title, an article is or would be a product of a foreign country or instrumentality designated pursuant to section 2511(b) of this title.

19 U.S.C. 2511 (b), Designation of eligible countries and instrumentalities, states:

The President may designate a foreign country or instrumentality for purposes of subsection(a) of this section only if he determines that such country or instrumentality - (1) is a country or instrumentality which (A) has become a party to the Agreement or the North American Free Trade Agreement, and (B) will provide appropriate reciprocal competitive government procurement opportunities to United States products and suppliers of such products. (Emphasis added).

Pursuant to 48 CFR 25.401, Canada is a designated country under the NAFTA. Since Canada is a NAFTA country, the standard set forth in 19 U.S.C. 2518(4)(B) must be used to determine whether an article is a product of Canada. Section 2518(4)(B) provides that:

An article is a product of a country or instrumentality only if (i) it is wholly the growth, product or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed. (Emphasis added).

The inquiry must resolve whether, under the facts presented in this case, the processing performed in Canada results in an article having a new name, character or use. A secondary, supporting inquiry is whether the operations are complex, require skill, entail expense, or add value; these findings are ordinarily corroborative of the new name, character or use finding. In our experience, these inquiries are highly fact-and-product specific; generalizations are troublesome and potentially misleading. The determination is in this instance "a mixed question of technology and customs law, mostly the latter." Texas Instruments, Inc. v. United States, 681 F.2d. 778, 783 (C.C.P.A. 1982).

In making this final determination, we must rely upon the judicial and administrative precedents that have considered the issue of substantial transformation.

As stated in your submission, foreign materials consisting of stainless steel, aluminum sheeting and other small parts will be further processed, assembled and used in the manufacture of electrical raceways in Canada. Thus, the critical issue that must be addressed in determining the country of origin of the electrical raceways is whether the foreign materials are substantially transformed as a result of the operations performed in Canada. That is, does the name, character or use of the foreign materials change as a result of the processing and assembly operations performed to manufacture the electrical raceways in Canada. Customs has previously considered the issue of whether the processing and assembly of electronic components into a finished article results in a substantial transformation of the individual components.

In HQ 730952 (May 18, 1988), Customs held that electrical components consisting of coils, capacitors and cases were substantially transformed as a result of being assembled into plug-in adapters (e.g., rectifiers). Customs stated that the individual parts lost their separate identities as a result of the assembly operation in that they became integral parts of a new article--a plug-in adapter. In HQ 732350 (June 23, 1989), Customs held that foreign transducers which were assembled with U.S. components to make hearing aids in the U.S. were substantially transformed as a result of the U.S. operations. Customs stated that the transducers lose their separate identity as a result of the assembly operation in that they become a integral part of a new article of commerce--a hearing aid--with a new, name, character and use. In HQ 735346 (February 23, 1995), Customs held that Taiwanese DC to DC converters which were imported into the U.S. (Scenario 1) or the Netherlands (Scenario II) and which were processed and assembled with other domestic components (e.g., power interface board assembly, power distribution board assembly, cigarette adapter cable, computer adapter cable), to make auto/marine adapters were substantially transformed as a result of the operations performed in either of the two countries. Customs stated that the processing performed in the U.S. or the Netherlands results in an article that has a new name, that of a auto/marine adapter, a new character that is visibly different than the DC to DC converter, and a new use in that it can be a power source for automatic data processing machines.

Based on the totality of the circumstances of this case and consistent with the Customs rulings cited above, we find that the foreign materials consisting of stainless steel sheeting, aluminum sheeting and other small parts that are used in the manufacture of electrical raceways in Canada in the manner described above are substantially transformed as a result of the operations performed in Canada. The name, character and use of the foreign materials change as a result of the processing and assembly operations performed in Canada. Like the electrical components in HQ 730952, the foreign materials lose their separate identity and become an integral part of an electrical raceway as a result of the assembly operations. The character and use of the foreign materials are changed as a result of the assembly operations performed in that the finished article, an electrical raceway, is visibly different than any of the individual foreign materials, acquiring a new use, which is a conduit for electricity.

We also take notice of the fact that, in this case, essential foreign materials are not only assembled in Canada into a finished article, but are fabricated before being assembled. For example, the stainless steel and aluminum sheeting are cut, pressed, and bent into various shapes (i.e., 90 degrees, 45 degrees, etc. bends or flanges), prior to being assembled into electrical raceways. Customs has consistently held that cutting, or bending materials to defined shapes or patterns suitable for use in making finished articles, as in this case, constitutes a substantial transformation. See, HQ 556215 (October 18, 1991) (Customs held that the cutting, shearing, boring and bending of U.S. stainless steel coils and sheets in Brazil to specific shapes and sizes suitable for use as components for the manufacture of railway passenger car body shells constituted a substantial transformation of the U.S. steel); HQ 557159 (January 11, 1994) (Customs held that four cutting operations, consisting of straight cuts, miter cuts to 45 degree angles, miter cut to an angle other than 45 degrees and notch cut or 90 degree cutting, of U.S. extruded aluminum in Mexico and the subsequent bending to shape of the aluminum to form louver and grille frames as well as the shearing and bending to shape of U.S. sheet material to form louver and grill components constituted a substantial transformation of the extruded aluminum and sheet material).

Based on the reasons stated above, we find that the foreign materials (stainless steel, aluminum sheeting and other small parts) which are further processed and assembled into electrical raceways in Canada, in the manner described above, are substantially transformed as a result of the Canadian operations. Accordingly, the country of origin of the electrical raceways is Canada.

HOLDING:

Based on the facts presented, foreign materials consisting of stainless steel, aluminum sheeting and other small parts, which are further processed and assembled into electrical raceways in Canada, in the manner described above, are substantially transformed as a result of the Canadian operations. Accordingly, the country of origin of the electrical raceways is Canada. Notice of this final determination will be given in the Federal Register as required by 19 CFR 177.29.

Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 CFR 177.31, that Customs reexamine the matter anew and issue a new final determination.

Pursuant to 19 CFR 177.30, any party-at-interest, as defined at 19 CFR 177.22(d), may within 30 days after publication of the Federal Register notice referenced above, seek judicial review of this final determination before the Court of International Trade.

Sincerely,

Harvey B. Fox, Director
Office of Regulations and Rulings