OT:RR:CTF:VS H075667 EE
Mr. Peter S. Knudsen, Jr.
Ecoair Corp.
Four Industrial Circle
Hamden, CT 06517-3152
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. § 2511); Subpart B, Part 177, CBP Regulations; Country of Origin; Eco-Tech Heavy Duty Alternator
Dear Mr. Knudsen:
This is in response to your correspondence of October 31, 2009, in which you requested a final determination on behalf of Ecoair Corp. (“Ecoair”), pursuant to subpart B of part 177, Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 177.21 et seq.). Under the pertinent regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality 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.
This final determination concerns the country of origin of the Eco-Tech Heavy Duty Alternator. We note that Ecoair is a party-at-interest within the meaning of 19 C.F.R. § 177.22(d)(1) and is entitled to request this final determination.
FACTS:
You describe the pertinent facts as follows. Eco-Tech Alternators operate in diesel powered military boats, fire trucks, ambulances, utility trucks, school shuttles, party buses, and commercial fishing boats; all applications where significant operating time is spent at idle and where electric power needs are independent of the engine speed. Eco-Tech alternators provide 80% of
maximum electrical output at idle versus 30% for typical conventional alternators. Therefore, all of the on-board electronics of emergency vehicles can be supported while vehicles are operating at idle, instead of keeping their engines racing in high idle operation.
You advise that there are two important parts of alternators: 1. the electro/mechanical parts including the rotor, stator, and end frames; and, 2. the electronic component, i.e. the regulator. The regulator controls the alternator by enabling it to supply the amount of electric power that matches the needs of the vehicle. Should the regulator not supply enough power, the battery will get depleted and the vehicle will stop operating. If the regulator supplies too much electrical power, the battery and the wiring will get hot and fail. You state that the electro/mechanical parts of the alternator are manufactured by Dehong Eco-Tech, a joint venture company in China. The electronic portion, the regulator, is manufactured in the U.S. by Carleton Industries. The electro/mechanical parts will be shipped to the Ecoair facility in Hamden, Connecticut where they will be assembled with the U.S. manufactured regulator into the alternator. The alternator will be tested and packaged in the U.S.
You have submitted the bill of materials for the alternator. Some of the components from China include the following: stator assembly, rotor assembly, rectifier, regulator base assembly, insulators, rear cover, outer package, and inner package. Components sourced in the U.S. include overvoltage transient suppressor, retainer ring, bearings, regulator, and cable. Drive end housing and diode end housing are sourced both in China and the U.S. You submitted schematics, photographs, specifications, and the step-by-step assembly process of the regulator and the alternator in the U.S. The assembly of the alternator, from components including the regulator, is comprised of thirty-one discrete steps and fifty-two parts, takes approximately 169 minutes. You claim that each step is completed by skilled workers who undergo an extensive training process.
Alternator assembly process involves pressing the bearing to the drive end housing; installing the snap ring, the heilicoil, and the stator; measuring the stator resistance and stator AUX winding resistance; using fluke meter to measure the rotor resistance; a hi-pot test to check insulation between each phase to ground; pressing the rotor into the stator/drive end housing assembly; installing the SRE housing, installing the air flow deflector; installing the rectifier sub-assembly; installing the heat shrink tubing; and, installing the regulator back plate and the ignition protect parts.
ISSUE:
What is the country of origin of the Eco-Tech Heavy Duty Alternator for the purpose of U.S. government procurement?
LAW AND ANALYSIS:
Pursuant to subpart B of part 177, 19 C.F.R. § 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.
Under the rule of origin set forth under 19 U.S.C. § 2518(4)(B):
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.
See also, 19 C.F.R. § 177.22(a).
In rendering advisory rulings and final determinations for purposes of U.S. government procurement, CBP applies the provisions of subpart B of part 177 consistent with the Federal Acquisition Regulations. See 19 C.F.R. § 177.21. In this regard, CBP recognizes that the Federal Acquisition Regulations restrict the U.S. Government’s purchase of products to U.S.-made or designated country end products for acquisitions subject to the TAA. See 48 C.F.R. § 25.403(c)(1). The Federal Acquisition Regulations define “U.S.-made end product” as:
…an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States 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 transformed.
48 C.F.R. § 25.003.
In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one which 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 (1982), aff’d 702 F. 2d 1022 (Fed. Cir. 1983).
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing
renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, extent and nature of post-assembly inspection and testing procedures, and the degree of skill required during the actual manufacturing process may be relevant when determining whether a substantial transformation has occurred. No one factor is determinative.
In a number of rulings (e.g., HQ 735608, dated April 27, 1995 and HQ 559089 dated August 24, 1995), CBP has stated: “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 (CCPA 1982).
This case involves fifty-three components which are proposed to be assembled in the U.S., largely by skilled workers. The regulator, manufactured in the U.S., is the electronic component of the alternator, which controls the electrical output of the alternator to match the electrical load of the vehicle. The regulator is a key component of the alternator. Should the alternator not supply enough power, the battery will get depleted and the vehicle will stop operating. The regulator will be assembled with fifty-two other components, into the alternator in a thirty-one step process which will take approximately 169 minutes. Under the described assembly process, the foreign components lose their individual identities and become an integral part of a new article, the alternator, possessing a new name, character and use. Based upon the information before us, we find that the components that are used to manufacture the alternator, including the regulator manufactured in the U.S., are substantially transformed as a result of the assembly operations performed in the U.S., and that the country of origin of the alternator for government procurement purposes is the U.S.
HOLDING:
The components that are used to manufacture the alternator are substantially transformed as a result of the assembly operations performed in the U.S. Therefore, the country of origin of the alternator for government procurement purposes is the U.S.
Notice of this final determination will be given in the Federal Register, as required by 19 C.F.R. § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 C.F.R. § 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 C.F.R. § 177.30, any party-at-interest 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,
Sandra L. Bell
Executive Director
Regulations and Rulings
Office of International Trade