OT:RR:CTF:VS H083693 EE
Lisa A. Crosby
Sidley Austin, LLP
1501 K Street, NW
Washington, D.C. 20005
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. § 2511); Subpart B, Part 177, CBP Regulations; Wood Chest
Dear Ms. Crosby:
This is in response to your correspondence of November 4, 2009, requesting a final determination on behalf of J. Squared, Inc. d/b/a University Loft Company (“ULC”), 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 G10624-30 Wood Chest. We note that ULC 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. ULC’s principal place of business is in Greenfield, Indiana. The company manufactures the wood chest at its facility in Greenfield, Indiana. The wood chest is a self-centering, stackable, two-drawer chest made of environmentally farmed hevea brasiliensis wood in a natural finish. Its dimensions are: 36 1/4” wide, 21 13/16” deep and 18 11/16” high. ULC designed this chest wholly within the U.S. ULC makes the wood chest from U.S. and imported components at its facility in Greenfield, Indiana.
You state that the wood chest contains over twenty components plus screws and other hardware. All of the materials are of U.S. or Malaysian origin. Production and packaging of the chest occurs in the U.S.
You submitted the bill of materials for the wood chest. Of the total cost of production, 40 percent is attributable to materials of U.S. origin, U.S. warehouse overhead and U.S. labor costs (including overhead). Some of the components from Malaysia include the following: drawers, panels, drawer frame pieces, top shelf frame pieces, drawer slides, and screws. The laminate top originates in the U.S. You submitted a photographic illustration of the U.S. production. The production of the wood chest takes approximately forty-one minutes. You claim that each step is completed by skilled workers who undergo an extensive training process.
The production of the wood chest begins by staging the left and right side panels for assembly. These panels are moved into the slide attachment workstation, where two drawer slides are drilled into place on each side panel using screws. A jig is used to ensure exact placement of the drawer slides. Next, two drawer frame assemblies and one top frame assembly are constructed from wood pieces imported from Malaysia. The wood pieces are hand-fitted together with glue and measured against a jig to ensure the frames meet exact specifications. After the various frame pieces are glued together, the frame is clamped and bradded to maintain a tight fit until the glue dries. The three frame assemblies (two drawer frames and one top frame) are then attached to the left and right side panel assemblies using screws and glue. The laminate top (U.S.-origin) and back panel are then affixed to the frame/side panel assembly using glue and screws.
On a separate production line, drawer assemblies are staged for production. A jig is used to align the drawer slides and attach them to the drawer assemblies with screws. The drawer assemblies with slides are then inserted into the chest and adjustments are made as necessary to meet specifications and ensure a smooth operation.
After final assembly, the wood chest undergoes a quality control review, during which the contract manufacturer and “Friends of the World” labels (reflecting that the wood is sustainably harvested) are affixed to the inside of the top drawer. The chest is then packaged using shrink-wrap and recycled cardboard. Finally, the packaged chest is palletized and labeled for shipment/delivery.
ISSUE:
What is the country of origin of the wood chest 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 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 Carlson Furniture Industries v. United States, 65 Cust. Ct. 474 (1970), the U.S. Customs Court ruled that U.S. operations on imported chair parts constituted a substantial transformation, resulting in the creation of a new article of commerce. After importation, the importer assembled, fitted, and glued the wooden parts together, inserted steel pins into the key joints, cut the legs to length and leveled them, and in some instances, upholstered the chairs and fitted the legs with glides and casters. The court determined that the importer had to perform additional work on the imported chair parts and add materials to create a functional article of commerce. The court found that the operations were substantial in nature, and more than the mere assembly of the parts together.
In HQ W563456, dated July 31, 2006, CBP held that certain office chairs assembled in the U.S. were a product of the U.S. for purposes of U.S. government procurement. The office chairs were assembled from seventy U.S. and foreign components. The imported components alone were insufficient to create the finished chairs and substantial additional work and materials were added to the imported components in the U.S. to produce the finished chairs. In finding that the imported parts were substantially transformed in the U.S., CBP stated that the components lost their individual identities when they became part of the chair as a result of the U.S. assembly operations and combination with U.S. components. In HQ 561258, dated April 15, 1999, CBP determined that the assembly of numerous imported workstation components with the U.S.-origin work surface into finished workstations constituted a substantial transformation. CBP held that the imported components lost their identity as leg brackets, drawer units, panels etc. when they were assembled together to form a workstation.
This case involves twenty main components which are proposed to be assembled in the U.S., largely by skilled workers. The laminate top, of U.S. origin, will be assembled into the wood chest in a twenty step process which will take approximately forty-one minutes. Under the described assembly process, we find that the foreign components lose their individual identities and become an integral part of a new article, the wood chest, possessing a new name, character and use. Based upon the information before us, we find that the components that are used to manufacture the wood chest, when combined with a U.S. origin laminate top, are substantially transformed as a result of the assembly operations performed in the U.S., and that the country of origin of the wood chest for government procurement purposes is the U.S.
HOLDING:
The imported components that are used to manufacture the wood chest are substantially transformed as a result of the assembly operations performed in the U.S. Therefore, we find that the country of origin of the wood chest 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