OT:RR:CTF:VS H317545 CMR
Robert J. Ernest, Esq.
Robert E. Shervette, IV, Esq.
Arent Fox LLP
1717 K Street, NW
Washington, D.C. 20006
RE: Origin of oral irrigator assembled in one country of components produced in more than one country
Dear Messrs. Ernest and Shervette:
This is in response to your request, dated March 25, 2021, on behalf of your client, Water Pik, Inc., regarding the origin of an oral irrigator assembled in Vietnam from components produced in China and Vietnam. A conference was held with you on April 29, 2021 to discuss this request. A supplemental submission, dated June 24, 2021, has also been taken into consideration in reaching our decision as set forth herein.
You have asked that certain information submitted in connection with this ruling request be treated as confidential, including information regarding the specific origin of the individual component parts used to produce the oral irrigator. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
The oral irrigator at issue is assembled in Vietnam from 67 types of components (77 total components). Most of these components will be imported from China into Vietnam for assembly of the oral irrigator. You indicate that the percentage costs of the parts for the oral irrigator, based upon current sourcing and future sourcing, are as follows: 67% from China/33% from Vietnam (current), and 62% from China/38% from Vietnam (future). The percentage of parts sourced from China is 79%, with 21% from Vietnam. Future sourcing will adjust these figures only slightly with 72% of parts being sourced from China and 28% being sourced from Vietnam.
You describe the function of the oral irrigator as follows:
An oral irrigator functions by utilizing a motor to drive a pump that draws water out of a reservoir and then forces the water through a series of small diameter tubes where its pressure increases as it moves through the plastic tubing that connects to a handle. The handle has a jet tip nozzle attached to it where the pressured water velocity increases and is ejected out in a coherent stream into the mouth of a user.
You provide a detailed description of the assembly process, however, you indicate that the major components or subassemblies to the oral indicator are the piston-pump assembly, the pump subassembly, the motor-gear subassembly, the HVDC motor assembly and the unit assembly. Based upon the descriptions provided in your submission, these components may be described as follows:
The Piston-Pump Subassembly is a combination of three parts assembled together: the Pump Body, Piston Rod, and Piston.
The Pump Subassembly provides the enclosures and valving for the pump, including the Piston-Pump Subassembly and the gears that will drive the pump. This subassembly works in combination with the Motor-Gear Subassembly.
The Motor-Gear Subassembly functions by transferring the rotational power of the motor through a gear to drive the Piston Rod that moves in an enclosed cylinder where it draws water out from the reservoir and into the cylinder and then pushes the water back out under pressure in through the plumbing to create a focused stream of water upon exiting the nozzle. The piston rod creates a single pulse of fluid per revolution. This component subassembly contains the Motor with Gear Component, along with other components that make up the Motor-Gear Subassembly.
HVDC Motor Assembly: When the Pump Subassembly and the Motor-Gear Subassembly are integrated together and affixed on the Chassis, this is referred to in the assembly flow-chart as the “HVDC Motor Assembly.
The Unit Assembly is composed of the HVDC Motor Assembly (which is the Pump and Motor-Gear Subassemblies that are integrated in the Chassis), the Upper and Lower Housing, the outtake tubing, the water reservoir, and other external components.
You describe the assembly process as requiring “32 operation stations requiring at least 42 steps, 33 technicians, and over 40 specialized tools and equipment, including uniquely customized fixtures and automated technologies.” You stress that each technician receives two to three days of training before being able to work in the assembly system to ensure “proper operation of the specialized equipment, for effective learning of assembly techniques and quality assessment, and to ensure safety in areas such as when soldering.” With the exception of the assembly of two components which require additional time, the assembly process takes approximately 15 to 20 minutes.
You provided a detailed description of the assembly process which occurs in Vietnam. However, we will focus on the assembly of the major components and subassemblies you have identified. Beginning with the piston-pump subassembly, you indicate the assembly starts with a technician “connect[ing] the Piston Rod and the Piston so that they are joined together and ensuring that the connecting Piston Rod swivels freely without excessive play.” Additional steps, including measuring and lubricating, occur prior to the installation of “the combined Piston and Piston Rod with the Pump Seal into the Pump Body” creating the Piston-Pump subassembly.
You also addressed the function of the piston-pump assembly, stating:
From an engineering perspective, the Piston-Pump subassembly (the Piston and Piston-Rod, along with the Pump Body), are the key components for providing the optimal pressure of the water for oral cleaning purposes because the design of their size and dimensions are what determines the volume of fluid displacement, which in turn dictates the flow rate of the liquid.
The piston-pump subassembly is part of the pump subassembly. As described above, the pump subassembly provides the enclosures and valving for the pump. Once the piston-pump assembly is completed, the assembly is described as requiring the assembly of the inlet check valve (consisting of five separate components), the power on/off switch (consisting of four component parts, plus plastite screws), and the valve keeper assembly (consisting of four component parts). The assembled valve keeper is assembled onto the pump body with screws. Finally, lubricated O-rings are placed on the top of the pump body and inlet valve, and then assembled to the pump inlet. This completes the pump subassembly.
The assembly of the motor gear subassembly begins with pressing the gear shaft into position in a hole in the center of underside of the gear box. A technician applies lubricant to the gear teeth and places the gear into is assigned position on the chassis. Then a “technician inserts the gear shaft of the Motor-Gear Subassembly into an off-center opening from the topside of the Gear Box.”
Once the motor gear subassembly is completed, it is incorporated into the HVDC Motor Assembly. A technician “places the Pump Subassembly into position on the Chassis so that the collar of the Piston Rod is placed over the protruding neck of the Gear that is set in place in the Chassis.” A “technician takes the Gear Box with the Motor-Gear Subassembly and the Gear Shaft and puts it into place on top of the Gear that is sitting on the Chassis with the Pump Subassembly. The Gear Shaft is inserted into the center of the Gear neck protruding portion and the gear teeth of the Motor-Gear Subassembly aligns with the gear teeth of the Gear and the screw holes on the Gear Box are lined up with the holes in the Chassis wherein screws are torqued into place connecting and holding the Motor-Gear Subassembly and Pump Subassembly to the Chassis.” This assembly is now referred to as the “HVDC Motor Assembly.”
Finally, the Unit Assembly is completed by assembling the remaining components as previously described. Throughout the description of the assembly process, you reference various specialized tools utilized in the assembly.
We note that in the discussion of the major components and subassemblies identified by you, there is no reference to the PCBA component which is listed among the numerous components of the oral irrigator. However, in your detailed description of the assembly process, you do discuss the incorporation of this component into the good. With regard to the PCBA, you explain that a technician will first strip a certain portion of the ends of the Wire Tie (capacitor) and then attach it to the PCBA. The PCBA and Thermal Cutoff are placed into the fixture. Insulating tape is used to hold the copper tie and to ensure the effect of the insulation. The power cord is fastened with the wire tie. The PCBA is installed into the chassis. PCBA wires are soldered with the Thermal Cutoff to motor tabs and switch tabs. The power cord ribbed lead is soldered to the PCBA pilot hole non-ribbed lead to the switch tab. A technician solders the PCBA with the Wire Tie and solders the wires onto the Motor with Gear Component, the Switch Power Supply, and the Switch, connecting all four components into an electric circuit. A technician completes the wiring and electrical connections of the components by wrapping insulation tape around the exposed wires on the Motor with Gear Component.
You seek an origin determination of Vietnam based on the assembly process that occurs in that country. You argue that the assembly process is complex and meaningful and should be considered to be a substantial transformation.
ISSUE:
Whether the country of origin of the oral irrigator at issue, produced as described herein, is China or Vietnam.
LAW AND ANALYSIS:
The country of origin of a good is the country in which the good last underwent a substantial transformation. See 19 CFR § 134.1(b). “A substantial transformation test is used in a number of different trade-related situations, including compliance with the country of origin marking statute, allowance of drawback, and qualification for GSP status.” See SDI Technologies, Inc. v. United States, 21 C.I.T. 895, 897 n.2, 977 F.Supp. 1235, 1239 n.2 (CIT 1997). In this case, a substantial transformation test is used to determine the origin of the oral irrigator at issue for purposes of duty assessment and for purposes of trade remedies under Section 301 of the Trade Act of 1974 (“Section 301”).
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982). 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, the role of those components in the function of the item, the 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, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative.
In this case, you submit that the assembly process which occurs in Vietnam is complex and meaningful and thus, the assembly should be considered a substantial transformation of the components of the oral irrigator resulting with Vietnam as the country of origin of the assembled good. In making this argument, you rely upon the number of components involved, the number of assembly steps, the number of “stations” for the assembly, the use of various tools, machinery, and custom-made fixtures, and the number of skilled workers involved in the assembly process, i.e., thirty-three. You cite to Headquarters Ruling Letter (HQ) H282391, dated March 16, 2017; New York Ruling Letter (NY) N302707, dated March 18, 2019; HQ H041939, dated March 10, 2011; HQ H075667, dated January 21, 2010; and HQ 555797, dated February 15, 1991. For each of these rulings, you reference the number of components, assembly steps, and for some, the assembly time and number of workers. However, a review of each ruling reveals that the outcomes do not rely simply on the number of components, the number of assembly steps, the time it takes to complete the assembly, or the number of workers. Comparing origin decisions based simply upon these factors is a mistake. The good at issue, the nature of the assembly, the sourcing of components, and the various functions of components in the finished good may all play a factor in assessing whether, in considering the totality of the circumstances, the origin of the good is the place of assembly.
For instance, you cite HQ H041939 to support your view that the assembly in Vietnam of the oral irrigator is a substantial transformation. You state the ruling held “that 20 parts of Thai- and non-Thai-origin were substantially transformed into power mirror actuators based on a final assembly process in Thailand that involved five discrete steps.” However, the ruling states:
In this case, the manufacturing process involves numerous assembly and subassembly processes, where approximately 20-30 parts and components were combined to create the finished power mirror actuators. We note that the assembly of the power mirror actuators involves several discreet steps with different types of operations including pressing the gears and the motor together and assembling this combination to a bundle of three to four cords called the cord comp. We also note that the vast majority of the components and subassemblies are of Thai origin. Based on the totality of the circumstances and the analysis of the precedent cited above, we find that the various components (individual parts and subassemblies) were substantially transformed as a result of the operations performed in Thailand to produce the power mirror actuators. Thus, we find that the power mirror actuators are a "product of" Thailand, a BDC, for the purposes of the GSP.
With regard to HQ H075667, another ruling on which you rely, you state:
The alternator assembly in HQ H075667 involved 52 components, 31 steps, 169 minutes assembly time, and operation types of pressing, fitting together, screwing, and installing parts into each other.
However, the ruling points out that the U.S.-manufactured regulator, the key electronic component of the finished alternator, is assembled with other components in the U.S. The ruling states:
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.
Had the regulator, a critical component of the alternator not been manufactured in the same country that the final assembly occurred, it is possible a different determination of origin may have occurred. The subassembly of the regulator in the United States, along with the assembly of the other components into the final good were considered, in the totality, in reaching the origin decision.
As noted above, origin determinations are case-by-case decisions and are not necessarily easily transferable to other commodities, as you have attempted to do through the rulings you cite pointing to the number of components, assembly steps, workers, and amount of time involved. You reference Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), and argue that it is distinguishable from the situation herein as you believe the assembly of the oral irrigator is much more complex than that of the flashlight at issue in Energizer. You state that “the electric motor and other components imported from China could be configured into other products and have no predetermined use.” However, we don’t agree with your assessment regarding all of the components. However, we do agree with your assessment that “a substantial transformation can still occur even if some parts have a predetermined use,”
In this case, we believe it is evident that many of the parts have a predetermined use as they are designed specifically to be joined together to form the oral irrigator at issue. We believe such parts would not be interchangeable for the assembly of products other than the oral irrigator. We agree that some parts, such as screws and 0-rings, may be viewed as parts of general use with no predetermined use.
In this case, the vast majority of the components, 79% (72% in the future) are produced in China. In addition, the component costs are greater from China, than from Vietnam.
In Energizer, referenced earlier, the Court of International Trade interpreted the meaning of “substantial transformation.” Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. The flashlight consisted of approximately fifty different components. All of the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight.
The court reviewed the “name, character and use” test utilized in determining whether a substantial transformation has occurred and noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. at 226, 542 F. Supp. at 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In reaching its decision in Energizer, the court expressed the question as one of whether the imported components retained their names after they were assembled into the finished Generation II flashlights. The court found “[t]he constitutive components of the Generation II flashlight do not lose their individual names as a result [of] the post-importation assembly.” The court also found that the components had a pre-determined end-use as parts and components of a Generation II flashlight at the time of importation and did not undergo a change in use due to the post-importation assembly process. Finally, the court did not find the assembly process to be sufficiently complex as to constitute a substantial transformation. Thus, the court found that Energizer’s imported components did not undergo a change in name, character, or use as a result of the post-importation assembly of the components into a finished Generation II flashlight. The court determined that China, the source of all but two components, was the correct country of origin of the finished Generation II flashlights under the government procurement provisions of the TAA. See HQ H298653, dated November 19, 2018.
We believe the assembly of the oral irrigator in Vietnam is not sufficiently complex to substantially transform the imported components which are designed to be part of the oral irrigator. Your argument that it required only two workstations and two workers to assemble the flashlight in Energizer, and it requires 33 workstations to assemble the oral irrigator, does not necessarily reflect the complexity of the assembly in this case as being greater, but only reflects the division of the assembly steps. Critical components of the oral irrigator are produced in China and while the production of one of those components will shift in the future, that shift and the assembly in Vietnam remain insufficient to change our view that, based on the totality of the circumstances, the origin of the oral irrigator is the country in which the majority of the components, including critical components, are produced, that is, China. The assembly in Vietnam simply is not sufficiently complex in our view to be a substantial transformation of the Chinese imported components.
HOLDING:
The country of origin of the oral irrigator at issue is China.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Classification Branch