MAR-2-05 RR:CR:SM 561180 KSG

J. Craig Taylor
GS Electric
1700 Ritner Highway
Carlisle, PA 17013

RE: substantial transformation; motor; 134.35(a); 134.35(b); ball bearings

Dear Mr. Taylor:

This is in reference to your letter of November 5, 1998, requesting a binding ruling on the country of origin marking of imported thermo overload protectors and 8mm ball bearings assembled in the U.S. with other components to create fractional horsepower motors produced for the floor care industry.

FACTS:

The thermo overload protectors, which are also known as ARTCO’s, are made in Mexico and cost $1.28. The ball bearings are made in Thailand and cost $.49 each. There are six to eight steel balls per bearing and several complete bearings used per motor. The selling price of the motors is approximately $23.00. There are 59 components that go into the making of a motor. You state that an appreciable amount of training is needed to assemble these motors; the operators go through a series of seminars and typically it takes a minimum of three to four years to be skilled at the assembly.

You provide the following description of the composition, manufacture, and operation of the motors. The motors consist of a stator, rotor, air moving fan and brackets to hold the rotor and stator together in a tight package. The rotor (moving portion) consists of a steel shaft upon which steel laminations are pressed into position. Electrical insulation made of mylar is pushed into place on the inside of these laminations and copper wire is wound onto them. These wires are connected to a commutator which acts as a connection point for the transfer of electric current through each wound coil. Varnish is added to the copper wire to ensure that, while rotating in the magnetic field of the stator, the wires do not move and cause electrical shorts to each other. The commutator is then turned down by a lathe to ensure that the surface has reached a specified smoothness. The rotor is then balanced to a specific level by measuring the imbalance and removing material from the steel laminations. The final test is an electrical test to ensure that the electrical path that current must take through the copper windings is intact.

The rotor is also made up of steel laminations but they are not pressed onto a steel shaft. These laminations are welded together with argon gas. The laminations are then fitted with an electrical insulating material which is usually made of a rag paper and mylar combination. The stators are then fitted with an automatic field termination (“AFT”) board. This board is made of a thermoplastic material and has pockets molded into its periphery. The board is pressed into place via posts that stick out of the bottom of the board which meet with holes in the laminations. The board is used to house the copper wire it is wound with and terminals. The terminals allow easy connection capability to the copper wire.

After the AFT board is pressed onto the laminations, the copper wire is wound onto the insulation which is resting in place against the laminations. The copper wires are dressed into pockets of the AFT board. The stator is then fit into a machine which inserts terminals into the pockets of the AFT board. The machine then bonds the copper wires to one another via a coating on the outside of the wire’s insulation. When heated to specified limits, the coating will become liquid and when cool, the coating will bond together making the copper wire coil into one solid mass. The next step is to perform electrical tests to ensure that the current path is sound.

The next step is the assembly of the rotor and stator into the motor. A bearing is pressed onto the shaft upon which the rotor laminations are pressed. Next, a bearing is pressed into a rubber cup which is pressed into the molded thermoset plastic lower motor housing. The bearings allow for rotation and axial positioning of the rotor in the motor. A molded thermoset plastic baffle ring is then placed onto the motor housing. Then a stamped steel baffle plate is screwed to the motor housing with four screws. Next, a spacer is placed in contact with the bearing which is in the motor housing. An aluminum fan is placed on that spacer and a thermoset plastic chamber is placed around this fan system to also provide direction. The chamber is secured to the motor housing with brass clips. Once the fan system is secured, a molded nylon air and water separator is placed on the shaft and secured against the fan by a brass nut. The aluminum fan consists of two aluminum disks with six blades. The blades are positioned between the disks and the whole assembly is stamped together.

The stator has to have an ARTCO (automatic resetable thermal cut out) device attached onto the stator copper windings. The ARTCO is attached with plastic cable ties and then tightened to hold it in place. An ARTCO is a tempereature sensitive device (switch) which opens a circuit and shuts down the motor when too much current is generated. The ARTCO is electrically placed between the stator terminal connections and the brush on one side of the stator.

The stator is then placed over the rotor and a steel bearing load spring is placed on top of the bearing that was previously pressed into position on the rotor shaft. A thermoset plastic end bracket is then glued on the bearing pocket and placed onto the stator. The placement is such that the bracket can be screwed against the stator with screws that dig into the motor housing. When in place, the bracket bearing pocket accepts the rotor bearing.

Next, two brush box assemblies are screwed into the plastic end bracket. The brush box assemblies are molded thermoset plastic, open on one end and house a brush assembly. A block of carbon which has a stranded wire that is electrically the same as the brush is mechanically fastened to a brass strip. All this is housed within the plastic brush box and the carbon brush is pushed out of the brush box via a helical spring that rests between the brush box and the brush. The brass strip protrudes out of the same end of the brush box that the carbon brush does. The end is then connected to the stator to allow the transfer of electrical current through the stator and onto the rotor commutator and thus the rotor copper windings.

The next step is to press an aluminum stamped cooling fan onto the rotor shaft. An insulated leadwire of stranded aluminum wire must be in place to electrically carry current from one side of the stator (the side opposite of the ARTCO) to the brush. The wire must have two brass connectors that are mechanically fastened to the wire. These connectors will mate with connectors on the stator and the brush. Once in place, a plastic thermoplastic cooling cap is snapped onto the end bracket. This cap provides direction for the air movement caused by the cooling fan when the rotor spins. Once the motor is assembled, it is tested, inspected, and packaged.

All the parts of the motor other than the ball bearings and the ARTCO are made in the U.S. You stated that the ARTCO is classified in subheading 8536.30 of the Harmonized Tariff Schedule of the United States (“HTSUS”), and the motor is classified in subheading 8501.20.50, HTSUS.

ISSUE:

Whether the imported thermo overload protectors (also known as ARTCO’s) and bearings, which are assembled with other components in the U.S. into fractional horsepower motors, are excepted from individual country of origin marking.

LAW AND ANALYSIS:

Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements of 19 U.S.C. 1304. Pursuant to 19 CFR 134.35(a), articles other than goods of a NAFTA country used in the U.S. in manufacture which results in an article having a name, character, or use differing from that of the imported article will be within the principle of the decision in the case of U.S. v. Gibson-Thomsen Co., Inc., 27 CCPA 269 (1940). Under this principle, the manufacturer or processor in the U.S. who converts or combines the imported article will be considered the “ultimate purchaser” of the imported article and the article shall be excepted from marking. The outermost containers of the imported articles shall be marked in accord with Part 134, Customs Regulations (19 CFR Part 134) (“Part 134").

Pursuant to 19 CFR 134.35(b), a good of a NAFTA country which is to be processed in the U.S. in a manner that would result in the good becoming a good of the U.S. under the NAFTA Marking Rules is excepted from marking. Unless the good is processed by the importer or on its behalf, the outermost container of the good shall be marked in accord with Part 134. I. Bearings

Because the bearings are stated to be products of a non-NAFTA country (Thailand), 19 CFR 134.35(a) applies with regard to the question of whether they are excepted from marking. In determining whether the combining of parts or materials constitutes a substantial transformation as required by 19 CFR 134.35(a), the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D. 85-25, dated September 25, 1984. However, the issue of whether a substantial transformation occurs is determined on a case-by-case basis.

The focus of C.S.D. 85-25 was a printed circuit board assembly (PCBA) produced by assembling in excess of 50 discrete fabricated components (e.g. resistors, capacitors, diodes, transistors, integrated circuits, sockets, connectors) onto a PCB. In finding that the assembly resulted in a substantial transformation, Customs stated that the processing involved a large number of components and a significant period of time as well as skill, attention to detail and quality control. In Headquarters Ruling Letter (“HRL”) 735453, dated August 25, 1994, Customs ruled that Chinese ball bearings further processed in the U.S. into double shielded ball bearings were not substantially transformed. The U.S. processing involved quality checking the open ball bearings, cleaning the bearings with a solvent, adding ball bearing grease and a rust inhibitor and encasing the ball bearings with two shields (one pair), forming the finished double shielded ball bearings. Customs reached its conclusion because there was no change in the character or use of the imported Chinese ball bearings after the U.S. processing. The imported ball bearings were essentially finished articles when imported and there was a simple assembly involved.

In HRL 734292, dated May 26, 1992, Customs ruled that imported components and sub-assemblies assembled into electric motors in the U.S. were substantially transformed and therefore, the imported components were excepted from individual country of origin marking. In that case, all the parts except the bearings and stator winding were imported from Brazil. The bearings and stator windings were of U.S. origin.

In contrast to HRL 735453, in this case, the ball bearings undergo a change in character and use after the U.S. processing. The processing involved is more complex and the bearings lose their separate identity when combined with numerous other components to create a completely different article of commerce (an electrical motor). The facts in this case are similar to HRL 734292, where Customs found that a substantial transformation occurred when numerous parts were assembled into electric motors in the U.S.

Based on the complexity of the assembly operation performed, the number of components and the skill required to assemble the motors, we find that the bearings are substantially transformed when incorporated into the motors in the U.S. and therefore, the bearings are excepted from individual marking pursuant to 19 CFR 134.35(a). The outermost container in which the bearings reach the ultimate purchaser must be marked to indicate the country of origin of the bearings.

II. ARTCO’S

Because the ARTCO’s are from Mexico, a NAFTA country, 19 CFR 134.35(b) is applicable. Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2. Paragraph (a) of this section states that the country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the motors are assembled in the U.S. at least in part of foreign (non-U.S.) material and therefore are neither wholly obtained or produced, nor produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3).

Section 102.11(a)(3) provides that the country of origin is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20....”

You state that the electric motor is classified at subheading 8501.20.50, HTSUS. The applicable tariff shift rule found in section 102.20(o) provides as follows:

HTSUS Tariff Shift and/or other requirements

8501.........................A change to heading 8501 from any other heading.

In the instant case, the foreign material is the ARTCO, which you state to be classified in subheading 8536.30, HTSUS. Therefore, the foreign material undergoes the applicable tariff shift. Pursuant to 19 CFR 102.11(a)(3), the country of origin of the motor is the country where the foreign materials undergo the applicable tariff shift, which is the U.S.

Since the country of origin of the electrical motors is the U.S., pursuant to 19 CFR 134.35(b), the ARTCO’s are excepted from individual marking. Unless the ARTCO’s are processed by the importer or on its behalf, the outermost container shall be marked with the country of origin of the ARTCO’s in accord with Part 134.

HOLDING:

The bearings from Thailand are substantially transformed when incorporated into the electrical motors in the U.S. and therefore, the bearings are excepted from individual marking pursuant to 19 CFR 134.35(a). The outermost container in which the bearings reach the ultimate purchaser must be marked to indicate the country of origin of the bearings.

Pursuant to 19 CFR 134.35(b), the ARTCO’s from Mexico are excepted from individual marking. Unless the good is processed by the importer or on its behalf, the outermost container must be marked to indicate the country of origin of the ARTCO’s.

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 Customs officer handling the transaction.

Sincerely,


John Durant, Director
Commercial Rulings Division