CLA-2 OT:RR:CTF:TCM H161857 HvB
Richard M. Belanger, Esq.
Sidley Austin LLP
1501 K Street, N.W.
Washington, D.C. 20005
RE: Country of Origin Marking for Junction Box Covers
Dear Mr. Belanger:
This is in response to your ruling request, dated April 13, 2011, to U.S. Customs and Border Protection (“CBP”), Office of International Trade, Regulations and Rulings, for a binding ruling on the appropriate country of origin marking for FloorPorts™ (“FloorPorts”). You submitted this request on behalf of The Legrand/Wiremold Company (“Wiremold”). Our response to your ruling request is below. Members of my staff met with you on July 14, 2011. We also received your supplemental submission on July 21, 2011. Your arguments presented at that meeting and in the supplemental are considered herein.
FACTS:
The FloorPort is a cover or lid for a junction box (or floor box), which is used in the floors of various industrial and commercial settings. The FloorPort is primarily composed of unspecified die cast metal. It is designed to safeguard the electrical circuitry in the junction box, while also permitting controlled access to the circuitry via a hinged egress, as needed. The article at issue is sold and shipped separately from the junction boxes to which they are designed to fit.
The junction box cover at issue contains approximately thirty-five (35) components, which are of either United States, Chinese, or Indian origin. We are told that Wiremold imports the foreign components used in the manufacture of the FloorPort in its Hartford, Connecticut facility. Of the thirty-five components, the following are foreign: the Die Cast Cover, the Die Cast Hinge, the Die Cast Trim Ring, the Die Cast Egress Blocks, the Hinge Pin Retainer, the Hinge Pin Cap, two Sliding Hinge Pins, two Ball Plungers/Ball Detents, and twelve Dowel Pins, in two different sizes.
The U.S. components account for twenty-nine percent (29%) of the total material cost for the FloorPort. The U.S. materials used in production of the junction box cover include: the die cast handle, flange gasket, cover gasket, carpet gasket, foam blocks, egress clips, and installation hardware. The labor involved in the U.S. production amounts to thirty-two percent (32%) of the total cost of production. The United States processing and materials together account for sixty-one percent (61%) of the total cost of production.
The entire United States manufacturing process is completed in five minutes by operators, who are supervised while on the job and who have received eight (8) hours of training. The training includes instruction in the proper use of a press which assists in fitting the pins and clips into place and a fixture that assists with mounting the gaskets.
The junction box cover is produced according to the following fourteen steps:
Using a press, workers “press fit” the foreign-origin Hinge Pins into the foreign-origin die cast egress blocks.
The foreign origin die cast parts and the U.S. origin die cast are powder coated.
The holes in the foreign-origin die cast trim ring are sealed with a silicone caulking material.
The U.S. origin internal cover gasket is fit onto the underside of the trim ring.
The U.S. origin egress gasket is fit into place.
Foreign-origin ball plungers are press fit into place.
To secure the hinge knuckle to the cover, operators “press fit” the pins into the cover.
Pins are “press fit” into the domestic handle to secure it to the cover.
The foreign-origin die cast egress blocks are affixed to the cover.
An operator uses a press to fit the four pins into position, thereby securing the die cast egress blocks to the cover.
Four egress clips are “press fit” into the cover.
Foam blocks are applied to the bottom of the die cast egress blocks.
The cover/hinge assembly is attached to the die-cast trim ring with two sliding hinge pins (“L” shaped pins.)
The decorative, protective hinged pin cap is snapped into place.
ISSUE:
Whether the merchandise is substantially transformed in the United States for the purposes of a country of origin determination.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that unless excepted, every article of foreign origin imported into the United States 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 United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).
Part 134, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. § 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as:
[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of [the marking regulations]…
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use that differs from the original material subjected to the process. M.B.I. Merchandise Industries, Inc. v. United States, 16 C.I.T. 495, 502 (1992) (citing United States v. Gibson-Thomsen Co., C.C.P.A. 267, 270 (C.A.D. 98) (1940)) The question of whether a substantial transformation occurs for marking purposes is a question of fact; to be determined on a case-by-case basis. National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (quoting Uniroyal Inc. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982), aff’d, 1 Fed.Cir. 21, 702 F.2d 1022 (1983)).
CBP has not ruled on the specific issue of whether the United States-based processing of various parts into a finished junction box cover constitutes a substantial transformation. You contend that the junction box cover is substantially transformed into a product of the United States by virtue of the processing, assembly operations, and combination with U.S.-origin components. Thus, at issue is whether the imported components, namely, the die cast cover, the die cast hinge, the die cast egress blocks, and the die cast trim hinge are substantially transformed by the assembly operation in the United States for purposes of 19 U.S.C. § 1304.
Assembly operations which are minimal or simple, as opposed to complex or meaningful will generally not result in a substantial transformation. In determining whether the United States processing constitutes a substantial transformation, the 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 (CIT 1983), aff'd, 741 F.2d 1368 (Fed. Cir. 1984). See also C.S.D. 85-25. If the manufacturing or combining process is merely a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 542 F. Supp. 1026 (CIT 1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).
CBP considers the totality of the circumstances test in determining whether an imported article loses it identity when it is combined with other articles in the United States. 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. CBP takes into account such factors as resources expanded on product design and development, the extent and nature of post-assembly inspection and testing procedures, and degree of worker skill required during the actual manufacturing process. See HQ H107335, dated September 9, 2010, and HQ H006417, dated August 20, 2008. No single factor is determinative.
When determining what the country of origin is for metal articles, the courts and CBP have generally held that the country of origin is the country in which the articles were originally cast. In National Hand Tool Corporation v. United States, 16 C.I.T. 308 (1992), the Court of International Trade held that hand tool components were forged in their final shape prior to importation because “the form of the components remained the same” after the assembly and heat-treatment processes performed in the United States. Id. at 311. In HQ 560441, dated November 18, 1997, we found that German rough forgings sent to Hungary where they were machined, assembled, and finished by removing a layer of impurities from the forgings did not undergo a substantial transformation in Hungary.
Similarly, the essential components of the junction box cover, i.e., the cover, trim plate, and egress blocks, are all die cast in China, and do not undergo a change in name, use, and character during the United States operations. The production that occurs in the U.S. facility is less complex than the processes performed on the hand tool components at issue in National Hand Tool Corporation, supra, at 311. Upon importation, the die cast parts are assembled, powder coated and sealed in five minutes with the other foreign metal components, namely hinges and hinge pins that allow the cover to open and provide easy access to the electrical wires contained in the junction box. The U.S. made components are, for the most part, a handle and gaskets that assist in the complete closure of the cover, to be sure, but are tangential to its function as a protective covering that allows easy access to the electrical components located inside the junction box. Hence, the production processes in the United States are minimal compared to what goes into the manufacture of major foreign components (e.g., the die cast cover, the die cast hinge, the die cast egress blocks, and the die cast trim hinge). Cf. HQ 559089, dated August 24, 1995 (in which we found that essential Canadian materials were substantially transformed as they were cut, bent, and pressed before being assembled into electrical raceways). Thus, the components appear to be mostly finished upon their arrival to the United States facility.
While the articles are permanently attached to the junction box as hinged covers, they are ancillary to the purpose thereto. Furthermore, the characters of the components remain unaltered following manufacture in the United States. Specifically, the die cast trim ring, cover, hinge and egress blocks which provides the rectangular shell and shape, appear to be substantially processed and manufactured upon its arrival to the U.S. facility, especially in comparison with the powder coat finishing that is applied to the die cast metal parts. Thus, based on the information provided, it appears that the major processes involved amount to pressing components together, or minimal assembly.
You assert that the instant junction box covers are analogous to the mechanically operated chimney-top dampers addressed in HQ 562541, dated December 20, 2002. In that decision, we ruled that the foreign lid and frame castings were substantially transformed by the production work performed in the United States, stating that “[t]he U.S. origin components are important to the functioning of the product—the opening and closing of the chimney-top damper.”
In the instant case, the U.S. origin handle does not provide the same level of essential functionality as the chimney damper lid. It is secondary in importance to the cover, in comparison with the foreign castings described in HQ 562541. The chimney lid damper, as evidenced by the promotional materials you submitted, serves to eliminate drafts and provide protection from the elements (e.g. moisture). The handle merely provides convenient access to the cover. While the U.S. origin gasket minimally contributes to one purpose of the junction box cover, which is to protect the circuitry from damage, its importance is secondary to the lid itself and the hinge, which are foreign origin.
Further, in HQ 562451, a minority number of parts were of foreign origin, and were subject to additional processing that is not applicable to the products at issue. In the case of the junction box covers at issue, the foreign origin components are merely subjected to powder coating, whereas, the lids at issue in HQ 562451 were drilled and painted. We emphasize that it was not just the processing that led our decision in HQ 562541; rather, it was a change in use, name, and character that occurred, that the work was complex, and that the U.S. origin products were essential to the product’s purpose. Here, the product at issue does not undergo processing that is comparable to the processing described in HQ 562541. Moreover, the company’s marketing materials promote the foreign-origin egress blocks to lock in the “up” position, thus protecting electrical and networking cables.
As we stated in HQ 562541, the U.S. operation must be “complex and meaningful” in order to constitute substantial transformation. Powder coating is not complex and meaningful. The promotional materials make clear that this step provides a way for the company to customize floor ports to match their customer’s design schemes. Thus, the junction box covers are shipped and sold separately from the junction box themselves. In consideration of all the totality of circumstances discussed above, we find that the instant product is not substantially similar to the chimney dampers at issue. See HQ 56012, dated October 27, 1997.
Furthermore, our research uncovered a more analogous decision. In HR 561297, dated June 2, 1999, we considered the U.S. processing of raw castings for the purpose of producing rifle receivers. Although the raw castings were machined, subjected to heat treatment, drilled, sandblasted, and dipped into a hot caustic solution causing a change in color, we found that those operations did not constitute a substantial transformation because the raw castings had the shape, character, and predetermined use of the finished receivers and merely required intermediate finishing operations. As we noted there, we relied on “the complexity of the assembly operations, the number of parts involved, and the need for trained technicians to meet very exacting specifications” in determining that the processing of raw castings coupled with assembly established substantial transformation. The assembly of rifles, pistols, or guns cannot be analogized to the assembly of flat metal pieces. Gunsmithing is a highly complex matter that requires more processing, precision and expertise than is required to snap together metal components. To wit, the entire junction box manufacture process in the United States is completed in five minutes.
You also contend that the cost of the U.S. operations is significant, accounting for more than half of the total cost of production at 61%. The Court of International Trade in National Hand Tool Corp., supra, at 312, held that the value that is added in the United States should not be a determinative factor because it “could lead to inconsistent marking requirements for importers who perform exactly the same processes on imported merchandise but sell at different prices.” The court therefore reaffirmed the name, use and character test discussed above. Id. Accordingly, we do not find this argument persuasive on balance of the other factors described above.
Finally, although not determinative of the outcome, this result is consistent with that obtained by applying the NAFTA marking rules located at 19 C.F.R. § 102. The foreign die cast parts, other than the hinge, are classifiable in heading 7326, HTSUS, as other articles of iron or steel. This classification would not change for the finished junction box cover and thus, a tariff shift would not occur.
HOLDING:
Pursuant to 19 U.S.C. §1304, we find that the die cast parts have not undergone a substantial transformation such that they would be considered foreign products and thus the FloorPort is subject to the country of origin marking requirements provided for in the marking statute.
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 transactions.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch