OT:RR:CTF:VS H313495 AP
Melissa Fox, LCB
Commercial Growth and Development
Vandegrift Forwarding Company, Inc.
100 Walnut Avenue, Suite 600
Clark, NJ 07066
RE: Country of origin of finished golf club drivers assembled in Mexico; Marking; Section 301 trade remedy; 9903.88.15, HTSUS
Dear Ms. Fox:
This is in response to your August 4, 2020 ruling request, filed on behalf of Cobra Golf Incorporated (“Cobra Golf” or “importer”), regarding the country of origin of golf club drivers identified as FMAX, SZ and 2021 SZ, which will be assembled in Mexico, for purposes of marking and Section 301 trade remedies.
FACTS:
Cobra Golf designs, manufactures, and markets golf products and services. The subject goods are finished golf club drivers classifiable in subheading 9506.31.00, Harmonized Tariff Schedule of the United States (“HTSUS”). The FMAX, SZ, and 2021 SZ golf club drivers will be assembled in Mexico with titanium heads, graphite shafts, and rubber grips sourced from the following countries:
Model
Country of manufacture of the head
Country of manufacture of the shaft
Country of manufacture of the grip
Assembly
FMAX
Taiwan (titanium from Taiwan)
China (carbon fiber from Japan and resin from China)
China (rubber compound from the U.S.)
Mexico
FMAX
Taiwan (titanium from Taiwan)
China (carbon fiber from Japan and resin from China)
Mexico (rubber compound from the U.S.)
Mexico
SZ
Taiwan (titanium from Taiwan)
Bangladesh (carbon fiber and resin from Japan)
China (rubber compound from the U.S.)
Mexico
2021 SZ
Taiwan (titanium from Taiwan)
Vietnam (carbon fiber and resin from Japan)
China (rubber compound from the U.S.)
Mexico
2021 SZ
Taiwan (titanium from Taiwan)
Vietnam (carbon fiber and resin from Japan)
Mexico (rubber compound from the U.S.)
Mexico
The head is made from titanium of Taiwanese origin. You explain that the production process for the driver head in Taiwan consists of treating, melting, and casting raw titanium using a wax injection mold. During the wax injection process, wax is injected into a tooling or mold to form the shape of the finished head. The titanium material of Taiwan origin is melted in a high temperature furnace and is then cast into the de-waxed, pre-heated shell clusters. After the casting is complete, the shell clusters undergo a de-shelling process and are broken into individually cast golf heads. Each titanium golf head cast is sandblasted and polished into the final size and shape of the corresponding golf head model. The titanium driver golf heads are then inspected, packed, and shipped from Taiwan to Mexico for the final cosmetic finishing operations.
The graphite shaft is produced in China (model FMAX), Bangladesh (model SZ) and Vietnam (model 2021 SZ) from carbon fiber of Japanese origin and resin of Chinese (model FMAX) and Japanese (models SZ and 2021 SZ) origin. The graphite driver shift consisting of 75 percent carbon fiber and 25 percent resin (glue) is made by wrapping sheets of the graphite composite material around a steel mandrel. The composite sheets are cut into different sizes and shapes called flags. These sheets are wrapped in various directions around the shaft depending upon the design of the shaft. The wrapping process is done by hand using computer-controlled alignment rollers. The completed shaft is shrink-wrapped in a cellophane material and heated in an oven to approximately 250 degrees to bond the individual wraps together. The shaft is then cooled, the wrap is removed, and the shaft is sanded to exact frequency tolerances.
The driver grip is made in China or Mexico through an injection molded process. The grip is made from rubber compound of U.S. origin.
The manufactured head, shaft, and grip are assembled into a golf club in Mexico.
ISSUE:
What is the country of origin of the subject golf club drivers for the purposes of marking and Section 301 trade remedies?
LAW AND ANALYSIS:
Marking
The marking statute, Section 304, Tariff Act of 1930, as amended (19 U.S.C.
§ 1304), provides that, unless excepted, every article of foreign origin (or its container) 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. Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
To provide a more seamless transition to the U.S.-Mexico-Canada Agreement (“USMCA”) for Canadian and Mexican traders, at this time, CBP continues to utilize the marking rules in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods of those countries. Title 19, C.F.R. § 102.11(a) provides that the country of origin of a good is the country in which:
The good is wholly obtained or produced;
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 § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Material” means a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components.” 19 C.F.R. § 102.1(l).
“Foreign material” is defined in Section 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.”
The golf clubs are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the golf clubs, and paragraph (a)(3) must be applied next to determine the origin of the finished article. The tariff shift requirement in Section 102.20 for the golf club drivers at issue states:
A change to subheading 9506.31 from any other subheading, except from subheading 9506.39.
This tariff shift rule requires a shift to subheading 9506.31, HTSUS, from any other subheading except subheading 9506.39, HTSUS. The golf club components are classified in subheading 9506.39, HTSUS, and do not undergo the change in tariff classification set out in 19 C.F.R. § 102.20(s). Since no country of origin determination can be made applying Section 102.11(a), the analysis continues with Section 102.11(b), which instructs us to examine the golf club’s “essential character” to determine its country of origin.
Section 102.11(b) states, in relevant part:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation [(“GRI”)] 3, where the country of origin cannot be determined under paragraph (a) of this section:
The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good ….
In determining the “essential character” of the finished good, Section 102.18(b)(1) provides, in relevant part:
(b) (1) For purposes of identifying the material that imparts the essential character to a good under § 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good … (ii) Materials that may be considered include materials produced by the producer of the good and incorporated in the good. For example, if a producer of a good purchases raw materials and converts those raw materials into a component that is incorporated in the good, that component is a material that may be considered for purposes of identifying the materials that impart the essential character to the good, provided that the component is classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule or other requirements applicable to the good; …
(2) For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following:
The nature of each material, such as its bulk, quantity, weight or value; and
(ii) The role of each material in relation to the use of the good.
Here, the individual components of the golf club drivers do not undergo the applicable tariff shift in 19 C.F.R. § 102.20(s), and consistent with Sections 102.11(b) and 102.18(b)(1) and (2), the two foreign components, the head and the shaft, are the components that impart the “essential character” unto the finished golf club driver because they are both important in the performance of the golf club. The shaft plays a key role in the performance of the golf swing while the head directly connects with the ball. CBP has previously ruled that the head and the shaft are the major components of a golf club. See Headquarters Ruling Letter (“HQ”) 563286, dated Aug. 25, 2005 (referring to the golf head or shaft as “one of the two major components” of a golf club, and where they are both imported and assembled together in the U.S., their countries of origin would need to be reflected on the finished golf club); but see HQ 562778, dated Sept. 5, 2003, quoting HQ 734256, dated July 1, 1992 (while describing the head and the shaft as “the most important components” of the golf club and noting that “the grips are much less significant components as compared with the heads and shafts” the finished golf club assembled with one U.S. important component in the U.S. required no country of origin marking).
In HQ 559431, dated Sept. 3, 1996, foreign materials (non-Canadian materials), namely the shaft, the head and the grip, were found to be essential parts of a golf club assembled in Canada. Reference was made to the interim regulations of 19 C.F.R.
§ 102.11(d) to determine the country of origin of the golf club although that section had been amended, and the decision did not take into consideration discussion concerning consideration of the single material as reflected in 61 F.R. 28932, 28938 and 28953 of T.D. 96-48. Consequently, as changes to Section 102.11(d) were adopted by the final rule in T.D. 96-48, HQ 559431 has been superseded by the regulatory change. Therefore, in this case for marking purposes, taking into consideration that the two foreign components, the head and the shaft, are assembled in Mexico and are classified in a tariff provision from which a change in tariff classification is not allowed, we find that the single material imparting the essential character of the finished golf club drivers is imparted by both the head and the shaft, and the country of origin of the finished golf club drivers will be the countries of origin of the head and the shaft.
Accordingly, the countries of origin of the FMAX golf club drivers for marking purposes are Taiwan (the country of origin of the titanium heads), and China (the country of origin of the graphite shafts). The FMAX golf club drivers must be marked “head made in Taiwan, shaft made in China” under 19 U.S.C. § 1304. The countries of origin of the SZ golf club driver for marking purposes are Taiwan (the country of origin of the titanium head), and Bangladesh (the country of origin of the graphite shaft). The SZ golf club driver must be marked “head made in Taiwan, shaft made in Bangladesh” under 19 U.S.C. § 1304. The countries of origin of the 2021 SZ golf club drivers for marking purposes are Taiwan (the country of origin of the titanium heads), and Vietnam (the country of origin of the graphite shafts). The 2021 SZ golf club drivers must be marked “head made in Taiwan, shaft made in Vietnam” under 19 U.S.C. § 1304.
Section 301 Duties
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 7.5% will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20(r), HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(s)(i), HTSUS. Among the subheadings listed in U.S. Note 20(s)(i) of Subchapter III, Chapter 99, HTSUS, is 9506.31.00.
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 681 F.2d 778 (CCPA 1982). In deciding 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. See Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (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. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
In Nat’l Hand Tool Corp. v. United States, 16 CIT 308, aff’d per curiam, 989 F.2d 1201 (Fed. Cir. 1993), the court determined that certain hand tool components used to make flex sockets, speeder handles, and flex handles were not substantially transformed within the United States. The components were cold-formed or hot-forged into their final shape prior to importation, with the exception of speeder handle bars, which were reshaped by a power press after importation, and the grips of the flex handles, which were knurled in the United States. After entry, the imported items were heat treated to strengthen the components, sand-blasted to clean the components, and electroplated to better enable the components to resist rust and corrosion. In making this determination, the court noted that the processing which occurred within the United States did not alter the name of the imported components, the character of the parts remained substantially unchanged upon the completion of such processing, and the intended use of the articles was predetermined at the time of importation. Although the court recognized that a predetermined use for imported articles does not preclude a finding of substantial transformation, the court noted that each component was intended to be incorporated in a particular finished mechanic’s hand tool. Moreover, the court dismissed as a basis for a substantial transformation the value of the processing, stating that the substantial transformation test utilizing name, character, and use criteria should generally be conclusive in country of origin marking determinations, and that such a finding must be based on the totality of the evidence.
CBP has consistently ruled on the origin of golf clubs, taking into consideration the different origin of the materials and where they were assembled. HQ 734256, supra, explained that a simple assembly of already finished components into golf clubs did not result in a substantial transformation:
… the making of the golf club is a simple assembly process of basically finished parts. We note that there is a hole on the top of the head so no drilling is necessary. The combining of the head and shaft is a relatively simple operation which does not take a great deal of time and skill and not a complex assembly. Basically, all that is needed to make the finished club is to insert the shaft into the head and to glue them together … Although U.S. made grips are added to the golf clubs, the grips are much less significant components as compared with the heads and shafts and their insertion onto the golf clubs is fairly simple. In other words, we find because the most important components are foreign and the assembly process is very simple there is no substantial transformation of the shafts and heads.
The ruling concluded that heads made in Taiwan and Japan, and shafts made in Japan were not substantially transformed by assembly in the United States. Therefore, the country of origin of each of these components had to be separately marked to indicate its own country of origin.
HQ 562778, supra, concluded that for clubs assembled in the United States where both the shaft and the head were made in China or Taiwan, no substantial transformation occurred in the United States and the country of origin of each foreign component had to be indicated on the club or the container. If the head and the shaft were made in two different countries, each country of origin had to be indicated in the marking such as “shaft made in China” and “head made in Taiwan.”
HQ 563286, supra, concluded that when shafts made in Country A or Country B, and heads made in Country A were used to produce finished golf clubs in the United States, the U.S. processing would not result in a substantial transformation of the imported components regardless of the origin of the grip. Under this scenario, the clubs needed to be marked to indicate the origin of the major components, for example, “Head made in Country A, Shaft made in Country B.”
The instant FMAX driver heads manufactured in Taiwan are assembled into golf clubs in Mexico with the FMAX shafts manufactured in China, and the FMAX grips manufactured in China or Mexico. The instant SZ driver head of Taiwanese origin is assembled into a golf club in Mexico with the SZ shaft of Bangladesh origin and the SZ grip of Chinese origin. The 2021 SZ heads of Taiwanese origin are assembled into golf clubs in Mexico with the 2021 SZ shafts of Vietnamese origin and the 2021 SZ grips of Chinese or Mexican origin. Consistent with HQ 734256, HQ 562778, and HQ 563286, the FMAX, SZ, and 2021 SZ heads and shafts are not manufactured in Mexico and the “relatively simple” assembly operations in Mexico will not result in a substantial transformation of the driver heads and shafts in Mexico.
As a result, for purposes of Section 301 remedies, the FMAX golf club drivers must reflect that the country of origin of the FMAX driver heads is Taiwan, and the country of origin of the FMAX shafts is China. The SZ golf club driver must reflect that the country origin of the SZ driver head is Taiwan, and the country origin of the SZ shaft is Bangladesh. Finally, the 2021 SZ golf club drivers must reflect that the country of origin of the 2021 SZ driver heads is Taiwan, and the country of origin of the 2021 SZ shafts is Vietnam.
HOLDING:
Pursuant to 19 C.F.R. § 102.11(b), the countries of origin of the FMAX golf club drivers for marking purposes are Taiwan (the country of origin of the titanium heads), and China (the country of origin of the graphite shafts). The FMAX golf club drivers must be marked “head made in Taiwan, shaft made in China” under 19 U.S.C. § 1304.
Pursuant to 19 C.F.R. § 102.11(b), the countries of origin of the SZ golf club driver for marking purposes are Taiwan (the country of origin of the titanium head), and Bangladesh (the country of origin of the graphite shaft). The SZ golf club drivers must be marked “head made in Taiwan, shaft made in Bangladesh” under 19 U.S.C. § 1304.
Pursuant to 19 C.F.R. § 102.11(b), the countries of origin of the 2021 SZ golf club drivers for marking purposes are Taiwan (the country of origin of the titanium heads), and Vietnam (the country of origin of the graphite shafts). The 2021 SZ golf club drivers must be marked “head made in Taiwan, shaft made in Vietnam” under 19 U.S.C. § 1304.
The countries of origin of the FMAX golf club drivers for the purposes of the application of subheading 9903.88.15, HTSUS, are Taiwan (the country of origin of the titanium heads), and China (the country of origin of the graphite shafts). As the driver shafts will be a product of China, Section 301 measures will apply. To the extent that the graphite shaft is a product of China, the value of it may be apportioned from the total of the golf club for purposes of the duty assessment.
The countries of origin of the SZ golf club driver for the purposes of the application of subheading 9903.88.15, HTSUS, are Taiwan (the country of origin of the titanium head), and Bangladesh (the country of origin of the graphite shaft). As the merchandise will not be a product of China, Section 301 measures will not apply.
The countries of origin of the 2021 SZ golf club drivers for the purposes of the application of subheading 9903.88.15, HTSUS, are Taiwan (the country of origin of the titanium heads), and Vietnam (the country of origin of the graphite shafts). As the merchandise will not be a product of China, Section 301 measures will not apply.
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 Programs Branch