OT:RR:CTF:VS H318891 AP
Laura Siegel Rabinowitz, Esq.
Greenberg Traurig LLP
200 Park Avenue
New York, New York 10166
RE: Country of origin; Section 301; unassembled futon
Dear Ms. Rabinowitz:
This is in response to your April 27, 2021 ruling request, filed on behalf of Dorel Home Furnishings, Inc. (“importer”), regarding the country of origin of an unassembled futon frame and mattress pads and a cover, which the company intends to import packaged together as an unassembled futon, for purposes of Section 301 trade remedies.
FACTS:
The merchandise consists of polyester fiber mattress pads, a mattress cover, and an unassembled metal futon frame. In Canada, the mattress pads will be manufactured using polyester fibers as raw materials. The manufacturing process involves mixing and shredding bundles of fibers. The fibers will be baked, formed to desired thickness and density, and cured and cut to required size. The mattress cover will be manufactured in Cambodia and imported into Canada. It will stay separate, and the pads will not be inserted into the cover in Canada. The metal futon will be manufactured in China and imported unassembled into Canada. No assembly will take place in Canada. The mattress pads, the cover, and the frame will be packaged into a retail box in Canada and imported into the United States.
After importation into the U.S., the mattress and the frame will be sold in unassembled form for home assembly by the ultimate purchaser. The final consumer will assemble the frame, will insert the pads into the mattress cover, and will attach the mattress to the frame.
The importer believes that the mattress has a country of origin of Canada and the frame has a country of origin of China because the packaging of the individual components into a retail box does not result in their substantial transformation.
ISSUE:
What is the country of origin of the unassembled futon for purposes of Section 301 trade remedies?
LAW AND ANALYSIS:
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty 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”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S.
Note 20(f), HTSUS. Among the subheadings listed in U.S. Note 20(f) is 9401.40.00, Harmonized Tariff Schedule of the United States (“HTSUS”).
A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, or use, which differs from the original material subjected to the process. In Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993), the court determined that hand tool components, which were cold-formed and hot-forged in Taiwan into their final shape, with post-importation processing such as heat treatment and electroplating, and assembly occurring in the U.S., did not undergo substantial transformation in the U.S. There was no change in name because each article as imported had the same name in the completed tool. There was no change in character because the articles remained the same after heat treatment, electroplating, and assembly in the U.S. The use of the imported articles was predetermined at the time of entry – each component was intended to be incorporated in a particular finished mechanics’ hand tool, except for one exhibit with a dual use.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (CIT 2016), the court interpreted the meaning of “substantial transformation.” The court reviewed the “name, character, or use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc. v. United States, 3 CIT 220, 226, 542 F. Supp. 1026, 1031 (1982), 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 Battery at 1318. The court stated that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Id. at 1319, citing Nat’l Hand Tool Corp., 16 CIT at 311-12.
In Carlson Furniture Indus. v. United States, 65 Cust. Ct. 474, Cust. Dec. 4126 (1970), which involved wooden chair parts, the court found that the assembly operations after importation were substantial in nature. 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 assembly operations resulted in the creation of a new article of commerce.
Headquarters Ruling Letter (“HQ”) H311854, dated Aug. 3, 2020, involved a Vietnamese rubberwood desktop and Chinese steel tube legs, which were imported together as an unassembled desk. Unlike in Carlson Furniture Indus., the assembly of the desktop and the legs into a desk in the U.S. was a simple combining operation that did not change the name, character, or use of the desktop and the legs. The desktop and the legs were substantially transformed before their importation in the U.S. and after importation their identity remained the same. The countries of origin of the unassembled desk were China and Vietnam.
In New York Ruling (“NY”) N315271, dated Nov. 12, 2020, Taiwanese mattresses were incorporated into a Chinese-origin sleeper ottoman and a Chinese-origin sleeper sofa in China. In China, the mattresses were placed on the sleeper frame and no other operations were performed. The Taiwanese mattresses were not substantially transformed and retained their identity as mattresses. The country of origin of the sleeper ottoman and the sleeper sofa was China while the country of origin of the mattresses was Taiwan.
At issue in New York Ruling Letter (“NY”) N312932, dated July 31, 2020, were a chest bed composed of an Indonesian wooden chest and frame, and a Chinese foam mattress, which were packaged in one box for shipment in Indonesia. The chest bed was a large piece of furniture placed in a home’s living room, family room, or office. When fully closed, the chest bed was essentially a storage unit used to stow the fold-away mattress and bedding until needed, and to display ornamental items. When fully extended, the chest bed was transformed into a temporary bed for use by an overnight guest. The essential character of the chest bed was imparted by the wooden chest/frame, which was responsible for the bulk of the volume, weight, function, and cost of the bed. The mattress was less important to the unique function, look and feel of the chest bed and lost its identity when incorporated in the chest bed. As a result, the country of origin of the chest bed was Indonesia, where both the wooden chest and bed frame originated.
As in Nat’l Hand Tool Corp., Energizer Battery, HQ H311854 and NY N315271, the imported futon components here have a predetermined use at the time of entry as components of a futon. Unlike in Carlson Furniture Indus., there is no assembly of the Chinese metal futon frame or of the Cambodian mattress cover in Canada, and they remain distinct articles and will retain their name, character, or use. Rather, all of the assembly will be done by the U.S. consumer. The packaging of the unassembled mattress and frame into a retail box in Canada will not substantially transform them in Canada. Unlike in NY N312932, where the mattress loses its identity when incorporated into the chest bed, the instant futon frame, mattress pads, and cover do not lose their identities. The frame, cover, and pads remain separate until the U.S. consumer opens the four zippers located on each side of the cover, puts the pads into the four compartments of the cover, closes the zippers, and places the subassembly pad/cover on the assembled frame. Accordingly, the countries of origin of the unassembled futon for purposes of Section 301 remedies will be China (country of origin of the unassembled metal frame), Canada (country of origin of the mattress pads), and Cambodia (country of origin of the cover).
HOLDING:
The countries of origin of the unassembled futon are China, Canada, and Cambodia for purposes of Section 301.
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 [U.S. Customs and Border Protection (“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