OT:RR:CTF:VS H095239 EE
Ms. Shannon Fura
Mr. Jeremy Page
Page•Fura, P.C.
1 South Dearborn, Suite 2100
Chicago, IL 60603
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. § 2511); Subpart B, Part 177, CBP Regulations; Country of Origin; Upright and Recumbent Exercise Bikes
Dear Ms. Fura and Mr. Page:
This is in response to your correspondence of September 1, 2009, resubmitted January 19, 2010, forwarded to us by the National Import Specialist (“NIS”) Division, in which you requested a final determination on behalf of Brunswick Corporation (“Brunswick”), pursuant to subpart B of part 177, Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 177.21 et seq.). Under the pertinent regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purpose of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.
This final determination concerns the country of origin of certain upright and recumbent exercise bikes. We note that Brunswick is a party-at-interest within the meaning of 19 C.F.R. § 177.22(d)(1) and is entitled to request this final determination.
FACTS:
You describe the pertinent facts as follows. The items at issue consist of upright and recumbent exercise bikes produced in the U.S. from U.S. and foreign components by Brunswick’s Life Fitness Division. You advise that both versions of the bikes are produced in the U.S. from a range of components and subassemblies. The majority of the components which comprise the bikes and the various subassemblies are stated to be of U.S. origin, with a lesser number sourced from Mexico, China, Taiwan, Germany, Indonesia, and Korea. All of the subassemblies are produced in the U.S. with the exception of the standard console assembly, which is produced in Indonesia. The various subassemblies are ultimately assembled into the final frame assembly to produce the final product. You state that the final assembly, which takes place in the U.S., is the most-complex step in the manufacturing process, requiring the incorporation of all of the other assemblies in a precise order to ensure the proper operation of the finished bike. The upright and recumbent exercise bikes will be tested and packaged in the U.S.
You submitted the list of components for the upright and recumbent exercise bikes and the origin of each component. You also submitted illustrations of the upright and recumbent exercise bikes and the step-by-step assembly process in the U.S.
A. Upright Exercise Bike
The upright exercise bike is produced from a number of distinct subassemblies which, with the exception of the console assembly, are assembled in the U.S. The primary subassemblies include the wheel assembly; the leg leveler and nut assembly; the seat assembly; the shieve/clutch bearing subassembly; the intermediate pulley/shaft; the drive pulley/crank hub; the idler-arm assembly; the alternator-pulley assembly; the rear resistor/bracket/cable assembly; the PCB/battery assembly; the reed switch/bracket subassembly; the shroud with decal assembly (left & right); and the handlebar assembly. The subassemblies are produced concurrently and then joined together during the final bike frame assembly process.
The assembly of the upright exercise bike is comprised of approximately 352 individual operational steps and more than 175 components. The production of the subassemblies takes approximately 90 minutes, which includes 30 minutes for the final assembly.
The upright exercise bike assembly process of the principal subassemblies involves:
Pressing flange bearing into wheel using arbor press; (wheel assembly)
Securing insert to wheel and bearing assembly with a screw; (wheel assembly)
Attaching decal seat post and seat with fasteners. Attaching seat post guide, spring support brackets, guide base with fasteners and pressing on seat post bumper; (seat assembly)
Pressing shieve and clutch bearing using mandrel; (shieve/clutch bearing subassembly)
Securing magnet and standoff assembly to crankshaft assembly with a screw; (intermediate pulley/shaft)
Securing crank hub to pulley with bolts; (drive pulley/crank hub)
Securing pulley to idler arm bracket with nut; (idler-arm assembly)
Securing pulley to alternator with nut and washer; (alternator-pulley assembly)
Assembling resistor, resistor brackets, resistor rod and covering the assembly with cardboard insulator; (rear resistor/bracket/cable assembly)
Installing wire harness to the resistor terminals with bolts and nuts; (rear resistor/bracket/cable assembly)
Seating stand-offs to PCB bracket with mallet; (PCB/battery assembly)
Securing PCB board to seating stand-offs with screws; (PCB/battery assembly)
Securing battery to PCB bracket with screws; (PCB/battery assembly)
Securing reed switch to reed switch bracket with screws; (reed switch/bracket subassembly)
Decal application on shrouds; (shroud with decal assembly)
Assembling of handlebar with electrode (heartbeat measurement) cable assembly, poly sleeves, and caution labeling and attaching handlebar end caps with mallet. (handlebar assembly)
B. Recumbent Exercise Bike
Similar to the upright exercise bike, the recumbent exercise bike is produced from a number of distinct subassemblies which, with the exception of the console assembly, are assembled in the U.S. The subassemblies include but are not limited to the resistor-mounting bracket assembly; the power-PCB bracket assembly; the shroud with decal assembly (left & right); the leg leveler assembly; the wheel assembly; the intermediate-pulley assembly; the idler-bracket pulley assembly; the pulley-clutch assembly; the crank-pulley assembly; the alternator-pulley assembly; the seat assembly; the lock assembly; the roller take-up assembly; the seat extrusion assembly; the battery mounting-bracket assembly; the extrusion endcap assembly; and the reed-switch mounting bracket assembly. The individual subassemblies are produced concurrently and then joined together and sequenced for the final bike frame assembly process to produce the finished recumbent bike.
The assembly of the recumbent exercise bike is comprised of approximately 468 individual operational steps and more than 270 components. The production of the recumbent exercise bike takes approximately 105 minutes, which includes 14 minutes for the final assembly.
The recumbent exercise bike assembly process of the principal subassemblies involves:
Securing resistor assembly into bracket with nut; (resistor-mounting bracket assembly)
Seating stand-offs to PCB bracket with mallet; (power-PCB bracket assembly)
Securing the PCB board to stand-offs with screws bracket; (power-PCB bracket assembly)
Decal application on shrouds; (shroud with decal assembly)
Assembling nuts to leg levelers; (leg leveler assembly)
Securing insert to wheel and bearing assembly with screw; (wheel assembly)
Securing magnet and standoff assembly to crankshaft assembly with screw; (intermediate-pulley assembly)
Securing pulley to idler arm bracket with nut; (idler-bracket pulley assembly)
Pressing shieve and clutch bearing using mandrel; (pulley-clutch assembly)
Securing crank hub to pulley with bolts; (crank-pulley assembly)
Securing pulley to alternator with nut and washer; (alternator-pulley assembly)
Assembling handlebars with seat weldment, cable assembly, cable sleeve, bottom seat pad, roller take-up assemblies and rollers using screws, washers and nuts; (seat assembly)
Assembling locking block with housing-insert assembly, compression spring, retainer bearing into housing, with packed housing. Further assembling and locking in place with groove pin (using arbor press), anti-rattle washer, knob/bracket assembly and handle using screws; (lock assembly)
Pressing take-up roller shaft through take-up roller plate with arbor press; (roller take-up assembly)
Assembling preload rollers to roller-place assemblies and assembling e-rings to assemblies; (roller take-up assembly)
Assembling seat extrusion with threaded rivets and cable clamp. Attaching locking rack with fasteners, stop bracket and bumper strip with screws; (seat extrusion assembly)
Securing battery to bracket with screws; (battery mounting-bracket assembly)
Assembling decal to endcap; (extrusion endcap assembly)
Securing reed switch to reed switch bracket with screws. (reed-switch mounting bracket assembly)
ISSUE:
What is the country of origin of the upright and recumbent exercise bikes for the purpose of U.S. government procurement?
LAW AND ANALYSIS:
Pursuant to subpart B of part 177, 19 C.F.R. § 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations as to whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.
Under the rule of origin set forth under 19 U.S.C. § 2518(4)(B):
An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.
See also, 19 C.F.R. § 177.22(a).
In rendering advisory rulings and final determinations for purposes of U.S. government procurement, CBP applies the provisions of subpart B of part 177 consistent with the Federal Acquisition Regulations. See 19 C.F.R. § 177.21. In this regard, CBP recognizes that the Federal Acquisition Regulations restrict the U.S. Government’s purchase of products to U.S.-made or designated country end products for acquisitions subject to the TAA. See 48 C.F.R. § 25.403(c)(1). The Federal Acquisition Regulations define “U.S.-made end product” as:
…an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed.
48 C.F.R. § 25.003.
In determining 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. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 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. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d 702 F. 2d 1022 (Fed. Cir. 1983).
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, 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, extent and nature of post-assembly inspection and testing procedures, and the degree of skill required during the actual manufacturing process may be relevant when determining whether a substantial transformation has occurred. No one factor is determinative.
In a number of rulings (e.g., Headquarters Ruling Letter (“HQ”) 735608, dated April 27, 1995 and HQ 559089 dated August 24, 1995), CBP has stated: “in our experience these inquiries are highly fact and product specific; generalizations are troublesome and potentially misleading.
In HQ 735368, dated June 30, 1994, CBP held that the country of origin of a certain finished bike assembled in Taiwan with components made in several countries was Taiwan. CBP stated that because the bicycle was assembled in Taiwan and one of the bicycle’s most significant components, the frame, was made in Taiwan, the country of origin of the bicycle was Taiwan. Although the other components came from several different countries, when they were assembled together in Taiwan, they each lost their separate identity and became an integral part of a new article of commerce, a bicycle.
In the instant case, the assembly of the upright exercise bike is comprised of approximately 352 discrete steps and over 175 U.S. and foreign components. The assembly of the recumbent exercise bike is comprised of approximately 468 discrete steps and over 270 U.S. and foreign components. With the exception of the standard console subassembly, all of the subassemblies are produced in the U.S. from U.S. and foreign components. The subassemblies are then assembled into the final frame assembly. We find that under the described assembly process, the foreign components lose their individual identities and become an integral part of the articles, the upright and recumbent exercise bikes, possessing a new name, character and use. The assembly process that occurs in the U.S. is complex and meaningful and requires the assembly of a large number of components into subassemblies to be assembled into the final products. Further, we note that a substantial number of components are of U.S. origin, where the assembly occurs, which was an important consideration in HQ 735368. Therefore, based upon the information before us, we find that the imported components that are used to manufacture the upright and recumbent exercise bikes are substantially transformed as a result of the assembly operations performed in the U.S. and that the country of origin of the bikes for government procurement purposes is the U.S.
HOLDING:
The components that are used to manufacture the upright and recumbent exercise bikes are substantially transformed as a result of the assembly operations performed in the U.S. Therefore, the country of origin of the upright and recumbent exercise bikes for government procurement purposes is the U.S.
Notice of this final determination will be given in the Federal Register, as required by 19 C.F.R. § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 C.F.R. § 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 C.F.R. § 177.30, any party-at-interest may, within 30 days after publication of the Federal Register notice referenced above, seek judicial review of this final determination before the Court of International Trade.
Sincerely,
Sandra L. Bell
Executive Director
Regulations and Rulings
Office of International Trade