CLA-2 OT:RR:CTF:VS H304126 EGJ
Thomas M. Keating
Rock Trade Law LLC
134 N. LaSalle St., Suite 1800
Chicago, IL 60602
RE: Country of origin of a Dishwasher Pump: Section 301 trade remedy; 9903.88.01, HTSUS
Dear Mr. Keating:
This is in response to your request, dated May 7, 2019, filed on behalf of your client the importer, regarding the country of origin of a centrifugal dishwasher pump. In your letter, you request a binding ruling on the applicability of Section 301 trade remedies to proposed transactions involving this dishwasher pump.
The subject merchandise is a centrifugal dishwasher pump, part number 1999-1E3001EU. Each pump consists of a pump assembly and an electric motor. In order to manufacture the pump, workers in Serbia combine discrete parts into subassemblies, which are then combined to form the finished product. The majority of the discrete parts are sourced from China, although a small percentage are sourced from Serbia and other countries.
Workers in Serbia will construct subassemblies to form the electric motor. These subassemblies are the rotor and the stator subassemblies. Workers will also construct the pump assembly from discrete parts, and then combine it with the electric motor assembly. The manufacturing process for each of these assemblies and subassemblies is set forth below.
The Rotor Subassembly
There are approximately six components which make up the rotor subassembly, all of which are manufactured in China: bushings, a bushing housing, an unmagnetized rotor with a shaft, a rotor housing, a rubber sleeve, and an impeller. Some of the processing materials, such as lubricating oil, are products of other countries. The rotor subassembly production consists of 11 steps. First, a dosing machine applies lubricating oil to the bushing housing to prepare for the insertion of the rubber sleeve. Next, the rubber sleeve is pressed into the bushing housing using a pneumatic press. After this step, a machine applies oil to the rubber sleeve. Then, the bushing is press fit into the rubber sleeve of the bushing house.
Turning to the rotor, lubricant is applied to the rotor’s shaft. Next, the bushing house is press fit onto the rotor’s shaft. Then, the impeller is mechanically press fit onto the rotor shaft. This rotor subassembly is then run through a machine that creates an electromagnetic field around the assembly. The field magnetizes the subassembly’s internal ferrite bars and turns them into permanent magnets in order to make the rotor functional.
A second bushing is pneumatically press fit into the rotor housing. A dosing machine applies lubricant to the bushing, which is then pneumatically press fit onto the rotor subassembly with the shaft extending through the bushing.
The Stator Subassembly
The stator subassembly is made up of a winding wire from the E.U., and the following parts from China: stator bobbins, terminals, lead free solder wire, lamination stacks, a lamination yoke, a printed circuit assembly, and a stator cover. The stator production consist of 13 steps. The process begins when three brass terminals are press fit into the bobbin to a predetermined height and in preparation for automated winding. Next, two bobbins are wound together in an automated winding machine using aluminum magnet wire. The terminals are electrically connected to the aluminum magnet wire using an automated machine induction soldering method. Then, workers flush the terminals of the bobbin with water. The stator coil is then tested for electrical resistance.
The subassembly undergoes further processing when two steel lamination stacks and a yoke stack are mechanically inserted into the wound stator coil. A machine then stamps both sides of the yoke which permanently connects it to the lamination stacks. The coil surrounding the steel laminations will act as an electromagnet and provide the magnetic field to drive the rotor.
A machine doses an ultraviolet sensitive glue onto the terminal solder points. The unit is then exposed to an ultraviolet light to cure the glue and to form a permanent joint. Workers then place a printed circuit board assembly onto the stator subassembly in preparation for the soldering step. Next, workers use a lead free solder wire to mechanically solder the printed circuit board to the terminals to create an electrical connection. Finally, the plastic cover is mechanically snap fit onto the stator subassembly.
The Motor and Pump Assembly
The finished pump assembly consists of the rotor subassembly, the stator subassembly, an O-ring, and a volute. First, workers will mechanically fit together the stator subassembly and the rotor subassembly. At this point, the subassembly is tested for electrical connectivity, motor speed, and vibration. Next, workers fit a rubber O-ring onto the housing of the subassembly to make a seal between the housing and the volute. The volute is mechanically twist fit onto the subassembly and then tested for air leakage. The completed pump is then tested for excessive noise and undergoes a final visual inspection.
What is the country of origin of the dishwasher pump for the purposes of applying Section 301 trade remedies?
LAW AND ANALYSIS:
There is no dispute that the instant centrifugal dishwasher pump is classified under subheading 8413.70.20 of the Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Pumps for liquids, whether or not fitted with a measuring device…: Other centrifugal pumps: Other: Other.” The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% will be imposed on certain Chinese imports pursuant to its 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(b), HTSUS. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 8413.70.20, HTSUS.
When determining the country of origin for purposes of applying current 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, 69 C.C.P.A. 151 (1982). In order to determine whether a substantial transformation has occurred, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. CBP has stated that a new and different article of commerce is an article that has undergone a change in commercial designation or identity, fundamental character, or commercial use. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article. This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
The question presented is whether the discrete parts from China are substantially transformed when they are assembled into a finished centrifugal dishwasher pump in Serbia. 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 HQ H282391, dated March 16, 2017, CBP determined that the country of origin of a gear motor was the United States because the assembly process in the United States amounted to a substantial transformation. The gear motor was comprised of two subassemblies, a gear box and a motor. The assembly of the gear motor consisted of assembling together 131 unique parts, and at least a total of 200 parts. These parts were imported from various origins and were used to first assemble the gear box and motor subassemblies, and then to assemble the complete gear motor through a complex operation with specialized skill and expertise. CBP noted that the complex operations involved at least 27 steps and took approximately two hours. CBP also considered the worker experience and training, stating that the workers were hired with previous experience and underwent additional training in order to reach proficiency in the assembly process. CBP thereby concluded that the foreign components lost their individual identities and became an integral part of a new article, the gear motor, and possessed a new name, character and use, amounting to a substantial transformation as a result of the assembly operations.
In addition, CBP has held that whether an assembly process is sufficiently complex to rise to the level of substantial transformation is determined upon consideration of all of the operations that occur within that country, including any subassembly processes that take place in that country. For example, in HQ H303529, dated June 6, 2019, the subject merchandise was an incomplete postage meter, which functioned as a specialized printer in a mail handling system. While one of the major subassemblies was made in Malaysia, the remaining subassemblies were made in China, and the final assembly process of connecting the subassemblies also occurred in China. CBP found that the assembly process that occurred in China was sufficiently extensive and complex as to substantially transform the components into a product of China. In doing so, CBP noted that the question of the complexity of the assembly process which occurred in China was not limited to an examination of the assembly of the various subassemblies to one another, but included an examination of all the assembly processes involved in China in the production of the incomplete postage meter. See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (“case law…indicates that a determination of substantial transformation must be based on a totality of factors”) (citing National Hand Tool Corp. v. United States, 16 C.I.T. 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993) and Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121 (1996)).
In the instant case, approximately 20 discrete parts from China are shipped to Serbia to be manufactured into subassemblies, and then combined to form the finished centrifugal dishwasher pump. The assembly is complex and involves magnetization of the rotor, pneumatic pressing of multiple components, ultraviolet glue curing, and induction soldering. Therefore, we find that the discrete parts are substantially transformed when they are combined to form a finished centrifugal pump in Serbia.
As the assembly of the Chinese parts into a centrifugal dishwasher pump results in a substantial transformation, the pump is a product of Serbia. Therefore, Section 301 measures will not apply.
The country of origin of the centrifugal dishwasher pump assembly for the purposes of the application of subheading 9903.88.01, HTSUS, is Serbia. As the merchandise will be a product of Serbia, Section 301 measures will not apply.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Monika R. Brenner, Chief
Valuation and Special Programs Branch