OT:RR:CTF:VS H304124 RMC/CMR
John M. Peterson
Neville Peterson LLP
One Exchange Plaza
55 Broadway, Suite 2602
New York, NY 10006
RE: Country of Origin of Cardiac Monitoring Strips
Dear Mr. Peterson
This is in response to your letter dated January 31, 2019, on behalf of Preventice Solutions, Inc. (“Preventice”), which was forwarded to us by the National Commodity Specialist Division. In your letter, you requested a binding ruling pursuant to 19 C.F.R. Part 177 on the country of origin for tariff and marking purposes of the Body Guardian Mini Easy Slide Strip Cardiac Monitoring Device (“BG Mini Strip”). In reaching our decision, set forth below, we have taken into consideration your initial submission and the information you provided in subsequent submissions dated February 12, 2019; March 27, 2019; April 5, 2019; April 14, 2019; May 9, 2019; and, November 15, 2019.
FACTS
The BG Mini Strip is part of a cardiac monitoring system used to measure and detect cardiac arrhythmias and other abnormal heart conditions. According to the information provided, the BG Mini Strip is a wearable patch that the patient attaches to the skin in the same manner as an adhesive bandage. Preventice states that the wearable strip acts as an electrode or “essentially a wet sensor.” Its construction includes an electrically conducive hydrogel that senses electrical activity associated with a heartbeat. When the device is worn on the skin, the hydrogel transmits the electrical activity generated by the heart to silver chloride conductors, which then carry it to a printed circuit board assembly (“PCBA”) contained in the device’s plastic housing. The PCBA purportedly contains the “functional circuitry” of the device and incorporates a Micro-USB port to which the BG Mini Device is connected during cardiac monitoring.
The BG Mini Strip is constructed of various materials sourced from multiple countries. Production of the strip takes place in Finland, Sweden, and China. In Finland, the PCBA is manufactured “presumably from materials and components originating in various countries.” You indicate that the PCBA represents 48.6% of the total cost of the finished product.
In Sweden, various materials forming the strip base to which the completed PCB unit is attached are processed to prepare the materials for assembly. These materials include an adhesive layer of United States origin which is used to connect the PCB to the strip base (i.e., the electrode); a printed flexfilm (consisting of Italian origin PET (polyethylene terephthalate) film which has been printed with U.S.-origin electrically conducive silver ink and U.S.-origin white dialectric ink); a second adhesive layer of United States origin which is used to connect layers of the electrode; an acrylic layer hydrogel of United States origin; and a protective silicon or fluoropolymer liner of unknown origin. With the exception of the hydrogel, these materials are die-cut to specified shapes as used in the finished good and placed on adhesive sheets for shipment to China. The hydrogel is cut into round pieces and is shipped to China on rolls. You indicate that the cost of production incurred in Sweden represents 16.5% of the total cost of the finished product.
In China, the PCBA is attached to one end of the printed flexfilm using a Chinese-origin metal clip which is assembled onto the back of the PCBA. A plastic cap is then molded over the PCBA with the Micro-USB port extending out from the cap. The completed PCB unit, i.e., the PCBA within the molded cap, is inserted by hand into a molded plastic “shoe,” which is laser-engraved with serial identifying information. The PCBA unit in the plastic shoe is assembled with precut adhesive which is hand placed on the bottom of the unit. The remaining die-cut materials are assembled by hand to the printed flexfilm to form the completed strip (electrode), including the precut hydrogel. You indicate that the cost of production incurred in China represents 26.1% of the total cost of the finished product.
Preventice provided the following image of the product in its condition as imported:
After importation, the device is combined with a monitor (not subject to this ruling request) to form a complete cardiac monitoring system. The monitor is equipped with a mini-USB component and a Bluetooth antenna. The mini-USB component stores the data collected by the device, and the Bluetooth antenna transmits the data in real time to an application on the user’s cellphone. This application transmits the data to a server maintained by Preventice, which generates reports based on the data for review by authorized healthcare professionals. If the Bluetooth connection is interrupted, the device will continue to monitoring the user’s heartbeat and collecting data so that it can be uploaded to Preventice’s server when the Bluetooth connection is reestablished.
Preventice provided the following image of the product in its post-importation, ready-to-use condition, with the monitor attached:
ISSUE:
What is the country of origin of the BG Mini Strips?
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 container) will permit in such a manner as to indicate to an 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 markings on the imported goods the country of which the good is the product. “The evident purpose is to mark the goods so 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. Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, 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 “the 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 which differs from the original material subjected to the process. United States v. Gibson Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982).
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. Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. 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.
The Court of International Trade has also looked at the essence of an article to determine whether its identity has been substantially transformed through assembly or processing. For example, in Uniroyal, Inc. v. United States, 3 CIT 220, 225, 542 F. Supp. 1026, 1030 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), the court held that imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and thus the character of the product remained unchanged and did not undergo substantial transformation in the United States. Similarly, in National Juice Products Association v. United States, 10 CIT 48, 61, 628 F. Supp. 978, 991 (1986), the court held that imported orange juice concentrate “imparts the essential character” to the completed orange juice and thus was not substantially transformed into a product of the United States.
In this case, you submit that the operations that occur in China “essentially involve the simple assembly of the electrode and its insertion into the PCB, plus the packaging of the PCB in a plastic housing.” Accordingly, you conclude that no substantial transformation occurs in China. You also conclude that the operations performed in Sweden do not effect a substantial transformation as they are “intermediate operations which merely prepare materials which will be incorporated into the finished BG Mini Strip.” Therefore, in your view, the country of origin should be determined by the Finnish PCBA, which imparts the “essence” of the BG Mini Strip.
For products used in medical-related applications, we have held that no substantial transformation occurs when the critical components which impart the essential character of the product subsequently undergo simple assembly and processing. See, e.g., Headquarters Ruling (“HQ”) H248851, dated July 8, 2014; HQ 560613, dated October 28, 1997; and, HQ H259473, dated June 30, 2015. For example, in HQ H300743, dated January 29, 2019, we held that a substantial transformation did not occur when components of a self-adhesive cutaneous electrode used for electrocardiogram and electromyofram applications underwent “relatively simple and minor [assembly] operations involving highly repetitive, low-skill functions” in China. As described in that case:
In China, the bulk roll hydrogel [was] first laminated to U.S.-origin conductive plastic and Chinese-origin fabric backing, in a process that [occurred] in one second for the surface area required to punch out a single self-adhesive cutaneous electrode. Then, the laminated bulk roll hydrogel [was] mechanically die cut one pad at a time, taking less than a second per pad. Subsequently, the Korean-origin leadwire [was] attached to the pad using U.S.-origin glue, “sandwiching” it between the conductive plastic and fabric backing in a process that takes less than four seconds per electrode. Finally, the finished self-adhesive cutaneous electrodes were inserted into plastic pouches and cardboard packaging for shipment to the United States.
In concluding that no substantial transformation occurred in China, we emphasized the simplicity of the assembly and processing and the fact that all of the engineering and design for the product occurred in the United States. Additionally, we noted that while the components added in China facilitated the product’s functionality, “the hydrogel itself remains unchanged by the Chinese assembly and processing and continues to provide the essential function of the FDA-regulated ‘cutaneous electrode’ product.” Accordingly, we concluded that the country of origin of the self-adhesive cutaneous electrodes was the United States.
According to the information provided, the final assembly in this case will occur in China and is similar in scope and complexity to the processing that occurred in HQ H300743. Specifically, the processing will involve inserting the electrode into the PCB assembly, inserting the PCB assembly into the molded plastic “shoe,” adding a plastic cap, adding the precut hydrogel and precut tape and skin layer to the electrodes, sealing the BG mini strips in individual pouches, and placing them into shipping boxes. As in HQ H300743, these assembly operations are “relatively simple and minor” and thus do not result in a substantial transformation.
In support of your view that the country of origin should be determined by the Finnish PCBA, you note that the PCBA “contains all the circuitry and functionality to perform the [heart] monitoring function” when it is produced in Finland. You cite to several rulings including HQ 561232, dated April 20, 2004; HQ 555600, dated September 15, 1991; and HQ 558957, dated April 17, 1995; in which CBP held that the attachment of wires, leads, and connectors to a PCBA does not result in a transformation and that the country of origin was the country where the PCBA or other electronic assembly was manufactured. In short, you believe that due to its important role in the functioning of a cardiac monitoring device, the Finnish PCBA is the very essence of the final product.
However, other components are also essential to the functioning of the final product. In HQ H300743, we noted that hydrogel “provide[d] the means whereby electrical activity in the body is recorded by the input circuits of an EEG/EMG machine, or electrical impulses are generated when used with stimulating equipment” and that “[t]he hydrogel’s adhesive properties are essential to allowing the product to function as a self-adhesive cutaneous electrode.” Accordingly, we held that the hydrogel imparted the essential character to the self-adhesive cutaneous electrode.
In this case, however, the final product’s function is distinguishable from the function of the self-adhesive cutaneous electrode at issue in H300743. In that case, the electrode was passive, merely sensing the electrical signals associated with a heartbeat and transferring them to an external medical diagnostic device. Although the BG Mini Strip is described as “essentially a wet sensor,” because of its integrated PCBA, it does more than passively transmit electrical signals. Even in its condition as imported (i.e., without the monitor attached), it is capable of both sensing the electrical signals associated with a heartbeat and performing the functions of an electrocardiogram—namely, translating the electrical impulses collected into data usable by healthcare professionals.
Both the U.S.- origin hydrogel and the Finnish-origin PCBA are important components which are not substantially transformed by the processing that occurs in Sweden or China. However, the function of the PCBA, in addition to its percentage of production cost of the final product, lead us to conclude that the character or essence of the BG Mini Strip is derived from the PCBA. Thus, we agree that the origin of the finished BG Mini Strip, manufactured as described herein, is Finland.
HOLDING:
The country of origin of the BG Mini Strip, manufactured as described above, is Finland for tariff and country of origin marking purposes.
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 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.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch