OT:RR:CTF:FTM H316389 TJS
Ms. Beth Hansen
Sunrise Global Marketing, LLC
500 S. Main St., Suite 450
Mooresville, NC 28115
RE: Country of Origin of Battery Packs
Dear Ms. Hansen:
This is in response to your correspondence, dated January 28, 2021, filed on behalf of Sunrise Global Marketing, LLC (“Greenworks Tools”), requesting a binding ruling on the country of origin of certain battery packs imported from China. Our ruling is set forth below.
FACTS:
The products at issue are battery packs to be used in power tools such as lawnmowers, string trimmers, and chainsaws. Every battery pack includes plastic housing, lithium-ion cells, cell brackets, nickel or copper sheets that connect the cells, electric wires, insulation and protection material, and terminals. Each pack also contains a battery management system, composed of a printed circuit board assembly (“PCBA”) and electronic components, which runs software and coordinates and monitors the electric flow between the lithium-ion cells and compatible tools also manufactured by Greenworks Tools. The lithium-ion cells are designed to store and provide power to the power tools with DC power. When combined with a compatible power tool, the battery pack provides power to the tool through the positive and negative poles, and there is a communication interface which is used to connect the communication between the battery management system and the tool.
According to your submission, the battery cells will be produced in China, Singapore, Malaysia, and Korea; the plastic housing will be made in Vietnam; and most of the other components, including the PCBA, the communications board assembly, wiring, wiring harness, nickel or copper sheets, and fasteners will be manufactured in China. The battery packs are assembled in China. The cells are first assembled on the plastic brackets and then welded with the copper or nickel sheets. The battery management system is then assembled by: (1) welding the electronic components onto the PCBA; (2) programing the embedded software; (3) testing the battery management system; and (4) water-proofing treatment by spraying coating. Finally, the battery sub-assembly, the plastic housing, and the insulation material are assembled into the finished battery pack. You state that the assembly process takes approximately 16.75 to 25.87 minutes.
ISSUE:
What is the country of origin of the subject battery packs?
LAW AND ANALYSIS:
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 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 the 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 marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that 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. Inc., 27 CCPA 297, 302, C.A.D. 104 (1940).
Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. § 1304. Section 134.1(b), Customs 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 laws and regulations.
A “substantial transformation” occurs when an article loses its identity and a new and different article emerges from the processing having a distinctive name, character or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940) (the Court held that imported wood brush block and toothbrush handles which had bristles inserted into them in the United States lost their identity as such and became new articles having a new name, character, and use). In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of the operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 C.I.T. 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). If the manufacturing or combining process is a minor one that leaves the identity of the imported article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982).
The test for determining whether a substantial transformation has occurred 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); see also Belcrest Linens v. United States, 741 F.2d 1368, 1372 (Fed. Cir. 1984). 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).
In your submission, you contend that the battery cells are not substantially transformed into battery packs by the operations that take place in China. You argue that the battery cells impart the essential character to the battery packs and no significant change in name, use or character occurs to the battery cells when such assembly occurs. Accordingly, you contend that the country of origin of the assembled battery pack is either China, Singapore, Malaysia, or Korea, depending upon the country of origin of the cells used. For the reasons set forth below, we agree.
First, we find that the components, including the battery cells from either China, Singapore, Malaysia, or Korea, do not undergo a change in name when they are assembled into a battery pack in China. The name of each article, as imported, remains the same as that article in the completed battery pack. See, e.g., National Hand Tool, 16 C.I.T. at 311. The name of the battery cells, as imported, remains the same as in the completed battery packs. As the constitutive components do not lose their individual names as a result of the assembly in China, no name change has occurred.
Turning to character, we find that there is no change in character as a result of the assembly process in China. For courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the articles or components. See, e.g., National Hand Tool, 16 C.I.T. at 311. Courts have not found a change in character when the “form of the components remained the same.” Id. In other cases, courts have looked to the “essence” of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing. Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-1098 (2000) and Uniroyal, Inc. v. United States, 3 C.I.T. 220 aff’d, 702 F.2d 1022 (Fed. Cir. 1983)). Here, we find that the lithium-ion battery cells from either China, Singapore, Malaysia, or Korea impart the “essence” of the finished battery packs. See also, e.g., Headquarters Ruling Letter (“HQ”) H306336 (Feb. 11, 2020); HQ H308831 (Feb. 25, 2020); HQ 561806 (May 9, 2002) (finding that the battery cells provide the “essence” of the finished article). Furthermore, the assembly process in China does not change the shape or material composition of the battery cells. The battery cells are simply held together as an aggregate product after the assembly process in China. Hence, we find that there is no change in character as a result of the assembly process in China.
In addition, we find that the battery cells do not undergo a change in use as a result of the assembly process in China. In looking at whether there is a change in use, courts have found that a change in use has occurred when the end use of the imported product was no longer interchangeable with the end use of the product after post importation processing; in contrast, when the end use was predetermined at the time of importation, courts have generally not found a change in use. Energizer Battery, 190 F. Supp. 3d at 1319 (citing Ferrostaal Metals Corp. v. United States, 664 F. Supp. 535, 540-41 (1987); National Hand Tool, 16 C.I.T. at 311-12; Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121-22 (1996); Uniroyal, 3 C.I.T. at 226). “When articles are imported in prefabricated form with a pre-determined use, the assembly of those articles into the final product, without more, may not rise to the level of substantial transformation.” Id. (citing Uniroyal, 3 C.I.T. at 226). At the time of importation, the battery cells are designed to store and provide power to the compatible power tools. After their assembly into battery packs in China, the lithium-ion cells maintain their function. Hence, their predetermined end use as components of battery packs does not undergo a change due to the assembly process in China.
Finally, we also find that the assembly process in China is not sufficiently complex as to constitute a substantial transformation and appears to be no more than the mere simple assembly of the battery cells with components from China into the housing from Vietnam. In further support, we note that the assembly process described here is relatively similar to the assembly process described in Energizer Battery, 190 F. Supp. 3d 1308. Energizer Battery concerned the government procurement provisions of the Trade Agreements Act of 1979, but the court in looking at the concept of substantial transformation, looked to judicial interpretations of identical language in cases involving country of origin marking, duty drawback, transshipment, voluntary restraint agreements, and the generalized system of preferences. Id. at 1313, 1316. Energizer Battery found plaintiff’s post importation processing was not sufficiently complex as to constitute substantial transformation. Id. at 1323. In doing so, the court noted, “the nature of the assembly is broadly described as assembling, screwing, connecting and soldering approximately fifty components, many of which are simple attaching mechanisms. None of these factors suggest an assembly process that is complex.” Id. at 1324. Similarly, in this case, we do not find the assembly process in China complex and find that the simple attachment of the components in China does not constitute a substantial transformation.
U.S. Customs and Border Protection (“CBP”) has previously held that the assembly of battery cells into battery packs does not result in a substantial transformation of the cells because the essential character of the cells does not change by being placed together in a plastic case. See HQ H308831; HQ H306336; HQ 563045 (Aug. 9, 2004); HQ 561806 (May 9, 2002). In a recent decision in HQ H308831, CBP applied the substantial transformation test to determine the country of origin of battery packs similarly produced as those at issue also to be used in power tools. In HQ H308831, CBP held that the assembly processes performed in China, which involved assembling, connecting, attaching, applying, and welding various components together followed by installing them into a plastic housing, did not result in a substantial transformation of the battery cells sourced from Singapore or Malaysia. HQ H308831 also held that the battery cells imparted the “essence” of the finished battery packs. In accordance with these rulings, we find that the country of origin of the battery packs at issue is either China, Singapore, Malaysia, or Korea, where the lithium-ion cells are produced.
HOLDING:
Based on the facts provided, the battery cells from China, Singapore, Malaysia, or Korea are not substantially transformed into battery packs by the processes taking place in China. As such, the country of origin of the battery packs is China, Singapore, Malaysia, or Korea, depending on the country of origin of the lithium-ion cells.
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 Customs Service 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,
Yuliya A. Gulis, Chief
Food, Textiles and Marking Branch