OT:RR:CTF:VS H338482 EE
Matthew Johnson
J Squared Inc., d/b/a University Loft Company
2588 Jannetides Blvd.
Greenfield, IN 46140
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 of Upholstered Wood Chairs
Dear Mr. Johnson:
This is in response to your request, dated March 28, 2024, for a final determination concerning the country of origin of certain upholstered wood chairs pursuant to Title III of the Trade Agreements Act of 1979 (“TAA”), as amended (19 U.S.C. 2511 et seq.), and subpart B of Part 177, U.S. Customs and Border Protection (“CBP”) Regulations (19 CFR 177.21, et seq.). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for response. J Squared Inc., d/b/a University Loft Company (“ULC”), is a party-at-interest within the meaning of 19 CFR 177.22(d)(1) and 177.23(a) and is therefore entitled to request this final determination.
FACTS:
You state that two upholstered wood chairs, item nos. G32PLY2 and G32PLY1, are manufactured at your facility in Greenfield, IN, utilizing components from various sources. Item no. G32PLY1 is a solid wood and high-pressure laminate upholstered chair. Its dimensions are: 19 15/16” wide x 23 11/16” deep x 33” high, with a 16” seat height. It features a waterfall-style, legged design and the legs and seat rails are constructed of curved bentwood. It is made of solid hardwood and high-pressure laminate.
Item no. G32PLY2 is a solid wood upholstered chair. Its dimensions are: 19 5/16” wide x 22 11/16” deep x 33” high with a 16” seat height. It features a waterfall-style, 2-position design and the legs and seat rails are constructed of curved bentwood.
You state that for both chairs, the construction allows for replacement of individual components. The production of the upholstered wood chairs involves the following steps:
Step #1
Fabric from the United States is cut to size for the seats with a cutting machine. Plastic welt cord from the United States is cut to size and wrapped around the inner upholstered chair back. The cut fabric for the back and the welt cord are sewn together with a sewing machine.
Step #2
Sheets of dust covers from the United States are cut to the specific size of the bottom seat with the cutting machine.
Step #3
Precut foam from the United States for the seats and backs are trimmed around the edges of the seat for even application of the fabric.
For the seats, the foam is combined with the wooden seat component, the cut seat fabric, and the dust cover. The fabric and dust cover are stapled by hand over the foam and onto the wooden seat.
For the inner/outer backs, the foam is combined with the wooden inner seat back, the back cut fabric, and the plastic welt cord that have already been sewn together. The fabric/welt cord is stapled by hand over the foam and onto the inner seat back. A finished non-upholstered outer seat back is then attached.
Step #4
Seven wooden components of the base of the chairs, consisting of the left seat rail, right seat rail, left leg, right leg, front crossbar, back crossbar, and bottom crossbar, are combined with hardware that is also purchased in the same kit as the wooden chair components. These include 60mm bolts with Loctite, 40mm bolts with Loctite, 35mm bolts with Loctite, and 10mm x 40mm large wooden dowels. The kit is from China.
Five wooden components (minus the seat rails) are attached using wood glue and dowels. A total of four dowels are used per chair. Next, the chair base is put on a chair base clamp to make sure the base of the chair is square, and all dowels are properly inserted.
Once it is confirmed that the base is straight, the remaining two wood components are added. The left and right seat rails are attached to the base using the 60mm bolts with Loctite. The upholstered seats are attached to the base using four 40mm bolts with Loctite. The upholstered inner backs with a finished outer back are attached to the base using four 35mm bolts with Loctite.
Step #5
The chairs are packaged for shipment using Microfilm rolls to protect seat and back surfaces from touching during shipment. Chairs are then boxed or palletized.
You provided an outline of the manufacturing process of the two chairs and the costed bill of materials.
ISSUE:
Whether the imported components are substantially transformed when assembled into the upholstered wood chairs in the United States.
LAW AND ANALYSIS:
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, pursuant to subpart B of Part 177, 19 CFR 177.21-177.31, which implements Title III of the TAA, as amended (19 U.S.C. 2511-2518).
CBP’s authority to issue advisory rulings and final determinations is set forth in 19 U.S.C. 2515(b)(1), which states:
For the purposes of this subchapter, the Secretary of the Treasury shall provide for the prompt issuance of advisory rulings and final determinations on whether, under section 2518(4)(B) of this title, an article is or would be a product of a foreign country or instrumentality designated pursuant to section 2511(b) of this title.
Emphasis added.
The Secretary of the Treasury’s authority mentioned above, along with other customs revenue functions, are delegated to CBP in the Appendix to 19 CFR Part 0 - Treasury Department Order No. 100-16, 68 Fed. Reg. 28,322 (May 23, 2003).
The rule of origin set forth under 19 U.S.C. 2518(4)(B) states:
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 CFR 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 Procurement Regulation (“FAR”). See 19 CFR 177.21. In this regard, CBP recognizes that the FAR restricts 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 CFR 25.403(c)(1).
The FAR, 48 CFR 25.003, defines “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.
In order to determine whether a substantial transformation occurs, 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, CBP considers factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process when determining whether a substantial transformation has occurred. No one factor is determinative.
In Carlson Furniture Indus. v. United States, 65 Cust. Ct. 474, Cust. Dec. 4126 (1970), which involved wooden chair parts, the court held that the assembly operations after importation were substantial in nature and more than a simple assembly of parts. 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.
In Headquarters Ruling Letter (“HQ”) H083693, dated March 23, 2010, CBP held that a wood chest assembled in the United States was a product of the United States for purposes of U.S. Government procurement. The wood chest was assembled from over 20 U.S. and foreign components in a 20-step process which took approximately 41 minutes. CBP held that the components that were used to manufacture the wood chest, when combined with a U.S.-origin laminate top, were substantially transformed as a result of the assembly operations performed in the United States.
In the instant case, as previously noted, the components in the kit from China consist of the left seat rail, right seat rail, left leg, right leg, front crossbar, back crossbar, bottom crossbar, 60mm bolts with Loctite, 40mm bolts with Loctite, 35mm bolts with Loctite, and 10mm x 40mm large wooden dowels. The U.S.-origin fabric, dust covers, and welt cord are cut to size and combined with the U.S.-origin foam to form the seat and the seat back. Based on the information presented, when the foreign components are integrated with the U.S. components, they lose their individual identities and become an integral part of a new article, the upholstered wood chair, possessing a new name, character and use. We, therefore, find that the last substantial transformation occurs in the United States. As to whether the upholstered wood chair produced in the United States qualifies as a “U.S.-made end product,” you may wish to consult with the relevant government procuring agency and review Acetris Health, LLC v. United States, 949 F.3d 719 (Fed. Cir. 2020).
HOLDING:
Based on the information outlined above, we determine that the components imported into the United States undergo a substantial transformation when made into the subject upholstered wood chairs.
Notice of this final determination will be given in the Federal Register, as required by 19 CFR 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 CFR 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 CFR 177.30, any party-at-interest may, within 30 days of publication of the Federal Register Notice referenced above, seek judicial review of this final determination before the U.S. Court of International Trade.
Sincerely,
Alice A. Kipel
Executive Director
Regulations and Rulings
Office of Trade