OT:RR:NC:N2:220
Lenny Feldman
Sandler, Travis & Rosenberg, P.A.
5385 Blue Lagoon Drive - Suite 200
Miami, FL 33126
RE: The country of origin of electric motors and the applicability of certain trade remedies under Section 301
Dear Mr. Feldman:
In your letter dated March 14, 2021 you requested a country of origin ruling on behalf of your client, General Transmissions, Inc., and request a confirmation that Section 301 remedies do not apply to the electric motor assembly upon importation.
The merchandise under consideration is referred to as a Brushless Direct Current Motors (BLDC motors), Part Numbers AEM90001, AEM19081-02, AEM19008-07, and AEM16170-11, which are described as a DC electric motors that operate on 14.4 to 18 VDC with maximum outputs between 185 and 810 W. The BLDC motors are said to be used in various power tools and lawn/garden appliances.
As part of your request, you provide three scenarios describing the production of the BLDC motors. In each scenario, you state that the BLDC motors are manufactured through four principal processes, namely the stamping and stacking of rotor and stator laminations to produce rotor and stator cores, rotor assembly, stator assembly, and final BLDC motor assembly. The rotor and stator core laminations are stamped from slitted magnetic steel coil which are interlocked and stacked to produce a rotor and stator core. Once the rotor core is produced, a shaft is inserted, magnets are applied, and the subassembly is glued and cured before being magnetized and receiving two bushings that are mechanically pressed onto the shaft. The rotor core is balanced, a cooling blade and bearing are then pressed onto the shaft to produce a rotor subassembly. Likewise, after the stator core is produced, two plastic plates are assembled onto each side of the stator core which is then wound with wire. The stator core is dipped into varnish, cured, a hall effect board is soldered in place, and the wound stacks are placed inside a housing to produce a stator subassembly. After the rotor and stator subassemblies are completed, the bearings are crimped in place, and the magnetized rotor subassembly, the stator subassembly, and a front plate are coupled together by a servo press to produce a BLDC motor.
In the first scenario, you state that the rotor and stator cores will be manufactured in Vietnam as described above and shipped to China for the remainder of the assembly operations. In the second scenario, you state that the rotor and stator cores will be manufactured in Taiwan and shipped to China for the remainder of the assembly operations. In the third scenario, you state that the rotor and stator cores will be manufactured in China and shipped to Mexico for the remainder of the assembly operations.
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 (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.
The “country of origin” is defined in 19 CFR 134.1(b) 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 this part.”
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). 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).
Regarding the country of origin and applicability of Section 301 remedies under the first scenario, in our opinion, the stamping and pressing work performed in Vietnam produces rotor and stator cores of Vietnamese origin. The cores that are shipped to China are further processed by adding the shaft, wrapping with wire, magnetizing, etc. and once assembled, are tested and packaged for export.
In our view, the rotor and stator are the dominant components of a finished electric motor. Based on the description provided in the first scenario, the Vietnamese rotor cores are not substantially transformed by adding the shaft, bearings, or gluing the magnets, etc. in China. Furthermore, the Vietnamese stator cores are not substantially transformed as a result of adding plastic plates, winding with wire, and adding a hall effect board in China. Thus, it is the opinion of this office that the assembly process performed in China does not result in a substantial transformation of the Vietnamese components and the motors under consideration are considered products of Vietnam for origin and marking purposes. Furthermore, the BLDC motors, Part Numbers AEM90001, AEM19081-02, AEM19008-07, and AEM16170-11, described in the first scenario, are not subject to the additional duties applicable to products of China under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
Regarding the country of origin and applicability of Section 301 remedies under the second scenario, in our opinion, the stamping and pressing work performed in Taiwan produces rotor and stator cores of Taiwanese origin. Like the first scenario, the cores that are shipped to China are further processed by adding the shaft, wrapping with wire, magnetizing, etc. and once assembled, are tested and packaged for export.
Based on the description provided in the second scenario, the Taiwanese rotor cores are not substantially transformed by adding the shaft, bearings, or gluing the magnets, etc. in China. Furthermore, the Taiwanese stator cores are not substantially transformed as a result of adding plastic plates, winding with wire, and adding a hall effect board in China. Thus, it is the opinion of this office that the assembly process performed in China does not result in a substantial transformation of the Taiwanese components and the motors under consideration are considered products of Taiwan for origin and marking purposes. Furthermore, the BLDC motors, Part Numbers AEM90001, AEM19081-02, AEM19008-07, and AEM16170-11, described in the first scenario, are not subject to the additional duties applicable to products of China under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
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”). 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.
Regarding the third scenario, you state that the rotor and stator cores are produced in China and the final assembly of the BLDC motors occurs in Mexico. To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the subject motors are neither wholly obtained or produced or produced exclusively from “domestic” materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). “Foreign material” is defined in section 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.”
The applicable tariff shift requirement in section 102.20 for the finished Transmission of heading 8501, HTSUS, is:
A change to subheading 8501 from any other heading.
The foreign material in the third scenario consists of the rotor and stator cores, the shafts, the bearings, and various parts and components. All the foreign materials are identified as being sourced from China. As the none of the components that make up the motors are classified under heading 8501, HTSUS, the tariff shift requirement of section 102.11(a)(3) is met. As such, we find that the motors described under the third scenario meet the marking rule and may be marked as products of Mexico.
However, regarding the applicability of Section 301 remedies under the third scenario, in our opinion, the stamping and pressing work performed in China produces rotor and stator cores of Chinese origin. The cores that are shipped to Mexico are further processed by adding the shaft, wrapping with wire, magnetizing, etc. and once assembled, are tested and packaged for export. But as stated previously, we are of the opinion that the rotor and stator are the dominant components of a finished electric motor. Based on the description provided in the third scenario, the Chinese rotor cores are not substantially transformed by adding the shaft, bearings, or gluing the magnets, etc. in Mexico. Furthermore, the Chinese stator cores are not substantially transformed as a result of adding plastic plates, winding with wire, and adding a hall effect board in Mexico. Thus, it is the opinion of this office that the assembly process performed in Mexico does not result in a substantial transformation of the Chinese components and the BLDC motors, Part Numbers AEM90001, AEM19081-02, AEM19008-07, and AEM16170-11, described in the third scenario, are subject to the additional duties applicable to products of China under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
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.”
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Karl Moosbrugger at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division