OT:RR:NC:N1:103
Candace Carpenter
Hexagon Purus Systems USA LLC
3335 Susan St, Suite 100 Costa Mesa, CA 92626
RE: The country of origin of battery modules and battery packs and the applicability of certain trade remedies under Section 301
Dear Ms. Carpenter:
In your letter dated December 13, 2022, you requested a country of origin ruling on a battery module and a battery pack.
The merchandise under consideration is a lithium-ion battery module, part number 41000000, and a battery pack, part number 40007000, used in various battery electric systems. The main components of the battery module include lithium-ion battery cells, a top and bottom housing, a cell holder and current collector, a module cold plate, and a battery management board. The battery modules are subsequently combined to form battery packs. Each battery pack is composed of a top cover, low voltage wiring, battery modules, high voltage bus bars, and mounting brackets.
Both the battery module and the battery pack are assembled in Canada using components sourced from Canada, China, Germany, Indonesia, Japan, Singapore, South Korea, and the United States. The lithium-ion battery cells are sourced from either China, Japan, or South Korea.
The assembly process for the battery module begins by placing lithium-ion battery cells into a cell holder and current collector. Adhesive is applied to the battery cells, which are then aligned, pressed, and left to cure. Thermistors are added before the subassembly is sent through a plasma cleaning machine that removes dust, debris, and other particles. Adhesive is used to fix a cold plate into place and the module is sent through a laser ablation machine to roughen the surface of the battery cells before wire bonding. Afterwards, a worker installs the battery management board, bottom housing component, and top housing component. Lastly, potting material is injected into each battery module and left to cure before various tests are performed.
The assembly of the battery pack involves placing battery modules into a metal frame where they are wired together using electrical harnesses. The assembly continues with adding coolant manifolds and installing high voltage bus bars. A worker then installs a top module, consisting of high-voltage connectors, fuses, and the battery management board. To complete the battery pack, the top cover and mounting brackets are bolted into place.
With regard to your request for the appropriate country of origin of the battery module and battery pack, 19 C.F.R. § 134.1(b) provides in pertinent part as follows: Country of origin means 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.
As stated in HQ 735009, dated July 30, 1993, “The country of origin is the country where the article last underwent a ‘substantial transformation’, that is, processing which results in a change in the article's name, character, or use.” In addition, the court has held that “A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, and use that differs from the original material subjected to the processing.” 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 Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer, the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
Customs and Border Protection has previously held that the assembly of battery cells into battery packs does not result in a substantial transformation of the battery cells because the essential character of the cells does not change simply by being placed together in a plastic case. Moreover, there is no significant change in name, use, or character to the battery cells when such an assembly occurs. See HQ ruling 563045, dated August 9, 2004, and HQ ruling 734393 dated March 20, 1992. The assembly operations in Canada do not change the battery cells, which provide the essence of the battery module and subsequent battery pack, into an article with a new name, character, or use, different from that possessed by the article prior to processing. The function of the battery cells is to store and provide power, and the function of the battery cells in the battery modules and battery packs is likewise to store and provide power. In view of these facts, the country of origin of the subject battery module, part number 41000000, and the battery pack, part number 40007000, for the purposes of Section 301 is China, Japan, or Korea, dependent upon where the battery cells are manufactured.
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 and Border Protection 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, please contact National Import Specialist Paul Huang at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division