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RE: The classification and country of origin of electric generators from China
Dear Mr. Reynolds:
In your letter dated October 29, 2018 you requested a tariff classification and country of origin ruling on behalf of your client, In Motion US, LLC.
There are two electric generators under consideration which are identified as the Frameless Generator and the Housed Generator. Both generators are said to operate on AC electricity and have an output of less than 75 kVA and are used in refrigeration systems on marine vessels and trucks. Based on the information provided, the rotor and stator subassemblies, as well as the end bells in the case of the Housed Generator, are manufactured in India and are sent to China for assembly, minor processing, and testing. The magnets and miscellaneous hardware are said to be of Chinese origin, while the paint and encapsulation materials are of U.S. origin.
We would note that the rotor and stator subassemblies are shipped from India in a condition ready for assembly into a generator. The production process in China involves assembling the rotor and the stator into the generator, applying the encapsulation material, curing, and testing. Once the generator is assembled and tested, a technician installs electrical connection wires and a nameplate prior to packing.
In your request you suggest the subject generators are correctly classified under 8501.61.0090, Harmonized Tariff Schedule of the United States (HTSUS). Based on the information provided, we agree.
The applicable subheading for the Frameless and Housed Generators will be 8501.61.0090, HTSUS, which provides for “Electric motors and generators…: AC generators: Of an output not exceeding 75kVA.” The rate of duty will be 2.5%.
With regard to the appropriate country of origin marking of the electrical generators, Section 304 of the 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 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. The regulations implementing the requirements and exception to 19 U.S.C. § 1304 are set forth in Part 134, Customs and Border Protection Regulations (19 C.F.R. Part 134).
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”. Customs and Border Protection (CBP) maintains, based on United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940), 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.”
Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) 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.
With regard to the Frameless and Housed Generators and determining the origin of the goods, we would note that the rotors, stators, shaft hardware, and housings are manufactured in India and sent to China for assembly, encapsulation, and testing. It is the view of this office that the assembly process performed in China does not constitute substantial transformation of the original articles into a new or different article of commerce. In the opinion of our office, the country of origin of the Frameless Generator and the Housed Generator is India.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at https://hts.usitc.gov/current.
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 firstname.lastname@example.org.
Steven A. Mack
National Commodity Specialist Division