Ernst & Young LLP
1401 McKinney Street
Houston, TX 77010
RE: The classification and preferential status under the United States-Mexico-Canada Agreement of an electric motor
Dear Mr. Leightman:
In your letter dated April 14, 2021 you requested a country of origin ruling on behalf of your client, Melecs Electronics Quertaro, S.A. de C.V..
The merchandise under consideration is identified as the Motor MSE-ISP bDrive 50 (motor), Part Number 125050104S01, which consists of a brushless DC electric motor, the housing, and a control printed circuit board assembly (PCBA). The motor, which you state has a maximum output of 159.93 Watts, is assembled in Mexico, as described below, and you have requested a determination of preferential treatment under the USMCA.
You describe the motor as being as an electrical actuator for use with motor vehicles. At the time of importation, the control PCBA is mounted to the motor housing but a gearbox is not attached. The function of the control PCBA is to control the operation of the motor, provide electrical protection, and convert applied 12 VDC electricity into 6 VDC electricity, which turns the motor shaft.
In your request, you suggest the motor is classifiable under subheading 8501.31.4000, Harmonized Tariff Schedule of the United States (HTSUS). We agree.
The applicable subheading for the Motor MSE-ISP bDrive 50, Part Number 125050104S01, will be 8501.31.4000, HTSUS, which provides for "Electric motors...: Other DC motors...: Of an output not exceeding 750W: Motors: Exceeding 74.6 W but not exceeding 735 W." The general rate of duty will be 4 percent ad valorem.
Based on the production documents supplied, the subject electric motor consists of the rotor package, the stator package, magnets, winding wire, ball bearing, shaft, housing, control PCBA, and various components. You state that the rotor package, the stator package, and the PCBA are manufactured in Mexico. The winding wire, housings, and various parts are produced in the United States. The magnets are sourced from China, the shaft is sourced from Germany, and the bearing is sourced from Thailand.
Your letter describes the production of the motor in Mexico as arranging steel laminations into a lamination stack, inserting magnets, and machine pressing a shaft to produce a rotor subassembly. Next, the steel laminations for the stator are arranged to form a lamination stack, wire is wound around the stator poles, and electrical connections are made to produce the stator subassembly. Later, the bearing is pressed into the end shield housing, the rotor subassembly is pressed into the bearing, the stator subassembly is pressed into the housing subassembly, and the housing is crimped together to form a motor. Afterwards, the PCBA, which is manufactured in your client's facility by soldering individual components onto a bare board, is mounted to the motor. We would note that based on the information provided, the individual steel laminations are stamped in Mexico and the housings are stamped in the United States.
Regarding the motor's eligibility for preferential treatment, the USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018 and approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act. General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if -
i. the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
ii. the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
iii. the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o))
The subject motor contains non-originating materials and is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the motor is not a good produced entirely in Mexico exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o).
The applicable tariff shift rule for merchandise classifiable under heading 8501. HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
A change to heading 8501 from any other heading, except from tariff items 8503.00.35, 8503.00.45 or 8503.00.65;
Since all the foreign materials are classified outside of heading 8503, HTSUS, the requisite tariff shift rule is met, and the finished motors are considered originating goods under the USMCA and eligible for preferential treatment.
Regarding the origin of the motor, 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 United States Trade Representative 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). 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.
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:
a) (1) The good is wholly obtained or produced;
2) The good is produced exclusively from domestic materials; or
3) 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 electric motor of heading 8501, HTSUS, is:
A change to subheading 8501 from any other heading.
The foreign material in this case consists of the shaft, the bearing, and the magnets. As the none of the components that make up the motor 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 are products of Mexico for country of origin marking purposes.
Regarding the applicability of Section 301 measures, in our opinion, the work performed in Mexico produces rotor and stator subassemblies of Mexican origin. Likewise, the housing and end shield, which form the base for the motor's bearing and shaft, are produced in the United States. In our view, the rotor and stator are the dominant components of a finished electric motor. The Chinese magnets, while vital to a motor's operation, are substantially transformed as a result of the assembly operations outlined above. The work performed in Mexico produces a motor of Mexican origin because the individual components are substantially transformed into a new and different article. As such, the motors 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.
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@example.com.
Steven A. Mack
National Commodity Specialist Division