MAR-2:OT:RR:NC:N2:212
Bess Motter
CommScope
3871 Lakefield Drive
Suwanee, GA 30024
RE: The country of origin of coaxial cable
Dear Ms. Motter:
In your letter dated March 11, 2020, you requested a country of origin ruling with regard to marking as well as the application of Section 301 Trade Remedies.
The merchandise at issue, identified by part number L4-HMHM-12-SGW-D, is described as insulated coaxial cable used in a variety of broadband services for both residential and commercial customers. The cable is comprised of an inner conductor core surrounded by a dielectric and outer conductor. In their finished state, the cables are sold in 12-foot lengths, each end fitted with a coaxial connector. The cables will be used to transmit high-speed data for services such as video, telephony, advertising, among a wide variety of others.
In your request, you state the finished cable goes through multiple steps in the manufacturing process, beginning in the United States and ending in Mexico. In the US, an inner conductor wire of Chinese origin is surrounded by a foam dielectric of US origin and then jacketed with an outer conductor of German origin. The cable is then insulated with plastic of US origin and wound on a reel in lengths of 1,000 feet. You state that this bulk, unterminated coaxial cable is identified by part number 520096202/00.
This 1,000-foot cable is then exported to Mexico where it is cut to 12-foot lengths. The ends of the cable are then stripped in preparation to add the connectors. Chinese origin connectors are attached via multiple steps including soldering the metal components. The finished cable is then tested for function and packaged for export.
With regard to your request for the appropriate country of origin of the coaxial cable, 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;
Since Mexico and the United States are NAFTA countries, the NAFTA Marking Rules must be applied in determining the country of origin of the subject cables for marking purposes.
Part 102, Customs and Border Protection Regulations (19 C.F.R. Part 102), sets forth the NAFTA Marking Rules. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes. 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;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Section 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 cable assemblies are neither wholly obtained nor 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 19 C.F.R. § 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.” In this case, the subject coaxial cables, in both bulk form and finished with connectors, are classified under subheading 8544.20.0000, Harmonized Tariff Schedule of the United States (HTSUS). The applicable rule for this subheading in Section 102.20 requires:
A change to subheadings 8544.11 through 8544.70 from any other subheading, including another subheading within that group, except when resulting from simple assembly.
With regard to the manufacturing process performed within the United States, you state that the individual conductors that are formed into the finished cable are manufactured in China and Germany. The remaining parts are sourced from the United States. Based upon the information provided, these foreign materials would fall outside of the subheadings listed above and the appropriate tariff shift is met. Therefore, the unterminated coaxial cable, part number 520096202/00, is eligible to be marked a product of the United States.
Once the unterminated cable is sent to Mexico, it must also meet the requirements set forth in the above product specific rule in order to be considered a product of Mexico for marking purposes. As previously stated, the cable upon importation into Mexico is classified under 8544.20, HTSUS, and would fall within the subheadings listed within the referenced rule. The Chinese connectors added to the ends of the cable would be classified outside of heading 8544, HTSUS. However, based on the information provided, we find that the process of affixing the connector parts to the end of the cable is not complex and consists of a limited number of steps and parts. As such, the addition of the connectors would be considered simple assembly as defined in 19 C.F.R. 102.1(o) and would not allow for a determination to be made pursuant to the terms of section 102.20.
As a determination cannot be reached by application of sections 102.11(a)(3) and 102.20, we must then consider the applicability of section 102(b)(1), which states, in part, that the country of origin is derived from the single material that imparts the essential character of the finished good. It is the opinion of this office that the unterminated, insulated cable imparts the essential character of the finished coaxial cable. Therefore, pursuant to 19 C.F.R. 102, the finished coaxial cable, part number L4-HMHM-12-SGW-D, is considered a product of the United States for marking purposes.
While the NAFTA marking rules contained in 19 C.F.R. Part 102 will determine the country of origin for marking purposes, the substantial transformation test will determine the country of origin for purposes of the Section 301 measures. See, e.g., Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018.
The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
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, “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.
As an initial matter, we must examine the process performed in the United States in order to ascertain the country of origin of the bulk, unterminated cable. Based upon the facts presented, it is the opinion of this office that the manufacturing operations performed in the United States substantially transform the foreign components into a new and different article of commerce with a name, character, and use distinct from the constituent parts. The process of combining multiple conducting elements with various insulators adds significant electrical properties that impart upon the cable its essential functions. It is the opinion of this office that the country of origin of the bulk, unterminated coaxial cable, part number 520096202/00, is the United States.
With regard to the operations performed in Mexico to create the finished coaxial cable, it is the opinion of this office that the bulk, unterminated cable imparts the critical functionality of the finished article. The addition of the Chinese connectors in Mexico does not substantially transform the cable into a new and different article of commerce with a name, character, and use distinct from that of the imported article. For the purposes of the application of Section 301 trade remedies under 9903.88.03, HTSUS, the country of origin of the finished cable assembly is the United States. Therefore, the insulated coaxial cable, part number L4-HMHM-12-SGW-D, is not subject to Section 301 trade remedies under 9903.88.03, HTSUS.
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 Luke LePage at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division