MAR-2:OT:RR:NC:N2:206
David Gaona
Hi-Lex Mexicana S.A de C.V.
Av. Peñuelas 9 Fracc. Ind. San Pedrito.
Querétaro de Arteaga, 76148
Mexico
RE: The country of origin of transmission cables.
Dear Mr. Gaona:
This is in response to your letter dated November 23, 2020, requesting a ruling on the country of origin of transmission cables for purposes of applying current trade remedies under Section 301. Pictures and descriptive literature were provided with your request.
The products under consideration are transmission cables, which are mechanical cables for use in conjunction with an automotive transmission. They connect the vehicle’s gearshift lever to the transmission itself, and function to select gears in the transmission when the gearshift lever is moved.
You state that a single transmission cable consists of a moveable inner cable made of steel (called “the inner”), which transmits the force and the movement so that the mechanisms that are joined can be activated; a flexible outer casing made of plastics (called “the outer”), which provides flexibility and protection to the inner; and a plastic guide (called “the liner”), which is placed between the inner and the outer and serves as a guide for the inner to slide inside, reducing friction caused by the constant sliding of the inner within the outer. The three components conform the “cable’s body”, onto which some Mexican, Japanese and Chinese end-fittings components are assembled.
The production process of transmission cables consists of five main manufacturing and assembly processes, all occurring entirely in Mexico: the inner manufacturing process, the liner manufacturing process, the outer manufacturing process, the cable’s body manufacturing process, and the end-fittings assembly process.
When determining the country of origin for purposes of applying current trade remedies under Section 301, Section 232, and Section 201, a substantial transformation analysis is applicable.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of the term “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight, under the TAA. All of the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight.
The court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred, 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.
In the present case, the Mexican steel wire (steel core) is stranded together with thinner wires of Japanese origin by a stranding machine, which results in a stranded wire (the inner cable). The liner is made of U.S. origin plastic pellets and Mexican calcium stearate, which are mixed and melted into the extrusion machine and shaped by an extrusion die. The Mexican wires are then stranded onto the liner and further adjusted with a tension-control machine. Then, resin of U.S origin is melted into the extruder machine and adhered over the stranded liner using an extrusion die, which results in a plastic outer casing (outer). Chamfering operations are made on both ends of the cut outer. The inner is then inserted into the outer using drill operations. Once the inner is inserted, two Mexican clamps and Chinese fittings are assembled on both ends to conform the transmission cable ready for importation to the United States.
It is the opinion of this office that the assembly of Chinese fittings into the cable body does not result in a substantial transformation. However, we find that the essence of the entire assembly is the Mexican steel wire. As a result, the country of origin of the transmission cables is Mexico for purposes of applying current trade remedies.
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, please contact National Import Specialist Liana Alvarez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division