N324063

N324063 February 10, 2022 CLA-2-85:OT:RR:NC:N1:103 CATEGORY: Classification; Origin; Trade Programs TARIFF NO.: 8507.80.8200 Derek Polman-Tuin Invinity Energy Systems (US) Corporation 1633 Broadway, Suite 2 Oakland, CA 94612 RE: The tariff classification, Section 301 measures, and United States-Mexico-Canada Agreement (USMCA) eligibility of a vanadium flow battery Dear Mr. Polman-Tuin: In your letter dated January 28, 2022, you requested a tariff classification and country of origin ruling. The item under consideration is the Invinity VS3-022 Vanadium flow battery. The unit is a rechargeable vanadium battery pack with a nominal voltage of 850 VDC and a capacity of 220 kWh. Each pack is composed of six battery modules assembled inside a custom 20-foot container. Within each battery module are two battery stacks, electrolyte storage tanks, and pumps. The vanadium flow battery stores and supplies energy using a reversible electrochemical reaction. The applicable subheading for the VS3-022 Vanadium flow battery will be 8507.80.8200, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Electric storage batteries, including separators therefor, whether or not rectangular (including square); parts thereof: Other storage batteries: Other.” The rate of duty will be 3.4 percent ad valorem. In your letter, you inquire whether Section 301 measures are applicable to the VS3-022 Vanadium flow battery and provide two separate manufacturing scenarios. In the first scenario, the process begins in China where a custom 20-foot container is fabricated. The container holds six battery modules, each with a lower and upper enclosure. The lower enclosure houses the storage tank, which will contain the electrolyte. To produce the tank, a tank lid assembly is combined with a tub, fittings are added, gas management ports are welded, and gaskets are installed. The storage tanks, pump assembly, gas management pre-assembly, and conveyance hose assembly are installed into each battery module. Then, a DC-to-DC converter, power supply, container harness assembly, fan air duct assembly, high voltage block assembly, cabling, and terminals are installed into the container. The tanks are filled with electrolyte before testing and final inspection. All components used to produce the subassembly are sourced from China. The Chinese subassembly is exported to Canada for final assembly. In Canada, a battery stack is assembled using parts sourced from Canada, Germany, China, and the United States. They include a membrane, electrodes, bipolar plates, manifolds, current collectors, isolators, endplates, and channel covers. The components are stacked in layers, compressed, and secured using threaded rods and washers. Also in Canada, Invinity assembles the reference cell using parts sourced from the United States, China, Austria, Germany, Ireland, and Japan. A frame, membrane, connector housing, isolators, end plates, and O-rings, are assembled to form a reference cell with four fluid connection interfaces plus one electrical interface. The manufacturing operations include crimping connectors, soldering wires, torquing bolts, and testing. Hoses and clamps connect the reference cell to the battery stack. The final assembly involves the installation of the battery stack and reference cell into the Chinese subassembly. This process begins with removing container covers, removing access panels, and fitting edge protectors. Two battery stacks are placed inside the upper enclosure of each battery module and connected by negative and positive stack cables. Afterwards, the wire harness is connected, and the battery management software is uploaded to the battery management controller. Various testing and inspections are performed before the covers and access panels are reinstalled and final paint is applied. In the second scenario, the manufacturing steps remain the same as the first scenario except the electrolyte is filled in Canada instead of China. Final assembly of the vanadium flow battery takes place in Canada. You state the electrolyte may be sourced from the United States, United Kingdom, Taiwan, Japan, or China. 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 order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, all factors such as the components used to create the product and manufacturing processes that these components undergo are considered in order to determine whether a product with a new name, character, and use has been produced. No one factor is decisive. 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). 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 examining assembly operations, Customs and Border Protection has looked to the nature of the assembly, as well as the origin of the component that imparts the “essence” to the end product. The final assembly of Invinity’s vanadium flow battery involves the installation of a battery stack, reference cell, and battery management controller into a Chinese subassembly that includes the balance of components required to produce a battery that is capable of storing and supplying energy. We find that the final assembly operations in Canada are not sufficiently complex as to constitute a substantial transformation. Next, we must determine the component that imparts the essence of the finished vanadium flow battery. While the battery stack cannot function solely on its own and requires the pumps, electrolyte, etc., to store and supply electricity, we find that the battery stack provides the essence of the flow battery. As such, in the first scenario, the country of origin of the Invinity VS3-022 Vanadium flow battery for purposes of Section 301 is Canada. Regarding the second scenario, in our view the filling of electrolyte in Canada is not complex and meaningful enough to substantially transform the imported components. Therefore, in the second scenario, the country of origin of the Invinity VS3-022 Vanadium flow battery for the purposes of Section 301 is Canada. Concerning the country of origin marking of the Invinity VS3-022 Vanadium flow battery, 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 United States 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 United States the English name of the country of origin of the article. Part 134 of the U.S. Customs and Border Protection Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021