H302358

HQ H302358 January 23, 2020 OT:RR:CTF:VS H302358 AP CATEGORY: Origin U.S. Customs and Border Protection Automotive and Aerospace Center for Excellence Team 023-1, Partnership Branch Port of Newark/New York 1100 Raymond Blvd. Newark, NJ 07102 Attn: Ms. Denise Basilio, Supervisory Import Specialist RE: Internal advice; Country of origin of [ ] bicycles; Substantial transformation Dear Ms. Basilio: This is in response to the October 5, 2018 request for an internal advice and December 7, 2018 submission, which were filed on behalf of [ ], regarding the country of origin of [ ] brand bicycles that are manufactured in Taiwan from frames produced in China and parts sourced from China, Japan, Taiwan, and the United States. You have asked that certain information submitted in connection with this internal advice request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this internal advice request, forwarded to our office, will not be released to the public and will be withheld from published versions of this decision. FACTS: [ ] is a manufacturer, importer, and distributor of bicycle-related product brands encompassing approximately 40,000 different products, including bicycles for [ ]’s bicycle brands [ ], [ ] and [ ]. The company has distribution centers in the United States and a branch office in Taiwan that sources the products that [ ] imports and distributes. [ ] describes the subject merchandise as complete non-mass market high-end bicycles of various types that are manufactured in Taiwan by third-party suppliers and exported to the United States. The bicycles at issue are [ ] brand bicycles with carbon frames manufactured in China. The remaining bicycle components, i.e., the wheels, drive train components, and control components such as handlebars and stems, are mainly sourced from Taiwan but also from China, Japan, and the United States. The final manufacturing and assembly occurs in Taiwan prior to exportation to the United States. [ ] states that the frame accounts for approximately 30-40 percent of the cost of the finished bicycle and up to 70 percent of the value of the bicycle is added from the predominantly Taiwanese-origin components attached to the frame. [ ] describes the final product as primarily carbon fiber framed performance bicycles, with prices differentiated based on the different types of components, such as suspension forks, drive train components, cranks and seats, and the quality and type of wheels and wheel specifications. [ ] states that the cost of the frame originating from China is a small part of the cost of the complete bicycle. ISSUE: What is the country of origin for the subject bicycles? LAW AND ANALYSIS: Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin imported into the United States 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 the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. § 1304, Congress intended to ensure “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940). The country of origin marking requirements and the exceptions of 19 U.S.C. § 1304 are set forth in Part 134, Customs Regulations (19 C.F.R. Part 134). Section 134.1(b), Customs Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” 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 the marking laws and regulations. A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. GibsonThomsen Co., 27 C.C.P.A. 267, C.A.D. 98 (1940); Texas Instruments, Inc. v. United States, 681 F.2d 778, 782 (1982). In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process may be considered when determining whether a substantial transformation has occurred. No one factor is determinative. Substantial transformation, including the “name, character and use” test, was at issue in Nat’l Hand Tool Corp. v. United States, 16 CIT 308, aff’d, 989 F.2d 1201 (Fed. Cir. 1993). The Court of International Trade (“CIT”) determined that the mechanics’ tools in Nat’l Hand Tool did not undergo substantial transformation in the United States and were not exempt from the marking requirements in 19 U.S.C. § 1304. The court found that there was no change in name because each article in its condition as imported had the same name in the completed tool. There was no change in character because the articles, which were either hot-forged or cold-formed into their final shape in Taiwan, remained the same after heat treatment, electroplating, and assembly in the United States. The use of the imported articles was predetermined at the time of entry as each component was intended to be incorporated in a particular finished mechanics’ hand tool, except for one exhibit. The court rejected the importer’s claim that the value added in the United States was relatively significant to the operation in Taiwan so that substantial transformation should be found, noting such a finding could lead to inconsistent marking requirements for importers who perform exactly the same processes on imported merchandise, but sell at different prices. Id. In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the CIT interpreted the meaning of “substantial transformation.” Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. All of the components of the flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States and assembled into the finished flashlight. The Energizer court reviewed the “name, character and use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, 3 CIT at 226, 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. 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 Nat’l Hand Tool Corp., 16 CIT at 311-12. Courts have also considered the natur

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin imported into the United States 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 the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. § 1304, Congress intended to ensure “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940). The country of origin marking requirements and the exceptions of 19 U.S.C. § 1304 are set forth in Part 134, Customs Regulations (19 C.F.R. Part 134). Section 134.1(b), Customs Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” 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 the marking laws and regulations. A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. GibsonThomsen Co., 27 C.C.P.A. 267, C.A.D. 98 (1940); Texas Instruments, Inc. v. United States, 681 F.2d 778, 782 (1982). In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, U.S. Customs and