H312767

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H312767 September 24, 2020 OT:RR:CTF:FTM H312767 MJD CATEGORY: Origin Mr. Robert Hooton Yamaha Motor Corporation, USA 6555 Katella Ave Cypress, California 90630 Re: Country of origin of electric bikes Dear Mr. Hooton: This is in response to your letter, dated July 17, 2020, requesting a binding ruling on the country of origin of two models of Yamaha electric bikes (“E-bikes”), the All Mtn High E-bike and the All Mtn low E-bike. Your request was forwarded by the National Commodity Specialist Division to this office for a response. Our ruling is set forth below. FACTS: The All Mtn High E-bike and the All Mtn Low E-bike are described by the requestor as bicycles that use “a distinctive electrically powered pedal-assist drive system to aid the rider in propulsion.” Both E-bikes are made primarily of Taiwanese components and also include Chinese and Japanese materials. The assembly of the E-bikes takes place in China. The materials sourced from Taiwan include the frame, which is a finished and painted product when shipped to China, and the fork, which will be cut and fitted to the frame and mounted to the crown race in China. The other components from Taiwan include the pedals, crown race, wheels, crank, levers, chain, handlebar, brakes, and seat post. The E-bike components sourced from China include the saddle seat, clips, fasteners, and brackets. The Pedal-Assist Drive Unit, the motor for the E-bike, is a product of Japan. It provides ease of use for the rider when it senses the rider has increased resistance and allows the E-bike to go faster while the rider is pedaling. The battery for the Pedal-Assist Drive Unit is sourced from China, and it powers the pedal assist system. The only difference between the two models of E-bikes is that the shifter assembly for the All Mtn High E-bike is of Japanese origin, while the shifter assembly for the All Mtn Low E-bike is of Chinese origin. All of the products when imported to China are finished products except for the fork. The following assembly process takes places in China: [T]he fork will be fitted to the frame after the fork is cut. The wires, levers, pedals, crank and chain are affixed to the unit and the wheels and brakes are connected to the lever control system. Labels are affixed, saddle is attached to seat post before adding the battery and drive unit to complete this E-Bike. According to the requestor’s supplemental submission, dated September 23, 2020, the total cost of the Taiwanese components, including the frame, accounts for 39.50 percent of the finished E-bikes. The total cost of the Chinese components, including the battery, accounts for 32 percent of the finished E-bikes. Lastly, the total cost of the Japanese components, including the Pedal-Assist Drive Unit, accounts for approximately 28.50 percent of the finished E-bikes. ISSUE: What is the country of origin of the All Mtn High E-bike and the All Mtn Low E-bike? LAW AND ANALYSIS: The marking statute, 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. Congressional intent in enacting 19 U.S.C. § 1304 was “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. Inc., 27 C.C.P.A. 297, 302, C.A.D. 104 (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 is said to have occurred when an article emerges from a manufacturing process with a name, character, and use which differs from the original material subjected to the process. United States v. Gibson-Thomsen 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, 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. No one factor is determinative. 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.” 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 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 reaching its decision in Energizer, the court considered whether the imported components retained their names after they were assembled into the finished flashlights. The court found “[t]he constitutive components of the Generation II flashlight do not lose their individual names as a result [of] the post-importation assembly.” The court also found that the components had a predetermined end-use as parts and components of a Generation II flashlight at the time of importation and did not undergo a change in use due to the post-importation assembly process. Finally, the court did not find the assembly process to be sufficiently complex as to constitute a substantial transformation. The court determined that the imported components did not undergo a change in name, character, or use as a result of their post-importation assembly into a finished Generation II flashlight. Virtually all of the components of the military flashlight, including the most important component, the LED, were of Chinese origin. Thus, the court determined that China was the correct country of origin of the finished flashlights for purposes of government procurement. The CIT has also looked at the essence of an article to determine whether the identity of a

The marking statute, 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. Congressional intent in enacting 19 U.S.C. § 1304 was “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. Inc., 27 C.C.P.A. 297, 302, C.A.D. 104 (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 is said to have occurred when an article emerges from a manufacturing process with a name, character, and use which differs from the original material subjected to the process. United States v. Gibson-Thomsen 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