H327993

HQ H327993 November 10, 2022 OT:RR:CTF:VS H327993 AMW CATEGORY: Valuation; Origin Center Director Machinery CEE U.S. Customs and Border Protection 200 N Mariposa Road Nogales, AZ 85621 Attn: Wendell O. Jones, Import Specialist, Machinery CEE RE: Application for Further Review of Protest No. 270422160717; Powin Energy Corp.; Country of Origin of Energy Storage Units; Section 301 Trade Remedy Dear Center Director: This is in response to an Application for Further Review (“AFR”) of Protest Number 270422160717, timely filed on behalf of Powin Energy Corp. (“Powin” or “importer”), concerning liquidation and assessment of duties pursuant to Section 301 of the Trade Act of 1974 for the entry of certain energy storage units. FACTS: The merchandise at issue is a device described as the “Stack 225” and “Stack 230” energy storage systems (the “Powin Stacks”). The subject Powin Stacks were assembled in Taiwan by Powin’s contract manufacturers, iBase Gaming Inc. (“iBase”) and Formosa Electronic Industries, Inc. (“Formosa”). Upon importation, Powin declared the country of origin of the Powin Stacks to be Taiwan. U.S. Customs and Border Protection (“CBP”), however, liquidated the entries as Chinese origin. Powin has paid the additional duties and is now protesting the assessment of the duties. The Powin Stack system is a modular energy storage device that “can be flexibly scaled to provide diverse, energy and electricity grid services.” A marketing brochure provided to CBP further describes the Powin Stacks as “modular, flexible, purpose-built battery arrays that are easily and cost-effectively scalable from kilowatts to megawatts.” Each Powin Stack incorporates hundreds of components, including four main subassemblies: (1) the module subassembly (consisting of eight battery cells), (2) the battery pack controller (“BPC”) subassembly, (3) the battery pack subassembly (consisting of three modules), and (4) the string control box subassembly. These subassemblies are then combined to form one Powin Stack, which consists of 11 battery packs, 11 BPCs, and one string control box. The Protest states that the assembly process in Taiwan relating to the four submodules occurs as follows: The module subassembly consists of 17 steps to produce a single module. The process involves inspecting the cells for defects, applying thermal pads on the two end plates, assembling the cells with the polycarbonate (“PC”) sheet, assembling the end plate onto the base, assembling the insulator parts onto the front end plate, attaching the PC sheet to the modules with rivets, installing and attaching the busbars and cell voltage and temperature sensor wires, physically welding the battery cell terminals using a laser welding machine, and inspecting and performing tests on the modules, including the ACIR Test, individual cell voltage test, module voltage test, and DC and AC HiPot Tests. The BPC subassembly process consists of eight steps to produce a single battery pack. The process involves installation of the BPC fan, the BPC power printed circuit board (“PCB”), heatsink, temperature sensors, power cable, and top plastic cover, and finally the BPC PCB. Testing is performed to verify functionality. The battery pack subassembly consists of 18 steps to produce a single battery pack. The process involves assembling the battery modules to the battery pack enclosure, connecting balance and thermistor cables, staggering the wires and temperature sensing wires in sequence, testing the terminal voyage of each battery module, and installing the busbar, installing the BPC subassembly. The battery pack is subject to various tests to verify functionality and safety, including a BP Charge Discharge FAT Test, BPC FAT Test, and Torque QC Check. The string control box subassembly consists of 100 steps. The process involves rubber pad assembly, the PVC wiring duct installation, the voltage sensor installation, the DC contactor installation, fuse and busbar installation, PC partition installation, channel cutting, switch assembly installation, installation of a 5-pin terminal sockets, circuit breaker wiring harness installation, U2 power supper supply PE and output wiring harness installation, bundling and installation of wire ties, U1 power input and output wiring harness installation, UPS power input and output wiring harness installation, board wiring harness installation, wire connectors installation, K1 relay coil and PE wiring harness installation, current transformer output wiring installation, TCP/IP and CAN wiring harness installation, indication output installation, labeling, installation of the PVC open wiring duct cover, and installation of the front bracket of the string controller panel. The string control box subassembly is then subject to a SCB Fat Test to verify functionality. The final assembly of the Powin Stack consists of 36 steps. The process involves the installation of the air duct, the front door frame, the bottom tray, columns, ground wires, AC and CAN cables, DC cables, and busbars, battery pack stacking, and barcode labeling. The finished Powin Stack is subject to a series of tests to verify its functionality and specifications, including an EOL Burn-In Test, EOL Charge Discharge Test, EOL Test, and HiPot and Bonding Test. Although not discussed in the Protest, Powin has previously confirmed to CBP that the battery cells used in the Powin Stacks are produced in mainland China before being incorporated in the assembly process occurring in Taiwan. In addition to the physical assembly, each Powin Stack comes pre-installed with Powin’s StackOS software, an Energy Management System (“EMS”) and Battery Management System (“BMS”) platform. The Protest states that the EMS is intended to “tell the battery resources when to operate,” serving “as the link between the grid demand and the BMS, continually monitoring what the grid needs…” Meanwhile, the Protest states, the BMS software “instructs the battery resources how to operate,” monitoring battery output, voltage, temperature, health, fire warnings, and the state of charge, and regulates the charging and discharging power. All told, the Protest states that an estimated 15-20% of the overall production cost for each Powin Stack is associated with labor and overhead costs incurred in Taiwan. ISSUE: Whether the country of origin for the subject Powin Stacks is Taiwan or China for Section 301 purposes. LAW AND ANALYSIS: We note that the matter protested is protestable under 19 U.S.C. § 1514(a)(5) as a decision relating to the liquidation or reliquidation of an entry. The protest was timely filed, within 180 days of liquidation for the entry. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further review of this protest is properly accorded to the importer pursuant to 19 C.F.R. § 174.24(b) because the issues protested involve questions of law or fact, which have not been ruled upon. The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), HTSUS. Therefore, when determining the country of origin for applying trade remedies under Section 301, the substantial transformation analysis is applicable. 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). If the manufacturing or combini

We note that the matter protested is protestable under 19 U.S.C. § 1514(a)(5) as a decision relating to the liquidation or reliquidation of an entry. The protest was timely filed, within 180 days of liquidation for the entry. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further review of this protest is properly accorded to the importer pursuant to 19 C.F.R. § 174.24(b) because the issues protested involve questions of law or fact, which have not been ruled upon.The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), HTSUS. Therefore, when determining the country of origin for applying trade remedies under Section 301, the substantial transformation analysis is applicable.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). If the manufacturing or combining process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). The Court of International Trade more recently interpreted the meaning of “substantial transformation” in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016). Energizer Battery involved the determi