N329305

N329305 November 29, 2022 CLA-2-85:OT:RR:NC:N1:103 CATEGORY: Classification; Origin; Trade Programs TARIFF NO.: 8507.60.0020; 9903.88.15 Shunsuke Nagano SIIX USA Corporation 651 Bonnie Lane Elk Grove Village, IL 60007 RE: The tariff classification, Origin, and United States-Mexico-Canada Agreement (USMCA) eligibility of a battery pack Dear Mr. Nagano: In your letter dated November 11, 2022, you requested a ruling on the tariff classification, country of origin, and eligibility of a battery pack under the United States-Mexico-Canada Agreement (“USMCA”). The merchandise under consideration is a Stihl battery pack, model number AP 300 S, compatible with Stihl AP Series power tools. Each battery pack contains rechargeable lithium-ion battery cells encased in a rectangular housing and has a rated voltage of 36 volts, a 7.2 Ah capacity, and weighs 3.96 pounds. The applicable subheading for the Stihl battery pack, model number AP 300 S, will be 8507.60.0020, 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: Lithium-ion batteries: Other.” The rate of duty will be 3.4 percent ad valorem. Regarding the country of origin, you state the battery pack is assembled in Mexico using components sourced from China, Germany, Hungary, India, Mexico, and the United States. The battery cells are sourced either from China or Singapore. The assembly of the battery pack begins with attaching moisture sheets to individual battery cells and inserting the cells into a holder to form a cell assembly. Various contact plates are welded onto the top and bottom of the cell assembly to form a core pack. An insulating plate and spacer plate are attached to the core pack before it is folded onto itself to form a double stacked configuration. A power bar assembly, terminal bar, and contact plate are welded to form a subassembly that is subsequently welded to the core pack. Next, a wire harness is taped to the core pack before being connected to a PCBA. Lastly, the entire core pack is inserted into the housing, a thermistor is glued into place, and the cover is affixed to the housing using screws. Before final inspection and packaging, various tests are performed, a label is attached, and the terminal plug is greased. With regard to your request for the appropriate country of origin of the battery pack, 19 C.F.R. § 134.1(b) provides in pertinent part as follows: Country of origin means 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 this part. 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 Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer, the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, 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. Customs and Border Protection has previously held that the assembly of battery cells into battery packs does not result in a substantial transformation of the battery cells because the essential character of the cells does not change simply by being placed together in a plastic case. Moreover, there is no significant change in name, use or character to the battery cells when such an assembly occurs. See HQ ruling 563045, dated August 9, 2004, and HQ ruling 734393 dated March 20, 1992. The assembly operations in Mexico do not change the Chinese or Singaporean battery cells, which provide the essence of the battery pack, into an article with a new name, character, or use, different from that possessed by the article prior to processing. In view of these facts, the country of origin of the subject battery pack, model AP 300 S, for the purposes of Section 301 is China or Singapore, dependent upon where the battery cells are manufactured. Concerning the country of origin marking of the battery pack, 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 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which: (a)(1) The good is wholly obtained or produced; (a)(2) The good is produced exclusively from domestic materials; or (a)(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. The battery pack is neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine its country of origin, and we need to apply paragraph (a)(3). Under 19 C.F.R. § 102.11(a)(3), any foreign materials of the battery pack must satisfy the tariff shift requirements of 19 C.F.R