Request for Reconsideration of NY N309148; Country of origin of an automotive suspension system (Items Numbers SQ10821, SQ11042, SQ11060, SQ11100 and SQ14302)

HQ H310543 May 18, 2020 OT:RR:CTF:VS H310543 AP CATEGORY: Origin Mr. Donald Gross Counsel to DeHeng Law Offices 1519 33rd Street, N.W. Washington, D.C. 20007 RE: Request for Reconsideration of NY N309148; Country of origin of an automotive suspension system (Items Numbers SQ10821, SQ11042, SQ11060, SQ11100 and SQ14302) Dear Mr. Gross: This is in response to your letter of April 20, 2020, on behalf of Gold Suspension System Malaysia SON BHD (“GSSM”), requesting reconsideration of New York Ruling Letter (“NY”) N309148, dated Feb. 4, 2020, regarding the country of origin of an automotive suspension system (items numbers SQ10821, SQ11042, SQ11060, SQ11100 and SQ14302) assembled in Malaysia from components of Chinese and Malaysian origin. We reviewed your request and we believe that NY N309148 is correct for the reasons set forth herein. NY N309148 describes the subject automotive suspension system as follows: The item under consideration is a vehicle Suspension System (Item Numbers SQ10821, SQ11042, SQ11060, SQ11100, and SQ14302), which consists of an elastic component (suspension spring and airbag), a damping component (shock absorber), steering gears (bearings), and joints and linkage (elastic rubber plate). The elastic components reduce the bumping, the shock absorber reduces the vibration and dampen the motion of the springs, while the steering gears convert the energy of vibration to heat. As most parts of any suspension must be movable and flexible, the linkages are connected by a flexible connection, including the bushing and bearing. These impact the system to adapt to the damping and vibration. You state that the shock absorber is sourced in China, and imported into Malaysia, where it gets assembled with the rest of the components of Malaysian origin. Below are the submitted images of each item number: NY N309148 determined that the assembly process in Malaysia did not result in a substantial transformation of the items and that the shock absorber sourced from China was the “very essence” of the entire suspension system. Therefore, the vehicle suspension system (items numbers SQ10821, SQ11042, SQ11060, SQ11100 and SQ14302) was considered a product of China for origin and marking purposes. In your April 20, 2020 request for reconsideration, you describe the function of the individual components and the assembly process. The nuts fasten the connection between the piston rod and the rubber cap of the shock absorber to prevent it from loosening. The bumber buffers and reduces shock. The dust cover prevents dust, mud, and mud water from causing piston rod erosion. The spring seat reduces buffering while fixing the installation direction and position of the spring, and reduces the noise generated by the spring operation. The spring seat provides spring support and fastening. The bearing part supports spinning and reduces steering friction. The suspension strut (shock absorber) accelerates and attenuates the vibration of the frame and body, and improves the ride balance, comfortability, maneuverability, and safety of the vehicle. The spring reduces buffering and provides support, bears and transmits the vertical load, and alleviates and inhibits the impact caused by uneven road surfaces. The strut mount connects and reduces buffering, connects the shock absorber to the frame, adapts steering action, connects the nonlinear flexibility with the shock absorber to produce the complete dampening function, and has a transmission role. The holders in item number SQ11042 reduce the steering friction. The assembly process involves combining, mounting, and screwing the individual components together. You assert that none of the individual components used to manufacture the final product could possibly perform the function of a comprehensive automobile suspension system. You argue that the essence of the suspension system is not comparable to the nature of any of the individual parts used to produce it. According your submission, the value of the suspension system far exceeds the value of its total parts and the cost of their production. It is your position that a product does not need to experience a change in character and use to be substantially transformed, and cite to Koru North America v. United States, 12 CIT 1120, 701 F. Supp. 229 (1988) and SDI Techs., Inc. v. United States, 21 CIT 895, 977 F. Supp. 1235 (1997), aff’d, 155 F.3d 568 (Fed. Cir. 1998). Further, it is your contention that unlike in Ran-Paige Co. v. United States, 35 Fed. Cl. 117 (1996), a substantial transformation occurred here because GSSM allegedly undertook a “complex and sophisticated” manufacturing operation to produce an entirely new product that improved on the capability and value of any individual part. 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 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, 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, U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 134). Section 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, 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, Inc. v. United States, 3 CIT 220, 226, 542 F. Supp. 1026, 1031 (1982), 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. 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 essential character of an article to determine whether its identity has been substantially transformed through assembly or processing. For example, in Uniroyal, 3 CIT at 225, the court held that imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and thus the character of the product remained unchanged and did not undergo substantial transformation in the United States. Similarly, in Nat’l Juice Prod. Assoc. v. United States, 10 CIT 48, 61, 628 F. Supp. 978, 991 (1986), the court held that imported orange juice concentrate “imparts the essential character” to the completed orange juice and was not substantially transformed into a product of the United States. In Headquarters Ruling Letter (“HQ”) H282391, dated Mar. 16, 2017, CBP determined that the country of origin of a gear motor was the United States because the assembly process in the United States amounted to a substantial transformation. The gear motor was comprised of a gear box and a motor. The assembly of the gear motor consisted of assembling together 131 unique parts, and at least a total of 200 parts. These parts were of various origins and were used to first assemble the gear box and motor subassemblies, and then to assemble the complete gear motor through a complex operation with specialized skill and expertise. The complex operations involved at least 27 steps and took approximately two hours. The hired workers had previous experience and underwent additional training in order to reach proficiency in the assembly process. CBP concluded that the foreign components lost their individual identities and became an integral part of a new article, the gear motor, with a new name, character and use, amounting to a substantial transformation as a result of the complex assembly operations. In NY N307541, dated Dec. 11, 2019, CBP examined a vehicle suspension system consisting of a shock absorber, coil spring, strut mount, bumper block, dust cover, spring cushion, and hardware. The shock absorber was sourced in China, where it underwent a punching and welding processes. It was imported into Taiwan to be assembled together with the rest of the components of Taiwanese origin into a complete strut assembly. CBP determined that the shock absorber was the essence of the entire strut assembly because it was the most complicated component of the assembly. Replacing an independent shock absorber was difficult and required professional equipment and technicians. It took 3-4 hours for the replacement service. Replacing a loaded strut assembly was an easier process, which only took one hour. As a result, the shock absorber was not substantially transformed in Taiwan and the strut assembly was considered a product of China (country of origin of the shock absorber) for origin and marking purposes. As in NY N307541, in the instant matter, the shock absorber is the most essential component of the vehicle suspension system because it is far more complicated in its nature than the other components; as it costs significantly more; and it is bulkier and heavier. It functions as a hydraulic pump that controls the spring’s coiling and uncoiling. After being combined, mounted, and screwed to form a suspension system, the individual vehicle components retained their character and use. Additionally unlike in HQ H282391, the final product here resulted from a simple assembly process. The assembly operations of the various components in Malaysia were not sufficiently complex to result in a substantial transformation. You cite to Koru North America, 12 CIT at 1120, 701 F. Supp. at 229, in which the whole fish was transformed into individual frozen filets with no skin and bones, and a new article of commerce. This matter is distinguishable from the Koru case because the transformation of the fish into a processed retail product was more than a simple assembly of individual parts. Rather the facts of this matter more closely resemble the situation that occurred in SDI Techs., 21 CIT at 895, 977 F. Supp. at 1235, where a center console and speakers became parts of a stereo rack system, but did not result in a substantial transformation of the stereo rack system. Likewise, in this matter, the individual components of the automobile suspension system were not subjected to a significant manufacturing process and retained their individual character and use after the assembly. See also Nat’l Hand Tool Corp., supra; Energizer Battery, supra. Lastly, the present case is also similar to the handles and fasteners in Ran-Paige, 35 Fed. Cl. at 117, which were attached to pans and covers, in that the attachment of the nuts, bumber, dust cover, spring seats, bearing part, spring and strut mount mounted and screwed to the shock absorber does not result in a substantial transformation of the shock absorber made in China, which is already the essence of the product. For all of the aforementioned reasons, we find that the subject automotive suspension system (items numbers SQ10821, SQ11042, SQ11060, SQ11100 and SQ14302) is a product of China, the country of origin of the shock absorber, which is the essence of the automotive suspension system, and that NY N309148 correctly determined the country of origin of the automotive suspension system. We therefore affirm NY N309148, dated Feb. 4, 2020. Sincerely, Craig T. Clark, Director Commercial and Trade Facilitation Division