Country of Origin of an F-Clamp; Substantial Transformation

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H312674 February 24, 2021 OT:RR:CTF:VS H312674 RSD CATEGORY: ORIGIN Andrew Bisbas, Esq. Lowenstein Sandler LLP 2200 Pennsylvania Avenue, N.W. Washington, D.C. 20037 RE: Country of Origin of an F-Clamp; Substantial Transformation Dear Mr. Bisbas: This is in response to your request for a ruling dated February 21, 2020, submitted on behalf of the Tractor Supply Company concerning the country of origin of a hand tool known as the F-clamp. Your request was originally sent to the National Commodity Specialist Division, who in turn sent your request to the Office of Regulations and Rulings for a decision concerning the country of origin of the product. Accompanying your submission were a series photographs that showed the various stages involved in the production of the product. FACTS: The merchandise under consideration is a hand tool known as the F-clamp because of its shape. It is commonly used in woodworking to temporarily clamp pieces of wood together until more permanent attachments, e.g. screws, can be applied or while glue is allowed to dry. The F-clamp is comprised of several components produced in two countries, South Korea and China. The main components of the tool include the clamp body, adjustable vertical arm, screw, bar/handle, and swivel pad. The clamp body and adjustable vertical arm are made using steel bars sourced from China. The steel bars are shipped to South Korea to make two pieces. The first piece is forged into an “L” shape with a fixed flat jaw of the F-clamp. The second straight steel bar piece (roughly the length of the short side of the “L” piece) is formed into the moveable and adjustable arm of the F-clamp. These two pieces are then shipped to China where they are further machined, polished, heat-treated, and plated. In addition, a Chinese-origin threaded screw that incorporates a vertically inserted steel bar (handle), and swivel tightening component are added to complete the adjustable clamping mechanism. A square and round hole are punched into the adjustable arm, and the round hole is threaded. This allows the clamp to be tightened and loosened accordingly. The body, vertical adjustable arm, and handle are then assembled along with a Chinese-origin swivel pad, which is attached to the end of the threaded screw. Finally, the finished F-clamp is packaged and shipped to the United States. ISSUE:      What is the country of origin of the F-clamps? LAW AND ANALYSIS: 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(r), and HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(s)(i), HTSUS. When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed. A substantial transformation is said to have occurred 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., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments 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 finished 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, and 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 will be considered when determining whether a substantial transformation has occurred. No one factor is determinative. In National Hand Tool Corp. v. United States, 16 CIT 308, 310, aff’d, 989 F.2d 1201 (Fed. Cir. 1993), the court examined whether post-importation processing in the United States substantially transformed certain tools, that is, flex sockets, speeder handles, and flex handles, that had been cold-formed or hot-forged in Taiwan into their final shape prior to importation, with the exception of the speeder handle bars which were reshaped by a large power press after importation. The tools were subjected to a heat treatment which strengthened the steel followed by cleaning which consisted of sand-blasting, tumbling and/or chemical vibration to prepare their surfaces for electroplating. For some of the tools, the heat treatment and cleaning occurred in the United States, but for others, these processes were performed in Taiwan. After cleaning, the tools were electroplated with nickel and chrome to resist rust and corrosion. As with the cleaning, the electroplating took place either in Taiwan or the United States, depending on the tool. After the post importation processing was completed, various components were assembled to produce the tools. In determining that the processing in the United States did not substantially transform the imported tools, the court considered whether there had been a change in the name, character, or use of each tool. The court found that there was no change in the name of the components; and, the character of the articles remained unchanged after the heat treatment, electroplating and assembly as each, with the exception of the speeder handles (which were reshaped by a power press after importation), left Taiwan in their final shape. Further, the use of each tool was pre-determined at the time of exportation, with the exception of one component that could be used as either a universal joint or a flex socket. The court noted that a pre-determined use does not preclude a finding of substantial transformation, but “the determination of substantial transformation must be based on the totality of the evidence.” See National Hand Tool, 16 CIT at 312. As the court stated in National Hand Tool, we must look at the totality of the evidence. Accordingly, we must consider the product at issue, how it functions, and the purpose of its components in carrying out its function. In this case, the type of clamp under consideration is known as an F-clamp. In Headquarters Ruling (HQ) H309984 dated September 11, 2020, Customs and Border Protection considered the country of origin of a very similar type product, known as a bar clamp. Like the F-clamp in this case, the bar clamp in H309984, was used in wood working for temporarily holding pieces of wood together until they could be permanently fastened together by means such as with screws or through gluing. It was noted that the actual parts that performed the function of holding the pieces of wood together were the clamp heads. The two clamp heads grasped the pieces of wood and pressed upon them to keep them in place until they were permanently fastened together. The other components of the clamps were the horizontal metal bar and the disc clutch which were made in China. These components served as a means to adjust the heads into the desired position and maintained pressure. It was pointed out that the Chinese components that were added, the bar, the disc clutch and the spring basically, assisted the heads in holding the pieces of wood together, but they did not perform the basic function of the clamps. The aluminum clamp heads were molded in Vietnam and they were subjected to heat treatment, coating, and simple assembly in China. The clamp heads retained the same shape, form and size when they were put together with the other components in China to make the finished clamps. Accordingly, it was found that the origin of the clamp heads dictated the origin of the finished bar and pipe clamps, and HQ H309984 held that the Vietnamese heads were not substantially transformed by the processing performed in China to make the finished clamps. The product under consideration in this case, the F-clamp, is made using generic steel bar cuts sourced from China. The steel bar cuts will be shipped to South Korea, where they will be forged into the final shape/form of the F-clamp. One piece is the “L” shaped piece with a fixed jaw and the other piece is the straight piece (roughly the length of the short side of the “L” piece) that forms the adjustable arm of the F-clamp. At this point, the pieces are recognized as an F-clamp and they are shipped to China for further machining/heat treatment/plating where a Chinese-origin screw/handle and swivel tightening component are added to complete the adjustable clamping mechanism. In China, a square and round hole are punched into the adjustable arm, and a round hole is threaded. Like the clamp heads in H309984, we find the South Korean clamp jaw forgings constitute the fundamental components of the finished F-clamps because they are responsible for holding the pieces of wood in place until they can be more permanently fastened together. When the forgings are exported from South Korea to China, they are formed to their final shape and resemble the finished F-clamps. The photographs and diagrams, submitted by Tractor Supply Company, show that at the time of export from South Korea, the forgings have the shape/appearance of a finished F-clamp. Moreover, when they are produced in the South Korea, these jaw forgings have a pre-determined use in the production of F-clamps because they are only intended for use as an immediate stage in the production of finished F-clamps. Upon arrival in China, the jaw forgings are clearly identifiable as the essential component of the F-clamp, with the overall shape, size, and character of a finished F-clamp. While the finishing operations and component assembly that occur in China are necessary for the production of the finished F-clamps, these operations are not extensive enough to alter the fundamental character of the jaw forgings. Therefore, we find that the origin of the South Korean clamp jaw forgings determines the origin of the finished F-clamps, and no substantial transformation occurs by the processing performed in China to make the finished F-clamps. Accordingly, we find that the country of origin of the F-clamps is South Korea. HOLDING: The country of origin of the F-clamps is South Korea. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch