Country of origin of the PhotonBlade Electrosurgical Device; Section 301 trade remedy

HQ H315735 September 10, 2021 OT:RR:CTF:VS H315735 JMV CATEGORY: Origin Mr. David R. Hamill Mr. Robert A. Shervette Arent Fox LLP 1717 K Street NW Washington, DC 20006 RE: Country of origin of the PhotonBlade Electrosurgical Device; Section 301 trade remedy Dear Mr. Hamill: This is in response to your correspondence, dated December 22, 2020, filed on behalf of your client Stryker Corporation (“Stryker”). In your letter, you request a binding ruling on the applicability of Section 301 trade remedies for the PhotonBlade Electrosurgical Device. You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), your request for confidentiality is approved. The information contained within brackets and all attachments to your request for a binding ruling, forwarded to our office, will not be released to the public and will be withheld from the published version of this ruling. FACTS: The PhotonBlade, classified in 9018.90.60 of the Harmonized Tariff Schedule of the United States (“HTSUS”), is a single use surgical cutting instrument that consists of a single blade with a rotatable and adjustable length shaft. It is described as an “advanced electrosurgical device with illumination, delivering precise energy and low thermal spread.” It is used in general purpose surgical procedures and operations performed on humans. The device includes the following functions: illumination, coagulation, and plasma cutting. The illumination is powered by a rechargeable battery and the coagulation and cutting are powered by a radio frequency (“RF”) wavelength generator. The PhotonBlade has a blade surrounded by an LED light assembly on one end and a tubular shaped handle on the other. The handle includes a telescoping extension that locks into position. The device is eight inches long when the telescoping shaft is retracted, and 11 inches long when fully extended. The handle has three buttons that activate the functions of illumination, coagulation, and cutting. When activated, the LED light assembly illuminates the tissue area directly in front and around the blade to improve visibility for the surgeon. The blade itself is a proprietary design made from steel with a special ceramic dielectric coating and insulation. The blade does not cut the tissue like a traditional scalpel. Instead, the ceramic blade focuses the RF Energy which cuts the tissue. The RF Energy alone cannot cut the tissue without the ceramic blade. Without the blade focusing the RF Energy, the RF Energy would disperse such that it would not be concentrated enough to cut the tissue and certainly not with any precision or accuracy. The tip of the device is rotatable such that the blade can be positioned in any plane without surgeons having to alter their grip and hand position while operating by manually rotating the blade shaft to put the blade in the desired position. At the end of the handle is a cable that has a plug at its end where a battery is stored. This battery powers the LED illumination. This plug also has three prongs that connect to an external power source, an Electrosurgery Generator Unit (“ESU”) that powers the coagulation and cutting functions. The ESU produces electrical waveforms that create the RF current. The blade’s special ceramic dialectic coating and design are what allows the blade to utilize the RF energy for cutting. The blade emits the RF energy into the tissue from the uncoated edges. The tissue that meets the blade undergoes RF induced intracellular oscillation of ionized molecules causing it to rapidly reach 100 degrees Celsius. This then causes the intracellular contents of the tissue to undergo a liquid to gas conversion, a massive volumetric expansion, and then explosive vaporization. This vaporization enables the blade to cut tissue. The combination of the special coating and the uncoated steel blade focuses the RF energy to facilitate the cutting function. Similarly, the blade’s dielectic coating and RF energy provide the coagulation function. RF energy is emitted from the blade at a particular frequency that heats the tissue to 60-99 degrees Celsius, which coagulates the soft tissue in the incision during cutting to reduce bleeding. Overall, there are three main subassemblies constructed in Country A [XX] that make up the final PhotonBlade device. These subassemblies are the following: (1) heatsink subassembly, which dissipates heat when the PhotonBlade is in use, (2) waveguide subassembly, which guides the RF energy to the blade, and (3) the telescoping subassembly. In Country A [XX], the LED package from Country B [XXX] is incorporated into the heatsink subassembly which also includes three other parts of Country A [XXXX] origin. Then the ceramic coated blade from [XXXXXX] and the heatsink subassembly are further assembled into the waveguide subassembly with four other parts of Country C [XXX] origin and one other part of Country A [XXX] origin. Finally, the waveguide subassembly is further processed into the telescoping subassembly with one part of Country C [XX] origin and 17 parts of Country A [XX] origin. The telescoping subassembly is then sent to China where the telescoping subassembly is combined with a cable and connector of Chinese origin, six parts of Country A [XXX] origin, and six other parts of Chinese origin, including a screw, polyolefin shrink tubing, heat shrink tubing, hook up wire, and a distal collar. The Cable and Connector subassembly connects the PhotonBlade to a power supply, in this case a battery and an RF generator. By value, the ceramic coated blade from Country C [XXXXXX] accounts for the largest percentage of material costs. After the PhotonBlade is assembled in China, the complete product is sent to the United States where it sterilized and packaged to be sold and shipped to customers. ISSUE: What is the country of origin of the PhotonBlade for the purposes of applying Section 301 trade remedies? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% 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”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(b), HTSUS. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 9018.90.60, HTSUS. When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. 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 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 Generation II 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., 3 C.I.T. 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. 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, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). When considering whether cutting instruments undergo a substantial transformation, U.S. Customs and Border Protection (“CBP”) looks at the extent of the processing necessary to produce a finished good. In HQ H310562, dated January 6, 2021, CBP considered the origin of a ceramic knife, a ceramic peeler, and a ceramic slicer. All three were made of ceramic blade blanks from Japan and were sharpened and attached to handles and otherwise finished in China. CBP has long held that the mere assembly of a knife via the attachment of a handle to a blade, minor etching or sharpening of the blank, does not constitute a substantial transformation. Therefore, CBP found the country of origin of the knife to be Japan as the processing in China was not a substantial transformation. However, regarding the slicer and peeler, CBP found there was a substantial transformation. In China, the blade blank was sharpened, edged, then assembled to the paddle, which provided the slicer with its distinctive capabilities. CBP stated that once the sharpened blade was combined with the paddle body handle and the rim housing, the unique purpose of the peeler and slicer began to manifest. In particular, the paddle body handle and the rim provided the platform and housing, which allowed the blades to perform their primary purpose in the manner intended. Without the body and the rim, these blades could not perform their primary function and would have no recognizable purpose. Therefore, CBP found that the blank blades of Japanese origin were substantially transformed in China as the commercial identity and identifiable use of the blanks only became apparent after the sharpening and assembly in China. Similarly, in W556902, dated February 3, 1993, CBP considered the country of origin of disposable razors produced in Mexico from razor cartridges of Mexican origin and razors of U.S. origin. The razor cartridges and the razors would ultimately be produced into disposable razors in Mexico. The base of the cartridge, known as the “platform” and the upper portion called “cap” were combined to form the cartridge housing, both produced in Mexico. The platform, cap and remaining plastic components were produced from injection molding of plastic pellets in Mexico. Three different blades, which were of U.S. origin, were stacked and separated by spacers between the platform and the cap of the cartridge housing. The blades were positioned inside using four protruding plastic posts to form the razor cartridge. Finally, the complete razor cartridge was affixed to a plastic handle creating the final disposable razor product. In HQ W556902, CBP determined that the razor blanks along with the plastic pellets were substantially transformed into a new product with a new identity and use by virtue of the processing in Mexico and therefore were a product of Mexico. You assert and we agree that the country of origin of the PhotonBlade is not China as assembling the telescoping subassembly with the connector and cable in China is a simple assembly. Although the cable and connector subassembly connects the device to a power and RF generator source, this subassembly does not and cannot perform the actual cutting function as it is merely a conduit for the RF wavelength from the energy source to the blade. Additionally, the other additional parts assembled to the PhotonBlade in China do not provide any major functional role. You also assert that the country of origin of the PhotonBlade is Country C [XXXXXX] as the ceramic blade of Country C [XXXXXX] origin provides the essential function of cutting the tissue during surgery. However, the blade cannot function without the additional parts from and assembly in Country A [XXX]. The identifiable use of the PhotonBlade is to enable surgeons to coagulate and cut tissue with RF energy, while providing increased visibility and ease of use. The blades alone cannot perform any of these functions before they are assembled into the PhotonBlade. The subassemblies created in Country A [XXX] provide the necessary functions of guiding the RF Energy to the blade and dissipating heat created through use of the PhotonBlade. Additionally, the LED added in Country A [XXX] provides illumination and the telescoping subassembly created in Country A [XXX] provides maneuverability. Therefore, we find that the commercial identity and identifiable use of the PhotonBlade is created by the processing done in Country A [XXX] and the country of origin is Country A [XXX]. HOLDING: The country of origin of the PhotonBlade for the purposes of Section 301 is Country A [XXX]. 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