Country of Origin; Grease seal; Section 301 trade remedy

HQ H322399 January 7, 2022 OT:RR:CTF:VS H322399 AP CATEGORY: Origin Jay Allan, LCB Director, Trade Compliance Law Department Amsted Industries, Inc. 180 North Stetson Avenue, Suite 1800 Chicago, IL 60601 RE: Country of Origin; Grease seal; Section 301 trade remedy Dear Mr. Allan: This is in response to your June 30, 2021 ruling request, on behalf of Amsted Industries (“Amsted”), regarding the country of origin of certain grease seals for railcar bogies, assembled in the United States with U.S. and Chinese components, exported to a foreign country, and returned by overseas customers to the U.S. after purchase for purposes of Section 301 measures. The importer has asked that certain information submitted in connection with this ruling be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in italics in this ruling or in the attachments to the ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this ruling. FACTS: Amsted intends to import Chinese steel shields of subheading 7326.90.8688, Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”) from China. The Chinese steel shields, unless specifically excluded, are subject to Section 301 duties when imported into the United States. The shield is a stamped circular metal ring imported in its final shape. It will be assembled in the United States into rubber grease seals, the item under consideration, which will, in turn, be assembled into bearings and mounted to the axle of a railcar bogie. The grease seal’s primary function is to ensure that the agent used to lubricate tapered roller bearings mounted onto axles does not leak out. A standard seal consists of an inner circular rubber material molded to an outer steel housing. In the United States, a rubber seal case produced at a U.S. plant will be molded and joined to the imported Chinese steel shield by inserting the U.S. rubber seal case and a U.S. rubber lip into the shield, and flanging the bottom on the shield. The seal case and the molded lip will prevent leakage of grease out of the seal. The shield will act as the running surface for the rubber lip and the primary function of the shield, when assembled as part of the grease seal, is to prevent dirt and water contaminates from touching the sealing surface. You state that the largest cost ([X]%) to produce the grease seal will be U.S. labor and U.S.-sourced material content, and that the Chinese shield will represent a small percentage ([X]%) of the total cost of the finished grease seal. The finished grease seal will be exported to customers outside of the U.S. The U.S. importer is seeking this origin determination because overseas customers may wish to return the grease seal to the U.S. under certain circumstances (i.e., if the seal is defective). ISSUE: What is the country of origin of the grease seal manufactured in the U.S. and returned to the U.S. by overseas customers after purchase 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 percent 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(d), HTSUS. Among the subheadings listed in U.S. Note 20(d) of Subchapter III, Chapter 99, HTSUS, is 7326.90.86. When determining the country of origin for purposes of applying Section 301 trade remedies, the substantial transformation analysis is applicable. The test 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. Texas Instruments, Inc. v. United States, 69 CCPA 151, 681 F.2d 778 (1982). U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes substantial transformation determinations on a case-by-case basis. CBP has stated that a new and different article of commerce is an article that has undergone a change in commercial designation or identity, fundamental character, or commercial use. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). Minimal or simple assembly operations 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. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and the character of the product remained unchanged and did not undergo substantial transformation in the United States). Headquarters Ruling Letter (“HQ”) W563587, dated Feb. 8, 2007, involved a cable seal manufactured in the U.S. and used on trucks, shipping containers and freight rail cars. The cable seal consisted of a U.S. lock body, Chinese bolt shank and locking ring, and Malaysian non-performed cable. The lock body was the most valuable component of the seal and imparted the essence of the seal. The cable lock enabled the cable ends to be permanently sealed to secure the cargo and prevent tampering without detection. CBP concluded that the seal was of U.S. origin for purposes of government procurement. In HQ H310543, dated May 18, 2020, a Chinese shock absorber was the essence of a vehicle suspension system. It functioned as a hydraulic pump that controlled the spring’s coiling and uncoiling. The assembly operations of the various components in Malaysia were not sufficiently complex to result in a substantial transformation. As a result, the country of origin of the suspension system was China, the country of origin of the shock absorber. In the instant matter, the U.S.-originating rubber seal case and molded lip seal prevent leakage of grease out of the seal and impart the essence of the grease seal. The Chinese steel shield is inserted inside the grease seal and serves as a running surface for the rubber molded lip. The steel shield’s function is minor compared to that of the U.S. rubber seal case and the U.S. rubber molded lip. Additionally, the steel shield represents a small percentage ([X]%) of the total cost of the finished grease seal. Since the Chinese steel shield is assembled in the United States with components mostly of U.S. origin, which provide the essence to the grease seal, the country of origin of the grease seal will be the United States and Section 301 measures will not apply to the finished grease seal when it is exported and returned by overseas customers to the United States. HOLDING: Based on the information presented, the country of origin of the grease seal exported abroad and returned to the U.S. by overseas customers for purposes of Section 301 measures is the United States. As the grease seal will be a product of the United States, Section 301 measures will not apply when it is returned to the U.S. 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 [CBP] 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 this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch