The country of origin of wheel hub units.

N324754 March 30, 2022 MAR-2:OT:RR:NC:N2:206 CATEGORY: Country of Origin Alex B. Johnson Leake & Andersson, LLP 1100 Poydras Street New Orleans, LA 70163 RE: The country of origin of wheel hub units. Dear Mr. Johnson: This is in response to your letter, dated March 11, 2022, requesting a ruling on the country of origin of wheel hub units for marking purposes and for purposes of applying trade remedies under Section 301 of the Trade Act of 1974, as amended, from China, which you filed on behalf of your client Genuine Parts Company. The products under consideration are a Double Flanged Wheel Hub Unit Incorporating Ball Bearings and a Double Flanged Wheel Hub Units Not Incorporating Ball Bearings, which are used in passenger vehicles, as well as light and heavy trucks. You state that generally wheel hub units are located between the brake drums or discs and the drive axle. They consist of many component parts, each of which must be precisely machine-finished, refined, and fitted at the final production stage to meet certain engineering specifications and grades. Wheel hubs keep the vehicle wheels securely attached to the vehicle axles, while bearing the full load of the vehicle as the wheels and tires rotate. Wheel hubs house tracking sensors for anti-lock braking systems, while also bearing the weight of high lateral forces allowing a motor vehicle to steer safely. The wheel hub units are manufactured and assembled from the following primarily raw, unfinished components: (1) inner rings; (2) outer rings; (3) wheel gear; (4) cages; (5) rollers or tapered rollers; (6) inner flange; (7) outer flange; (8) steel rollers or steel balls; (9) seal rings; (10) bolts, (11) anti-lock brake (ABS) sensors; (12) grease; (13) labels; and (14) packaging. The grease, labels, and packaging materials are planned to be sourced in Thailand while the unfinished component parts will be sourced from China. The component parts sourced from China are roughly cut and imported into Thailand without the precise measurements and grading necessary for use in the Wheel Hubs. The "country of origin" is defined in 19 CFR 134.1(b) 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 this part. The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (Uniroyal). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987). In Uniroyal case, the court held that an upper was not substantially transformed when attached to an outsole to form a shoe and that the upper was "the very essence of the completed shoe". Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) 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, “…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. Based on the information provided, the components comprising the wheel hub units are made in China and shipped to Thailand. You state that the Thailand manufacturing and production processes involve a network of highly specialized industrial machines, technology, and computers that operate in controlled conditions necessary to manufacture the Wheel Hubs. In order to comply with U.S. motor vehicle and other safety standards, as well as the weight demands of high-performance modern automobiles, the component parts require the following manufacturing processes prior to constructing them into the final product Wheel Hubs: (1) super-fine grinding of all surfaces to perfect the required diameters and measurements; (2) demagnetization of all ferrous, iron-containing metals; (3) cleaning of the outer ring and inner ring flange; (4) roll form the inner flange plate to re-shape it to perform its designed purpose; (5) assembly of inner ring flange and outer rings; (6) roller installation and assembly; (7) bolt press fitting; (8) sorting via a ferrule sorter machine; (9) machine assembly of the steel balls, seal rings and ring gear; (10) clearance detection tests; (11) rolling and forming process via cold forming machine; (12) ABS installation and sensor testing; (13) marking in a laser marking machine; (14) grease injections; (15) oiling and application of anti-rust agents, and/or painting; (16) testing to ensure compliance with pressure and heat specifications; (17) labeling; and (18) packaging. You also supplied pictures of each component in the condition it arrives in Thailand and in the finished state ready to be installed into its final application. Although the separate components from China require further manufacturing in order to be assembled into the complete wheel hub units, they have the basic characteristics of the wheel hub units and the processing operation performed in Thailand is only a finishing operation that completes the products but does not fundamentally change them. The components are identifiable as parts of the wheel hub units and the end-use of these components is pre-determined at the time of importation to Thailand. As a result, it is the opinion of this office that no substantial transformation occurs in Thailand. Therefore, the country of origin of the wheel hub units will be China for purposes of applying trade remedies under Section 301, of the Trade Act of 1974, as amended. 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 Customs 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.” This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Liana Alvarez at liana.alvarez@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division