The country of origin of ignition coils on side for gas engines

N331814 April 21, 2023 OT:RR:NC:N2:201 CATEGORY: Origin Russell Coleman SEM AB 10475 Crosspoint BlvdIndianapolis, IN 46256 RE:      The country of origin of ignition coils on side for gas engines Dear Mr. Coleman: In your letter dated March 28, 2023, you requested a country of origin ruling determination on ignition coil on side for gas engines.  In your request, you state that your largest customer, Cummins Engines, based in the United States, is purchasing ignition coils on side from SEM AB in Sweden to develop/build CNG (Compressed Natural Gas) engines.  The new ignition coil on side that SEM AB supplies to Cummins, contains some parts that are made in China at the SEM Technology Center, which is a subsidiary owned by SEM AB in Sweden.  You present in the attached documents/slides with your ruling request, that the product shows substantial transformation by the work done in Sweden. The item under consideration is described as an ignition coil on side, used to provide electrical energy to the spark plugs.  The incoming four (4) components are a (1) coil top (made in Sweden and China), which is a plastic housing with PCB (Printed Circuit Board), electromagnetics cores and epoxy, etc.  (2) An ignition cable (made in Sweden) which is a copper wire with one rubber boot at each end to connect to the coil top and mounting plate.  (3) A Mounting Plate (made in Sweden) which is a plastic part with reinforcement (bushing) and a HV (High Voltage) terminal mounted; and (4) an Extension (Made in Sweden), which is a rubber part with a spring to be connected to the engine spark plugs.  The complete ignition coil on side will be delivered from Sweden to the United States. Section 134.1(b), Customs Regulations (19 C.F.R. § 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 to render such other country the “country of origin”.  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, 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. Regarding your request for the appropriate country of origin of the ignition coil on side, 19 C.F.R. § 134.1(b) provides in pertinent part as follows: Country of origin means 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 to render such other country the ‘country of origin’ with origin in the meaning of this part. For tariff purposes, 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). 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 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, 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. The Coil Top component, which is the only component assembled in China, is comprised of a bobbin (made in Sweden) and a PCB (made in Sweden) which are shipped to China to be assembled with the coil housing, pre-mounted core, and the PCB.  The parts are mounted together, and the winding wires are soldered into position.  The Top Coil is then shipped back to Sweden.  The finished complete product, the ignition coil on side, is then shipped from Sweden to the United States. Based upon the facts presented, it is the opinion of this office that the Coil Top component assembled in China from Chinese and Swedish components, is substantially transformed in China and would by itself be a Product of China, however once returned to Sweden and assembled into the finished Ignition Coil on Side, it loses its individual commercial identity and becomes part of the whole.  Consequently, it is the opinion of this office that the country of origin of the complete Ignition Coil on Side is Sweden. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR Part 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, contact National Import Specialist Matthew Sullivan at matthew.sullivan@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division