HQ W563587 - U.S. Government Procurement; Final Determination; country of origin of bolt container seals and cable seals; substantial transformation; 19 C.F.R. Part 177 - United States International Trade Commision Rulings

United States International Trade Commision Rulings And Harmonized Tariff Schedule

faqs.org Rulings By Number Rulings By Category Tariff Numbers

faqs.org > Rulings and Tariffs Home > Rulings By Number > 2007 HQ Rulings > HQ W56282~1 - HQ W966867 > HQ W563587

Previous Ruling Next Ruling
HQ W563587

February 8, 2007

MAR-2-05 RR:CTF:VS W563587 HEF

CATEGORY: MARKING

Mr. William L. Matthews
Pillsbury Winthrop Shaw Pittman LLP
2300 N Street, N.W.
Washington, DC 20037-1122

RE: U.S. Government Procurement; Final Determination; country of origin of bolt container seals and cable seals; substantial transformation; 19 C.F.R. Part 177

Dear Mr. Matthews:

This is in response to your letter dated September 5, 2006, requesting a final determination on behalf of TydenBrammall, pursuant to subpart B of Part 177, Customs Regulations (19 C.F.R. § 177.21 et seq.). Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), U.S. Customs and Border Protection (“CBP”) issues country of origin advisory rulings and final determinations on whether an article is or would be a product of a designated foreign country or instrumentality for the purpose of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.

This final determination concerns the country of origin of certain bolt container seals and cable seals. We note that TydenBrammall is a party-at-interest within the meaning of 19 C.F.R. § 177.22(d)(1) and is entitled to request this final determination. Confidential treatment for certain business information identified in your request for a final determination will be extended in accordance with your request. Photographs of the bolt container seals and cable seals were submitted with your request. In preparing this final determination, consideration was given to your supplemental submission dated December 12, 2006.

FACTS:

Vu Bolt Container Seal

You advise us that TydenBrammall will manufacture Vu Bolt Container Seals at its production facility in Angola, Indiana. The container seals are used to secure rail, container, and truck cargo shipments. The container seal is composed of the following five components: bolt shank, lock body, locking ring, inner cover, and clear cover. The bolt shank, lock body, and locking ring are manufactured in China. The inner cover and clear cover are manufactured in Malaysia.

At the Indiana facility, a machine operator uses a press to seat the locking ring within the grooves of the lock body, and the operator gauges the locking ring to ensure proper placement within the lock body. Next, the lock body is inserted into the inner cover to form the lock body subassembly. The lock body subassembly is placed into a linear inkjet marking machine where a custom serialization number is applied to the subassembly. Then, the serialized subassemblies are inspected to ensure the correct serialization and quality. The serialized subassemblies are moved to an ultrasonic welding station where they are aligned in rows of five by ten and covered by the clear cover. There, the subassembly and clear cover are ultrasonically welded together and then inspected for quality. Finally, the completed subassemblies are packaged together with the bolt shanks in packages of 200 Vu Bolt Container Seals per box.

You also request that CBP issue a final determination for an identical assembly process except that the lock body is of U.S. origin.

XBorder Cable Seal

You advise us that TydenBrammall will manufacture the XBorder Cable Seal at its production facility in Angola, Indiana. The XBorder Cable Seal is intended for one-time use on trucks, shipping containers, and freight rail cars. A TydenBrammall press release emphasizes that the seal has a secure and permanent locking mechanism that makes cargo tampering virtually impossible without detection. Press Release, TydenBrammall, XborderTM Seal Secures High Risk Cargo, http://www.tydenbrammall.com/cargoguy/pressreleases/xborder.pdf (last visited November 15, 2006). The XBorder Cable Seal is composed of the following four components: bolt shank, lock body, non-preformed cable, and locking ring. The bolt shank, lock body, and locking ring are manufactured in China, and the non-preformed cable is manufactured in Malaysia.

To begin the U.S. assembly operation, a machine operator uses a press to seat the locking ring within the grooves of the lock body and gauges the locking ring to ensure its proper placement. Then, the operator uses a multi-headed electrical resistance cutting machine to cut the non-preformed cable to a specified length. Next, both ends of the cable are ground using an abrasive belt to taper the welded tips of the cable. Then, one end of the cable is positioned at the bolt shank to form the bolt shank subassembly. The bolt shank subassembly is inserted into a swaging press that applies an eight-axis crimp to the subassembly. The other end of the cable is positioned at the lock body to form the lock body subassembly. The lock body subassembly is inserted into a swaging press that applies an eight-axis crimp to the subassembly. Then, both crimps of the cable seal are inspected for quality by examining the depth and position of the crimps. Next, a custom serial number is applied to the cable seal using a laser. The finished XBorder Cable Seals are inspected for quality, bundled into groups of 10 and packaged 100 per box.

You also request that CBP issue a final determination for an identical assembly process except that the lock body is of U.S. origin.

ISSUE:

What are the countries of origin of the bolt container seal and the cable seal for purposes of U.S. Government procurement?

LAW AND ANALYSIS:

Pursuant to Subpart B of Part 177, 19 C.F.R. § 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.), CBP issues country of origin advisory rulings and final determinations on whether an article is or would be a product of a designated country or instrumentality for the purposes of granting waivers of certain “Buy American” restrictions in U.S. law or practice for products offered for sale to the U.S. Government.

Under the rule of origin set forth under 19 U.S.C. § 2518(4)(B):

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.

See also, 19 C.F.R. § 177.22(a).

In determining 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, 6 Ct. Int’l Trade 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). If the manufacturing or combining process is a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred. Uniroyal Inc. v. United States, 3 Ct. Int’l Trade 220, 542 F. Supp. 1026 (1982). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D. 80-111, C.S.D. 85-25, and C.S.D. 90-97.

In order to determine whether a substantial transformation occurs when components of various origins are assembled to form completed articles, CBP considers the totality of the circumstances and makes such decisions on a case-by-case basis. The country of origin of the article’s components, the extent of the processing that occurs within a given country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. Additionally, facts such as resources expended on product design and development, extent and nature of post-assembly inspection procedures, and worker skill required during the actual manufacturing process will be considered when analyzing whether a substantial transformation has occurred; however, no one such factor is determinative.

Vu Bolt Container Seal

CBP has considered a number of different scenarios involving the assembly of locking apparatus. Each case presents a slightly different set of facts. In Headquarters Ruling Letter (“HRL”) 734440, dated March 30, 1992, CBP found that a lock apparatus was substantially transformed in the United States as a result of combining it with pieces manufactured in the United States. CBP noted that the predominant expense of the assembled lock was in the parts produced in the United States, which required extensive manufacturing and development. By contrast, the imported piece was a generic mechanism that was inserted into the U.S. pieces.

In HRL 734923, dated May 14, 1993, CBP determined that imported components of a door lockset, the rosettes and parts of the latch, were substantially transformed when they were assembled together with significant U.S. components in the United States to make the finished door lockset. CBP noted that the manufacture of the rosettes in China was relatively simple and did not require a great deal of precision as compared to the manufacture of the other components in the United States, which required significant precision and substantial machinery and tooling.

Similarly, in HRL 735198, dated March 1, 1995, CBP held that imported lock cases and cylinder retainer blocks were substantially transformed into industrial padlocks in the United States as a result of their assembly with a substantial number of U.S.-origin components. CBP found that the character of the lock case and cylinder retainer block was changed as a result of their incorporation into the finished padlock.

By contrast, in HRL 734227, dated June 26, 1992, CBP found that chrome plated levers did not lose their separate identity when they were combined with domestic locksets to form completed lever locksets. CBP reasoned that the levers were a significant component of the completed article, and their assembly in no way changed the character of the levers. The levers were clearly recognizable both before and after the assembly. Moreover, the lever was a separate component, which had to be disassembled from the rest of the lockset prior to its installation.

In HRL 734629, dated October 1, 1992, CBP found that a lock cylinder was not substantially transformed where it was not attached to the remaining pieces of the lock until after it was received by the installer. Furthermore, CBP noted that the lock cylinder did not lose its separate identity when combined with the remaining pieces. The cylinder remained visible even after assembly by the installer and the attachment process was a simple screw mount, which meant that the cylinder easily could be replaced.

In HRL 735133, dated May 5, 1994, CBP held that imported lock parts and assemblies were not substantially transformed when assembled in the United States with a U.S.-origin coverplate screw. CBP noted that most of the cost in making the finished lock was attributable to operations performed in Taiwan and that the production in the United States was a simple manual assembly operation of basically finished parts.

In the first scenario, TydenBrammall proposes to assemble the Vu Bolt Container Seal entirely from imported parts. You contend that the various components are substantially transformed based on their assembly in the U.S. alone. The U.S. assembly operation that you describe consists of the assembly of a small number of parts, the addition of a serial number, the ultrasonic welding of a clear cover to the lock body assembly, and the packaging of the finished lock body assembly with the imported bolt shank. Similar to the situation described in HRL 735133, supra, we find that the described manufacturing process is a simple assembly operation of imported components that is not complex and meaningful enough to result in a substantial transformation. In considering the last country in which the container seal underwent a substantial transformation, we believe that the lock body primarily imparts the essential character of the container seal. While the seal numbers are a unique feature to the container seal, the lock body is the component that imparts the ability of the container seal to actually lock and secure the cargo. The lock body is also the most valuable component of the container seal. Therefore, based on the facts presented in the first scenario, we find that China is the country of origin of the Vu Bolt Container Seal.

In the second scenario, TydenBrammall proposes to assemble the Vu Bolt Container Seal in the same manner except that the lock body is of U.S. origin. According to the confidential figures you have provided, the cost of the lock body represents a significant percentage of the total cost of the components used in the Vu Bolt Container Seal. In fact, under this scenario, most of the cost in making the container seal is attributable to the U.S. part and the labor performed in the United States. Furthermore, as noted above, we find that the lock body imparts the essential character of the container seal. Thus, we find that the imported locking ring, inner cover, and clear cover are substantially transformed when assembled in the United States with the U.S.-origin lock body to form the lock body assembly.

However, we also find that the Chinese-origin bolt shank is not substantially transformed when packaged with the lock body assembly in the United States. In HRL 734219, dated September 3, 1991, CBP ruled that water pans and charcoal pans were not substantially transformed when combined in the United States with other domestic and foreign components of smoker/grill units. CBP reasoned that the water pans and charcoal pans were completely finished articles when imported, there was no extensive manufacturing process involved, and that placing the pans into a container with other domestic and foreign articles was a minor operation, required no skill, and was not time-consuming. CBP noted that the pans were not permanently attached either before sale or once assembly of the unit was completed by the consumer. Moreover, Customs observed that the pans were functionally necessary to the use of the smoker/grill units, in that the units could not perform the essential operations of barbecuing, smoking, roasting or steaming without the pans.

In the instant case, the bolt shank is a finished article when it is imported into the United States. In the United States, it is merely packaged with the lock body assembly. This act is not an extensive manufacturing process. The bolt shank is not attached to the lock body assembly prior to the sale of the container seal. When the U.S. customer attaches the bolt shank, it remains clearly visible. Furthermore, the bolt shank is functionally necessary to the essential operation of the container seal. As such, the bolt shank is not substantially transformed as a result of packaging it with the lock body assembly. Therefore, the country of origin of the bolt shank is China. We note that the distinction between the origins of the bolt shank and the lock body assembly is not necessary in the first assembly scenario, as the country of origin for both the bolt shank and the lock body assembly is China.

Based upon the information provided, we find that China is the country of origin of the Vu Bolt Container Seal that is produced entirely from Chinese and Malaysian parts. Where TydenBrammall uses a U.S. lock body in the assembly of the product in the United States, the country of origin of the lock body assembly is the United States and the country of origin of the bolt shank is China.

XBorder Cable Seal

In the first scenario, you propose to manufacture the XBorder Cable Seal using imported components only. On numerous occasions, CBP has considered various manufacturing processes performed on wire and cable and whether such processes result in substantial transformations. In HRL 561392, dated June 21, 1999, CBP held that the cutting of a cable to length and the assembly of the cable to connectors did not result in a substantial transformation. In HRL 561392, all of the components were from Taiwan and the operations were performed in China.

In HRL 560214, dated September 3, 1997, CBP found that where imported wire rope cable was cut to length, U.S.-origin sliding hooks were put on the rope, and U.S.-origin end ferrules were swaged on in the United States, the wire rope cable was not substantially transformed.

In HRL 555774, dated December 10, 1990, CBP held that no substantial transformation occurred where Japanese wire was cut to length and U.S.-origin electrical connectors were crimped onto the ends of the wire in the United States.

Consistent with these decisions, we find that a substantial transformation does not occur as a result of operations described in the first scenario, which include cutting an imported cable to a specified length, grounding its ends, crimping an imported bolt shank and imported lock body onto the ends, and serializing the product with a laser. In considering the last country in which the cable seal underwent a substantial transformation, we believe that the essential character of the cable seal is derived from the lock body, which enables the cable ends to be sealed permanently to secure the cargo and prevent tampering without detection. Therefore, the country of origin of the XBorder Cable Seal is China.

In the second scenario, TydenBrammall proposes to assemble the XBorder Cable Seal in the same manner except that the lock body is of U.S. origin. According to the confidential figures you have provided, the lock body is by far the most valuable component of the cable seal. In fact, most of the cost in making the finished cable seal is attributable to the U.S. part and labor performed in the United States. As we stated above, we also believe that the lock body imparts the essential character of the cable seal. Therefore, we find that the components of foreign origin are substantially transformed when they are assembled with the U.S. lock body in the United States to form the cable seal. Based on these specific facts, the country of origin of the XBorder Cable Seal is the United States.

HOLDING:

Based upon the facts provided, we find that where the Vu Bolt Container Seal is assembled from Chinese and Malaysian components in the United States, the components are not substantially transformed. The country of origin for the Vu Bolt Container Seal for purposes of U.S. Government procurement is China.

Where the lock body assembly of the Vu Bolt Container Seal is assembled in the United States using a U.S.-origin lock body, we find that the imported locking ring, inner cover and clear cover are substantially transformed. Thus, the country of origin of the lock body assembly for purposes of U.S. Government procurement is the United States. In addition, we hold that the Chinese-origin bolt shank does not undergo a substantial transformation. Therefore, the country of origin of the bolt shank for purposes of U.S. Government procurement is China.

Where the XBorder Cable Seal is assembled from imported components in the United States, the imported components do not undergo a substantial transformation. Based on these facts, the country of origin of the XBorder Cable Seal for purposes of U.S. Government Procurement is China.

Where the XBorder Cable Seal is assembled in the United States from imported components and a U.S.-origin lock body, we find that the imported components undergo a substantial transformation. Therefore, the country of origin of this XBorder Cable Seal for purposes of U.S. Government procurement is the United States.

Notice of this final determination will be given in the Federal Register as required by 19 C.F.R. § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 C.F.R. § 177.31, that CBP reexamine the matter anew and issue a new final determination. Any party-at-interest may, within 30 days after publication of the Federal Register notice referenced above, seek judicial review of this final determination before the Court of International Trade.

Sincerely,

Sandra L. Bell,
Executive Director

Previous Ruling Next Ruling