HQ H017620 - U.S. Government Procurement; Final Determination; Country of origin of a flashlight and replacement part; 19 C.F.R. Part 177 - United States International Trade Commision Rulings

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HQ H017620

February 5, 2008

MAR-02 OT:RR:CTF:VS H017620 HEF

CATEGORY: MARKING

Mr. Steven P. Sonnenberg
Sonnenberg & Anderson
300 South Wacker Drive, 12th Floor
Chicago, Illinois 60606

RE: U.S. Government Procurement; Final Determination; Country of origin of a flashlight and replacement part; 19 C.F.R. Part 177

Dear Mr. Sonnenberg:

This is in response to your letter dated September 13, 2007, requesting a final determination on behalf of Energizer Battery, Inc. (“Energizer”), pursuant to subpart B of Part 177, Customs and Border Protection (“CBP”) 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 (codified at 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 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 a military-grade flashlight and replacement part. We note that Energizer 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 flashlight and the replacement part, at various stages of manufacture, were submitted with your request.

FACTS:

You advise that Energizer intends to sell the subject flashlight to consumers and to the U.S. military. A subcomponent of the flashlight, the lens head subassembly, may be sold separately as a replacement part for the subject flashlights. You indicate that the flashlight has many features that render it suitable for military use. The flashlight provides long-lasting light emitting diode (“LED”) lighting and infrared lighting, the latter of which is invisible to the naked eye. It has a heavy-duty design and can withstand the impact of being dropped twenty or more feet. In addition, it can also be clipped to a standard issue military vest.

Both the subject military flashlight and the replacement lens head subassembly are manufactured in the United States from U.S. and foreign-origin components. The following operations occur within the United States:

Assembly of Lens Head Subassembly

The LED is manufactured to Energizer’s specifications by a third party in the United States.

The LED is mounted to a foreign-origin “hex board” by another third party in the United States and shipped to an Energizer facility in Vermont.

A foreign-origin, partially assembled half lens and separate printed circuit board (“PCB”) are imported to Energizer’s Vermont facility. At the facility, the LED/hex board subassembly is mounted to a heat sink on the half lens with the use of two small screws.

Wires are spot soldered to the positive and negative terminals of the LED.

The following foreign-origin components are assembled together: a lens reflector, lens, and rubber gasket.

The resulting subassembly from step 5 is attached to the LED and half lens to form the lens head subassembly that will be used either in the flashlight or sold separately as a replacement part.

The lens head subassembly’s wiring, soldering, and physical connections are inspected.

Assembly of the Flashlight

If the lens head subassembly described above will be incorporated into a finished flashlight, its wires are routed through a foreign-origin plastic body or case to corresponding battery contacts.

Foreign-origin gaskets are attached for weatherproofing.

The second half of the body or case is attached with six screws.

Final testing is performed, which includes the use of devices capable of perceiving infrared light.

You explain that all final products undergo testing of their white, red, blue and infrared lights by the use of an infrared detection device. Manufacturing and inspection staff at the Vermont facility will use troubleshooting skills to identify and, if possible, correct any mechanical or electronic deficiencies revealed by the testing. In addition, you state that Energizer has expended significant resources in connection with the design exploration, development, detailing, and modeling of this product in the United States.

ISSUE:

What are the countries of origin of the flashlight and the replacement part for purposes of U.S. Government procurement?

LAW AND ANALYSIS:

Pursuant to subpart B of Part 177, Customs Regulations (19 C.F.R. § 177.21 et seq.), which implements Title III of the Trade Agreements Act of 1979, as amended (“TAA,” codified at 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 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.

Under the rule of origin set forth at 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 rendering advisory rulings and final determinations for purposes of U.S. Government procurement, CBP applies the provisions of subpart B of Part 177 consistent with the Federal Procurement Regulations. See 19 C.F.R. § 177.21. In this regard, CBP recognizes that the Federal Procurement Regulations restrict the U.S. Government’s purchase of products to U.S.-made or designated country end products for acquisitions subject to the TAA. See 48 C.F.R. § 25.403(c)(1). The Federal Procurement Regulations define “U.S.-made end product” as:
an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States 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 transformed.

48 C.F.R. § 25.003

Therefore, the question presented in this final determination is whether, as a result of the operations performed in the United States, the flashlight and replacement part are substantially transformed into products of the United States.

In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of the 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 that 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, generally will not result in a substantial transformation. 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.

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, and use are primary considerations in such cases. Additionally, facts such as resources expended on product design and development, the extent and nature of post-assembly inspection procedures, and the 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.

You assert that the U.S.-origin LED imparts the essential character to the flashlight and the replacement lens head subassembly. In addition to having a high monetary value relative to the other components, it generates the primary light in both products. The LED is manufactured to Energizer’s specifications in order to provide certain desirable characteristics regarding the light’s color, intensity, durability, coverage, and efficiency. You also note that the foreign-origin reflector is engineered to maximize these particular characteristics.

You claim that as a result of the manufacturing, assembly, and testing processes performed in the United States, the foreign-origin components undergo a substantial transformation such that both the flashlight and the replacement lens head subassembly become products of the United States for purposes of U.S. Government procurement.

In Headquarters Ruling Letter (“HRL”) 563236, dated July 6, 2005, CBP examined whether multi-line telephone sets assembled in Mexico from parts of Mexican and foreign origin were products of Mexico for purposes of U.S. Government procurement. Among the foreign components imported into Mexico for the assembly of the telephone sets were printed circuit assemblies (“PCAs”) from Malaysia. The handsets, liquid crystal displays, microphone assemblies, and stands incorporated into the telephones were of Mexican origin. In reaching a determination that the telephone sets were products of Mexico, CBP noted that the telephone sets were comprised of certain essential parts (such as the handsets) that were of Mexican origin. Moreover, many of the components lacked any functionality prior to their assembly within the telephone set.

In HRL 962528, dated February 18, 2000, CBP considered the eligibility of a rechargeable power failure light for duty free treatment under the Generalized System of Preferences. In that case, the power failure light was assembled in Thailand from various Thai and foreign origin components, including a PCB assembled in Thailand. CBP found that the process of assembling various components into a PCB resulted in a substantial transformation of the imported components. Moreover, CBP found that the assembly of the PCB with a bulb holder assembly, a plug blade assembly, and the upper and lower housing assemblies to make the finished power failure light substantially transformed the PCB.

Based on the totality of the circumstances and consistent with the CBP rulings cited above, we find that the various imported components (individual parts and subassemblies) are substantially transformed as a result of the operations performed in the United States to produce both the replacement lens head subassembly and the finished flashlight. Under each manufacturing scenario, the imported components lose their individual identities and become an integral part of a new article possessing a new name, character, and use. In support of this conclusion, we agree that the U.S.-origin LED imparts the essential character to both the replacement part and the finished product, as it generates the primary light of both products. We also recognize that Energizer has expended significant resources in connection with the design and development of the subject flashlight in the United States. Moreover, the U.S.-origin LED and the labor performed in the United States during the assembly and testing operations represent a majority of the costs associated with the production of both the replacement lens head subassembly and the finished flashlight.

HOLDING:

Based upon the specific facts of this case, we find that the imported components of the flashlight and replacement lens head subassembly are substantially transformed as a result of the described manufacturing operations performed in the United States. The country of origin of the flashlight and the replacement lens head subassembly is the United States.

Sincerely,

Sandra L. Bell,

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