[Federal Register Volume 79, Number 220 (Friday, November 14, 2014)]
[Notices]
[Pages 68284-68286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26955]
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DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final Determination Concerning Outdoor Unit
AGENCY: U.S. Customs and Border Protection, Department of Homeland
Security.
ACTION: Notice of final determination.
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SUMMARY: This document provides notice that U.S. Customs and Border
Protection (``CBP'') has issued a final determination concerning the
country of origin of Outdoor Units used in HVAC systems. Based upon the
facts presented, CBP has concluded in the final determination that the
U.S. is the country of origin of the Outdoor Units for purposes of U.S.
Government procurement and country of origin marking.
DATES: The final determination was issued on November 7, 2014. A copy
of the final determination is attached. Any party-at-interest, as
defined in 19 CFR 177.22(d), may seek judicial review of this final
determination on or before December 15, 2014.
FOR FURTHER INFORMATION CONTACT: Karen S. Greene, Valuation and Special
Programs Branch: (202) 325-0041.
SUPPLEMENTARY INFORMATION: Notice is hereby given that on November 7,
2014, pursuant to subpart B of Part 177, Customs and Border Protection
Regulations (19 CFR Part 177, subpart B), CBP issued a final
determination concerning the country of origin of Outdoor Units, which
may be offered to the U.S. Government under an undesignated government
procurement contract. This final determination, in HQ H248850, was
issued at the request of Mitsubishi Electric US Inc., under procedures
set forth at 19 CFR Part 177, subpart B, which implements Title III of
the Trade Agreements Act of 1979, as amended (19 U.S.C. 2511-18). In
the final determination CBP concluded that, based upon the facts
presented, the Outdoor Units were substantially transformed in the U.S.
such that the U.S. is the country of origin of the Outdoor Units for
purposes of U.S. Government procurement and country of origin marking.
Section 177.29, CBP Regulations (19 CFR 177.29), provides that a
notice of final determination shall be published in the Federal
Register within 60 days of the date the final determination is issued.
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial
review of a final determination within 30 days of publication of such
determination in the Federal Register.
Dated: November 7, 2014.
Glen E. Vereb,
Acting Executive Director, Regulations and Rulings, Office of
International Trade.
Attachment
HQ H248850
November 7, 2014
OT:RR:CTF:VS H248850 KSG
Stuart P. Seidel, Esq.
Baker & McKenzie LLP
815 Connecticut Avenue NW.
[[Page 68285]]
Washington, DC 20006-4078
RE: Government Procurement; Country of Origin of Outdoor Unit of
CITY MULTI VRF System; substantial transformation
Dear Mr. Seidel:
This is in response to your letter dated December 13, 2013, and
additional submission and information dated May 12 and October 31,
2014, requesting a final determination on behalf of Mitsubishi
Electric US, Inc. (``Mitsubishi''), pursuant to subpart B of part
177 of the U.S. Customs and Border Protection (``CBP'') Regulations
(19 CFR Part 177). Under these regulations, which implement Title
III of the Trade Agreements Act of 1979 (``TAA'') as amended (19
U.S.C. 2511 et seq.), CBP issues country of origin advisory rulings
and final determinations as to 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.
The final determination concerns the country of origin of an
Outdoor Unit for a CITY MULTI Variable Refrigerant Flow (``VRF'')
multi-split heating, ventilation and air conditioning system (``HVAC
System''). We note that as a U.S. importer, Mitsubishi is a party-
at-interest within the meaning of 19 CFR 177.22(d)(1) and is
entitled to request this final determination. A conference was held
on this matter on April 8, 2014.
FACTS:
The HVAC System is comprised of Outdoor Units; Indoor Units;
Branch Circuit (BC) Controllers; system controllers; and vertical
air handlers. This final determination pertains to the Outdoor Units
of the system. You listed various types of Outdoor Units, including
the R2 Series, the Y Series, the H2i hyper-Heat Series, the WY
Series, and the WR2 Series.
In the U.S., the base from Japan is unpacked. The base pan
contains the compressor and accumulator. An appropriate flat heat
exchanger (HEX) with aluminum fins and copper tubing and copper
headers is selected for the particular Outdoor Unit and the HEX is
moved with a mechanical lift to coil bending equipment. The HEX is
placed in coil bending equipment to form the coil with two 90 degree
bends. The HEX is then removed from the bender and positioned on the
base pan. Some Outdoor Units utilize two coils and each must be
formed before being placed on the unit base pan. The refrigerant
tubing from the headers of the HEX is connected to the refrigerant
tubing on the unit base connecting compressors, reversing valves,
the accumulator and other components depending on the model type.
The tubing is filled with nitrogen. The six to ten connections
between the refrigerant tubing from the headers on the HEX are
brazed to the refrigerant tubing on the base unit. The unit is moved
into a leak test chamber to test for leaks. Photographs which show
the complex machinery and segments involved in the HEX bending and
brazing processes were submitted.
Although there are various types of Outdoor Units, you state
that in the U.S., the fan motor, fan, fan-motor mount, unit top
panel, fan orifice, and fan guard cover are installed onto the unit
base. The vacuum pump is also attached to the unit process tube.
Next, an appropriate control box is placed into the programming
fixture. The compressor, outdoor fan motor, reversing valve,
pressure switches and sensors are wired to the appropriate location
in the control box. Software is loaded onto the printed circuit
board (PCB) which separates the PCB specification for Y Series and
R2 Series Outdoor Units. It is stated that the software used for the
Outdoor Unit was developed in the U.S.
Various tests are performed to ensure the Outdoor Unit
functions. You have provided the costs of the various materials and
labor used to produce the Outdoor Units in Japan and the U.S.
The mechanical contractor brings all the components of the
system together to install them as laid out by the design engineer.
The Outdoor Unit itself is ground or roof mounted and is connected
to the BC Controller.
ISSUE:
What is the country of origin of the Outdoor Unit for U.S.
Government procurement and country of origin marking.
LAW AND ANALYSIS:
Pursuant to subpart B of part 177, 19 CFR 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 as to 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 CFR 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 Acquisition
Regulations. See 19 CFR 177.21. In this regard, CBP recognizes that
the Federal Acquisition 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 CFR 25.403(c)(1). The
Federal Acquisition 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 name,
character, or use distinct from that of the article or articles from
which it was transformed.
48 CFR 25.003.
In order 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 the
degree of skill required during the manufacturing process may be
relevant when determining whether a substantial transformation has
occurred. No one factor is determinative. The same standard is
applicable to determinations of the country of origin for marking
purposes under 19 U.S.C. 1304.
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, 573 F. Supp. 1149 (CIT 1983), aff'd 741 F.
2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or
simple, as opposed to complex or meaningful, will generally not
result in a substantial transformation. In Carlson Furniture
Industries v. United States, 65 Cust. Ct 474 (1970), the U.S.
Customs Court (predecessor to the U.S. Court of International
Trade), held that the assembly of finished and unfinished chair
parts into finished chairs in the U.S. was a substantial
transformation. The court did acknowledge that more than the
assembly of chairs took place; the legs were cut to length and in
some cases, the seats were upholstered.
It is your position that the country of origin of the Outdoor
Unit is the U.S. because the final assembly in the U.S. is complex.
In New York Ruling Letter (NYRL) 808608 dated April 13, 1995,
Customs considered whether imported heat exchanger cores were
required to be individually marked with their country of origin if
they were later processed in the U.S. by a U.S. manufacturer. The
heat exchanger core was a heat exchanger subassembly constructed of
25 steel tubes with attached aluminum fins. The tubes were evacuated
and filled with a small amount of water which made them into ``heat
pipes'' (a two-phase heat transfer system). The final subassembly
had a protective aluminum housing that surrounded the fins. After
importation into the U.S., two fans, a wire harness and a gasket
were installed on the heat exchanger core. The completed unit was
then marketed as a cabinet cooler. It was determined that the
imported heat exchanger cores were substantially transformed as a
result of the U.S. processing, and therefore the U.S. manufacturer
was the ultimate purchaser under 19 CFR 134.35.
[[Page 68286]]
We find that the processing in the U.S. of the Outdoor Unit is
similar to the processes considered in NYRL 808608. Similar to NYRL
808608, the HEX is bent and assembled with the fan motor and vacuum
pump to complete the Outdoor Unit. Substantial processing is
performed in the U.S., including bending of the HEX, brazing of the
various connections, and installation of the control box which
includes software developed in the U.S. to complete the Outdoor
Unit. We find that these are complex operations requiring skilled
workers. Based on the totality of the circumstances, we find that
the Outdoor Units are substantially transformed as a result of the
processing in the U.S. Accordingly, we find that the Outdoor Unit
may be considered a product of the U.S. for purposes of U.S.
Government procurement.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), provides that unless excepted, every article of foreign
origin imported into the U.S. shall be marked in a conspicuous place
as legibly, indelibly, and permanently as the nature of the article
(or its container) will permit, in such a manner as to indicate to
the ultimate purchaser in the U.S. the English name of the country
of origin of the article. Congressional intent in enacting 19 U.S.C.
1304 was ``that the ultimate purchaser should be able to know by an
inspection of the marking on the imported goods the country of which
the goods is the product. The evident purpose is to mark the goods
so that at the time of purchase the ultimate purchaser may, by
knowing where the goods were produced, be able to buy or refuse to
buy them, if such marking should influence his will.'' United States
v. Friedlaender & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements the
country of origin marking requirements and the exceptions of 19
U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR
134.1(b)), defines ``country of origin'' as the country of
manufacture, production or growth of any article of foreign origin
entering the U.S. 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 the marking laws and regulations. The case of United
States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98)
(1940), provides that an article used in manufacture which results
in an article having a name, character or use differing from that of
the constituent article will be considered substantially
transformed. In such circumstances the U.S. manufacturer is the
ultimate purchaser. The imported article is excepted from individual
marking and only the outermost container is required to be marked.
See 19 CFR 134.35.
As Mitsubishi Electric US, Inc. will be considered the ultimate
purchaser of the Outdoor Units, the imported components used in the
manufacture of the Outdoor Units may be excepted from country of
origin marking, provided their outer containers in which they are
imported are marked with their country of origin pursuant to 19
U.S.C. 1304(a)(3)(D).
HOLDING:
Based on the facts provided, the Outdoor Unit is considered a
product of the U.S. for U.S. Government procurement purposes, and
Mitsubishi Electric US, Inc. will be considered the ultimate
purchaser of the Outdoor Unit.
Notice of this final determination will be given in the Federal
Register, as required by 19 CFR 177.29. Any party-at-interest other
than the party which requested this final determination may request,
pursuant to 19 CFR 177.31, that CBP reexamine the matter a new and
issue a new final determination. Pursuant to 19 CFR 177.30, 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,
Glen E. Vereb
Acting Executive Director, Regulations and Rulings Office of
International Trade
[FR Doc. 2014-26955 Filed 11-13-14; 8:45 am]
BILLING CODE 9111-14-P