[Federal Register Volume 79, Number 205 (Thursday, October 23, 2014)]
[Notices]
[Pages 63416-63419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25237]
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DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final Determination Concerning Various
Elliptical Exercise Machines and Option Package Kits
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 various elliptical exercise machines manufactured
and distributed by Octane Fitness, and their option package kits that
add from three products to the elliptical exercise machines. Based upon
the facts presented, CBP has concluded that Taiwan is the country of
origin of the elliptical exercise machines and two of the option
package kits, and China for one option package kit, for purposes of
U.S. Government procurement.
DATES: The final determination was issued on October 16, 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 within November 24, 2014.
FOR FURTHER INFORMATION CONTACT: Antonio J. Rivera, Valuation and
Special Programs Branch, Regulations and Rulings, Office of
International Trade, (202) 325-0226.
SUPPLEMENTARY INFORMATION: Notice is hereby given that on October 16,
2014 pursuant to subpart B of Part 177, U.S. Customs and Border
Protection Regulations (19 CFR part 177, subpart B), CBP has issued a
final determination concerning the country of origin of various
elliptical exercise machines, and their option package kits,
manufactured and distributed by Octane Fitness, which may be offered to
the U.S. Government under an undesignated government procurement
contract. This final determination, HQ H248696, was issued under
procedures set forth at 19 CFR Part 177, subpart B, which implements
Title III of the Trade Agreement Act of 1979, as amended (19 U.S.C.
2511-18). In the final determination, CBP concluded that, based upon
the facts presented, the assembly operations for the elliptical
exercise machines performed in Taiwan, using a majority of Taiwanese
components, substantially transformed
[[Page 63417]]
the components into the various elliptical exercise machines.
Therefore, the country of origin of the elliptical exercise machines is
Taiwan for purposes of U.S. Government procurement. Furthermore, CBP
concluded that the three option package kits for the elliptical
exercise machines retained their respective countries of origin because
the three kits were already in their final form before being packaged
into the option kit. Therefore, for U.S. Government procurement
purposes, the country of origin is Taiwan for two option package kits,
and China for the other option package kit.
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: October 16, 2014.
Glen E. Vereb,
Acting Executive Director, Regulations and Rulings, Office of
International Trade.
HQ H248696
October 16, 2014
OT:RR:CTF:VS H248696 AJR
CATEGORY: Country of Origin
Mr. Peter Joseph Hammond
Director of Operations
Octane Fitness
7601 Northland Drive
North Suite 100
Brooklyn Park, MN 55428
RE: U.S. Government Procurement; Title III, Trade Agreements Act of
1979 (19 U.S.C. Sec. 2511); Subpart B, Part 177, CBP Regulations;
Country of Origin; 23 Variations of Elliptical Exercise Machines and
Option Package Kits
Dear Mr. Hammond:
This is in response to your letter dated September 30, 2013,
forwarded to us from the National Commodity Specialist Division in
New York, requesting a final determination on behalf of Octane
Fitness (``Octane'') pursuant to subpart B of part 177, Customs and
Border Protection (``CBP'') Regulations (19 C.F.R. Sec. 177.21 et
seq.). Under the pertinent regulations, which implement Title III of
the Trade Agreements Act of 1979, as amended (19 U.S.C. Sec. 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 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 23
variations of elliptical exercise machines (``Elliptical(s)'') and
option package kits. We note that Octane is a party-at-interest
within the meaning of 19 C.F.R. Sec. 177.22(d)(1) and is entitled
to request this final determination.
FACTS:
You describe the pertinent facts as follows. The items at issue
consist of 23 Ellipticals produced in Taiwan by Octane. Three option
package kits (``Option(s)'') can be added onto certain Ellipticals.
You advise that each of the Ellipticals, without the Options,
consist of two main assemblies: a base assembly and a console
assembly. A significant majority of the components comprising the
base and the console are stated to originate from Taiwan. The
submitted bill of materials, stated to reflect an accurate
proportion of materials used to produce the Ellipticals, lists 461
component items for the base assembly and 33 component items for the
console assembly. This bill of materials shows that the base is
comprised of 450 Taiwanese components, 10 Chinese components, and 1
U.S. component, while the console is comprised of 31 Taiwanese
components and 2 Chinese components. You state that the base and the
console are produced in Taiwanese factories through an extensive
assembly process. Once the assembly process is complete, the bases
and consoles are brought together and tested in Taiwan, then
packaged separately in Taiwan to facilitate shipment, before being
imported from Taiwan to Octane's U.S. warehouses.
Along with the submitted bill of materials reflecting the
country of origin of the components, you submitted a list describing
the Ellipticals and photos illustrating the step-by-step assembly
process in Taiwan.
A. The 23 Variations of Ellipticals
The Ellipticals are presented in charts titled ``GSA Elliptical
Cross Trainer Model (and Description).'' The Ellipticals are further
``grouped into like categories'': ten ``Standing'' Ellipticals, nine
``Seated'' Ellipticals, and four ``Lateral'' Ellipticals.
The ten Standing Ellipticals include two commercial grade
Ellipticals (PRO310 and PRO370) and eight heavy commercial grade
Ellipticals (PRO3700 and PRO4700). The PRO3700 and the PRO4700 come
in four different models: (1) the Touch Integrated 15'' LCD TV
embedded with Netpulse package; (2) the Attached Flat Screen TV
package; (2) the 900 MHz Keypad package; and (4) the basic package,
which is without the LCD TV, flat screen TV, or keypad.
The nine Seated Ellipticals, known under their trade name
``xRide,'' include eight heavy commercial grade Ellipticals (xR5000
and xR6000) and one commercial grade Elliptical (xR650), which has
total body seating and moving arms. The xR5000 has only lower body
seating, while the xR6000 has total body seating and moving arms.
The xR5000 and the xR6000 come in four different models: (1) the
Touch Integrated 15'' LCD TV embedded with Netpulse package; (2) the
Attached Flat Screen TV package; (3) the 900 MHz Keypad package; and
(4) the basic package, which is without the LCD TV, flat screen TV,
or keypad.
The four Lateral Ellipticals, known under their trade name
``LateralX,'' are all heavy commercial grade Ellipticals under the
LX8000 series, which is a total body Elliptical that is laterally
adjustable. The LX8000 comes in four different models: (1) the Touch
Integrated 15'' LCD TV embedded with Netpulse package; (2) the
Attached Flat Screen TV package; (3) the 900 MHz Keypad package; and
(4) the basic package, which is without the LCD TV, flat screen TV,
or keypad.
These Ellipticals are described to have a similar base and
console assembly process, which takes about eight weeks to
manufacture in factories located in Taiwan with over 100 workers
assembling the mostly Taiwanese components, one-by-one, until the
product is completed.
B. The Base Assembly Process
The base assembly process takes place in Taiwan and is described
as follows:
1. Obtaining over 80 feet of steel tubes and sheet metal;
2. Cutting the steel tubes with an automated sawing machine into
about 20 pieces;
3. Cutting holes in some of the steel tubes using automated
equipment in machining workshop;
4. Bending some of the steel tubes into precise shapes using
automated tube bending machines;
5. Attaching the separate steel and metal pieces into
subassemblies in a welding workshop using automated welding
machines;
6. Powder coating process to clean, heat, paint, and dry the
parts;
7. Cleaning and heating through a variety of chemical baths and
preparing the parts for painting;
8. Painting and drying; and
9. Assembling the final base product.
C. The Console Assembly Process
The console assembly process takes place in Taiwan. The
Taiwanese components consist of a circuitboard assembly, plastic
components, cable assemblies, and a keypad. The Chinese components
consist of a power supply and power cord. The process is described
as follows:
1. Wave soldering electronic components to a circuit board using
surface mount technology;
2. Molding the plastic components by injecting Taiwanese
material into a mold machine;
3. Assembling Taiwanese wires and connectors for the cable
assemblies; and
4. Assembling the keypad.
Once complete, the consoles provide the Ellipticals with
automated control by adjusting the motion of the hand and foot
pedals; fluctuating resistance to the pedals to vary workouts; and
tracking the time exercised, calories burned, and heart rate of the
Elliptical's user.
Lastly, the final assembly brings together the base assembly and
console assembly. The bases and consoles are then packaged
separately and imported from Taiwan to Octane's U.S. warehouses.
D. The Assembly Process for the Options
You advise that three Options are available: stationary side
steps; a ``Cross
[[Page 63418]]
Circuit Pro kit,'' consisting of adjustable dumbbells and stationary
side steps; and an upper body lockout kit. Minor variations of the
Options are available depending on the model of Elliptical machine
they serve.
The stationary side steps Option is available for the PRO3700
and PRO4700 Ellipticals. It allows users to step onto platforms on
each side of the machine. The stationary side steps undergo an
assembly process similar to the base assembly process, where a
Taiwanese factory takes steel and sheet metal through automated
machines and conveyer systems to cut, bend, weld, clean, heat,
paint, and then dry the final stationary side steps product. Under
this Option, the stationary side steps product is shipped by itself
from Taiwan to Octane's U.S. warehouses.
The Cross Circuit Pro kit Option provides the stationary side
steps and the adjustable dumbbells in a package for the PRO3700,
PRO4700, and LX8000 Ellipticals. Unlike the stationary side steps
assembly process, the adjustable dumbbells are first made in China
before being brought to Taiwan. In Taiwan, the adjustable dumbbells
are packaged together with the stationary side steps as the Cross
Circuit Pro kit. This kit is imported as one unit from Taiwan to
Octane's U.S. warehouses.
The upper body lockout kit Option is available for the PRO370,
PRO3700, and PRO4700 Ellipticals. It allows users to isolate lower
body exercises by preventing upper body movements. The upper body
lockout kit undergoes a similar assembly to the base and the
stationary side steps assemblies. Here, a Taiwanese steel tube is
processed through a Taiwanese supplier that also uses automated
machines and conveyer systems to cut, bend, weld, clean, heat,
paint, and then dry the final upper body lockout kit. This kit is
imported from Taiwan as a unit to Octane's U.S. warehouses.
ISSUE:
What is the country of origin of the Ellipticals and the Options
for the purpose of U.S. Government procurement?
LAW AND ANALYSIS:
Pursuant to subpart B of part 177, 19 C.F.R. Sec. 177.21 et
seq., which implements Title III of the Trade Agreements Act of
1979, as amended (19 U.S.C. Sec. 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. Sec.
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. Sec. 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 C.F.R. Sec. 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
C.F.R. Sec. 25.403(c)(1). The Federal Acquisition Regulations
defines ``designated country end product'' through the following
relevant defintions:
Designated country end product means a WTO GPA country end product,
an FTA country end product, a least develop country end product, or
a Caribbean Basin country end product.
World Trade Organization Government Procurement Agreement (WTO GPA)
country means any of the following countries: Armenia, Aruba,
Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong,
Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea (Republic
of), Latvia, Liechtenstein, Lithuania, Luxembourg, Malta,
Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovak
Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, or United
Kingdom.
WTO GPA country end product means an article that--
(1) Is wholly the growth, product, or manufacture of a WTO GPA
country; or
(2) In the case of an article that consists in whole or in part of
materials from another country, has been substantially transformed
in a WTO GPA country 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. The term refers to a product
offered for purchase under a supply contract, but for purposes of
calculating the value of the end product includes services (except
transportation services) incidental to the article, provided that
the value of those incidental services does not exceed that of the
article itself.
48 C.F.R. Sec. 25.003.
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 (Ct. Int'l Trade 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. Factors which
may be relevant in this evaluation may include the nature of the
operation (including the number of components assembled), the number
of different operations involved, and whether a significant period
of time, skill, detail, and quality control are necessary for the
assembly operation. 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. If the manufacturing
or combining process is a minor one which 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
(1982), aff'd 702 F. 2d 1022 (Fed. Cir. 1983). In a number of
rulings (e.g. Headquarters Ruling Letter (``HQ'') 732498, dated
October 3, 1989, and HQ 732897, dated June 6, 1990), CBP stated,
``merely packaging parts of a kit together does not constitute a
substantial transformation.''
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, extent and
nature of post-assembly inspection and testing procedures, and the
degree of skill required during the actual manufacturing process may
be relevant when determining whether a substantial transformation
has occurred. No one factor is determinative.
In HQ 735608, dated April 27, 1995 and HQ 559089, dated August
24, 1995, CBP has stated: ``in our experience these inquiries are
highly fact and product specific; generalizations are troublesome
and potentially misleading.''
In HQ 735368, dated June 30, 1994, CBP held that the country of
origin of a bicycle assembled in Taiwan with components made in
several countries was Taiwan. CBP stated that because the bicycle
was assembled in Taiwan and one of the bicycle's most significant
components, the frame, was made in Taiwan, the country of origin of
the bicycle was Taiwan. Although the other components came from
several different countries, when they were assembled together in
Taiwan, they each lost their separate identity and became an
integral part of a new article of commerce, a bicycle.
In the instant case, the assembly of the Ellipticals is
comprised of two major assemblies, the base assembly and the console
assembly. The base and console for each of the Ellipticals are
produced through separate, extensive assembly processes that occur
entirely in Taiwan. With regard to the generalized base assembly,
approximately 461 components, from which 450 originate from Taiwan,
are transformed into the final base product by cutting, bending,
welding, painting, and further assembling these components into
bases for the Ellipticals. With regard to the generalized console
assembly, approximately 33 components, from which 31 originate from
Taiwan, are transformed into the final console product by wave
soldering, molding, and further assembling these components into
consoles for the Ellipticals. Though the base and console are
shipped separately to Octane's U.S. warehouses, the base and console
are first brought together in Taiwan for a complete machine test
that ensures the machine is working properly. We find that
[[Page 63419]]
under the described assembly process, the components from China and
the U.S. lose their individual identities and become an integral
part of the articles, the Ellipticals, possessing a new name,
character and use. The assembly process that occurs in Taiwan is
complex and meaningful, requiring the assembly of various components
into a base and a console, which are then further assembled into the
final Elliptical product for testing before shipment from Taiwan.
Additionally, aside from the significant number of components that
originate from Taiwan, the Elliptical's most significant components,
the base and the console, were made from start to finish in Taiwan,
which was an important consideration in HQ 735368. Moreover, the
base and the console are combined for testing as the full Elliptical
product in Taiwan. Thus, even though the base and the console are
shipped separately from Taiwan to the U.S., the identity of the
product as an Elliptical is already intact in Taiwan during testing,
and before shipment to the U.S. where any later combination in the
U.S. should be seen as a minimal assembly process that does not
result in a substantial transformation.
Similarly, the assembly of two of the Options, the stationary
side steps and the upper body lockout kit, are entirely produced in
Taiwan from starting components to finished products. Conversely,
the adjustable dumbbells are made into their final form in China
before reaching Taiwan. We find that under the described assembly
processes, the side stationary steps and the upper body lockout kit
are products originating from Taiwan because their components,
Taiwanese metals, and manufacturing processes wholly originate and
take place in Taiwan. However, we find that the adjustable dumbbells
originate from China since packaging the adjustable dumbbells with
the stationary side steps in the Cross Circuit Pro kit in Taiwan
does not substantially transform the adjustable dumbbells into a new
article of commerce having a new name, character or use. As noted in
HQ 732498 and HQ 732897, the repackaging of the adjustable dumbbells
and the stationary side steps is not a substantial transformation
because the separate items are already in their finished forms, not
modified or affixed to each other, or combined in a permanent
matter. Accordingly, the individual products which make up these
Options retain their individual countries of origin, such that the
adjustable dumbbells in the Cross Circuit Pro kit are not considered
products of Taiwan, but rather products of China.
Therefore, based upon the information before us, we find that
the country of origin of the Ellipticals, the stationary side steps,
and the upper body lockout kit is Taiwan for U.S. Government
procurement purposes. However, the packaging of the Cross Circuit
Pro kit is not sufficient to change the country of origin for the
adjustable dumbbells from China to Taiwan, and the adjustable
dumbbells remain a product of China.
HOLDING:
The components that are used to manufacture the Ellipticals are
substantially transformed as a result of the assembly operations
performed in the Taiwan. Therefore, the country of origin of the
Ellipticals for U.S. Government procurement purposes is Taiwan. The
Options for the Ellipticals retain their respective country of
Origin because repackaging these products into Option kits for the
Ellipticals does not substantially transform these products from
their already final product form. Therefore, the countries of origin
for U.S. Government procurement purposes of the stationary side
steps, adjustable dumbbells, and upper body lockout kits are Taiwan,
China, and Taiwan, respectively.
Notice of this final determination will be given in the Federal
Register, as required by 19 C.F.R. Sec. 177.29. Any party-at-
interest other than the party which requested this final
determination may request, pursuant to 19 C.F.R. Sec. 177.31, that
CBP reexamine the matter anew and issue a new final determination.
Pursuant to 19 C.F.R. Sec. 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. 2014-25237 Filed 10-22-14; 8:45 am]
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