HQ H022169

May 2, 2008

OT:RR:CTF:VS H022169 GG

CATEGORY: Marking

Mr. Lawrence M. Friedman &

Ms. Nicole A. Kehoskie

Barnes, Richardson & Colburn

1420 New York Avenue, 7^th^ Floor

Washington, DC 20005

RE: U.S. Government Procurement; Final Determination; country of origin
of electric mini-trucks; substantial transformation; 19 CFR Part 177

Dear Mr. Friedman & Ms. Kehoskie:

This is in response to your letter dated December 20, 2007, requesting a
final determination on behalf of Global Electric Motorcars ("GEM")
pursuant to subpart B of Part 177, Customs and Border Protection ("CBP")
Regulations (19 C.F.R. § 177.21 [et seq]{.underline}.). 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.]{.underline}),
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 electric
mini-trucks. We note that GEM 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.

FACTS:

GEMS imports a mini-truck glider from India. The glider consists of a
frame, finished cab, axles, and wheels in one unit. The glider -- so
called because it can be rolled much like a dolly or scooter -- does not
include the normal critical components of an internal-combustion vehicle
such as an engine, transmission, drive shaft, exhaust system, fuel
system, or rear axle differential. It also does not have the critical
components of an electric vehicle including the motor, battery pack,
differential, or electronics necessary to control the electric vehicle.
The brake assembly included with the glider will be removed and replaced
with another after importation. The truck bed will be imported separate
from the glider and installed after importation and upfitting as an
electric vehicle.

The glider is claimed to be non-functional and not intended for sale to
retail motor vehicle purchasers in its imported state. Once in the
United States, GEM manufactures an electric mini-truck from the glider
and various other assemblies. GEM will fit the complete mini-truck with
an electric motor to create an energy efficient, zero emissions
mini-truck for sale to certain U.S. government agencies.

As noted above, the glider is imported from India. According to GEM's
December 20, 2007 request, the glider is assembled with approximately 87
different component parts, 68 of which are of U.S. origin. In response
to a request from this office of a more detailed breakdown of the
components, GEM submitted a costed bill of materials with country of
origin for elective drive conversion components. This indicates that
U.S. components amount to approximately 51% of the total component cost.
The U.S. assembly process will require eight work stations, details of
which are as follows:

> Station 0 -- The glider is unloaded, the wheels and tires are removed
> and the glider is put on the conveyor for assembly.
>
> Station 1 -- The rear axle and brake assembly shipped with the glider
> are removed and replaced with one that is compatible with the electric
> function of the truck. The replacement gear box and axles are of U.S.
> origin, while the replacement brakes are of Indian origin. The motor
> of Canadian origin is attached onto the rear axle/gear
> box/differential assembly of U.S. origin; the controller and charger
> of Canadian origin are also attached to the glider.
>
> Station 2 -- The wiring harnesses of U.S. origin are integrated.
>
> Station 3 -- The battery tray, batteries and cable of U.S. origin are
> assembled and incorporated.
>
> Station 4 -- The electronic driver information display of U.S. origin
> is incorporated.
>
> Station 5 -- The optional electric cab heater is installed.
>
> Station 6 -- The wheels and tires are reinstalled.
>
> Station 7 -- The fully assembled electric mini-truck is test run.
>
> Station 8 -- The electric mini-truck is unloaded and inspected for
> precision of assembly and operation.

Quality control will occur at each of the eight work stations and at two
more off-line stations.

ISSUE:

What is the country of origin of the electric mini-truck 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]{.underline}., which implements Title III of the Trade Agreements
Act of 1979, as amended (19 U.S.C. § 2511 [et seq.]{.underline}), 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]{.underline}, 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]{.underline} 19 CFR § 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]{.underline} 48 CFR §
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 CFR § 25.003.

Therefore, the question presented in this final determination is
whether, as a result of the operations performed in the United States,
the glider is substantially transformed into a product of the United
States.

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]{.underline}, 6 Ct. Int'l Trade 204, 573 F. Supp. 1149 (1983),
[aff'd]{.underline}, 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]{.underline}, 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.

You assert that the electric motor (Canada), batteries (United States),
charger (Canada), gear box (United States) and brakes (India) of the
electric mini-truck form the heart of the mini-truck, and are all
installed in the United States, changing the identity of the imported
glider from a body into a self-propelled truck. These components
allegedly provide the power source to the truck and enable it to carry
out its intended use. Accordingly, it is argued, the U.S. components
added and the assembly and testing performed in the U.S. are
substantial.

GEM cites to several Headquarters rulings ("HQ") to support its
analysis. Specifically, it refers to HQ 558919, dated March 20, 1995; HQ
559887, dated October 3, 1996; and HQ 562502, dated November 8, 2002. We
find HQ 558919 to be most analogous to the situation before us. There,
CBP held that an extruder subassembly manufactured in England was
substantially transformed in the United States when it was wired and
combined with U.S. components (motor, electrical controls and extruder
screw) to create a vertical extruder. In reaching that decision, CBP
emphasized that the imported extruder subassembly and the U.S.
components each had important attributes that were functionally
necessary to the operation of the vertical extruder. Although HQ 558919
may be distinguished because the components that were assembled with the
imported extruder subassembly were exclusively of U.S. origin, the two
cases are similar to the extent that the imported articles (extruder
subassembly and glider) and certain of the other components with which
the imported articles are combined are "functionally necessary" to the
operation of the finished product. In GEM's situation, the glider could
not be used as an electric mini-truck on its own, but requires assembly
with other, crucial components.

We also take note of HQ 731076, dated November 1, 1988, which addressed
country of origin marking requirements for an automobile assembled in
Taiwan with components from Japan, the United States, and Taiwan. The
U.S. components consisted of an oxygen sensor, a catalytic converter and
two roll over valves. The Taiwanese components included trim pad
assemblies, head linings, front and rear seats, glass, instrument
panels, arm rests, support rod, leaf springs, heat protectors, carpet,
brake pipes, fuel pipes, cable harnesses, battery cables, axle
assemblies, tension rods, battery and tires. Associated materials such
as glue, paint and coating were also procured in Taiwan. All other
components were of Japanese origin. CBP held that the automobile
components lost their separate identities and consequently were
substantially transformed when they were assembled into vehicles in
Taiwan. As a result, the country of origin of the imported automobiles
for marking purposes was Taiwan, which precluded the various components
from having to be separately marked with their original countries of
origin. Customs indicated that it considered the manufacture of an
automobile much more than a mere assembly operation and also considered
it persuasive that the Taiwanese input to the final product contributed
38% of its value and took 33 hours to accomplish.

Based upon the totality of the circumstances and consistent with the CPB
rulings cited above, we find that the imported mini-truck glider is
substantially transformed as a result of the assembly operations
performed in the United States to produce an electric mini-truck. Under
the described assembly process, the imported glider loses its individual
identity and becomes an integral part of a new article possessing a new
name, character and use. Further, we note a substantial number of the
components added to the imported glider are of U.S. origin. Therefore,
based upon the specific facts, the country of origin of the electric
mini-truck for purposes of U.S. Government procurement is the United
States.

HOLDING:

The imported mini-truck gliders are substantially transformed when they
are assembled in the United States with other imported and domestic
components. As a result, the country of origin of the electric
mini-trucks 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

Office of International Trade