Court Opinion

ID: 9375420
Source: CourtListenerOpinion
Date Created: 2023-02-27 18:01:22.300632+00
Date Added: 2024-06-11T17:16:58.744060
License: Public Domain

Slip Op. 23-24

                  UNITED STATES COURT OF INTERNATIONAL TRADE

CYBER POWER SYSTEMS (USA) INC.,

                       Plaintiff,
                                                       Before: Leo M. Gordon, Judge
             v.

UNITED STATES,                                         Court No. 20-00124

                       Defendant.

                                        OPINION

[Following trial on the issue of substantial transformation for purposes of determining
country of origin under 19 U.S.C. § 1304(a), judgment for Plaintiff as to the origin of one
model of subject merchandise, and judgment for Defendant as to the remaining five.]

                                                                Dated: February 27, 2023

      John M. Peterson, Richard F. O’Neill, and Patrick B. Klein, Neville Peterson LLP,
of New York, N.Y., for Plaintiff Cyber Power Systems (USA) Inc.

       Luke Mathers, Trial Attorney, and Beverly A. Farrell, Senior Trial Attorney,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York,
N.Y., argued for Defendant United States. With them on the brief were Brian M. Boynton,
Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, and Justin
R. Miller, Attorney-in-Charge. Of counsel was Yelena Slepak, Attorney, Office of the
Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border
Protection, of New York, N.Y.

      Gordon, Judge: Plaintiff Cyber Power Systems (USA) Inc. (“Cyber Power”)

commenced this action contesting a denied protest regarding the country of origin

marking of five models of uninterruptible power supplies (“UPS”) and one model of surge

voltage protectors (“SVP”). Upon entry of the subject merchandise, which Plaintiff had

marked as “Made in the Philippines,” U.S. Customs and Border Protection (“Customs”)
Court No. 20-00124                                                                  Page 2

determined that the country of origin for the five UPSs and one SVP was China and

excluded their entry when Cyber Power refused to change its markings. Cyber Power

contended before Customs, and now before the court, that its operations in the

Philippines, conducted by Cyber Power Systems Manufacturing, Inc. (“Cyber Power

Philippines”), resulted in a “substantial transformation” of the merchandise into Philippine

origin, having a name, character, and use different from each device’s Chinese

components.

       The court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (2018). The court

presumes familiarity with its prior opinions in this action. See Cyber Power Sys. (USA)

Inc. v. United States, 44 CIT ___, ___, 471 F. Supp. 3d 1371 (2020); Cyber Power Sys.

(USA) Inc. v. United States, 46 CIT ___, ___, 560 F. Supp. 3d 1347 (2022). For the

reasons that follow, the court enters judgment for Plaintiff as to the Philippine origin of

one model of subject merchandise, UPS Model No. CP600LCDa, and judgment for

Defendant as to the Chinese origin of the remaining five models.

                      I. Standard of Review and Legal Framework

                                 A. Standard of Review

       The    court   reviews   Customs’    protest   decisions   de   novo.   28    U.S.C.

§ 2640(a)(1) (2018). For contested factual issues, a statutory presumption of correctness

imposes the burden of proof on Plaintiff. See id. § 2639(a)(1); Universal Elecs., Inc.

v. United States, 112 F.3d 488, 492 n.2 (Fed. Cir. 1997); Chrysler Corp. v. United States,

33 CIT 90, 97, 601 F. Supp. 2d 1347, 1353–54 (2009), aff’d, 592 F.3d 1330 (Fed. Cir.

2010). Despite its name, the statutory presumption of correctness is not a true evidentiary
Court No. 20-00124                                                                   Page 3

presumption governed by Federal Rule of Evidence 301, but rather an “assumption” that

allocates to Plaintiff the burden of proof on contested factual issues that arise from the

protest decision. Universal Elecs., 112 F.3d at 492 n.2; 21B Charles A. Wright & Kenneth

W. Graham, Jr., Fed. Prac. & Proc. Evid. § 5124 (2d ed. 2022) (“Rule 301 does not apply

to ‘assumptions’—rules for allocating the burden of proof that are often mislabeled as

‘presumptions.’ . . . [T]he best known include: . . . the ‘assumption’ that official duty has

been regularly performed.” (footnotes omitted)). Plaintiff’s burden of proof carries an

initial burden of production (to make an evidentiary proffer), and an ultimate burden of

persuasion to establish the operative facts by a preponderance of the evidence.

Universal Elecs., 112 F.3d at 492.

                     B. The Marking Statute (19 U.S.C. § 1304(a))

       Section 304(a) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1304(a), 1

requires that all merchandise imported into the United States be marked permanently,

legibly, indelibly, and in a conspicuous place, to indicate to the ultimate purchaser the

English name of the product’s country of origin. The implementing regulation, 19 C.F.R.

§ 134.1(b), defines the term “country of origin” as “the country of manufacture, production,

or growth of any article of foreign origin entering the United States.” Section 134.1(b)

explains that “[f]urther 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 this part.” 19 C.F.R. § 134.1(b) (emphasis added). Simply stated,

1Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2018 edition.
Court No. 20-00124                                                                   Page 4

imported merchandise originates for marking purposes in the last country in which it

underwent a “substantial transformation” prior to importation into the United States.

Merchandise not marked with the proper country of origin may be excluded by Customs

from entry into the United States. See 19 U.S.C. § 1304(j); see also 19 C.F.R. § 134.3(a). 2

                             C. Substantial Transformation

       Plaintiff must establish by a preponderance of the evidence that its subject

merchandise is substantially transformed in the country it wishes to represent as the

merchandise’s country of origin. See 28 U.S.C. § 2639(a)(1); Universal Elecs., 112 F.3d

at 492 (plaintiff bears burden of proof on contested factual issues arising from underlying

protest decision).

2 Additionally, effective July 6, 2018, the Office of the United States Trade Representative
imposed an additional tariff—twenty-five percent ad valorem—on certain products from
China, including those in issue in this action, that are classified in the subheadings
enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(b), Harmonized
Tariff Schedule of the United States.

In ruling on cross-motions for summary judgment, the court articulated the purpose of the
Section 301 tariffs:

       [T]he purpose of the imposition of the Section 301 tariffs was to promote a
       change in the “government of China's acts, policies and practices related to
       technology transfer, intellectual property and innovation.” . . . Additionally,
       the Section 301 tariffs were intended to encourage a partial de-coupling of
       China’s economy from that of the United States, by discouraging investment
       in, and trade with, China.

Cyber Power, 46 CIT at ___, 560 F. Supp. 3d at 1352 (citations omitted). It is evident to
the court that Cyber Power was engaging in that decoupling process. However, the mere
fact that Cyber Power was attempting to meet the policy objective does not overcome its
inability to demonstrate that five of the six devices were substantially transformed in the
Philippines.
Court No. 20-00124                                                                   Page 5

      A substantial transformation occurs “when an article emerges from a

manufacturing process with a name, character, or use which differs from those of the

original material subjected to the process.” Torrington, Co. v. United States, 764 F.2d

1563, 1568 (Fed. Cir. 1985) (citing Tex. Instruments, Inc. v. United States, 681 F.2d

778, 782 (C.C.P.A. 1982)); see also United States v. Gibson-Thomsen Co., 27 C.C.P.A.

267, 273 (1940) (clarifying that marking statute did not “require that an imported article,

which is to be used in the United States as material in the manufacture of a new article

having a new name, character, and use, and which, when so used, becomes an integral

part of the new article, be so marked as to indicate to the retail purchaser of the new

article that such imported article or material was produced in a foreign country”).

Substantial transformation is fact-specific and determined on a case-by-case basis.

See Belcrest Linens v. United States, 741 F.2d 1368, 1373 (Fed. Cir. 1984).

       While the test is expressed in the disjunctive, courts consider all three factors, and

have generally found a change in name to be “the weakest evidence of substantial

transformation.”   See, e.g., Koru N. Am. v. United States, 12 CIT 1120, 1126,

701 F. Supp. 229, 234 (1988) (quoting Nat’l Juice Prods. Ass’n v. United States, 10 CIT

48, 59, 628 F. Supp. 978, 989 (1986)). Indeed, a finding of substantial transformation

frequently rests on multiple factors because a change in character often results in a

change in use, and a change in character or use generally necessitates a change in

name. See id. 12 CIT at 1127, 701 F. Supp. at 235 (“The fish’s name has been changed

as the result of the processing method which occurred in Korea. . . . The fish’s character,

after its journey through Korea, is also vastly different.’” (internal citations omitted));
Court No. 20-00124                                                                    Page 6

see also Belcrest Linens, 741 F.2d at 1374 (“[T]he identity of the merchandise changed

as did its character and use: embroidered fabric was transformed into pillowcases which

are clearly distinguishable in character and use from the fabric of which they were

made.”); Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535,

541 (1987) (“Based on the totality of the evidence, showing that the continuous hot-dip

galvanizing process effects changes in the name, character and use of the processed

steel sheet, the Court holds that the changes constitute a substantial transformation and

that hot-dipped galvanized steel sheet is a new and different article of commerce from full

hard cold-rolled steel sheet.”); Uniden Am. Corp. v. United States, 24 CIT 1191, 1194,

120 F. Supp. 2d 1091, 1095 (2000) (“Here, each cordless telephone has experienced a

change in both name and use from its original materials.”).

       In applying the test, the U.S. Court of Appeals for the Federal Circuit has

emphasized the requirement that there be a “new and different” article that emerges from

the manufacturing process. See, e.g., Acetris Health LLC v. United States, 949 F.3d 719

(Fed. Cir. 2020); Zuniga v. United States, 996 F.2d 1203 (Fed. Cir. 1993); Azteca Milling

Co. v. United States, 890 F.2d 1150 (Fed. Cir. 1989); see also Anheuser-Busch Brewing

Ass’n v. United States, 207 U.S. 556, 562 (1908) (“There must be transformation; a new

and different article must emerge.”).

                                        II. Discussion

       The dispositive question in this action, as noted over the course of the litigation, is

whether the subject merchandise was substantially transformed at the Cyber Power

Philippines factory. In denying cross-motions for summary judgment, the court found that,
Court No. 20-00124                                                                    Page 7

while the subject merchandise underwent a change in name in the Philippines, that

“change . . . alone [did] not appear sufficient to constitute a ‘substantial transformation,’”

and “that a determination as to the resulting ‘character’ and ‘use’ of the subject

merchandise after production at Plaintiff’s Philippine facility require[d] analysis and

adjudication.” Cyber Power, 46 CIT at ___, 560 F. Supp. 3d at 1356–57 (“[T]he factual

details as to the extent and nature of Cyber Power’s operations regarding the subject

merchandise in the Philippines also remain in dispute.”); see also Pl.’s Mot. for Summ. J.,

ECF No. 48; Def.’s Cross-Mot. for Summ. J., ECF No. 60.

                                    A. Findings of Fact

       On August 8–11, 2022, the court held a bench trial to decide whether the subject

merchandise was properly marked under 19 U.S.C. § 1304(a) as “Made in Philippines.”

Trial, ECF Nos. 144–47. Thereafter, the parties submitted proposed findings of fact and

conclusions of law. See Plaintiff’s Proposed Findings of Fact and Conclusions of Law,

ECF No. 157 (“Pl.’s FOF & COL”); Defendant’s Proposed Findings of Fact and

Conclusions of Law, ECF No. 158 (“Def.’s FOF & COL”).

              1. Uncontested Facts Regarding the Subject Merchandise

       Before trial, the court delineated the uncontested facts in its Pretrial Order.

See Pretrial Order, Schedule C, ECF No. 142 (“Jt. Uncontested Facts”).             The UPS

devices at issue are Model Nos. CP600LCDa, CBN50U48A-1, CST135XLU,

OR500LCDRM1U, and SX650U, and the SVP device is Model No. HT1206UC2RC1.

See Jt. Uncontested Facts ¶¶ 1–2.
Court No. 20-00124                                                                      Page 8

         The UPS devices essentially serve as backup batteries for a range of electronic

devices and electrical appliances.        See, e.g., Jt. Uncontested Facts ¶ 14 (Model

No. OR500LCDRM1U); see, e.g., id. ¶ 17 (“If power to a connected device is lost, [this

model] activates a lead acid battery, which provides emergency power to the connected

device until power is restored[.]”). These devices assist in a “graceful shutdown” during

a power failure so as “to protect against the loss of data and damage to valuable

electronics.” Id. ¶¶ 25, 33, 41, 48. To make the UPSs function as intended, all five subject

models contain “firmware”—computer code—that is written in Taiwan and programmed

on the main PCBAs of each device. Id. ¶¶ 19, 27, 35, 43 & 51; see also Trial Vol. III at

377–80 (Plaintiff’s witness Thomas L. Fuehrer explaining general function of firmware).

         The surge protector, SVP Model No. HT1206UC2RC1, provides “surge protection

of up to 2880 joules to connected devices.” Jt. Uncontested Facts ¶ 56. Unlike the UPS

devices, it contains neither firmware nor a battery. Trial Vol. III at 436, ECF No. 151;

Deposition Transcript of Chi-Ting (Tim) Huang at 149, ECF No. 153 (“Huang Dep.”).

         With respect to four of the UPS devices and the single SVP device, it is undisputed

that the majority of their components, including the main printed circuit board assemblies

(“PCBAs”), were manufactured in China. Jt. Uncontested Facts ¶¶ 18, 20–23, 26, 28–31,

34, 36–39, 50, 52–55, 58, 60–63. Throughout this litigation, Plaintiff contended, and

Defendant disputed, that the main PCBA for UPS Model No. CP600LCDa was

manufactured in the Philippines. See Huang Dep. at 40. 3

3   Mr. Huang’s deposition was used as the majority of his direct testimony at trial.
Court No. 20-00124                                                                Page 9

      The main PCBA controls all the functions of the device in which it is installed.

See Huang Dep. at 40; Trial Vol. III at 417. In its presentation of the case, Plaintiff

identified multiple other PCBAs within certain of the models of the subject merchandise,

in addition to the main PCBAs. See, e.g., Huang Dep. at 87–93. Plaintiff also presented

testimony generally addressing the specifications and functions of PCBAs—namely, that

“a printed circuit board assembly is the fiberglass board [inside a UPS, for example] with

the copper traces attached to it that are embedded inside it. Those copper traces connect

the components that are also located on the printed circuit board. . . . [T]he assembly is

the board plus all the components.” Trial Vol. III at 375–76.

                      2. Trial Witnesses and Admitted Evidence

      Plaintiff’s principal witness, Chi-Ting “Tim” Huang, is an employee of Cyber Power

Systems Inc. (“Cyber Power Taiwan”), who is assigned to and serves as the general

manager of Cyber Power Philippines. 4 Huang Dep. at 6–8, 13; Trial Vol. I at 46–48, ECF

No. 149. Mr. Huang testified that he “manage[s] all the departments at the [Philippines]

factory[,] execute[s] the short-term, medium-term, and long-term plans of the

company[, and] appl[ies] for all the relevant documents for the company from the

Philippines government.” Trial Vol. I at 46. Mr. Huang’s testimony primarily consisted of

a review of Plaintiff’s trial exhibits relating to each model of the subject merchandise.

See generally Huang Dep.; Plaintiff’s Trial Exhibits (“PTX”) 6–63. During trial, Mr. Huang

also guided the court through a demonstrative video depicting the operations in July 2020

4 Cyber Power Taiwan is the parent company of Plaintiff, Cyber Power Philippines, and
other entities. Jt. Uncontested Facts ¶ 64; Huang Dep. at 13; Trial Vol. III at 522, 527.
Court No. 20-00124                                                                Page 10

at the Cyber Power Philippines factory. 5 Trial Vol. I at 48–122; Trial Vol. II at 128–222,

ECF No. 150; Jt. Trial Exhibit 1.

       At trial, and as memorialized in its Proposed Findings of Fact and Conclusions of

Law, Defendant challenged Mr. Huang’s credibility on the basis of discrepancies in his

signature used to sign various documents, inconsistencies in his testimony about the

relationship between Cyber Power Philippines and a related entity, Phisonic, and errors

in his explanation of the July 2020 demonstrative video. See Def.’s FOF & COL at 24–27

(“These examples of implausible testimony reveal a witness whose testimony should be

seen as untrustworthy and, thus, not credited unless corroborated by other,

unimpeachable evidence.”).

       As a threshold matter, the court notes the limited relevance of any testimony

regarding Cyber Power’s corporate structure and relationship with Phisonic to the

substantial transformation issue. As explained below, the court finds that Mr. Huang’s

testimony contained evidentiary gaps regarding certain aspects of the assembly of the

subject merchandise during the relevant time period. See infra pp. 18–24. Even though

these gaps detract from his credibility, the court finds that Mr. Huang’s demeanor on the

stand, along with his direct answers regarding the technically complex subject

merchandise, rendered him a credible witness overall.

5 As a demonstrative exhibit, the video was not entered into evidence. See, e.g., Trial
Vol. II at 188, ECF No. 150; Pre-Trial Order, Schedule C-1, ¶ 69 (Plaintiff’s Statement of
Material Facts in Dispute) (“The video record does not purport to depict the manufacture
of the specific goods which are the subject of this action, but is proffered as a
demonstrative or pedagogical exhibit, in accordance with Rule 611 of the Federal Rules
of Evidence.”).
Court No. 20-00124                                                                   Page 11

       Plaintiff’s remaining witnesses were Thomas L. Fuehrer, the electrical project

manager at Cyber Power, and Brent A. Lovett, the general manager and president of

Cyber Power. Trial Vol. III at 360, 362, 478. The Government’s witnesses were Linda

Horacek, an import specialist on Customs’ electronic enforcement team, and Karl

Moosbrugger, a national import specialist at Customs, who were involved in the

administrative investigation and protest determination. Id. at 596, 608, 611–17; Trial

Vol. IV at 789, 825, ECF No. 152.

       At trial, Cyber Power again raised its relevance objection to testimony by

Defendant’s witnesses “dealing with the administrative process by which the protest was

decided.” Trial Vol. III at 593.     This objection was previously denied by the court.

See ECF Nos. 135, 136. As the court explained at trial, and reiterates now, in presiding

over a bench trial the court maintains the ability to ignore any testimony that it finds to be

irrelevant. Here, every witness other than Mr. Huang lacked personal knowledge as to

the operations at the Cyber Power Philippines factory. Accordingly, the probative value

of their respective testimony is minimal because it does not assist the court in resolving

the central question—whether those operations, occurring in early 2020, constituted a

substantial transformation of the subject merchandise.

                            3. Operations in the Philippines

       To determine whether substantial transformation of the subject merchandise

occurred in the Philippines, the court has reviewed the admitted evidence and testimony

pertaining to the manufacture of each model of subject merchandise during the relevant

time period—early 2020 up to the date of entry, March 27, 2020.             Jt. Uncontested
Court No. 20-00124                                                                 Page 12

Facts ¶ 1; ECF No. 20-1; see also Trial Vol. III at 452, 454 (establishing that UPS Model

No. CBN50U48A-1 went into production and entered marketplace in March 2020).

Although the parties do not identify exact dates, they appear to be in agreement that the

subject merchandise was manufactured in early 2020. See, e.g., Huang Dep. at 36, 65,

68, 84; Trial Vol. II at 153, 295 (questioning by Defendant making reference to early 2020

as relevant time period).

      During direct examination, Mr. Huang identified and described the contents of

various documentary exhibits associated with the production process of each model of

UPS or SVP in issue.         He also testified that Cyber Power Philippines began

“manufacturing” UPSs and SVPs in October 2018, and that Phisonic, a related entity

operating in the same building as Cyber Power Philippines, was incorporated in

March 2019 and has been manufacturing PCBAs since September 2019. Id. at 26–29;

see PTX 8.

      For each of the six devices at issue, Plaintiff submitted the following information as

separate exhibits: “Spec Sheets” for each device (PTX 9, 18, 20, 28, 37, 46, and 55);

“User Manuals” (PTX 10, 19, 29, 38, 47, and 56); Bills of Materials for the components of

each device (UPS or SVP) (PTX 11, 21, 30, 39, 48, and 57); and Bills of Materials for the

components of each PCBA (main boards and other boards, if applicable) (PTX 12, 22,

31, 40, 49, and 58).        Plaintiff also introduced exhibits purporting to show the

manufacturing process for each device: “Production Timelines” (PTX 13, 23, 32, 41, 50,

and 59); “Manufacturing Process Flowcharts” (PTX 14, 26, 35, 44, and 53, and 62); and

“Standard Operating Procedures” for both the PCBA(s) and device assembly processes
Court No. 20-00124                                                              Page 13

(PTX 15, 24, 25, 33, 34, 42, 43, 51, 52, 60, and 61). Finally, for each device, Plaintiff

submitted schematics for each device’s PCBA(s), dimension drawings, and “exploded”

view diagrams of the finished UPS and SVP devices (PTX 17, 27, 36, 45, 54, and 63).

      For five of the six models of subject merchandise, it is undisputed that the main

PCBAs were manufactured in China. Before discussing the assembly process for all of

the UPS and SVP devices, the court addresses the disputed origin of UPS Model

No. CP600LCDa’s main PCBA.

                i. Origin of UPS Model No. CP600LCDa’s Main PCBA

      To support its position that the CP600LCDa was manufactured in the Philippines

from the PCBA stage onward, Plaintiff submitted additional documentary evidence—

specifically, “work orders” and “set issuing” records—that purport to show the production

of PCBAs by Phisonic. See PTX 16. This additional evidence, together with the contents

of the core documentary exhibits and Mr. Huang’s testimony, permits the court to draw

the necessary factual inferences to conclude that the main PCBAs for the subject

CP600LCDa devices were manufactured in the Philippines.

      For the CP600LCDa, the Spec Sheet and User Manual are consumer-facing

documents that reveal nothing about the manufacture or country of origin for the subject

devices or their main PCBAs. 6 See PTX 9 & 10. Mr. Huang testified, based on these

6Both the Spec Sheet and User Manual refer to the device as “CP600LCD,” which the
parties appear to treat as an interchangeable name for the CP600LCDa. See, e.g., Pl.’s
FOF & COL ¶ 45; Def.’s FOF & COL ¶ 22. The same seems true for a different UPS
device, Model No. OR500LCDRM1U.                Compare PTX 37 (Spec Sheet for
OR500LCDRM1U), with PTX 39 (Bill of Materials for OR500LCDRM1Ua).
Court No. 20-00124                                                               Page 14

exhibits and his personal knowledge, that the CP600LCDa was “manufactured” at Cyber

Power Philippines as of early 2020 and is still in production there, and that the User

Manual would be packed with each device before shipping. Huang Dep. at 35–36.

      The CP600LCDa’s Bills of Materials (i.e., “component lists” for both the main PCBA

and the UPS in its entirety) are undated, but provide references to the country of origin

for each type of component. PTX 11 & 12. Notably, both Bills of Materials state that the

device’s firmware (Part No. 0PA-0000506-03) “is designed and coded in Taiwan; [and]

loaded in Philippines.” PTX 11 & 12 (emphasis added). Mr. Huang specifically testified

that the Bill of Materials for the CP600LCDa’s main PCBA showed 128 types of

components that were combined by Phisonic employees in the Philippines to produce

that main PCBA. Huang Dep. at 39–40, 45.

      The Manufacturing Procedure Flowchart for the CP600LCDa corroborates the

foregoing exhibits by listing the Philippines as the country where firmware is loaded.

See PTX 14; see also PTX 15 at 01089 (Standard Operating Procedure) (showing, as

general matter, that firmware burning for CP600LCDa is step of PCBA manufacturing

process). Mr. Huang testified that he personally observed the processes shown in the

Flowchart, and that “descriptions of the operations that are performed” in the Philippines

were accurate. Huang Dep. 46–47. While the component lists and the Flowchart lack

dates, when these exhibits are read together with the remaining exhibits pertaining to the

CP600LCDa’s manufacture, the court can draw key inferences as to the origin of the

subject model’s main PCBA.
Court No. 20-00124                                                                  Page 15

       Turning next to the Production Timeline for the CP600LCDa, this exhibit lists the

Philippines as the country location for both the PCBA operations (Surface Mount Device

(“SMD” or “SMT” for “Surface Mount Technology”), Auto-Insertion (“AI”), and Dual in-line

package (“DIP”)) and the assembly and testing of that model of UPS. PTX 13. Mr. Huang

testified that Phisonic employees conducted the SMD, AI, and DIP operations in the

Philippines, while Cyber Power Philippines employees completed the UPS assembly,

testing, and packaging. Huang Dep. at 45–46.

       While the production timeline lacks dates, it includes a production quantity—1,440

units—that also appears in the additional documentation provided for the CP600LCDa:

the “work orders” and “set lists.” See PTX 13 & 16; Huang Dep. at 43 (“[Y]ou can see the

quantity for the purchase order[,] which is 1,440.”). These work orders and set lists reflect

each stage of the PCBA manufacturing process—SMD, AI, and DIP assembly—for a total

quantity of 1,440 PCBA boards. 7 PTX 16. Further, these work orders and set lists include

a date range—September 2019 through February 2020—for the PCBA manufacturing

process as a whole that is consistent with Plaintiff’s claimed timeline for manufacture of

the subject merchandise. Id.; see also Huang Dep. at 29 (testifying that Phisonic began

manufacturing PCBAs in Philippines in September 2019). Finally, the work orders and

set lists repeatedly reference “Phisonic,” as the company conducting the listed operations,

which again is consistent with Mr. Huang’s testimony that the main PCBAs for the subject

CP600LCDa UPSs were manufactured by Phisonic in the Philippines as of early 2020.

7The CP600LCDa is the only model of subject merchandise for which a production
quantity can be consistently traced across multiple documents.
Court No. 20-00124                                                                Page 16

Huang Dep. at 55 (testifying that PCBA manufacturing machines shown in PTX 16 were

Phisonic’s machines).

      The remaining exhibits pertaining to the CP600LCDa—Standard Operating

Procedures for main PCBA and UPS assembly, and diagrams showing PCBA circuitry

and the UPS components—provide little additional support for the country of origin of the

PCBAs, as they are generalized instructional and informational documents. See PTX 15

& PTX 17. Mr. Huang testified that the Standard Operating Procedures are posted at

workstations at the Cyber Power Philippines factory and that “the operator or the worker

of that workstation would then perform the job according to the manual.” Huang Dep.

at 51–52.   Although the Procedures are dated “First draft: 2018, Revised in 2019,”

Mr. Huang failed to confirm whether the workers who manufactured the subject

merchandise in early 2020 acted in accordance with them. See id.; PTX 15. There is

nothing contained in the Procedures, such as the identification of a specific order or

quantity, to tie them to the subject merchandise. Likewise, the circuit diagrams for all of

the PCBAs (dated 2018) and UPS assembly diagrams (undated) for the CP600LCDa do

not provide information establishing the country of origin for its main PCBA. PTX 17.

      For its part, Defendant argues that Plaintiff has failed to establish that the main

PCBAs for the subject CP600LCDa devices were manufactured in the Philippines.

According to Defendant, “Cyber Power’s failure to provide sufficient documentation

actually tied to the articles comprising the subject merchandise detained by [Customs]

leaves the Court with no ability to evaluate this claim with confidence.” Def.’s FOF & COL

at 32. Specifically, the Government points to (1) an invoice purporting to show that a part
Court No. 20-00124                                                                 Page 17

of the main PCBA for the CP600LCDa was shipped to China rather than the Philippines

(Defendant’s Trial Exhibits (“DTX”) 4 & 5), and (2) a report from an audit of the Cyber

Power Philippines factory in February 2020 (DTX 9). See Def.’s FOF & COL at 32–34.

The audit report states that, as of February 28, 2020, there were PCBA manufacturing

operations taking place in the Philippines, but those operations appeared to be less than

fully organized.   See, e.g., DTX 9 at 02055 (“Although responsibilities for the new

processes were assigned, there were no records to demonstrate who are assigned to

specific process . . . . Moreover, Job Descriptions for these processes were not

available.”).

       The court finds that it is unable to draw Defendant’s preferred factual inferences

from the cited exhibits. The invoice, which appears to show a part of the main PCBA for

the CP600LCDa, is dated June 27, 2019—prior to the dated work orders and set lists for

the CP600LCDa on which Plaintiff relies. DTX 5. Without additional context, it is unclear

what the invoice can prove about the manufacture of the CP600LCDa’s main PCBA in

later 2019 and early 2020. As to the audit report, the court’s findings with respect to the

country of origin of the CP600LCDa’s main PCBA do not depend on a thorough

understanding of Phisonic’s corporate structure or the sophistication of its operations.

Rather, the court merely concludes that Phisonic is indisputably located in the Philippines.

See, e.g., PTX 7 (showing Phisonic’s factory layout in Philippines); Def.’s FOF & COL

at 24 (arguing that Phisonic may be a mere “proxy” for Cyber Power Philippines). Thus,

the watermark “Phisonic” on Plaintiff’s admitted work orders and set lists from late 2019
Court No. 20-00124                                                                Page 18

to early 2020 tilts the scales in favor of a finding that the main PCBAs for the subject

CP600LCDa devices were manufactured in the Philippines.

      As a whole, Plaintiff’s documentary evidence contains consistent references to the

Philippine production of the main PCBA for the CP600LCDa, quantity-specific work orders

and set lists showing dates corresponding with the approximate timeframe during which

the subject merchandise was manufactured, and comports with Mr. Huang’s testimony

as to his personal knowledge of operations occurring at Phisonic and Cyber Power

Philippines in early 2020. Based on the totality of this evidence, the court concludes that

Plaintiff has proven that the main PCBAs for the subject CP600LCDa devices were

manufactured in the Philippines.

      The Philippine origin of the CP600LCDa from the main PCBA process onwards

distinguishes it from the remaining UPS and SVP devices, for which it is undisputed that

the main PCBAs originated in China.          Before the court reaches its substantial

transformation determination, however, it will address the evidence on the record that

purports to establish the nature and extent of the assembly processes for each UPS and

SVP device.

               ii. Device Assembly and Testing of All Subject Models

      Unlike the evidence establishing the origin of the CP600LCDa’s main PCBA,

Plaintiff’s evidence of subsequent assembly and testing of the subject UPSs and SVPs

does not permit the court to piece together a coherent and detailed manufacturing timeline

for the subject merchandise in the Philippines as of the relevant time period (early 2020).

The court now addresses the deficiency of each set of exhibits.
Court No. 20-00124                                                                 Page 19

       First, the Spec Sheets and User Manuals for each model contain no information

about the manufacturing process for the subject merchandise. See PTX 9, 10, 18, 19,

20, 28, 29, 37, 38, 46, 47, 55 & 56. Mr. Huang’s testimony based on these exhibits

confirmed only that he recognized these devices and the general timeline of their

manufacture. See, e.g., Huang Dep. at 62–65 (UPS Model No. CBN50U48A-1 was being

manufactured at Cyber Power Philippines in early 2020, but has since been “phased out”).

       The next exhibits—Bills of Materials for the devices and their respective PCBAs,

including main PCBAs—do not describe the manufacture of the subject merchandise, but

rather, list the types of components that are part of each device or PCBA. See PTX 11,

12, 21, 22, 30, 31, 39, 40, 48, 49, 57, & 58. While they provide the country of origin for

each type of component generally, these Bills lack any information to link them to the

subject merchandise specifically. They are undated, and do not indicate a total quantity

or order of finished merchandise.      Indeed, as the Government points out, there is

non-specific country of origin information provided for certain components in some of the

Bills. See, e.g., PTX 30 at 00032 ln.123 (showing, for “electrolytic cap,” that country of

origin is “4% from Taiwan, 18% from Japan/Korean, 78% from CHINA); Def.’s FOF & COL

at 29. Mr. Huang testified that the percentages represent the relative chance of a given

part being from a particular country, and that to confirm the actual country of origin, one

must review a “procurement order” to identify the part’s supplier. Trial Vol. II at 324–25.

From Mr. Huang’s testimony, the court infers that the Bills provided are summary-type

documents, further distancing them from the subject merchandise. On direct, Mr. Huang

testified only as a general matter that these Bills of Materials show the parts used to make
Court No. 20-00124                                                               Page 20

each PCBA—including the main PCBAs—and UPS or SVP device, and confirmed that

(for the devices other than CP600LCDa) the PCBAs were assembled in China as of early

2020, while the assembly, testing, and packaging of each device occurred in the

Philippines.   See Huang Dep. at 66–68 (CBN50U48A-1); id. at 85, 89–90, 92–93

(CST135XLU); id. at 111–13, 116–18 (OR500LCDRM1U); 131–33 (SX650U); id. at

153–55 (HT1206UC2RC1); see also id. at 37–41 (discussing CP600LCDa’s Bills of

Materials and testifying that PCBA components are assembled in Philippines).

       Turning next to the Production Timelines and Manufacturing Process Flowcharts

that ostensibly show how the UPS and SVP devices are assembled, the court is faced

with the conundrum of similarly weak “connective tissue” between generalized

descriptions of the operations at the Cyber Power Philippines factory and the actual

assembly of the subject merchandise as it occurred in early 2020. Both sets of exhibits

are undated, and lack any additional documentation to confirm that these timelines

specifically show the assembly process of the subject merchandise. See PTX 13, 14, 23,

26, 32, 35, 41, 44, 50, 53, 59 & 62. The production quantities and work hours in these

exhibits also lack further context to tie them to the subject merchandise. See PTX 13, 23,

32, 41, 50 & 59.

       The Standard Operating Procedures, circuit diagrams, dimension drawings, and

“exploded” diagrams for each model suffer from similar issues: there is nothing to link

these exhibits to specific quantities of merchandise, and no testimony to confirm whether

or not these processes were being followed by the workers who assembled the subject
Court No. 20-00124                                                                 Page 21

merchandise at the Cyber Power Philippines factory in early 2020. See PTX 15, 17, 24,

25, 27, 33, 34, 36, 42, 43, 45, 51, 52, 54, 60, 61 & 63.

       Mr. Huang’s testimony regarding these exhibits is noticeably lacking when

compared to his testimony on the CP600LCDa. Mr. Huang repeatedly confirmed that he

was “familiar” with the operations in each exhibit, that they occurred in China (as to the

PCBAs) and the Philippines (as to the UPS and SVP devices), and that the exhibits

themselves were “accurate.” See Huang Dep. at 69–82 (CBN50U48A-1); id. at 95–107

(CST135XLU); id. at 114–28 (OR500LCDRM1Ua); id. at 137–44 (SX650U); id. at 150–65

(HT1206UC2RC1). He failed to testify, however, that he had personally observed the

manufacture of the subject merchandise, or to point to any other evidence that could link

its production to these summary, “guidelines”-type exhibits, especially with reference to

the necessary timeframe: early 2020. See generally id. The need to tie the evidence to

that timeframe is critical because Mr. Huang repeatedly acknowledged that Cyber

Power’s operations continued to shift from China to the Philippines. For instance, with

respect to the CST135XLU, Mr. Huang testified that all of its PCBAs (main board, control

board, USB charging board, COAX board, and NTVS board) were manufactured in China

as of early 2020, but as of the time of the trial were manufactured by Phisonic in the

Philippines. Id. at 87–93. Because many of the documentary exhibits are undated,

however, it is difficult to discern which exhibits are concurrent with each other, and which

describe operations occurring in different countries.

       The questions raised by the lack of consistent dates and other links between the

documentary evidence and Mr. Huang’s testimony also confuses the operational timeline
Court No. 20-00124                                                                 Page 22

with respect to “firmware burning.” These inconsistencies and gaps in the record are

illustrative of Plaintiff’s evidentiary failures.   Importantly, Plaintiff argues that the

“[f]irmware is applied to the PCBAs in all the subject UPS models. . . . at [the Cyber Power

Philippines] plant in the Philippines, using firmware code which was created . . . in Taiwan

by Taiwanese firmware engineers.” Pl.’s FOF & COL ¶ 85 (emphasis added). Plaintiff

goes on to argue that once firmware is burned into a particular Cyber Power device, it

cannot be overridden by additional firmware. See Trial Vol. III at 463 (“Q. Once you burn

firmware the door is shut? A. That’s correct.”).

       The evidence, however, appears to present a less clear picture. For all of the

subject UPS devices, at least some firmware burning occurs during the PCBA

manufacturing     process,     a    stage     of    production   that—except      for   the

CP600LCDa—undisputedly occurs in China. See PTX 23, 25, 32, 33, 41, 42, 50, & 51.

This is borne out by the documentary evidence: the Bills of Materials for the

CBN50U48A-1 list firmware as designed in Taiwan, with the same part number

(#0HU-5048017-00) appearing in the Bills for the finished UPS device and the main

PCBA. PTX 21, ln.157; PTX 22, ln.157. The Standard Operating Procedure for the

CBN50U48A-1’s main PCBA lists “Firmware Burn-In” as a step in the main board

manufacture, and identifies the firmware by the same part number as the

Bills: 0HU-504817-00. PTX 24 at 01032. As of 2020, Plaintiff concedes that these

operations took place in China. See Huang Dep. at 68. CBN50U48A-1’s Standard

Operating Procedure for UPS assembly does not mention firmware.              See PTX 25.

Nevertheless, Plaintiff contends that the firmware for this device is loaded in the
Court No. 20-00124                                                                  Page 23

Philippines, where only UPS assembly, testing, and packaging occurred. Pl.’s FOF

& COL ¶ 59 (“The assembled UPS Model No. CBN50U48A-1 is then programmed in the

Philippines with firmware which is produced in Taiwan and which enables the electronic

components of the UPS to function.”).

       As another example, the Bill of Materials for the main PCBA of the SX650U states

that its firmware was “designed and coded in Taiwan, loaded in Philippines.” PTX 49.

The Standard Operating Procedures for both PCBA and UPS assembly show firmware

burning as a step in the UPS assembly process. PTX 51 at 01210; PTX 52 at 01228. Mr.

Huang testified, however, that the firmware burning for the SX650U “[i]nitially . . . was

done in China.” Huang Dep. at 140 (“Q. So when you made this main board in China,

you did some firmware burning in China? A. Yes.”). Plaintiff has failed to explain this

seeming contradiction.

       Based on the foregoing, the court concludes that Plaintiff has failed to carry its

burden of producing evidence to show that five of the six models of subject

merchandise—UPS Model Nos. CBN50U48A-1, CST135XLU, OR500LCDRM1U,

SX650U, and SVP Model No. HT1206UC2RC1—were substantially transformed in the

Philippines.   Plaintiff’s evidence does not establish what operations occurred in the

Philippines to produce these subject devices to permit the court to conduct a substantial

transformation analysis.

       A distinction must be made, however, for the CP600LCDa. Having determined

that its main PCBA originates in the Philippines, the court is able to infer that the majority

of its manufacture—multi-phase assembly of its main board, and assembly and testing of
Court No. 20-00124                                                                Page 24

the ultimate UPS device—took place in the Philippines. Accordingly, the court proceeds

to a substantial transformation analysis for the CP600LCDa.

                                B. Conclusions of Law

       In a civil action, preponderance of the evidence means “the greater weight of

evidence, evidence which is more convincing than the evidence which is offered in

opposition to it.” Bosun Tools Co. v. United States, 43 CIT ___, ___, 405 F. Supp. 3d

1312, 1315 (2019) (quoting Hale v. Dep’t of Transp., 772 F.2d 882, 885 (Fed. Cir. 1985)).

Here, Plaintiff Cyber Power bore the burden of proof that the assembly it alleged took

place in the Philippines with respect to the six models of subject merchandise constituted

“substantial transformation” under the “name, character, or use” test, such that “new and

different” articles emerged.

 1. UPS Model No. CP600LCDa Was Substantially Transformed in the Philippines

       As the court articulated in its summary judgment opinion, the substantial

transformation test is not straightforward to apply. Cyber Power, 46 CIT at ___, 560

F. Supp. 3d at 1351. Nevertheless, courts deciding issues of substantial transformation

have established several guiding tenets and consistently emphasized the case-by-case

nature of the test. See, e.g., Nat’l Hand Tool v. United States, 16 CIT 308, 311 (1992),

aff’d 989 F.2d 1201 (Fed. Cir. 1993) (“To determine whether a substantial transformation

of an article has occurred . . . each case must be decided on its own particular facts.”

(quoting Uniroyal, Inc. v. United States, 3 CIT 220, 224, 542 F. Supp. 1026, 1029 (1982))).

       The court reiterates its prior rejection of two potential alternatives to the

substantial transformation test of name, character, or use: first, an “essence”-based
Court No. 20-00124                                                                Page 25

approach that would look only to whether the essential or critical component of a product

had been transformed; and second, an approach that would per se decide whether

substantial transformation had occurred on a component-by-component basis.

See Cyber Power, 46 CIT at ___, 560 F. Supp. 3d at 1354 (“The court agrees with

Plaintiff that Defendant’s proposed focus on the PCBA and the application of an

‘essence’ or ‘critical component’ test here is without merit.        The Government’s

suggestion to focus solely on the PCBA components[8] of the subject merchandise may

well undermine the objective of the ‘substantial transformation’ test, namely to focus on

a change in name, character, or use.”); id. (“While the intended use of components may

provide some insight as to whether the assembly of those components into the finished

merchandise accomplishes a change in use that indicates a ‘substantial transformation,’

such a consideration is but one of many for the court to consider as part of the ‘totality

of the evidence.’” (citation omitted)). The Government’s approach does not promote

uniformity, consistency, and predictability in the application of the substantial

transformation test. Consequently, the court does not read the prior caselaw on that

test as having altered the fundamental requirements of “name, character, or use” by

narrowing it to an essence- or component-based interpretation.

8 To be functional, the subject UPS devices require multiple components in addition to
the main PCBA—including, but not limited to, firmware unique to each model, and a
battery. Without these components, the main PCBA cannot individually perform the
functions of a UPS. See, e.g., Huang Dep. at 61, 82, 147; Trial Vol. III at 385–86; Trial
Vol. IV at 911.
Court No. 20-00124                                                                 Page 26

       Rather, a change in name, character, or use turns on the nature of the potentially

transformative processing, considered in the context of the particular kind of

merchandise being manufactured. See Meyer Corp., U.S. v. United States, 43 F.4th

1325, 1331 (Fed. Cir. 2022) (holding that “the trial court correctly focused its inquiry on

manufacturing steps that changed the shape, form, chemical properties, and mechanical

properties” of a product).

       Because the court finds that the entirety of the CP600LCDa’s manufacture

occurred in the Philippines, the court need not make a determination as to whether its

UPS assembly process alone constituted a substantial transformation. The CP600LCDa

began its manufacturing journey in the Philippines as a set of components not yet

functional as a power source of any kind. See Huang Dep. at 39–40, 45 (128 types of

components were combined in Philippines to assemble CP600LCDa’s main PCBA). After

several stages of manufacturing, each involving numerous steps directed toward

changing the electronic properties of the device as a whole, the CP600LCDa left the

Philippines as a fully functioning UPS. It is undisputed that that the CP600LCDa is

capable of providing “battery backup (using simulated sine wave output) and surge

protection for desktop computers, workstations, networking devices, and home

entertainment systems,” and that, thanks to its programming, “is able to provide real time

status and alerts of potential problems.” Jt. Uncontested Facts ¶¶ 40, 42. Even without

detailed evidence describing the assembly stage of UPS production, the change from all

of its components to its ultimate finished product as a UPS device is a change so marked

as to shift the burden of proof in Plaintiff’s favor.
Court No. 20-00124                                                               Page 27

      Thus, the court holds that Cyber Power’s operations in the Philippines resulted in

a “new and different article”: the CP600LCDa. Indeed, the CP600LCDa’s Philippine

manufacture satisfies all three prongs of the substantial transformation test: a change in

name (from a set of PCBA and UPS component parts to the finished, functioning UPS

Model No. CP600LCDa), a change in character (from component parts not yet capable

of being electronically programmed to a device capable of performing a number of

intelligent functions), and a change in use (from component parts to a device geared

towards a specifically identified purpose: protecting against power outages).

      Accordingly, the subject UPS Model No. CP600LCDa devices should be marked

as products originating from the Philippines under 19 U.S.C. § 1304(a).

       2. Plaintiff Failed to Carry Its Burden of Proof as to UPS Model Nos.
      CBN50U48A-1, CST135XLU, OR500LCDRM1U, SX650U, and SVP Model
                                 No. HT1206UC2RC1

      The court now turns to the country of origin of the remaining models of subject

merchandise. As articulated in its Findings of Fact, the court determined that Plaintiff’s

evidence in this case is undercut by its lack of connection to the subject merchandise and

the existence of unanswered questions and unresolved conflicts among the documentary

evidence, Mr. Huang’s testimony, and Plaintiff’s contentions in its Proposed Findings of

Fact and Conclusions of Law.

      Before trial, the court was faced with many questions pertaining to the subject UPS

and SVP devices: how the production process in the Philippines evolved as more of Cyber

Power’s operations shifted there; when and where discrete steps of the so-called

“assembly” process, such as firmware burning, were taken; and whether Plaintiff could
Court No. 20-00124                                                                 Page 28

submit evidence of assembly procedures that depicted the manufacturing process of the

subject merchandise.

       Based on Mr. Huang’s testimony and Plaintiff’s admitted exhibits, the trial did not

provide answers to these questions. The court thus holds that Plaintiff has failed to prove,

by a preponderance of the evidence, that five of the six subject models are products of

the Philippines. The court cannot reliably discern how the parts of the remaining four

UPS devices, or the single SVP device at issue, were assembled into fully functioning

products.   Plaintiff failed to present the specific testimony describing the assembly

process of the subject devices for the relevant time period, and instead focused on a

general overview of its product types and manufacturing operations. See, e.g., Huang

Dep. at 74–75, 104–05, 123–25, 138, 161–65. Thus, no witness with personal knowledge

confirmed that the assembly operations depicted in the documentary exhibits fully

reflected the manufacture of the subject merchandise. Without such testimony, the

documentary evidence alone does not establish what the assembly process for the

subject UPS and SVP devices looked like in early 2020.

       Furthermore, discrepancies between the exhibits and Mr. Huang’s testimony with

respect to where and at what stage certain steps were performed, along with the absence

of dates, quantities, and other merchandise-specific information, leave the court unable

to determine whether the devices were substantially transformed in the Philippines. That

the devices left the Philippines with new names cannot suffice to prove that “new and

different article[s] emerged” from the operations at Cyber Power Philippines factory.
Court No. 20-00124                                                              Page 29

Simply put, with the exception of the CP600LCDa, this is a case in which Plaintiff has

failed in its burden of proof from the outset.

                                       III. Conclusion

       For the foregoing reasons, the court finds that country of origin for UPS Model

No. CP600LCDa is the Philippines, and the country of origin for the remaining five models

of subject merchandise is China. Judgment will enter accordingly.

                                                              /s/ Leo M. Gordon
                                                           Judge Leo M. Gordon

Dated: February 27, 2023
       New York, New York