[Federal Register Volume 71, Number 150 (Friday, August 4, 2006)]
[Notices]
[Pages 44302-44303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-12575]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection


Notice of Issuance of Final Determination Concerning Chairs

AGENCY: Customs and Border Protection, Department of Homeland Security.

ACTION: Notice of final determination.

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SUMMARY: This document provides notice that the Bureau of Customs and 
Border Protection (Customs) has issued a final determination concerning 
the country of origin of certain office chairs to be offered to the 
United States Government under an undesignated government procurement 
contract. The final determination found that based upon the facts 
presented, the country of origin of the subject chair is the United 
States.

DATES: The final determination was issued on July 31, 2006. 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 30 days of August 4, 2006.

FOR FURTHER INFORMATION CONTACT: Fernando Pe[ntilde]a, Esq., Valuation 
and Special Programs Branch, Office of Regulations and Rulings; 
telephone (202) 572-8740.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on July 31, 
2006, pursuant to subpart B of part 177, Customs Regulations (19 CFR 
part 177, subpart B), Customs issued a final determination concerning 
the country of origin of certain office chairs to be offered to the 
United States Government under an undesignated government procurement 
contract. The Customs ruling number is HQ 563456. This final 
determination was issued at the request of Herman Miller, 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).
    The final determination concluded that, based upon the facts 
presented, the assembly in the United States of over 70 U.S.-origin and 
foreign components to create the subject office chair substantially 
transformed the foreign components into a product of the U.S.
    Section 177.29, Customs Regulations (19 CFR 177.29), provides that 
notice of final determinations shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, Customs Regulations (19 CFR 177.30), states 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: July 31, 2006.
Sandra L. Bell,
Acting Assistant Commissioner, Office of Regulations and Rulings.

Attachment

MAR-2-05 RR:CTF:VS 563456 FRP

July 31, 2006

CATEGORY: Marking

Ms. Lisa A. Crosby
Sidley Austin LLP
1501 K Street, NW., Washington, DC 20005

RE: U.S. Government Procurement; Final Determination; country of 
origin of office chairs; substantial transformation; 19 CFR Part 177

Dear Ms. Crosby:
    This is in response to your letter dated February 22, 2006, on 
behalf of Herman Miller, Inc. (hereinafter ``HM''), in which you 
seek a final determination pursuant to subpart B of Part 177, 
Customs Regulations, 19 CFR 177.21 et seq. Under these regulations, 
which implement Title III of the Trade Agreements Act of 1979, as 
amended, (19 U.S.C. 2411 et seq.), U.S. Customs and Border 
Protection (``Customs'') issues country of origin advisory rulings 
and final determinations on whether an article is or would be a 
product of a designated foreign 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 
certain office chairs, which HM is considering selling to the U.S. 
Government. We note that HM is a party-at-interest within the 
meaning of 19 CFR 177.22(d)(1) and is entitled to request this final 
determination.
    FACTS:
    HM is a manufacturer of office furniture. It imports components 
which the company assembles with domestic components into finished 
furniture goods.
    We are told that HM assembles the subject chair in the U.S. from 
over 70 U.S.-origin and foreign components. HM provided a copy of a 
costed bill of materials for a typical chair that was recently sold 
to another Government agency. The features of the chair allow the 
height of the chair to be adjusted and to be tilted to allow the 
body to naturally pivot at the ankles, knees and hips. Two back 
support options are available to improve posture and lower back 
comfort. Three arm choices are available: Fixed, height-adjustable 
and fully adjustable, which allows the arms to pivot sideways.
    According to that bill of materials, 87.6 percent of the cost of 
the materials is attributable to materials of U.S. origin. Some of 
the materials used are as follows: Base, tilt assembly, pneumatic 
activator assembly, seat frame assembly, arm adjustment kit, back 
assembly (all of U.S. origin); telescoping cylinder, casters, armpad 
and lumbar pad (all of which are of non-U.S. origin).
    You state that all components, whether purchased locally or 
imported, are received at HM's production facility in Holland, 
Michigan. Assembly begins by attaching a telescoping cylinder to a 
chair base. This telescoping cylinder is what permits the height of 
the chair to be adjusted. The casters selected by the ultimate 
purchaser are then added to the chair legs. The swing arms, seat, 
arm rests, back, and lumbar support are then added in that order.
    After final assembly, each chair is quality tested by a worker 
who adjusts the height of the seat, reclines the chair, and adjusts 
the armrests to determine that all are working correctly. The chair 
is then boxed or blanket-wrapped for delivery to the purchaser.

[[Page 44303]]

    Additionally, you state that significant resources are expended 
on the chair's design and that development research continues in 
HM's U.S. design studios to ensure that it remains the benchmark 
when compared to other available work chairs.
    ISSUE:
    Whether the assembled HM chairs are considered to be products of 
the United States for purposes of U.S. Government procurement.
    LAW AND ANALYSIS:
    Under 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 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 
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 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). In Carlson Furniture Industries et al. 
v. United States, 65 Cust. Ct. 474 (1970), the court ruled that U.S. 
operations on imported chair parts constituted a substantial 
transformation and thus conferred U.S. origin on the finished chair. 
The court stated:
    The imported articles are not chairs in unassembled or knocked-
down condition. They are at best the wooden parts which go into the 
making of chairs. [I]t is not contemplated that these imported chair 
parts are to be sold [* * *] in the condition in which they are 
imported.
    [A]dditional work would have to be performed on them and 
materials added to them to create with them a functional article of 
commerce.
    We regard these operations as being substantial in nature, and 
more than the mere assembly of parts together. And the end result of 
the activities performed on the imported articles by the plaintiff 
Carlson Furniture is the transformation of parts into a functional 
whole--giving rise to a new and different article* * *
    Customs has also previously considered, in a number of cases, 
whether components imported into a country for assembly have been 
substantially transformed as a result of such processing. 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, C.S.D. 89-110, 
C.S.D. 85-118, C.S.D. 90-51, and C.S.D. 90-97. In C.S.D. 85-25, 19 
Cust. Bull. 844 (1985), we held that for purposes of the Generalized 
System of Preferences, the assembly of a large number of fabricated 
components onto a printed circuit board in a process involving a 
considerable amount of time and skill resulted in a substantial 
transformation. In that case, in excess of 50 discrete fabricated 
components (such as resistors, capacitors, diodes, integrated 
circuits, sockets, and connectors) were assembled.
    In Headquarters Ruling Letter (``HRL'') 563110, dated October 
20, 2004, Customs addressed whether assembly of fishing fly reels in 
the U.S. of imported and U.S.-origin components resulted in a 
substantial transformation. The reels comprised over 20 separate 
parts and the U.S.-origin components accounted for over 50 percent 
of the total cost of each assembled reel. In addition, some of the 
imported components were further processed in the U.S. before final 
assembly into fishing fly reels. Based on the totality of the 
circumstances, Customs held that the imported reel components were 
substantially transformed as a result of the assembly operations in 
the U.S.
    In HRL 561734, dated March 22, 2001, 66 FR 17222, Customs ruled 
that Sharp multifunctional machines (printer, copier and fax 
machines) assembled in Japan were a product of Japan for purposes of 
government procurement. The machines in that case were comprised of 
227 parts (108 parts obtained from Japan, 92 from Thailand, 3 from 
China, and 24 from ``other'' countries) and eight subassemblies, 
each of which was assembled in Japan. It was further noted that the 
scanner unit (one of the eight subassemblies assembled in Japan) was 
characterized as ``the heart of the machine.'' See also, HRL 561568 
dated March 22, 2001, 66 FR 17222.
    As the cases set forth above demonstrate, in order to determine 
whether a substantial transformation occurs when components of 
various origins are assembled to form completed articles, Customs 
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, 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.
    Like the importer in Carlson Furniture, you inform us that HM 
does not import chairs in knock-down condition. You claim that the 
imported components alone are insufficient to create a finished 
chair and that substantial additional work and materials are added 
to the imported components in the U.S. to produce a finished chair. 
Additionally, we are advised that the assembly operation in the U.S. 
involves a large number of parts and the addition of high-value U.S. 
subassemblies. We find that the assembly processing that occurs in 
the U.S. is complex and meaningful, requires the assembly of a large 
number of components, and renders a new and distinct article of 
commerce that possesses a new name, character, and use. We further 
note that the U.S.-origin seat and back frame assemblies, which are 
made with your trademark fabric, together with the tilt assembly, 
are of U.S. origin and give the chair its unique design profile and 
essential character.
    Therefore, we find that the imported components lose their 
individual identities and become an integral part of the chair as a 
result of the U.S. assembly operations and combination with U.S. 
components; and that the components acquire a different name, 
character, and use as a result of the assembly operations performed 
in the U.S. Accordingly, the assembled chair will be considered a 
product of the United States for purposes of U.S. Government 
procurement in making this determination.
    HOLDING:
    On the basis of the information provided, we find that the 
assembly in the U.S. substantially transforms the components of 
foreign origin. Therefore, the country of origin of the chair is the 
United States for purposes of U.S. Government procurement.
    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 Customs 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,
Acting Assistant Commissioner, Office of Regulations and Rulings
 [FR Doc. E6-12575 Filed 8-3-06; 8:45 am]
BILLING CODE 9111-14-P