[Federal Register Volume 78, Number 86 (Friday, May 3, 2013)]
[Notices]
[Pages 26058-26061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10555]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Generation 
II Military Energizer Flashlights

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 the Generation II military Energizer flashlight, 
with light-emitting diodes. Based upon the facts presented, CBP has 
concluded in the final determination that China is the country of 
origin of the Generation II military Energizer flashlight, for purposes 
of U.S. Government procurement.

DATES: The final determination was issued on April 29, 2013. 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 June 3, 2013.

FOR FURTHER INFORMATION CONTACT: Robert Dinerstein, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of 
International Trade (202-325-0132).

SUPPLEMENTARY INFORMATION: Notice is hereby given that on April 29, 
2013, pursuant to subpart B of part 177, Customs and Border Protection 
(CBP) Regulations (19 CFR part 177, subpart B), CBP issued a final 
determination concerning the country of origin of the Generation II 
military Energizer flashlights which may be offered to the United 
States Government under an undesignated government procurement 
contract. This final determination, in HQ H215657, was issued at the 
request of Energizer Battery Inc. under procedures set forth at 19 CFR 
Part 177, Subpart B, which implements Title III of the Trade Agreements 
Act of 1979, as amended (19 U.S.C. 2511-18). In the final 
determination, CBP concluded that the Generation II military Energizer 
flashlights assembled in the United States from foreign made parts and 
programmed with U.S. origin software in the United States are products 
of China for purposes of U.S. Government procurement.
    Section 177.29, CBP 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, 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: April 29, 2013.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International 
Trade.

HQ H215657

April 29, 2013

MAR-02 OT:RR:CTF:VS H215657 RSD

CATEGORY: MARKING

M. Jason Cunningham, Esq.
30 South Wacker Drive
Suite 2200 No. 41
Chicago, Illinois 60606

RE: Final Determination of U.S. Government Procurement: Country of 
Origin of Military Energizer Flashlight

Dear Mr. Cunningham:
    This is in response to your letter dated March 28, 2012, 
requesting a final determination on behalf of Energizer Battery, 
Inc. (Energizer), pursuant to subpart B Part 177 Customs and Border 
Protection (``CBP'') Regulations (19 CFR Sec.  177.21 et. seq.). 
Under these regulations, which implement Title III of the Trade 
Agreements Act of 1979, as amended (codified at 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 a Generation 
II flashlight. You have provided additional information regarding 
the processing operations performed on the flashlight in the United 
States in submissions made through email and a DVD on July 13, 2012, 
November 8, 2012, and February 14, 2013. We note that Energizer is a 
party-at-interest within the meaning of 19 CFR Sec.  177.22(d)(1) 
and is entitled to request this final determination. We regret the 
delay in our response

FACTS:

    The product at issue is a finished second generation military 
flashlight (Generation II)

[[Page 26059]]

produced by Energizer Battery Inc. On January 3, 2012, our office 
issued an advisory ruling, H195536, to Energizer, concerning the 
Generation II flashlight, in which we stated that the assembly of 
the various foreign parts and the foreign LED into the Generation II 
flashlight was not sufficiently complex and significant to 
constitute a substantial transformation. In the advisory ruling, we 
indicated that the origin of the LED would determine the origin of 
the finished flashlight, and because the LED was of Chinese origin, 
the country of origin of the finished flashlight would also be 
China. You have subsequently requested that we reconsider our 
determination in the advisory ruling by requesting this final 
determination. You have presented additional information regarding 
the production of the energizer flashlight, photographs of the 
Generation II flashlight at various stages of manufacture, and a DVD 
showing the final assembly process of the flashlight.
    You advise that Energizer intends to sell the Generation II 
flashlight to the U.S. military. The Generation II flashlight is 
designed to be extremely rugged so that it can withstand forceful 
impacts without compromising its performance or its waterproof 
operation. It also provides long-lasting LED and infrared lighting, 
which is invisible to the naked eye, but useful for signaling in 
military situations. The previous versions of the generation 
flashlights relied more upon mechanical switches, while the 
Generation II flashlight uses a microprocessor and programming 
control, which requires more sophisticated hardware and software 
programming.
    The Generation II flashlight also incorporates two additional 
innovations. The IFF Mode for the infrared light is an infrared 
strobe mode used to ``Identify Friend or Foe.'' Although the 
flashlight is designed to be used with two AA batteries in the 
field, it can actually operate with a single AA battery while 
maintaining the same features, but with a shorter battery life.

The production process is as follows:

    1. The LED wafer is ``grown'' in the U.S. and exported to China. 
In China, the LED wafer is mounted and coated with resin and then 
shipped to the Energizer facility in Vermont.
    2. A third party in the U.S. mounts the Chinese LED wafer onto a 
Chinese-origin ``hex board'' and coats it with resin.
    3. In Vermont, the LED is combined with various imported 
subcomponents from China including the main PCBA, switch PCBA, head 
cover, pivot locks, washers, switch levers, springs, lens rings, 
screws, buttons, etc., to create the lens head subassembly.
    4. The lens head subassembly's wiring, soldering, and physical 
connections are inspected.
    5. At the second work station, the following Chinese-origin 
flashlight body components are combined with the lens head 
subassembly to make the Generation II flashlight: body seal ring, 
end cap top plate, end cap bottom plate, end cap PCBA and switch 
assembly, body bracket, spring holders, battery cartridge, screws, 
body with overmold, hinge ring, end cap with overmold, lock wheel 
with screw and nut insert, belt clip, clip retainer, and clip 
screws. During the assembly process, one of the more important 
operations that must be precisely performed is the spot soldering of 
the wires, switches and other various components to the LED. The 
assembly process of the flashlight takes approximately seven minutes 
to complete under actual production conditions with fully trained 
qualified operators.
    According to the information presented in a November 8, 2012, 
email, Energizer provides all the technical and quality control 
training necessary for the operators to be designated as qualified 
to produce the flashlights. The DVD submitted, demonstrates the 
assembly process involves putting together more than fifty parts and 
components in a multi-step process. The DVD shows the two work 
stations at the Energizer facility in St. Albans, Vermont. As 
explained above, at the first workstation, the operators combine 
various subcomponents of the lens head subassembly. After the lens 
heads subassembly is created, it is transferred to a second separate 
workstation, where the Energizer operators combine the lens head 
subassembly with approximately 30 other imported components to 
create the end product, the Generation II military flashlight.
    We also note that in producing the flashlights, Energizer 
installs U.S. origin software that Energizer created in house. The 
programming allows for battery type detection; battery quantity 
alternative operation levels; lighting levels; and the control of 
power, not for the light output, but for the purposes of controlling 
heat and the protection of the sensitive LEDs. The code writing for 
the software programing was developed and completed in the United 
States, but the programming is transmitted to China for flashing the 
program to the circuitry for the lights. Along with the main white 
LED light, the flashlight also has four smaller LED's that emit red, 
blue, green, or infrared light. A modification that Energizer has 
made to this model is that each of the LEDs that emit visible light, 
i.e. white, red, blue, and green, can shine at high, medium, or low 
intensity. The original programming for this feature, like all of 
the programming for the flashlight, occurs in the United States and 
will use a proprietary source code. It is stated that Energizer has 
expended significant resources in connection with the redesign and 
development of this product in the United States. You have enclosed 
a spreadsheet that identifies all of the costs and country of origin 
data of all subcomponents used in the lens head subassembly and all 
the other components used in the production of the Generation II 
military flashlight.

ISSUE:

    What is the country of origin of the Energizer military 
Generation II flashlight for purposes 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 
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 C.F.R. Sec.  25.003.

    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled into 
completed products, CBP considers the totality of the circumstances 
and makes such determinations on a case-by-case basis. The country 
of origin of the item's components, extent of the processing that 
occurs within a country, and whether such processing renders a 
product with a new name, character, and use are primary 
considerations in such cases. No one factor is decisive, the key 
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. 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. 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.

[[Page 26060]]

    In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), U.S. Customs Service 
(legacy agency to CBP) (hereinafter, incorporated with the reference 
to ``CBP'') held that for purposes of the Generalized System of 
Preferences (``GSP''), 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. Whether an 
operation is complex and meaningful depends on the nature of the 
operation, including the number of components assembled, number of 
different operations, time, skill level required, attention to 
detail, quality control, the value added to the article, and the 
overall employment generated by the manufacturing process.
    CBP has held in a number of cases that complex and meaningful 
assembly operations involving a large number of components result in 
a substantial transformation. For example, in HQ H047362, dated 
March 26, 2009, CBP found that 61 components manufactured in China 
and assembled into ground fault circuit interrupters (GCFIs) in 
Mexico in a two-phase process by skilled workers using sophisticated 
equipment were substantially transformed in Mexico. In particular, 
we took into consideration that the first phase involved the 
assembly of a PCB in a 42-step technically complex process that took 
12 minutes and that the completed PCB had the entire major 
components necessary for the GCFI to fulfill its function. We also 
took into consideration that in the second phase the PCB would be 
assembled with 29 other components to form the GCFIs in a 43-step 
process taking approximately 10 minutes, after which the components 
lost their individual identities and become an integral part of the 
interrupters with a new name, character and use.
    In HQ 962528 dated February 18, 2000, CBP considered the 
eligibility of a rechargeable power failure light for duty free 
treatment under the Generalized System of Preferences (GSP). In that 
case, the power failure light was assembled in Thailand from various 
Thai and foreign origin components including a PCB assembled in 
Thailand. CBP found that the process of assembling various 
components into a PCB resulted in a substantial transformation of 
the imported components. Moreover, CBP found that the assembly of 
the PCB with a bulb holder assembly, a plug blade assembly and an 
upper and lower housing assembly to make the finished power failure 
light substantially transformed the PCB.
    By contrast, assembly operations that are minimal or simple will 
generally not result in a substantial transformation. For instance, 
in HQ 734050, dated June 17, 1991, CBP held that Japanese-origin 
components were not substantially transformed in China when 
assembled in that country to form finished printers. The printers 
consisted of five main components identified as the ``head'', 
``mechanism'', ``circuit'', ``power source'', and ``outer case.'' 
The circuit, power source and outer case units were entirely 
assembled or molded in Japan. The head and mechanical units were 
made in Japan, but exported to China in an unassembled state. All 
five units were exported to China where the head and mechanical 
units were assembled with screws and screwdrivers. Thereafter, the 
head, mechanism, circuit, and power source units were mounted onto 
the outer case with screws and screwdrivers. In holding that the 
country of origin of the assembled printers was Japan, CBP 
recognized that the vast majority of the printer's parts were of 
Japanese origin and that the operations performed in China were 
relatively simple assembly operations.
    CBP first considered the country of origin of a military 
flashlight made by Energizer in HQ H008708 dated May 7, 2007. We 
found that the various imported components (individual parts and 
subassemblies) were substantially transformed as a result of the 
operations performed in the United States to produce the replacement 
lens head assembly and the finished flashlight. Under each 
manufacturing scenario, we concluded that the imported components 
lost their individual identities and became an integral part of a 
new article possessing a new name, character, and use. However, 
unlike the scenario here, in support of this conclusion, we noted 
that the U.S. origin LED imparted the essential character to both 
the replacement part and the finished product, as it generated the 
primary light of both products. We also recognized that Energizer 
had expended significant resources in connection with the design and 
development of the flashlight in the United States. We also pointed 
out that the U.S.-origin LED and the labor performed in the United 
States during the assembly and testing operations represented the 
majority of the costs associated with the production of both the 
replacement lens head subassembly and the finished flashlight.
    In HQ H017620, dated February 5, 2008, CBP considered the 
country of origin of the prior model Generation I flashlight for 
government procurement purposes. We determined that the 
manufacturing operations performed in the U.S. to produce the 
replacement lens head subassembly and the finished flashlight 
resulted in a substantial transformation of the imported components. 
In support of this conclusion, we explained that the U.S.-origin LED 
imparted the essential character to both the replacement part and 
the finished product, as it generates the primary light of both 
products. We also recognized that Energizer had expended significant 
resources in connection with the design and development of the 
subject flashlight in the United States. Moreover, the U.S.-origin 
LED and the labor performed in the United States during the assembly 
and testing operations represented a majority of the costs 
associated with the production of both the replacement lens head 
subassembly and the finished flashlight. We followed this analysis 
in an advisory ruling, HQ H057777 dated July 16, 2009, concerning 
the revised Generation II flashlight and determined that the various 
imported components (individual parts and subassemblies) were 
substantially transformed as a result of the operations performed in 
the U.S. to produce both the lens head subassembly and the finished 
flashlight. In support of this conclusion, we agreed that the U.S. 
origin LED imparts the essential character to the Generation II 
flashlight as it generates the primary light of the flashlight.
    As previously noted, in contrast to HQ H017620 and HQ H057777, 
we indicated in the advisory ruling H195536 that the U.S. assembly 
of the various foreign parts and LED into the military Generation II 
flashlight did not result in a substantial transformation. We 
mentioned that the LED still imparted the essential character of the 
finished flashlight, and since it was not of U.S. origin, the 
country of origin of the flashlight for government procurement 
purposes would not be the United States. You have now provided 
additional information with this request for a final determination 
regarding the assembly process of the Generation II military 
flashlight. Some of the information was presented on a DVD showing 
the assembly process.
    Upon consideration of the additional information that you have 
provided and our observations of the assembly process shown in the 
DVD, we continue to believe that our conclusion in advisory ruling 
H195536 that the foreign made components and parts do not undergo a 
substantial transformation when they are assembled together in the 
United States was correct. We note virtually all of the components 
of the military Generation II flashlight, including the most 
important component, the LED, are of Chinese origin. All of the 
components arrive in the United States ready for assembly into the 
Generation II flashlight. Only the assembly process is done in the 
United States. Although the assembly process involves putting 
together a number of different parts to produce the flashlight, most 
of this work consists of rather simple insertions, relatively simple 
attaching and fastening of the components and parts together. This 
work seems to involve following a fairly straightforward routine and 
does not seem to be exceptionally complex, and it only takes several 
minutes to complete. You point out that the operators must solder 
some of the components together, but we do not believe that the 
soldering involved in this case is a particularly complex operation 
that is indicative of a substantial transformation, when compared to 
the operation performed in China in creating the various parts 
including the LED of the flashlight.
    It is also noted that in the United States, the Generation II 
flashlight is programmed with software that is written in the United 
States. We observe, however, that the programming is not essential 
to the basic operation of the flashlight. The programming 
constitutes only an enhancement how the flashlight operates, but it 
does not change its fundamental nature. While the programming does 
provide the flashlight with some additional features, such as being 
able to detect the battery type installed in the flashlight, and 
controlling the power level for protection of the LEDs, the 
programming is not sufficiently complex enough to change

[[Page 26061]]

the identity or the character of the device. The flashlight could 
still function as a flashlight without the software programming; 
after the software is loaded onto the device, it still remains a 
flashlight.
    Consequently, we find that the assembly and programming 
operations Energizer performs in the United States on the various 
imported components (individual parts and subassemblies) do not 
create a new article of commerce with a new name, character, and 
use. Therefore, we find the imported components, including the LED, 
from China are not substantially transformed as a result of the 
operations performed in the United States to produce both the lens 
head subassembly and the completed Generation II military 
flashlight. Accordingly, we find that the country of origin of the 
Generation II military flashlight for government procurement 
purposes remains the country of origin of the components and 
subassemblies, including the LED, China.

HOLDING:

    Based upon the specific facts of this case, we find that the 
imported components of the flashlight and replacement lens head 
subassembly are not substantially transformed as a result of the 
described assembly operations and programing operations performed in 
the United States. The country of origin for government procurement 
purposes of the Generation II military flashlight is China.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 CFR Sec.  177.29. Any party-at-interest 
other than the party which requested the final determination may 
request, pursuant to 19 CFR Sec.  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 Regulations and Rulings, Office of 
International Trade

[FR Doc. 2013-10555 Filed 5-2-13; 8:45 am]
BILLING CODE 9111-14-P