[Federal Register Volume 81, Number 98 (Friday, May 20, 2016)]
[Notices]
[Pages 31951-31953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11947]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Certain 
Intermodal Containers

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 a twenty foot long intermodal container. Based 
upon the facts presented, CBP has concluded that the country of origin 
of the intermodal container is the Republic of Korea for purposes of 
U.S. Government procurement.

DATES: The final determination was issued on May 13, 2016. 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 20, 2016.

FOR FURTHER INFORMATION CONTACT: Teresa M. Frazier, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of Trade (202) 
325-0139.

SUPPLEMENTARY INFORMATION: Notice is hereby given that pursuant to 
subpart B of Part 177, U.S. Customs and Border Protection Regulations 
(19 CFR part 177, subpart B), CBP issued a final determination 
concerning the country of origin of certain intermodal containers, 
which may be offered to the U.S. Government under an undesignated 
government procurement contract. This final determination, HQ H273529, 
was issued 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 processing in Korea results in a substantial transformation. 
Therefore, the country of origin of the intermodal container is Korea 
for purposes of U.S. Government procurement.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any 
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of a final determination within 30 days of publication of such 
determination in the Federal Register.

    Dated: May 13, 2016.
Myles B. Harmon,
Acting Executive Director, Regulations and Rulings, Office of Trade.

H273529

May 13, 2016

OT:RR:CTF:VS H273529 TMF

CATEGORY: Country of Origin

Michael G. McManus, Duane Morris LLP, 505 9th Street NW., Suite 
1000, Washington, DC 20004-2166
Re: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. 2511); Substantial Transformation; Twenty Foot 
Intermodal Shipping Containers

    Dear Mr. McManus: This is in response to your correspondence of 
February 12, 2016, requesting a final determination on behalf of 
your client, Sea Box, Inc. (``Sea Box''), pursuant to subpart B of 
part 177, U.S. Customs and Border Protection (CBP) Regulations (19 
CFR 177.21 et seq.). Under pertinent regulations, which implement 
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 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 a twenty foot long Sea Box 
shipping container that is claimed to be a product of the Republic 
of South Korea or the United States. We note that Sea Box, Inc. is a 
party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is 
entitled to request this determination.

[[Page 31952]]

FACTS:

    Your client requests a country of origin determination 
concerning a twenty foot long intermodal container. You state that 
the twenty foot shipping container is a 20 foot, International 
Organization for Standardization (ISO) compliant container 
possessing the following external measurements: 19' 10.5'' in length 
with a tolerance of +0, -1/4 of an inch; 8.0' in width with a 
tolerance of +0, -3/16 of an inch; 8.0' in height with a tolerance 
of +0, -3/16 of an inch. The internal dimensions are: 19'4 11/64'' 
(L); 7'8 17/32'' (W); 7'4 3/16''(H). The 20 foot container is 
comprised of corrugated steel sides and roofing which give it a 
favorable strength to weight ratio; two sets of forklift ``pockets'' 
that permit forklifts to lift and move laden or unladen containers; 
wooden flooring tested to withstand 16,000 lbs. per square foot (144 
square inches); 24 top and bottom wall tie down steel lashing rings 
each having a capacity of 4,000 lbs.; and two vents. The twenty foot 
containers weigh 5,000 lbs. each and can accommodate a payload of 
47,910 lbs.
    You state that your client intends to assemble the containers 
from parts originating in South Korea, the People's Republic of 
China (PRC) and the United States. You state three of the four 
principal components (the right and left sidewalls and the roof) of 
the twenty foot container will be made in Korea. You state that the 
container floor is made in China as well as the two container ends, 
which includes the doors. The U.S. components are prime and finish 
coatings, decals, tie backs/welding wire, aluminum shot blast media 
and sealant.

Manufacturing Process

    You describe Sea Box's manufacturing of the container to be a 
complex industrial process which takes more than day to complete. 
You list fourteen manufacturing steps that require the manipulation 
of large components to form a structurally sound container to its 
precise size in accordance with ISO specifications.
    You state that the container must be capable of being stacked up 
to nine units high, with the base of a stack strong enough to 
support 423,280 static lbs. above it (8 containers x 58,800 lbs. per 
container). In addition, the container must be able to support a 
dynamic load taking into account a vessel's motion in conformity 
with the American Bureau of Shipping (ABS). You also advise that the 
containers must be International Container Safety Convention (CSC) 
certified and manufactured according to ISO standards.
    You state in order to be CSC certified in the United States, the 
manufacturer's facility must be pre-approved for manufacturing CSC-
certified containers by a testing and certification organization 
sanctioned by the U.S. Coast Guard. You also state that the 
manufacturer must design and build prototype containers of the 
specific kind and type proposed in the specific facility to be 
certified and then submit them for testing by the approved 
organization. You note that only after successful completion of 
these prerequisites will a company be authorized to manufacture and 
furnish containers to be included in the internationally accepted 
ISO system of transportation.

ISSUE:

    Whether the twenty foot intermodal container is considered to be 
a product of the United States or Korea for U.S. Government 
procurement purposes.

LAW AND ANALYSIS:

    Pursuant to 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 as to whether an article is a 
product of a designated country for the purpose of granting waivers 
of certain ``Buy American'' restrictions on U.S. Government 
procurement.
    In rendering final determinations for purposes of U.S. 
Government procurement, CBP applies the provisions of Subpart B of 
Part 177 consistent with the Federal Procurement Regulations. See 19 
CFR 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 Trade Agreements Act. See 48 CFR 
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 name, character, or use distinct from that of the 
article or articles from which it was transformed.'' See 48 CFR 
25.003.
    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 CFR 177.22(a).
    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. Substantial 
transformation occurs when an article emerges from a process with a 
new name, character or use different from that possessed by the 
article prior to processing. A substantial transformation will not 
result from a minor manufacturing or combining process that leaves 
the identity of the article intact. See United States v. Gibson-
Thomsen Co., 27 C.C.P.A. 267 (1940). 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. See Belcrest Linens v. United 
States, 6 Ct. Int'l Trade 204, 573 F. Supp. 1149 (1983), aff'd, 741 
F.2d 1368 (Fed. Cir. 1984). Additionally, factors such as the 
resources expended on product design and development, the extent and 
nature of post-assembly inspection and testing procedures, and 
worker skill required during the actual manufacturing process will 
be considered when determining whether a substantial transformation 
has occurred. No one factor is determinative.
    In Uniroyal, Inc. v. United States, the Court of International 
Trade held that no substantial transformation occurred because the 
attachment of a footwear upper from Indonesia to its outsole in the 
United States was a minor manufacturing or combining process which 
left the identity of the upper intact. Uniroyal, Inc. v. United 
States, 3 CIT 220, 224, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 
F.2d 1022 (Fed. Cir. 1983). The court found that the upper was 
readily recognizable as a distinct item apart from the outsole to 
which it was attached, it did not lose its identity in the 
manufacture of the finished shoe in the United States, and the upper 
did not undergo a physical change or a change in use. Also, under 
Uniroyal, the change in name from ``upper'' to ``shoe'' was not 
significant. The court concluded that the upper was the essence of 
the completed shoe, and was not substantially transformed.
    In National Hand Tool Corp. v. United States, 16 CIT 308 (1992), 
aff'd, 989 F.2d 1201 (Fed. Cir. 1993), the court considered sockets 
and flex handles which were either cold formed or hot forged into 
their final shape prior to importation, speeder handles which were 
reshaped by a power press after importation, and the grip of flex 
handles which were knurled in the United States. The imported 
articles were heat treated, cleaned by sandblasting, tumbling, and/
or chemical vibration before being electroplated. In certain 
instances, various components were assembled together which the 
court stated required some skill and dexterity. The court determined 
that the imported articles were not substantially transformed and 
that they remained products of Taiwan. In making its determination, 
the court focused on the fact that the components had been cold 
formed or hot forged ``into their final shape before importation'', 
and that ``the form of the components remained the same'' after the 
assembly and heat treatment processes performed in the United 
States.
    It is your position that the country of origin of the intermodal 
containers is South Korea because three of the container's 
components (the roof and two side panels), like National Hand Tool 
and Uniroyal, impart the container's essential character because 
they are already formed in the final shape prior to importation into 
the United States. You also state that the three Korean components--
the roof and side panels predominate in value since they cost more 
than the Chinese components (front end, door end and floor). In sum, 
you argue that the country of origin is South Korea, or in the 
alternative, the United States.
    In HQ 555111, dated March 14, 1989, CBP determined that shearing 
steel sheets to size, along with bending, notching or drilling of 
the sheared pieces constituted a substantial transformation, such 
that the container parts were different in character and use from 
the originally imported steel sheets. It was also

[[Page 31953]]

determined that the container parts were distinct articles of 
commerce that were bought and sold in the trade. CBP also found a 
second substantial transformation occurred when the container parts 
were assembled into finished steel storage containers. It was also 
determined that the container parts were distinct articles of 
commerce that were bought and sold in the trade. CBP found that the 
assembly was complex, involving a large number of components and a 
significant number of different operations, requiring a relatively 
significant period of time as well as skill, attention to detail and 
quality control.
    In HQ 557607, dated December 18, 1993, CBP determined that steel 
plates imported into Mexico and used in the production of certain 
railway freight cars (referred therein as ``railcar tanks'') 
underwent a double substantial transformation. The steel plates were 
sandblasted to remove any foreign debris and particles; cut to same 
length and width in varying sizes; rolled and cold-formed into 
cylindrical or near-cylindrical shape; tack-welded to hold their 
shape with seams, then permanently welded using a design-specific 
welding fixture. Thereafter, the rings were permanently welded in 
place; and holes were cut into the tank shell in accordance with 
design specifications for the placement of miscellaneous parts that 
were also permanently welded. The seams were then subject to X-ray 
analysis to ensure against any defects, followed by painting with 
rust-resistant paint primer. CBP determined that the welding and 
complex assembling of the steel container parts resulted in a new, 
finished and different article of commerce possessing a distinct 
name, character and use.
    We find that the essential character of the container is 
imparted by the Korean-origin roof, and two side panels, which, as 
in National Hand Tool, are already formed in their final shapes 
prior to importation. Further, the twenty foot containers are 
similar to the final goods discussed in HQ 555111 and HQ 567607. 
While these two decisions pertained to the Generalized System of 
Preferences (GSP), and the GSP often considers whether the second 
substantial transformation is not just a ``pass-through'' operation, 
we note that in those two decisions it was important that the 
components were formed and created in the final country of assembly. 
Similarly, in this case we find that the Sea Box container will 
mostly be comprised of components from Korea, especially when 
comparing these components to the container's finished surface area, 
such that the origin of the finished container may be considered 
Korea. As noted in our ruling to you, HQ H267876, dated December 23, 
2015, the operations in the United States are not sufficient to 
result in a substantial transformation; therefore, we find that the 
country of origin of the finished twenty foot intermodal containers 
will be Korea for government procurement purposes.

HOLDING:

    Based upon the specific facts of this case, we find that the 
country of origin of the intermodal containers for purposes of U.S. 
Government procurement is Korea.
    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 CBP reexamine the matter anew and 
issue a new final determination. Pursuant to 19 CFR 177.30, any 
party-at-interest may, within 30 days of publication of the Federal 
Register Notice referenced above, seek judicial review of this final 
determination before the Court of International Trade.

Sincerely,

Myles B. Harmon,
Acting Executive Director, Regulations and Rulings, Office of Trade.

[FR Doc. 2016-11947 Filed 5-19-16; 8:45 am]
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