[Federal Register Volume 82, Number 46 (Friday, March 10, 2017)]
[Notices]
[Pages 13356-13358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04741]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Country of 
Origin of the KC-390 Military Cargo Airplane Converted to a Fire-
Fighting Aircraft

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 United States Customs and 
Border Protection (``CBP'') has issued a final determination concerning 
the country of origin of a military cargo airplane manufactured in 
Brazil, known as the KC-390, that will be converted into a fire-
fighting aircraft in the United States. Based upon the facts presented, 
CBP has concluded in the final determination that for purposes of 
United States Government procurement the country of origin of the 
converted KC-390 aircraft will be Brazil, where it was originally 
manufactured.

DATES: The final determination was issued on March 06, 2017. 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 April 10, 2017.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on March 06, 
2017, 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 a converted military 
cargo airplane which may be offered to the United States Government 
under an undesignated government procurement contract. This final 
determination, HQ H280872, was issued at the request of Embraer 
Aircraft Holding, 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 
was presented with a scenario in which a military cargo plane, the KC-
390, manufactured in Brazil, will be converted into an aircraft that 
would be used for combating forest fires in the United States. CBP has 
determined for purposes of United States Government procurement that 
the country of origin of the KC-390 aircraft converted from a military 
cargo aircraft to a fire suppression aircraft in the United States will 
be Brazil, the country where the airplane was originally manufactured.
    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: March 06, 2017.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H280872

March 06, 2017

OT:RR:CTF:VS H280872 RSD

CATEGORY: Country of Origin

Mr. Bruce L. Bunin
Director Business Development
Embraer Aircraft Holding, Inc.
Ft. Lauderdale, Florida 33315

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. 2511); subpart B Part 177 CBP Regulations; 
Converting a Military Cargo Airplane to a Fire Fighting Aircraft

    Dear Mr. Bunin:
    This is in response to your letter dated October 24, 2016, 
requesting a final determination on behalf of Embraer Aircraft 
Holding, Inc., (Embraer) pursuant to subpart B of Part 177, Customs 
and Border Protection (``CBP'') Regulations (19 CFR 177.21 et. 
seq.). Under the 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 purposes of granting 
waivers of certain ``Buy American'' restrictions in the U.S. law or 
practice for products offered for sale to the U.S. Government.
    This final determination concerns the country of origin of the 
Embraer KC-390 aircraft, which will be converted from a military 
cargo aircraft to an aircraft used for fire suppression. We note 
that Embraer is a party-at-interest within the meaning of 19 CFR 
177.22(d) and is entitled to request this final determination.

FACTS:

    Embraer is large Brazilian aerospace company that manufactures 
aircrafts. The merchandise at issue is an aircraft known as the 
Embraer KC-390. It is a medium-sized, twin-engine jet powered 
military transport aircraft developed by Embraer for the Brazilian 
Air Force that is able to perform aerial refueling and for 
transporting cargo and troops. It is the heaviest aircraft that 
Embraer had made to date. The aircraft was designed for a variety of 
military mobility missions, including heavy and outsized cargo 
transport and air drop, troop transport and parachute drop, air-to-
air refueling, search and rescue, and medical evacuation. It has a 
modern cockpit and an advance cargo handling system designed to 
enable fast and efficient military operations in normal or austere 
environments.
    Embraer intends to offer the KC-390 aircraft in response to a 
United States Forest Service (USFS) solicitation for air tankers 
that can be used in civil fire-fighting operations. Presently, the 
KC-390 is produced in Brazil. Embraer plans to modify the KC-390 
from a medium military cargo aircraft to a fire suppression aircraft 
to meet the requirements of the USFS solicitation. The work on the 
aircraft will occur in the United States at a Boeing facility in San 
Antonio, Texas. You state that the conversion of the KC-390 from a 
military transport aircraft to a civil fire-fighting aircraft will 
require modification of multiple systems and structures in order to 
meet the USFS requirements for aerial fire-fighting.
    The following systems in the aircraft need to be removed: the 
refueling systems, self-protection system, military mission 
equipment, antennas and systems, cargo handling systems (CHS), 
electronic controls, and the ballistic protection. In addition, the 
central panel assemblies of the Container Delivery System (CDS) 
rails and inboard panels will be removed in order to install a lower 
component retardant delivery system (RDS) under the cargo 
compartment floor. This change will also mandate a redesign, 
manufacture, and integration of a new roller solution on the mid-
board floor beams. The aircraft structures, cargo compartment floor, 
avionics systems, and electrical systems need to be modified. A 
series of other engineering activities associated with the removal 
of the cargo handling system and the installation of the fire-
fighting systems will be completed as well. Because the USFS does 
not require an electronically controlled locking system, that system 
will also be removed.
    Because the KC-390 military communications and navigation 
systems and sensors are not required for the USFS flight operations, 
they also will be removed. Removing those components includes the 
partial redesign and manufacture of the control and power harnesses, 
removal of Line Replaceable Units (LRUs), removal of structural 
supports for some of the LRUs and the removal of external fuselage 
surface fairings. KC-390 armor panels will also be removed from the 
flight deck and loadmaster station and from actuator bays.
    Several systems will be installed on the aircraft, such as: a 
new hydraulic actuator and fluid line, new bell doors, a new harness

[[Page 13357]]

for power, a new refueling port, a new retardant tank, new pumps, 
and new fuselage fairings. A major structural modification required 
for the KC-390 to accommodate the RDS system will be made to the 
center fuselage of the KC-390. The avionics system will incorporate 
some new functionalities that need to be developed and integrated 
into the current system such as: fire-fighting control panels to 
allow monitoring and control of RDS information and actuation, new 
synoptics for tank integration, and integration of Global 
Positioning System and moving map functionality to allow automatic 
tracking and disposal of retardant.
    It will also be necessary to develop and install new hydraulic 
systems for actuation of the retardant system doors, which comprises 
the integration of new actuators, a new hydraulic line and valves, 
and the relocation of the hydraulic lines passing under the floor 
due to the presence of the RDS lower component. The insertion of the 
RDS lower component under the floor will affect the current 
emergency actuation system of the main landing gear. The system will 
be re-routed under the floor, and cables and pulleys will be 
repositioned. In addition, a new internal tank will be added. The 
internal tank will require an external aircraft refueling port for 
retardant fluid, which means that there will be a design, 
manufacture, and installation of new fluid lines and valves.

ISSUE:

    What is the country of origin of the Embraer KC-390 aircraft 
after it has been converted from a military cargo aircraft to an 
aircraft that can be used by the USFS in combatting forest fires?

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 or 
would be a product of a designated country or instrumentality for 
the purposes of granting waivers of certain ``Buy American'' 
restrictions in U.S. law or practice for products offered for sale 
to the U.S. Government, under the rule of origin set forth under 19 
U.S.C. 2518(4)(B).
    An article is a product of a country or instrumentality only if 
(i) it is wholly the growth, product, or manufacture of that country 
or instrumentality, or (ii) in the case of an article which consists 
in whole or in part of materials from another country or 
instrumentality, it has been substantially transformed into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed. See also, 19 CFR 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 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 TAA. 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.
    In order to determine whether a substantial transformation 
occurs when components of various origins are put together 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). 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. See 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.
    CBP has considered changes to airplanes in prior decisions. In 
Headquarters Ruling Letter (HQ) 546092, dated September 16, 1992, a 
Yak 52 aircraft built in Romania was disassembled in Russia and 
certain vital components of the aircraft were replaced, in order to 
render the aircraft suitable for performing aerobatic acts. In 
particular, the aircraft was completely disassembled in order to 
replace the aircraft's spar with a new heavier spar, which is one of 
the main longitudinal supports of the wings of an aircraft. In 
addition, a new engine and propeller were fitted as part of the 
modification of the aircraft. The newly designed aircraft was 
capable of use with up to nine positive and seven negative 
gravitational forces. CBP noted that the purpose of the disassembly 
and reassembly of the Yak 52 aircraft in Russia was not to restore 
the aircraft to its original purpose. Rather, the work performed on 
the Yak 52 aircraft was to transform it from a trainer plane into a 
plane capable of aerobatic flight. In addition, the reassembly was 
very substantial involving, most notably, a completely new spar, 
engine, and propeller. Accordingly, CBP found that the manufacture 
in Russia resulted in a substantial transformation of the Yak 52 
aircraft.
    HQ H561322, dated May 11, 1999, involved the assembly of 
imported component parts of the fuselage plus the installation of 
other key components of an aircraft in the United States. CBP held 
that the imported fuselage was substantially transformed in the 
United States when it was reassembled and combined with significant 
other parts of the aircraft such as the engines, avionics and the 
landing gear to make the Hawker 800XP aircraft. CBP noted that when 
it was entered into the United States, the fuselage was unassembled, 
unpainted and did not have an interior. Even more significantly, the 
fuselage was basically an empty shell which lacked the essential 
components necessary to allow it to function as an aircraft. The 
most important of the other components that were involved in the 
making of the Hawker aircraft were the two engines. CBP found that 
the installation of these components was not a simple minor 
finishing operation, but a sophisticated procedure which required a 
high degree of technical skill. Accordingly, CBP held that the 
aircraft manufacturer substantially transformed the imported 
fuselage and the other imported component parts when it assembled 
them together to make the finished Hawker 800XP aircraft. Therefore, 
CBP held that the country of origin of the Hawker 800XP aircraft was 
the United States.
    In HQ H560245, dated April 4, 1997, certain satellite 
communications systems were installed in freight vans or trucks 
operated as motor carriers in the United States. The satellite 
communication system units consisted of three main components: a 
communications unit, an outdoor antenna unit, and a display unit. 
The system was an interactive communications tool that linked 
vehicles to a dispatch center so that messages and positioning 
information of the vehicle could be sent and received through a 
network management center. CBP found that the function of the vans 
and trucks remained the same before and after the installation of 
the communication systems, that is, for the transportation of 
articles. CBP also determined that the installation of the 
communication systems did not change the identity of the vans or 
trucks; it merely enabled the vans and trucks to be located while 
they were on the road. Therefore, CBP held that the vans and trucks 
could be entered under subheading 9802.00.50, HTSUS.
    In this case, we understand that the KC-390 will be overhauled 
when it is converted from a military cargo plane to an aircraft that 
has the capability of dispersing fire-fighting retardant. In the 
process of converting the KC-390, we recognize that some systems and 
components will have to be removed, while other new systems and 
components will be added. However, the work performed to the 
aircraft in this case is not as significant as the work performed to 
the aircraft in HQ 546092, where the aircraft's spar was replaced 
with a new and heavier spar, and a new engine and propeller were 
fitted as part of the modification of the aircraft. In addition, in 
HQ 546092, the aircraft was also equipped with two large annunciator 
panels to be used

[[Page 13358]]

in aerobatic instruction. In contrast, the information presented 
indicates that the most important systems of the KC-390 will remain 
intact even after the work is done to convert it to a fire 
suppression aircraft. The modification of the KC-390 aircraft 
largely consists of removing items from the aircraft that are 
associated with hauling military cargo and personnel and installing 
some new systems in order that the aircraft can carry and disperse 
fire retardant materials. Along these lines, while there will be 
some modifications, the basic structural integrity and the 
aerodynamics of the aircraft will not be changed. For example, the 
size and shape including its length and wing-span will not be 
changed. In addition, no information was presented showing that the 
engine powering the aircraft will be significantly reworked, meaning 
there will be no meaningful change to the aircraft's power, speed 
and range. Similarly, the electronics and instruments, which are 
involved in flying the airplane, will not be significantly changed.
    Although the KC-390 will be modified from a military cargo 
aircraft to an airplane that has fire suppression capability, we do 
not find that the fundamental identity of the product will be 
changed. After the work is completed to give the KC-390 its forest 
fire- fighting capability, the product will still remain an 
airplane. Unlike the imported components in H561322, when the 
aircraft in this case will be imported into the United States, it 
will already be a fully functioning airplane capable of flight, and 
ready for transporting personnel and equipment. While the type of 
materials carried on the aircraft and the method of delivery of 
those materials will be for a different purpose, we find that the 
changes made to the aircraft to convert it to a fire suppression 
airplane are not extensive enough to result in a substantial 
transformation of the aircraft. Therefore, we find that the country 
of origin of the KC-390 aircraft after it is converted from a 
military cargo aircraft to a fire suppression aircraft will be the 
country where the KC-390 aircraft was originally produced, Brazil.

HOLDING:

    Based upon the specific facts of this case, we find that the 
country of origin of the KC-390 aircraft converted from a military 
cargo aircraft to a fire suppression aircraft for purposes of U.S. 
Government procurement will remain Brazil, the country where it was 
originally manufactured.
    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,

Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

[FR Doc. 2017-04741 Filed 3-9-17; 8:45 am]
 BILLING CODE P