[Federal Register Volume 82, Number 54 (Wednesday, March 22, 2017)]
[Notices]
[Pages 14737-14740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05647]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning a Gearmotor

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 certain gearmotors known as the R47DRE90M4 
gearmotors. Based upon the facts presented, CBP has concluded that the 
country of origin of the R47DRE90M4 gearmotor is the United States for 
purposes of U.S. Government procurement.

DATES: The final determination was issued on March 16, 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 21, 2017.

FOR FURTHER INFORMATION CONTACT: Antonio J. Rivera, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of Trade, at 
(202) 325-0226.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on March 16, 
2017, 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 a certain gearmotor 
known as the R47DRE90M4 gearmotor, which may be offered to the U.S. 
Government under an undesignated government procurement contract. This 
final determination, HQ H282391, 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 imported components that are used to 
manufacture the R47DRE90M4 gearmotor are substantially transformed as a 
result of the assembly operations performed in the United States. 
Therefore, for purposes of U.S. Government procurement, the United 
States is the country of origin of the R47DRE90M4 gearmotor.
    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: March 16, 2017.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

Attachment

HQ H282391
March 16, 2017

OT:RR:CTF:VS H282391 AJR
Mr. C. Alexander Cable
SEW-Eurodrive
1275 Old Spartanburg Hwy
Lyman, SC 29365

RE: U.S. Government Procurement; Final Determination; Country of 
Origin; Gearmotors

Dear Mr. Cable:

    This is in response to your letter, dated July 18, 2016, requesting 
a final determination on behalf of SEW-Eurodrive, Inc. (``SEW USA''), 
pursuant to subpart B of Part 177, Customs and Border Protection 
(``CBP'') Regulations (19 CFR 177.21 et seq.). Under these regulations, 
which implement Title III of the Trade Agreements Act of 1979 
(``TAA''), 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

[[Page 14738]]

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.
    This final determination concerns the country of origin of the 
R47DRE90M4 gearmotor (``R47DRE90M4''). We note that SEW USA is a party-
at-interest within the meaning of 19 CFR 177.22(d)(1) and is entitled 
to request this final determination.

FACTS:

    SEW-Eurodrive is a group of worldwide companies that provide drive 
solutions for various applications in the automotive, building 
materials, and metal processing industry, among others. SEW-Eurodrive 
Gmbh & Co. KG (``SEW Germany'') is the parent company of SEW USA and 
other SEW-Eurodrive manufacturing plants around the world. SEW USA 
produces drive solution products, such as gearmotors, in the United 
States, incorporating SEW-Eurodrive-produced parts acquired from SEW 
Germany and other parts acquired from third-party vendors.
    Gearmotors, such as the R47DRE90M4, are mainly comprised of two 
subassemblies: A gear box and a motor. Because SEW-Eurodrive applies a 
modular design to its products, certain components are interchangeable 
and customizable as necessary to meet specifications. As a result, SEW-
Eurodrive gearmotors have over 2.1 million configurations, with the 
average gearmotor consisting of approximately 100 to 120 individual 
unique components, such as gears, shafts, housings, stators, rotors, 
and end-shields.
    SEW USA seeks to sell the R47DRE90M4 to the U.S. Government. 
According to SEW USA, because the configurations may vary, it provides 
the following representative illustration of the R47DRE90M4 production 
process.\1\
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    \1\ SEW USA notes that other models and combinations are 
assembled similarly to this representative process.
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Procurement of Materials:

    SEW USA uses over 100 separate parts to assemble the R47DRE90M4. 
According to SEW USA, many of these parts are acquired from SEW Germany 
(``SEW Parts''). These parts include gears, housings, stators, rotors, 
shafts, and end shields that are produced at SEW-Eurodrive 
manufacturing plants in Brazil, China, France, Germany, and the United 
States, among other designated and non-designated countries. SEW USA 
states while the majority of the SEW Parts are produced in countries 
designated and approved pursuant to the TAA, SEW-Eurodrive's ``current 
system of inventory distribution to assembly centers makes it 
impossible to determine with specificity the country of origin for all 
component parts.'' For this reason, many of these SEW Parts are shipped 
to SEW Germany as inventory and then redistributed according to need.
    Additionally, SEW USA acquires other parts from third-party vendors 
(``Other Parts''). These parts include screws, nuts, bolts, shims, and 
rings. SEW USA considers the SEW Parts ``essential'' because they are 
the parts that SEW-Eurodrive must produce themselves, while the Other 
Parts are ubiquitous and can be purchased on the open market.
    For the gear box subassembly, SEW USA procures the following 
materials: One pinion; three gears (three types); two pinion shafts 
(two types); three output shafts (three types); six keys (six types); 
three oil seals (three types); at least six deep groove ball bearings 
(six types); eight circlips (eight types); two space tubes (two types); 
two breather valves (two types); one gear housing; one supporting disc; 
one eye bolt; one sealing compound; one cylindrical roller bearing; 
five screw plugs (one type); one gearcase cover; six hex head screws 
(one type); one gasket; two closing caps (two types); and, at least 
seven shims (seven types).
    For the motor subassembly, SEW USA procures the following 
materials: One rotor; one snap ring; five retaining rings (five types); 
four keys (four types); seven flanges (seven types); seven screw plugs 
(six types); two deep groove ball bearings (two types); eight machine 
screws (two types); one stator; four hex head screws (one type); four 
oil seals (four types); four fan guards (four types); two fans (two 
types); two aluminum fans (two types); one high inertia flywheel; one 
equalizing ring; one B-side bearing end shield; 20 hexagon nuts (five 
types); 28 studs (seven types); one oil flinger; one nameplate; two 
grooved pins (one type); one gasket for lower part; two terminal boxes 
for lower part (two types); ten screws (four types); one terminal 
block; three terminal clips (two types); one lock washer; one gasket 
for cover; one terminal box cover; one identification; one gasket; one 
drain hole plug; one protection canopy; four distance supports (one 
type); four pan head screws (one type); synthetic grease (quantity as 
needed); two bed plate kits (two types); and, one earth/ground terminal 
kit.

Assembly of the Gearmotor

    Once SEW USA receives the materials for the R47DRE90M assembly, the 
parts are placed into stock locations at the facility in the United 
States. From there, the parts needed to build the motor subassembly are 
gathered and taken to the assembly cell. SEW USA then assembles the 
motor subassembly in accordance with the following standard:
    (1) the A-side end shield is heated;
    (2) the rotor is cleared and inspected;
    (3) two bearings are pressed onto the rotor shaft, and secured with 
hardware;
    (4) an oil drain is screwed into the A-side end shield;
    (5) the rotor is pressed into the A-side end shield;
    (6) the stator is placed on top of the rotor and into the end 
shield;
    (7) the B-side end shield is added along with the mounting 
hardware;
    (8) the two end shields and the stator are bolted together;
    (9) an oil seal is installed around the shaft and into the B-side 
end shield;
    (10) a fan is attached to the rotor shaft extension on the B-side 
and secured with hardware;
    (11) a fan cover is placed over the fan and secured to the stator;
    (12) a terminal box is assembled and attached to the stator with 
hardware;
    (13) an oil seal is placed in the A-side end shield;
    (14) an oil flinger is placed on the A-side shaft extension; and,
    (15) a pinion gear is placed onto the shaft with hardware to hold 
it in place.
    The completed motor subassembly is visually inspected, and then it 
is moved to the next assembly location in SEW USA's facility, along 
with the remaining parts needed to build the gear box subassembly. SEW 
USA then assembles the gear box subassembly in accordance with the 
following standard:
    (1) the pinion shaft has a bearing pressed onto it and hardware is 
then used to ensure accurate placement;
    (2) a spacer is added and then a key;
    (3) the shaft is placed into the housing along with the gear wheel 
that mates to the motor pinion;
    (4) another bearing is added and the whole input assembly is 
pressed together in the gear housing;
    (5) the output oil seal is prepared for further assembly;
    (6) the output shaft has a bearing pressed onto it;
    (7) a bearing is pressed into the housing and the output gear wheel 
is placed on top of it, with hardware holding both parts in place;
    (8) the output shaft is slid into the wheel, bearing, and housing 
and is then pressed into place;
    (9) hardware and shims are added to both the pinion and output 
shafts to ensure proper placement within the housing;

[[Page 14739]]

    (10) the seals are assembled into the housing;
    (11) the oil plugs are added to the housing; and,
    (12) the inspection cover is placed onto the housing with an eye 
for moving the unit.
    The completed gear box subassembly is then mated together with the 
motor subassembly to form the R47DRE90M4 gearmotor. The gearmotor is 
tested to ensure that it runs in the proper manner, and then oil is 
added per customer specifications and in accordance with the mounting 
position. Afterwards, the unit is hung and painted. Once dried, the 
unit is packed with any additional accompanying parts, and shipped to 
the customer.
    According to SEW USA, the entire assembly requires approximately 
two hours. SEW USA states that this includes several quality checks 
throughout the process, and that each major action, such as the motor 
assembly or unit testing, must be signed off to ensure uniform quality 
of the product. SEW USA indicates that the process requires several 
skilled workers, who have previous experience or training in mechanics 
or gearing assembly. Particularly, the workers must have experience and 
expertise in assembly processes, which require operating presses, 
proper heating techniques for various tolerance fits, and use of 
assembly tooling. SEW USA notes the workers are trained until they 
reach the required proficiency in the operations, and this training 
process can take several weeks to a few months depending on the 
complexity of the assembly unit and experience of the worker.

ISSUE:

    What is the country of origin of the R47DRE90M4 for the purpose of 
U.S. government procurement?

LAW AND ANALYSIS:

    Pursuant to subpart B of Part 177, 19 CFR 177.21 et seq., which 
implements the TAA, 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. 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 a name, character, or 
use distinct from that of the article or articles from which it was 
transformed.
    48 CFR Sec.  25.003.
    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 (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. Factors which may be 
relevant in this evaluation may include the nature of the operation 
(including the number of components assembled), the number of different 
operations involved, and whether a significant period of time, skill, 
detail, and quality control are necessary for the assembly operation. 
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. If the manufacturing or combining process is a 
minor one which leaves the identity of the article intact, a 
substantial transformation has not occurred. Uniroyal, Inc. v. United 
States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd 702 F. 2d 1022 (Fed. 
Cir. 1983).
    In order to determine whether a substantial transformation occurs 
when components of various origin 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. 
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. No one factor is 
determinative.
    In a number of rulings (e.g., Headquarters Ruling Letter (``HRL'') 
735608, dated April 27, 1995, and HRL 559089, dated August 24, 1995), 
CBP has stated: ``in our experience these inquiries are highly fact and 
product specific; generalizations are troublesome and potentially 
misleading. The determination is in this instance `a mixed question of 
technology and Customs law, mostly the latter.''' Texas Instruments, 
Inc. v. United States, 681 F.2d 778, 783 (CCPA 1982).
    SEW USA contends that the various components, imported into the 
United States for assembly of the R47DRE90M4, are substantially 
transformed during the processing which occurs in the United States. 
SEW USA notes that the assembly process is complex, requiring skilled 
workers, and that the various components cannot function until 
assembled into the completed gearmotor. In support, SEW USA cites to 
HRL 563236, dated July 6, 2005; HRL 557208, dated July 24, 1993; HRL 
734979, dated September 3, 1993; HRL 73046, dated May 10, 1991; HRL 
734560, dated July 20, 1992; HRL 559067, dated September 19, 2995; and, 
New York Ruling (``NY'') 872132, dated April 9, 1992.
    While the cases cited by SEW USA consider whether imported parts 
were substantially transformed due to assembly operations in the United 
States, the assembled products in these cited cases were telephones, 
except for NY 872132 (holding that Japanese gear boxes were 
substantially transformed in the United States when assembled with 
electronic motors to create a gearmotor). Similar to NY 872132, we note 
the following rulings, which we find are more analogous to the 
situation in this case.
    In HRL 559703, dated August 23, 1996, numerous parts were sourced 
from vendors located in the United States and/or other countries. These 
parts were then assembled into various

[[Page 14740]]

subassemblies, and then these subassemblies were assembled into 
aircraft engines, ultimately involving thousands of individual parts 
and a complex operation requiring specialized skill and expertise. It 
was held that these parts were substantially transformed as a result of 
the operations performed in the United States, leading to the 
production of an aircraft engine.
    In HRL H022169, dated May 2, 2008, a glider (consisting of a frame, 
finished cab, axels, and wheels) was imported into the United States 
and assembled with approximately 87 different component parts 
(including the essential parts: A motor, controller, and charger of 
Canadian origin; a gear box and axel of U.S. origin; and brakes of 
Indian origin) into an electric mini-truck. The process consisted of 
eight assembly work stations involving attachment and installation 
operations, as well as quality control and testing of the product. It 
was held that the imported glider and other foreign components were 
substantially transformed into an electric mini-truck by the assembly 
operations that took place in the United States. See also HRL 558919, 
dated March 20, 1995 (holding that an extruder subassembly manufactured 
in England was substantially transformed in the United States when it 
was wired and combined with U.S. components (motor, electrical controls 
and extruder screw) to create a vertical extruder, particularly noting 
that the imported extruder and U.S. components were functionally 
necessary to the operation of the vertical extruder); HRL H075667, 
dated January 21, 2010 (holding that 53 components were substantially 
transformed into an alternator by the assembly operations in the United 
States, noting the 169 minute, 31 step process involving skilled 
workers and the U.S.-origin of the regulator component); and, HRL 
734292, dated May 26, 1992 (holding that imported components and 
subassemblies were substantially transformed into electronic motors in 
the United States, noting the U.S. origin of the stator component 
because of the extensive experience required for production of the 
stator).
    In this case, we find that the imported parts are substantially 
transformed as a result of the assembly operations in the United 
States. We note that building the R47DRE90M4 in the United States 
consists of assembling together 131 unique parts, and at least a total 
of 200 parts. Similarly to HRL 559703 and HRL H022169, production of 
the R47DRE90M4 requires importing numerous parts of various origins, 
which are used to first assemble the gear box and motor subassemblies, 
and then to assemble the complete gearmotor, through a complex 
operation with specialized skill and expertise. As noted in HRL H075667 
and HRL 734292, the complex operation in this case involves at least 27 
steps that take approximately two hours. We note that SEW USA's workers 
are hired with previous experience in mechanical fields, and undergo 
additional training by SEW USA, which may endure several weeks to a few 
months, in order to reach the proficiency in the assembly operations 
that is required by the company. Under the described assembly process, 
the foreign components lose their individual identities and become an 
integral part of a new article, the R47DRE90M4, possessing a new name, 
character and use. Based upon the information before us, we find that 
the components that are used to manufacture the R47DRE90M4 are 
substantially transformed as a result of the assembly operations 
performed in the United States, and that the country of origin of the 
R47DRE90M4 for government procurement purposes is the United States.

HOLDING:

    The components that are used to manufacture the R47DRE90M4 are 
substantially transformed as a result of the assembly operations 
performed in the United States. Therefore, the country of origin of the 
R47DRE90M4 for government procurement purposes is the United States.
    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. 2017-05647 Filed 3-21-17; 8:45 am]
 BILLING CODE P