81 FR 787 - Notice of Issuance of Final Determination Concerning Certain Intermodal Containers

DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection

Federal Register Volume 81, Issue 4 (January 7, 2016)

This document provides notice that U.S. Customs and Border Protection (``CBP'') has issued a final determination concerning the country of origin of certain intermodal containers. Based upon the facts presented, CBP has concluded that the country of origin of the intermodal containers is the country of origin of the imported panels for purposes of U.S. Government procurement.

[Federal Register Volume 81, Number 4 (Thursday, January 7, 2016)]
[Notices]
[Pages 787-789]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-33244]


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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 certain intermodal containers. Based upon the 
facts presented, CBP has concluded that the country of origin of the 
intermodal containers is the country of origin of the imported panels 
for purposes of U.S. Government procurement.

DATES: The final determination was issued on December 23, 2015. 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 February 8, 2016.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on December 23, 
2015, 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 H267876, 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 the United States does not result in a 
substantial transformation. Therefore, the country of origin of the 
intermodal containers is the country of origin of the imported panels 
for purposes of U.S. Government procurement 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: December 23, 2015.
Myles B. Harmon,
Acting Executive Director, Regulations and Rulings, Office of 
International Trade.

H267876

OT:RR:CTF:VS H267876 TMF

CATEGORY: Country of Origin

Michael G. McManus
Duane Morris LLP
505 9th Street, N. W., 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; Intermodal 
Shipping Containers

Dear Mr. McManus:

    This is in response to your correspondence of July 29, 2015, 
supplemented by your letter of September 30, 2015, requesting a 
final determination on behalf of 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 II 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 the country of origin of Sea 
Box shipping containers. We note that Sea Box, Inc. is a

[[Page 788]]

party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is 
entitled to request this final determination. A meeting was held 
November 4, 2015.

FACTS:

    You state that the subject containers are made in various sizes: 
20 foot long; Bicon; Tricon and Quadcon. The 20' shipping container 
is considered to be a standard unit in the shipping industry.

1. Twenty Foot Shipping Containers

    You state that a 20 foot ISO \1\-compliant container has the 
following external measurements:
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    \1\ International Organization for Standardization set standard 
sizes and manufacturing specifications for all containers.
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    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 gives 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.

2. Bicons

    You state that a Bicon is a shipping container that is 
approximately half the size of a 20 foot container and manufactured 
to precise dimensions such that when two are linked together by 
connecting couplers, they form a 20 foot equivalent unit (``TEU'') 
and may be transported as if the combination were a single 20 foot 
container. The ISO-compliant Bicon container has the following 
external dimensions: 9'9 3/4'' in length with a tolerance of +0, -3/
16 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: 9'3 1/2'' (L); 7'8 17/32'' (W); 7'4 3/16'' 
(H). You state that the Bicon has similar features to the 20 foot 
unit, except that the Bicon only has one set of forklift ``pockets'' 
and uses several tie down steel lashings. You state that the Bicon 
has a weight of 2,900 lbs. and can accommodate a payload of 23,555 
lbs., and has a storage capacity of 527 cubic feet.

3. Tricons

    You state that a Tricon is approximately one-third the size of a 
20 foot container and that it is manufactured to precise dimensions 
such that when three Tricons are linked together by connecting 
couplers, a TEU is formed and may be transported as if the 
combination was a single 20 foot container. The ISO-compliant Tricon 
container has the following external dimensions: 6'5 9/16'' in 
length with a tolerance of +0, -3/16 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: 6'3 25/64'' 
(L); 7'7 22/32'' (W); 7'5 9/64'' (H). You state that the Tricon has 
similar features to the 20 foot unit and the Bicon, except that 
instead of a wooden flooring, the Tricon has heavy duty steel 
flooring. You state the Tricon has a weight of 2,600 lbs. each laden 
and may accommodate a payload of 13,300 lbs., and has a storage 
capacity of 356 cubic feet.

4. Quadcons

    You state that a Quadcon is approximately one-fourth the size of 
a twenty foot container and that it is manufactured to precise 
dimension such that when four Quadcons are linked together by 
connecting couplers, a TEU is formed and may be transported as if 
the combination were a single 20 foot container. The ISO-compliant 
Quadcon container has the following external dimensions: 4'9 7/16'' 
in length with a tolerance of +0, -3/16 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: 4'7 
3/4'' (L); 7'6 9/16'' (W); 7'5'' (H). You state that the Quadcon has 
similar features to the Tricon, except that it also has swing doors 
on both sides for convenient access. You state the Quadcon has a 
weight of 2,300 lbs. each unladed and may accommodate a payload of 
8,900 lbs., and has a storage capacity of 260 cubic feet.

Manufacturing Process

    In your submission, you described Sea Box's manufacturing 
facilities to include a separate, free-standing, testing center with 
equipment capable of testing containers for ISO compliance to 1.8 
times the maximum required load (which is equivalent to 846,720 
lbs.). You advise that the manufacturing process requires the 
manipulation of large components to form a structurally sound 
container to its precise size in accordance with ISO specifications, 
allowing containers to be capable of transport by rail, truck and 
ship with uniform fitting on preexisting truck and rail support 
structures. You provided a list of the 43 components of the 
containers. We note that that the front wall panel, side wall panel, 
right-hand door, right-hand door gasket, left-hand door gasket, roof 
panel, floor panel, lashing rings, front corner post tie downs, and 
corner blocks, all originate from one foreign country. Connecting 
couplers, hand assembly restraint bar, tie-back, rivets nuts and 
bolts, hinges, amongst other components, originate from the U.S. You 
indicate that by using grinders and/or cutting wheels, the 
components are ground to bare steel where welding is required. 
Specifically, the floor sections, wall section, front and rear-end 
sections, and roof section are ground to bare steel where welding is 
required. Next, the components are loaded into the Jig and once the 
dimensional tolerances are verified and adjusted, the components are 
tacked and stich-welded together, vertical seams are welded, and all 
outside components are fully welded. If required, roof corner plates 
and floor gussets are welded, and door tieback hooks are welded. 
Next, pilot holes are drilled into the floor and steel cross-members 
and doors are secured. The container is then moved to the blast 
booth for painting with primer and a top coat. You indicate that the 
particular steel that is used in the roof and sides is not available 
in the U.S.
    You state that the containers must be capable of being stacked 
up to nine units high, with the base of a stack strong enough to 
support 470,400 static lbs. above a container (8 containers x 58,800 
lbs. per container). You also state 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 CSC \2\ certified at a CSC 
certified, manufacturer's facility that is preapproved by the U.S. 
Coast Guard.
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    \2\ International Container Safety Convention concerning 
testing, inspection, approval and maintenance of shipping 
containers.
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ISSUE:

    Whether the intermodal containers are considered to be products 
of the United States 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 C.F.R 
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. The country 
of origin of the item's components,

[[Page 789]]

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, 
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.
    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).
    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 U.S. 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 U.S.
    It is your position that the country of origin of the intermodal 
containers is the U.S. because your client's operations are 
``plainly complex and meaningful'' in that every component loses its 
identity and becomes an integral part of the shipping container. You 
state that this process is more complex than processes found to 
effect a substantial transformation in certain past rulings, and you 
cite to Headquarters Ruling Letters (HQ) H248850, dated November 7, 
2014; H259326, dated April 13, 2015; H192144, dated October 22, 
2014; and H251592, dated June 24, 2014. You also state that the 
large scale industrial process that is employed to manipulate 
components weighing hundreds to thousands of pounds to manufacture a 
shipping container to narrow tolerances is surely a ``complex 
operation requiring skilled workers.'' You also advise that this 
``large scale industrial'' manufacturing process requires skilled 
labor, special equipment, facilities, labor resources and in-process 
quality assurance techniques and precision subject to ISO 
specifications and rigorous CSC certification. You argue that the 
strict dimensional tolerances that are required for safety and to 
assure compliance with ISO and CSC standards for use in 
international commerce makes the process precise, expensive, complex 
and meaningful. We reviewed your submission and note that although 
the large scale assembly requires skilled labor for safety and 
compliance with certain ISO and CSC certification requirements, this 
does not result in a substantial transformation of the non-U.S. 
components. Rather, the container assembly is distinguishable from 
the aforementioned cases where CBP found substantial transformation.
    In H259326, the exoskeleton assistive walking device assembly 
consisted of hundreds of parts sourced from U.S. manufacturers, with 
the exception of three parts, all of which were assembled in the 
U.S. In H259326, CBP found the inclusion of the two of the three 
non-U.S. parts (a heat diffuser/shield, foot straps/binding) would 
be permanently attached to the finished devices such that they would 
``lose their separate identities and be subsumed into the finished 
exoskeleton,'' thereby resulting in a substantial transformation 
when used in the manufacturer of the finished exoskeleton. However, 
in this case, the foreign-origin front, side and roof and floor 
panels are not subsumed into a complex device.
    Further, there is not complex assembly of the container like in 
H248850, dated November 7, 2014, in which CBP found a substantial 
transformation involving U.S. patented operations which consisted of 
bending of the HEX; brazing of various connections; and installing a 
control box which contained U.S. developed software. With the 
intermodal containers, although skilled workers are required to 
ensure safety and accuracy in accordance with ISO and CSC 
requirements, the grinding, welding and assembly processes 
essentially do not change the predetermined use of the panels, all 
of which originate from one foreign country. In regard to H251592, 
CBP determined that certain AIO cartridges assembled with toner 
powder from Japan, a cleaning unit from Thailand, and a development 
unit from China, were substantially transformed because the toner 
powder was found to be the most critical element of the AIO 
cartridge. As in Uniroyal, the essential character of the container 
is imparted by the foreign-origin roof, side and bottom panels, 
which, like National Handtool, are already formed in the final shape 
prior to importation. In H192144, CBP found imported coated, optical 
lenses underwent a double substantial transformation in a 
beneficiary country to meet the 35 percent value-content GSP 
requirement, which is not at issue here. Therefore, we do not find a 
substantial transformation in the manufacture of the subject 
intermodal containers.

HOLDING:

    Based upon the specific facts of this case, we find that the 
imported panels are not substantially transformed as a result of the 
described operations performed in the United States. The country of 
origin of the intermodal containers for purposes of U.S. Government 
procurement is imparted by the roof, side and floor panels, which 
are of non-U.S. origin.
    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 & Rulings 
Office of International Trade

[FR Doc. 2015-33244 Filed 1-6-16; 8:45 am]
BILLING CODE 9111-14-P