Notice of Issuance of Final Determination Concerning Certain Treadmills, 79041-79043 [2016-27159]

Download as PDF Federal Register / Vol. 81, No. 218 / Thursday, November 10, 2016 / Notices Dated: November 4, 2016. Anna Snouffer, Deputy Director, Office of Federal Advisory Committee Policy. DEPARTMENT OF HOMELAND SECURITY [FR Doc. 2016–27135 Filed 11–9–16; 8:45 am] Notice of Issuance of Final Determination Concerning Certain Treadmills U.S. Customs and Border Protection BILLING CODE 4140–01–P U.S. Customs and Border Protection, Department of Homeland Security. ACTION: Notice of final determination. AGENCY: DEPARTMENT OF HEALTH AND HUMAN SERVICES National Institutes of Health Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting. The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy. asabaliauskas on DSK3SPTVN1PROD with NOTICES Name of Committee: Heart, Lung, and Blood Initial Review Group, Heart, Lung, and Blood Program Project Review Committee. Date: December 2, 2016. Time: 8:00 a.m. to 2:00 p.m. Agenda: To review and evaluate grant applications. Place: Sheraton BWI (Baltimore), 1100 Old Elkridge Landing Road, Baltimore, MD 21090. Contact Person: Jeffrey H Hurst, Ph.D., Scientific Review Officer, Office of Scientific Review/DERA, National Heart, Lung, and Blood Institute, National Institutes of Health, 6701 Rockledge Drive, Room 7208, Bethesda, MD 20892, 301–435–0303, hurstj@ nhlbi.nih.gov. (Catalogue of Federal Domestic Assistance Program Nos. 93.233, National Center for Sleep Disorders Research; 93.837, Heart and Vascular Diseases Research; 93.838, Lung Diseases Research; 93.839, Blood Diseases and Resources Research, National Institutes of Health, HHS) Dated: November 4, 2016. Michelle Trout, Program Analyst, Office of Federal Advisory Committee Policy. [FR Doc. 2016–27137 Filed 11–9–16; 8:45 am] BILLING CODE 4140–01–P VerDate Sep<11>2014 17:46 Nov 09, 2016 Jkt 241001 This document provides notice that U.S. Customs and Border Protection (‘‘CBP’’) has issued a final determination concerning the country of origin of certain treadmills. Based upon the facts presented, CBP has concluded that, for purposes of U.S. Government procurement, the country of origin of the treadmills is the United States in Scenario One and Taiwan in Scenario Two. DATES: The final determination was issued on November 1, 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 December 12, 2016. FOR FURTHER INFORMATION CONTACT: Ross Cunningham, Valuation and Special Programs Branch, Regulations and Rulings, Office of Trade (202) 325–0034. SUPPLEMENTARY INFORMATION: Notice is hereby given that on November 1, 2016, 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 treadmills, which may be offered to the U.S. Government under an undesignated government procurement contract. This final determination, HQ H262943, 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 in both scenarios, the processing in the United States or in Taiwan results in a substantial transformation. Therefore, for purposes of U.S. Government procurement, the country of origin of the treadmills is the United States in Scenario One and Taiwan in Scenario Two. 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 SUMMARY: National Heart, Lung, and Blood Institute; Notice of Closed Meeting PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 79041 177.22(d), may seek judicial review of a final determination within 30 days of publication of such determination in the Federal Register. Dated: November 1, 2016. Alice A. Kipel, Executive Director, Regulations and Rulings, Office of Trade. HQ H262943 November 01, 2016 OT:RR:CTF:VS H262943 RMC CATEGORY: Country of Origin John A. Knab Garvey Shubert Barer PC 1000 Potomac Street NW Suite 200 Washington, DC 20007 Re: U.S. Government Procurement; Country of Origin of Treadmills; Substantial Transformation Dear Mr. Knab: This is in response to your letter dated March 16, 2015, requesting a final determination on behalf of Johnson Health Tech North America (‘‘Johnson’’) pursuant to subpart B of Part 177 of the U.S. Customs and Border Protection (‘‘CBP’’) Regulations (19 CFR part 177). Under these regulations, which implement Title III of the Trade Agreements Act of 1979 (‘‘TAA’’), 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 for products offered for sale to the U.S. Government. This final determination concerns the country of origin of treadmills. As a U.S. importer, Johnson is a party-atinterest within the meaning of 19 CFR § 177.22(d)(1) and is entitled to request this final determination. Facts Johnson is an exercise equipment manufacturer based in Cottage Grove, Wisconsin. It is a wholly-owned subsidiary of the Taiwanese entity Johnson Health Tech. Co., Ltd. (‘‘JHT’’). JHT, through its subsidiaries, operates in Taiwan, China, and the United States. The equipment at issue is the Matrix® T3xe commercial treadmill. Johnson describes the Matrix® T3xe as a ‘‘state of the art, electric, motorized treadmill controlled by software in a control box located in a user-friendly console supported by a console mast.’’ In its submission, Johnson describes two scenarios for assembling the Matrix® T3xe. In short, the first involves welding the metal components comprising the treadmills’ major subassemblies in the United States, assembling the components in the United States to form the finished product, and then partially disassembling the treadmills for shipment to U.S. customers. The second is similar to the first, except that the welding and assembly will occur in Taiwan before the finished treadmill is partially disassembled and sent to the U.S. customer. E:\FR\FM\10NON1.SGM 10NON1 79042 Federal Register / Vol. 81, No. 218 / Thursday, November 10, 2016 / Notices iii. Assembly & Testing in the United States 1. Scenario One—Final Assembly in the United States a. Design in the United States Johnson states it designs and engineers the Matrix® T3xe and similar models of treadmills in Wisconsin based on product development done in the United States and in consultation with designers and engineers in Taiwan. The engineering and design group uses SolidWorks software to create 3D computer-aided design (‘‘CAD’’) models and 2D models for use as diagrams to guide the manufacturing process. Each treadmill generally has between 200 and 400 2D CAD drawings representing between 400 and 700 separate components or subassemblies used in the treadmill. Johnson also states that the Matrix® T3xe’s console software is designed in the United States, while the ‘‘detailed coding’’ is done in Taiwan. b. Component Parts and Materials Come From China & Other Countries According to the bill of materials that Johnson provided, the Matrix® T3xe consists of approximately 466 individual parts. The vast majority of these parts are produced in China from Chinese materials. Under both scenarios, however, the Matrix® T3xe will also include some parts from the United States, Italy, and Taiwan. Under Scenario 1, the coated wooden deck that comprises the base will be of U.S. origin, and the elastic belt that the user walks on will be of Italian origin. Additionally, the elastometer, the cover for the driver motor, the television tuner, and the heart-rate monitor will be of Taiwanese origin. All other parts will be of Chinese origin. c. Assembly, Time & Employees asabaliauskas on DSK3SPTVN1PROD with NOTICES i. Description of Major Subassemblies Johnson states that the finished treadmills will consist of three major subassemblies: (1) the treadmill base; (2) the console; and (3) the console mast. The treadmill base is the part of a treadmill that lies flat on the floor. It comprises a deck and belt that form the running surface; a set of motors and rollers that control the speed of the belt and the pitch of the running surface; and side rails and covers to protect the equipment and the user. These parts are joined together by numerous bolts, washers, and screws. The console is essentially the computer that allows the user to control the treadmill’s operation. It is situated roughly at chest height to allow the user to adjust the treadmill while in operation. Here, it consists of a touch-screen display and also incorporates a heart-rate monitor and a television tuner. The console mast houses the console and connects it to the treadmill base. It also incorporates left and right arms to support the user and a rack for reading materials. ii. Chinese Operations In China, the console control board will be assembled and the rest of the parts that make up the finished treadmill will then be shipped to the United States for assembly. VerDate Sep<11>2014 17:46 Nov 09, 2016 Jkt 241001 Johnson describes the U.S. assembly process as involving welding various components and ‘‘connecting, lining up, adjusting and bolting frames, tightening and torqueing frame bolts, attaching motors, installing power switches, wiring, pulleys and filters.’’ First, workers will weld together the metal frames that comprise the three major subassemblies. The treadmill base will require 18 welding seams, the console frame, which houses the console, will require seven welding seams, and the console mast will require two welding seams. Once the major subassemblies have been welded together, several major components will be assembled including the console parts, console mast parts, rollers, side rails, and deck and belt. The rollers, side rails, and deck and belt will then be combined with the metal treadmill base to form the ‘‘rudimentary base.’’ Next, the electronic components will be bolted and wired into the rudimentary base to make the motorized and operational treadmill base. The U.S. assembly team will then temporarily assemble and wire the motorized base with the console and the console mast to make the substantially final product. The product will then be spotchecked and subjected to quality control and operational testing. This quality control and operational testing will involve bringing the finished treadmills to a ‘‘quiet room’’ to ensure that the treadmill is operating properly. During testing, the assembler will run tests at different speeds and elevations and use natural hearing, noise detection equipment, and a vibrograph to check for unusual noises and vibrations. Johnson estimates that the total time necessary for U.S. assembly and testing will be 116 minutes. iv. Labor in the United States Johnson estimates that assembly in the United States under Scenario 1 will require 68 employees. This figure includes employees involved in the assembly process from sub-assembly welding, assembly, quality control, and packaging, but does not include those involved in design, engineering, or post-assembly installation. v. Disassembly for Shipment Finally, the finished product will be partially disassembled by separating the treadmill base from the console and the console mast so that it can be packaged for shipment to U.S. customers. 2. Scenario Two—Final Assembly in Taiwan As noted above, Scenario Two is similar to Scenario One, with the key difference being that the subassembly-welding and finalassembly operations will occur in Taiwan before the finished treadmill is partially disassembled and sent to the U.S. client. In addition, certain parts that are Chinese in Scenario One will be swapped out for Taiwanese parts in Scenario Two (specifically, the motor chassis, the side rails, the roller set, the packaging box, the polystyrene set, and the screw set). PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 Issue What is the country of origin for purposes of U.S. Government procurement of the Matrix® T3xe treadmill under Scenario 1 and Scenario 2? 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 a name, character, or use distinct from that of the article or articles from which it was transformed. 48 CFR 25.003. In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, 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 CIT 204 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). 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 postassembly inspection and testing procedures, and the degree of skill required during the actual manufacturing process may be relevant when determining whether a E:\FR\FM\10NON1.SGM 10NON1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 218 / Thursday, November 10, 2016 / Notices substantial transformation has occurred. No one factor is determinative. The Court of International Trade has also applied the ‘‘essence test’’ to determine whether the identity of an article is changed through assembly or processing. For example, in Uniroyal, Inc. v. United States, 3 CIT 220, 225, 542 F. Supp. 1026, 1030 (1982), aff’d 702 F.2d 1022 (Fed. Cir. 1983), the court held that imported shoe uppers added to an outer sole in the United States were the ‘‘very essence of the finished shoe’’ and thus were not substantially transformed into a product of the United States. Similarly, in National Juice Products Association v. United States, 10 CIT 48, 61, 628 F. Supp. 978, 991 (1986), the court held that imported orange juice concentrate ‘‘imparts the essential character’’ to the completed orange juice and thus was not substantially transformed into a product of the United States. In Headquarters Ruling (‘‘HQ’’) H270580, dated May 10, 2016, we considered whether a substantial transformation occurred when Johnson, the importer here, assembled ‘‘G3 Dip’’ and ‘‘G3 Back Extension’’ exercise machines in the United States. As in this case, Johnson proposed two different assembly scenarios. Under Scenario One, which applied to both machines, we held that although nearly all the parts were of Chinese origin, the extent of U.S. assembly operations was sufficiently complex and meaningful to result in a substantial transformation. Specifically, the assembly involved U.S. workers welding nine separate subassemblies with 49 seams for the ‘‘G3 Dip’’ and three separate subassemblies with 22 seams for the ‘‘G3 Back Extension.’’ In addition to the welding, U.S. workers also cleaned and degreased parts, ground down and painted the frame, and sprayed the frame with clear coat. The 200 to 500 parts that comprise the final products were then assembled in a process involving fastening hardware; adding rubber grips; capping off tube ends; positioning pulleys; adding weights, cables, or belts; and placing warning placards. We found that a substantial transformation had occurred because the assembly operations caused the individual parts to lose their separate identities and to become integral components of a product with a new name, character, and use. However, under Scenario Two in HQ H270580, which applied only to the ‘‘G3 Dip,’’ three of the nine subassemblies were imported from China as pre-assembled components. Under Uniroyal, 3 CIT 220, these critical components together imparted the ‘‘very essence’’ of the finished product. The processing in the United States thus did not result in a substantial transformation in Scenario Two. See also National Juice Prods. Ass’n, 10 CIT 48. Similarly, in HQ 733188, dated July 5, 1990, we held that no substantial transformation occurred when Venezuelan exercise benches and boards were assembled in the United States. The Venezuelan metal frames as imported were essentially complete, and the U.S. assembly consisted primarily of attaching the cushions and minor parts. Further, no machining was done in the United States and no specialized VerDate Sep<11>2014 17:46 Nov 09, 2016 Jkt 241001 training, skill, or equipment was required to assemble the exercise equipment. CBP thus held that no substantial transformation occurred in the United States. Here, although nearly all the parts will be of Chinese origin, the extent of U.S. or Taiwanese assembly operations is sufficiently complex and meaningful to result in a substantial transformation in both scenarios. Unlike the exercise equipment at issue in HQ 733188, the treadmill parts will not be essentially complete when they are imported into either the United States or Taiwan for assembly. To the contrary, they will require substantial additional work to create a functional treadmill. Most importantly, U.S. or Taiwanese workers will need to weld a total of 27 seams to create the three major subassemblies (the treadmill base, the console frame, and the console mast) that comprise the finished treadmill. The additional assembly steps, which involve approximately 466 individual parts and ‘‘connecting, lining up, adjusting and bolting frames, tightening and torqueing frame bolts, attaching motors, installing power switches, wiring, pulleys and filters,’’ are similar in scope and complexity to those that we found sufficient to effect a substantial transformation under Scenario One in HQ H270580. Under these circumstances, the Matrix® T3xe’s country of origin for purposes of government procurement is the United States under Scenario One and Taiwan under Scenario Two. Holding The finished treadmill’s country of origin for purposes of government procurement is the United States under Scenario One and Taiwan under Scenario Two. 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-atinterest 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 & Rulings, Office of Trade. [FR Doc. 2016–27159 Filed 11–9–16; 8:45 am] BILLING CODE 9111–14–P DEPARTMENT OF HOMELAND SECURITY Federal Emergency Management Agency ACTION: Notice. This notice amends the notice of a major disaster declaration for the State of North Carolina (FEMA–4285– DR), dated October 10, 2016, and related determinations. SUMMARY: DATES: Effective Date: October 31, 2016. FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and Recovery, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646–2833. The notice of a major disaster declaration for the State of North Carolina is hereby amended to include the following areas among those areas determined to have been adversely affected by the event declared a major disaster by the President in his declaration of October 10, 2016. SUPPLEMENTARY INFORMATION: Brunswick County for Individual Assistance (already designated for assistance for debris removal and emergency protective measures [Categories A and B], including direct federal assistance, under the Public Assistance program) Halifax County for Individual Assistance and assistance for assistance for debris removal and emergency protective measures (Categories A and B), including direct federal assistance, under the Public Assistance program. The following Catalog of Federal Domestic Assistance Numbers (CFDA) are to be used for reporting and drawing funds: 97.030, Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling; 97.033, Disaster Legal Services; 97.034, Disaster Unemployment Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048, Disaster Housing Assistance to Individuals and Households In Presidentially Declared Disaster Areas; 97.049, Presidentially Declared Disaster Assistance— Disaster Housing Operations for Individuals and Households; 97.050 Presidentially Declared Disaster Assistance to Individuals and Households—Other Needs; 97.036, Disaster Grants—Public Assistance (Presidentially Declared Disasters); 97.039, Hazard Mitigation Grant. W. Craig Fugate, Administrator, Federal Emergency Management Agency. [FR Doc. 2016–27128 Filed 11–9–16; 8:45 am] BILLING CODE 9111–23–P [Internal Agency Docket No. FEMA–4285– DR; Docket ID FEMA–2016–0001] North Carolina; Amendment No. 10 to Notice of a Major Disaster Declaration Federal Emergency Management Agency, DHS. AGENCY: PO 00000 Frm 00077 Fmt 4703 Sfmt 9990 79043 E:\FR\FM\10NON1.SGM 10NON1

Agencies

[Federal Register Volume 81, Number 218 (Thursday, November 10, 2016)]
[Notices]
[Pages 79041-79043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27159]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Certain 
Treadmills

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determination.

-----------------------------------------------------------------------

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 treadmills. Based upon the facts 
presented, CBP has concluded that, for purposes of U.S. Government 
procurement, the country of origin of the treadmills is the United 
States in Scenario One and Taiwan in Scenario Two.

DATES: The final determination was issued on November 1, 2016. A copy 
of the final determination is attached. Any party-at-interest, as 
defined in 19 CFR Sec.  177.22(d), may seek judicial review of this 
final determination within December 12, 2016.

FOR FURTHER INFORMATION CONTACT: Ross Cunningham, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of Trade (202) 325-
0034.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on November 1, 
2016, 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 treadmills, 
which may be offered to the U.S. Government under an undesignated 
government procurement contract. This final determination, HQ H262943, 
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 in both scenarios, the processing in the United States or in 
Taiwan results in a substantial transformation. Therefore, for purposes 
of U.S. Government procurement, the country of origin of the treadmills 
is the United States in Scenario One and Taiwan in Scenario Two.
    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: November 1, 2016.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H262943

November 01, 2016

OT:RR:CTF:VS H262943 RMC

CATEGORY: Country of Origin

John A. Knab
Garvey Shubert Barer PC
1000 Potomac Street NW
Suite 200
Washington, DC 20007

Re: U.S. Government Procurement; Country of Origin of Treadmills; 
Substantial Transformation

Dear Mr. Knab:

    This is in response to your letter dated March 16, 2015, 
requesting a final determination on behalf of Johnson Health Tech 
North America (``Johnson'') pursuant to subpart B of Part 177 of the 
U.S. Customs and Border Protection (``CBP'') Regulations (19 CFR 
part 177). 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 purposes 
of granting waivers of certain ``Buy American'' restrictions in U.S. 
law or for products offered for sale to the U.S. Government. This 
final determination concerns the country of origin of treadmills. As 
a U.S. importer, Johnson is a party-at-interest within the meaning 
of 19 CFR Sec.  177.22(d)(1) and is entitled to request this final 
determination.

Facts

    Johnson is an exercise equipment manufacturer based in Cottage 
Grove, Wisconsin. It is a wholly-owned subsidiary of the Taiwanese 
entity Johnson Health Tech. Co., Ltd. (``JHT''). JHT, through its 
subsidiaries, operates in Taiwan, China, and the United States.
    The equipment at issue is the Matrix[supreg] T3xe commercial 
treadmill. Johnson describes the Matrix[supreg] T3xe as a ``state of 
the art, electric, motorized treadmill controlled by software in a 
control box located in a user-friendly console supported by a 
console mast.''
    In its submission, Johnson describes two scenarios for 
assembling the Matrix[supreg] T3xe. In short, the first involves 
welding the metal components comprising the treadmills' major 
subassemblies in the United States, assembling the components in the 
United States to form the finished product, and then partially 
disassembling the treadmills for shipment to U.S. customers. The 
second is similar to the first, except that the welding and assembly 
will occur in Taiwan before the finished treadmill is partially 
disassembled and sent to the U.S. customer.

[[Page 79042]]

1. Scenario One--Final Assembly in the United States

a. Design in the United States

    Johnson states it designs and engineers the Matrix[supreg] T3xe 
and similar models of treadmills in Wisconsin based on product 
development done in the United States and in consultation with 
designers and engineers in Taiwan. The engineering and design group 
uses SolidWorks software to create 3D computer-aided design 
(``CAD'') models and 2D models for use as diagrams to guide the 
manufacturing process. Each treadmill generally has between 200 and 
400 2D CAD drawings representing between 400 and 700 separate 
components or subassemblies used in the treadmill.
    Johnson also states that the Matrix[supreg] T3xe's console 
software is designed in the United States, while the ``detailed 
coding'' is done in Taiwan.

b. Component Parts and Materials Come From China & Other Countries

    According to the bill of materials that Johnson provided, the 
Matrix[supreg] T3xe consists of approximately 466 individual parts. 
The vast majority of these parts are produced in China from Chinese 
materials.
    Under both scenarios, however, the Matrix[supreg] T3xe will also 
include some parts from the United States, Italy, and Taiwan. Under 
Scenario 1, the coated wooden deck that comprises the base will be 
of U.S. origin, and the elastic belt that the user walks on will be 
of Italian origin. Additionally, the elastometer, the cover for the 
driver motor, the television tuner, and the heart-rate monitor will 
be of Taiwanese origin. All other parts will be of Chinese origin.

c. Assembly, Time & Employees

i. Description of Major Subassemblies

    Johnson states that the finished treadmills will consist of 
three major subassemblies: (1) the treadmill base; (2) the console; 
and (3) the console mast.
    The treadmill base is the part of a treadmill that lies flat on 
the floor. It comprises a deck and belt that form the running 
surface; a set of motors and rollers that control the speed of the 
belt and the pitch of the running surface; and side rails and covers 
to protect the equipment and the user. These parts are joined 
together by numerous bolts, washers, and screws.
    The console is essentially the computer that allows the user to 
control the treadmill's operation. It is situated roughly at chest 
height to allow the user to adjust the treadmill while in operation. 
Here, it consists of a touch-screen display and also incorporates a 
heart-rate monitor and a television tuner.
    The console mast houses the console and connects it to the 
treadmill base. It also incorporates left and right arms to support 
the user and a rack for reading materials.

ii. Chinese Operations

    In China, the console control board will be assembled and the 
rest of the parts that make up the finished treadmill will then be 
shipped to the United States for assembly.

iii. Assembly & Testing in the United States

    Johnson describes the U.S. assembly process as involving welding 
various components and ``connecting, lining up, adjusting and 
bolting frames, tightening and torqueing frame bolts, attaching 
motors, installing power switches, wiring, pulleys and filters.'' 
First, workers will weld together the metal frames that comprise the 
three major subassemblies. The treadmill base will require 18 
welding seams, the console frame, which houses the console, will 
require seven welding seams, and the console mast will require two 
welding seams.
    Once the major subassemblies have been welded together, several 
major components will be assembled including the console parts, 
console mast parts, rollers, side rails, and deck and belt. The 
rollers, side rails, and deck and belt will then be combined with 
the metal treadmill base to form the ``rudimentary base.''
    Next, the electronic components will be bolted and wired into 
the rudimentary base to make the motorized and operational treadmill 
base. The U.S. assembly team will then temporarily assemble and wire 
the motorized base with the console and the console mast to make the 
substantially final product. The product will then be spot-checked 
and subjected to quality control and operational testing.
    This quality control and operational testing will involve 
bringing the finished treadmills to a ``quiet room'' to ensure that 
the treadmill is operating properly. During testing, the assembler 
will run tests at different speeds and elevations and use natural 
hearing, noise detection equipment, and a vibrograph to check for 
unusual noises and vibrations.
    Johnson estimates that the total time necessary for U.S. 
assembly and testing will be 116 minutes.

iv. Labor in the United States

    Johnson estimates that assembly in the United States under 
Scenario 1 will require 68 employees. This figure includes employees 
involved in the assembly process from sub-assembly welding, 
assembly, quality control, and packaging, but does not include those 
involved in design, engineering, or post-assembly installation.

v. Disassembly for Shipment

    Finally, the finished product will be partially disassembled by 
separating the treadmill base from the console and the console mast 
so that it can be packaged for shipment to U.S. customers.

2. Scenario Two--Final Assembly in Taiwan

    As noted above, Scenario Two is similar to Scenario One, with 
the key difference being that the subassembly-welding and final-
assembly operations will occur in Taiwan before the finished 
treadmill is partially disassembled and sent to the U.S. client. In 
addition, certain parts that are Chinese in Scenario One will be 
swapped out for Taiwanese parts in Scenario Two (specifically, the 
motor chassis, the side rails, the roller set, the packaging box, 
the polystyrene set, and the screw set).

Issue

    What is the country of origin for purposes of U.S. Government 
procurement of the Matrix[supreg] T3xe treadmill under Scenario 1 
and Scenario 2?

Law and Analysis

    Pursuant to Subpart B of Part 177, 19 CFR 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 CFR 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 CFR 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 CFR 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 CFR 25.003.
    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled into 
completed products, 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 CIT 204 (1983), aff'd, 741 F.2d 1368 (Fed. Cir. 
1984). 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

[[Page 79043]]

substantial transformation has occurred. No one factor is 
determinative.
    The Court of International Trade has also applied the ``essence 
test'' to determine whether the identity of an article is changed 
through assembly or processing. For example, in Uniroyal, Inc. v. 
United States, 3 CIT 220, 225, 542 F. Supp. 1026, 1030 (1982), aff'd 
702 F.2d 1022 (Fed. Cir. 1983), the court held that imported shoe 
uppers added to an outer sole in the United States were the ``very 
essence of the finished shoe'' and thus were not substantially 
transformed into a product of the United States. Similarly, in 
National Juice Products Association v. United States, 10 CIT 48, 61, 
628 F. Supp. 978, 991 (1986), the court held that imported orange 
juice concentrate ``imparts the essential character'' to the 
completed orange juice and thus was not substantially transformed 
into a product of the United States.
    In Headquarters Ruling (``HQ'') H270580, dated May 10, 2016, we 
considered whether a substantial transformation occurred when 
Johnson, the importer here, assembled ``G3 Dip'' and ``G3 Back 
Extension'' exercise machines in the United States. As in this case, 
Johnson proposed two different assembly scenarios. Under Scenario 
One, which applied to both machines, we held that although nearly 
all the parts were of Chinese origin, the extent of U.S. assembly 
operations was sufficiently complex and meaningful to result in a 
substantial transformation. Specifically, the assembly involved U.S. 
workers welding nine separate subassemblies with 49 seams for the 
``G3 Dip'' and three separate subassemblies with 22 seams for the 
``G3 Back Extension.'' In addition to the welding, U.S. workers also 
cleaned and degreased parts, ground down and painted the frame, and 
sprayed the frame with clear coat. The 200 to 500 parts that 
comprise the final products were then assembled in a process 
involving fastening hardware; adding rubber grips; capping off tube 
ends; positioning pulleys; adding weights, cables, or belts; and 
placing warning placards. We found that a substantial transformation 
had occurred because the assembly operations caused the individual 
parts to lose their separate identities and to become integral 
components of a product with a new name, character, and use.
    However, under Scenario Two in HQ H270580, which applied only to 
the ``G3 Dip,'' three of the nine subassemblies were imported from 
China as pre-assembled components. Under Uniroyal, 3 CIT 220, these 
critical components together imparted the ``very essence'' of the 
finished product. The processing in the United States thus did not 
result in a substantial transformation in Scenario Two. See also 
National Juice Prods. Ass'n, 10 CIT 48.
    Similarly, in HQ 733188, dated July 5, 1990, we held that no 
substantial transformation occurred when Venezuelan exercise benches 
and boards were assembled in the United States. The Venezuelan metal 
frames as imported were essentially complete, and the U.S. assembly 
consisted primarily of attaching the cushions and minor parts. 
Further, no machining was done in the United States and no 
specialized training, skill, or equipment was required to assemble 
the exercise equipment. CBP thus held that no substantial 
transformation occurred in the United States.
    Here, although nearly all the parts will be of Chinese origin, 
the extent of U.S. or Taiwanese assembly operations is sufficiently 
complex and meaningful to result in a substantial transformation in 
both scenarios. Unlike the exercise equipment at issue in HQ 733188, 
the treadmill parts will not be essentially complete when they are 
imported into either the United States or Taiwan for assembly. To 
the contrary, they will require substantial additional work to 
create a functional treadmill. Most importantly, U.S. or Taiwanese 
workers will need to weld a total of 27 seams to create the three 
major subassemblies (the treadmill base, the console frame, and the 
console mast) that comprise the finished treadmill. The additional 
assembly steps, which involve approximately 466 individual parts and 
``connecting, lining up, adjusting and bolting frames, tightening 
and torqueing frame bolts, attaching motors, installing power 
switches, wiring, pulleys and filters,'' are similar in scope and 
complexity to those that we found sufficient to effect a substantial 
transformation under Scenario One in HQ H270580. Under these 
circumstances, the Matrix[supreg] T3xe's country of origin for 
purposes of government procurement is the United States under 
Scenario One and Taiwan under Scenario Two.

Holding

    The finished treadmill's country of origin for purposes of 
government procurement is the United States under Scenario One and 
Taiwan under Scenario Two.
    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 this final determination may 
request, pursuant to 19 CFR Sec.  177.31, that CBP reexamine the 
matter anew and issue a new final determination. Pursuant to 19 CFR 
Sec.  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 & Rulings, Office of Trade.

[FR Doc. 2016-27159 Filed 11-9-16; 8:45 am]
 BILLING CODE 9111-14-P

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