Recent CIT Decision May Inch Closer to 'Saner' Origin Determination Process, Customs Lawyer Says
A Feb. 24 Court of International Trade decision could result in "inching toward a saner and more legally sound approach to origin determinations" involving the substantial transformation test, customs lawyer Larry Friedman of Barnes Richardson said in a blog post Feb. 24. The language in the decision is "generally favorable for a simplified and more reasonable approach to origin," after years of focus on pre-determined end use of assembled components following the trade court's unappealed 2016 decision in Energizer.
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In the ruling, Judge Leo Gordon said that neither importer Cyber Power Systems (USA) nor the U.S. succeeded in arguing it side over a country of origin dispute and ordered the case to go to trial (see 2202240059). Friedman said that while "the current legal landscape has not changed," he is hopeful the case will be a "vehicle to clarify the substantial transformation test" employed by CBP and the courts to determine COO.
In the decision, Gordon rejected much of the U.S.' legal analysis regarding the definition of a substantial transformation. The relevant analysis over the past few years has focused on the individual components of a good that CBP deems to be the "essence" of the finished product in order to find the COO, Friedman told Trade Law Daily. CBP's prevailing sentiment was that if an essential part has a predetermined end use, then assembly is not likely to substantially transform it.
"In Cyber Power, the court said the appropriate focus is not on the parts before assembly and how they appear after assembly," Friedman said. "Instead, the court says it will look at the process as a whole. I understand this to mean that the correct point of comparison is between the name, character and use of the imported part and the name, character, and use of the finished article."
Friedman provided an example of a propeller used to make a boat engine. Under the government's argument in the Cyber Power case, the propeller will never transform into an engine since it is a propeller before and after assembly and put to its predetermined end use. Under the traditional analysis, CBP would compare the propeller to the finished engine even though, despite its predetermined use and simple assembly, it has a different name, character and use than the engine.
"If this were not the law, how would we ever realistically expect to find a single country of origin for a complex item like an airplane or locomotive that consists of thousands of parts that are used to assemble the finished whole?" Friedman emailed. "Some of those parts are more or less expensive and more or less critical to the operation of the whole, but none (in my hypothetical) have the name, character or use of the finished item."