Customs Lawyer Knocks CBP's Recent 'Double' Substantial Transformation Test for Assembled Goods
A recent CBP ruling that found Volvo cars assembled in Sweden from Chinese subassemblies are products of China (see 1910030014) is “almost certainly wrong,” and throws into doubt whether substantial transformation applies to all assembled goods, Larry Friedman of Barnes Richardson said in an Oct. 6 blog post.
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CBP’s reliance in its decision on the fact that the subassemblies from China had a predetermined end use prior to assembly misapplies prior court precedent, which has held that predetermined end-use “does not preclude finding a substantial transformation,” Friedman said. ”Customs' current love affair with predetermined end-use as indicative of simple assembly and of there being no change in character is turning into the crutch it uses to deny substantial transformation claims,” he said.
And the agency’s finding that the assembly process in Sweden was too simple to be considered substantial transformation is dubious, Friedman said. “Cars have lots of big, heavy moving parts that need to be connected just so. The assembly implicates important safety and regulatory requirements. The workers are likely skilled and using expensive tools and other equipment. I may be making an unsupported factual assumption, but it is inconceivable to me that this is a simple process compared to sewing pillowcases or making hairbrushes.
“This ruling calls into question the applicability of substantial transformation to all assembled goods including assemblies as complex as (non-knocked down) motor vehicles, aircraft, and farm equipment,” Friedman said. “Essentially, the law has moved to require a double substantial transformation, or at least further processing of the parts prior to assembly.”