Main Idea: Feeling positive about your country of origin determination? CBP’s decision on battery modules and packs confirms the importance of understanding the complexity of the substantial transformation rules.

In a decision impacting the electric vehicle, renewables, and other related industries, U.S. Customs and Border Protection (CBP) discusses the country of origin of battery modules and battery packs, as well as the applicability of certain trade remedies under Section 301 to such products.  The products CBP analyzes in ruling N329847 (Jan. 10, 2023) are lithium-ion battery modules and battery packs that are used in various battery electric systems for electric vehicles.  Each battery module’s main components include: lithium-ion battery cells, a top and bottom housing, a cell holder and current collector, a module cold plate, and a battery management board. The battery modules are manufactured into battery packs containing multiple battery modules. Both the battery modules and battery packs are assembled in Canada through multi-step assembly processes that include: applying adhesive, aligning, pressing, curing, plasma cleaning, laser ablation, wire bonding, material injection, bolting, and testing of inputs sourced from Canada, China, Germany, Indonesia, Japan, Singapore, South Korea, and the United States.  The lithium-ion battery cells are sourced from either China, Japan, or South Korea.

19 C.F.R. § 134.1(b) defines country of origin as: “… the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” …” A substantial transformation occurs when an article emerges from a manufacturing process with a name, character, and use that differs from the original material subjected to the processing.” See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). CBP country of origin determinations on a case-by-case basis based on the totality of evidence.

Applying the substantial transformation analysis to the battery modules and battery packs assembled in Canada, CBP focuses on the component providing the “essence” of the battery module and in which country that component undergoes a substantial transformation. In its ruling CBP determines that the country of origin for the products is China, Japan, or South Korea, depending upon where the battery cells are manufactured. CBP states that the assembly operations in Canada do not substantially transform the battery cells, which provide the essence of the battery module and subsequent battery pack, into an article with a new name, character, or use, different from that possessed by the article prior to processing. 

CBP has previously held that assembling battery cells into battery packs does not characterize substantial transformation of the battery cells because the fundamental character of the cells is not altered simply by being placed together in plastic casing.  See HQ 563045 (Aug. 9, 2004) and HQ 734393 (Mar. 20, 1992). 

CBP’s ruling presents an example of why importers and manufacturers need to be aware of the manufacturing and assembly criteria CBP considers “substantial” enough to constitute a substantial transformation.

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Photo of Simeon Yerokun Simeon Yerokun

imeon Yerokun is a counsel in Crowell & Moring’s International Trade group and based in the firm’s Washington, D.C. office. He advises clients on all areas of import regulatory compliance, trade remedies, and international trade litigation.

Simeon has extensive experience counseling companies in

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imeon Yerokun is a counsel in Crowell & Moring’s International Trade group and based in the firm’s Washington, D.C. office. He advises clients on all areas of import regulatory compliance, trade remedies, and international trade litigation.

Simeon has extensive experience counseling companies in the areas of business and human rights law, including compliance with global anti-forced labor and human rights requirements. He regularly represents companies before U.S. government agencies on forced labor-related matters, including securing the release of goods detained and seized by U.S. Customs and Border Protection. He also offers deep experience assisting companies in mapping their supply chains, including linking imported products back to their raw materials using enterprise software and other inventory management audit tools. Simeon is highly accomplished in forced labor supply chain mapping and risk assessments, as well as verifying due diligence efforts with on-the-ground visits to client facilities, incorporating third-party intelligence and audit resources.

Simeon’s experience also covers a broad spectrum of trade and customs issues, including those related to import regulatory compliance matters such as valuation, classification, duty drawback, marking and labeling, entry procedures, and penalties; free trade agreements; antidumping and countervailing duty issues; trade litigation; intellectual property issues such as trademark and copyright infringement; the enforcement of exclusion orders issued by the International Trade Commission (ITC); steel and aluminum tariffs under the Section 232 National Security Investigation; and the additional tariffs on products from China under Section 301 of the Trade Act of 1974.

Additionally, Simeon handles antidumping (AD) and countervailing duty (CVD) investigations before the U.S. Department of Commerce’s International Trade Administration (ITA) and the U.S. International Trade Commission (ITC) under the Tariff Act of 1930, and litigation involving the U.S. Court of International Trade (CIT).

Prior to joining Crowell, Simeon was a trade and finance attorney in the Office of Chief Counsel—U.S. Customs and Border Protection (CBP), and before that, he served as counsel to Commissioner Irving A. Williamson at the U.S. International Trade Commission.

Simeon is a proud graduate of Howard University School of Law, where he served as technical editor of the school’s Human Rights and Globalization Law Review.

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Photo of Emily Devereaux Emily Devereaux

Emily Devereaux is a senior international trade analyst I in Crowell & Moring’s Washington, D.C. office. She provides practice support to the International Trade Group on import regulatory matters pending before the Office of the U.S. Trade Representative (USTR) and U.S. Customs and

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Emily Devereaux is a senior international trade analyst I in Crowell & Moring’s Washington, D.C. office. She provides practice support to the International Trade Group on import regulatory matters pending before the Office of the U.S. Trade Representative (USTR) and U.S. Customs and Border Protection (CBP). She works closely with attorneys developing courses of action for clients impacted by investigations under Section 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. She also supports unfair trade investigations, including antidumping (AD) and countervailing duty (CVD) investigations, sunset reviews, and changed circumstance reviews before the Department of Commerce and the International Trade Commission (ITC).

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