CIT Origin Decision Likely Killed Precedent, Will Lead to More CBP Protests, Firm Says

A recent Court of International Trade opinion left prior court precedent on the question of what constitutes a substantial transformation "dead, or on life support," an analysis from law firm Neville Peterson said. The result is that importers who have been told by CBP that the country of origin of their goods is the country of origin of the goods' major inputs or essential components will likely seek reconsideration of those rulings, seeking refunds on Section 301 China tariffs in particular, the firm said.

Neville Peterson said that country of origin rulings became more important after CBP started using them to maximize its collection of Section 301 tariffs. CBP strayed from its standard "substantial transformation" analysis, arguing instead that a product is from the country where its key components are from. In the recent CIT opinion, Cyber Power Systems v. U.S., Judge Leo Gordon rejected the agency's heavy reliance on the origin of pre-determined components, ultimately sending the case to trial (see 2202240059).

Gordon questioned prior CIT precedent, namely the Energizer Battery Co. v. U.S. decision, which said that assembly operations could not result in a substantial transformation if the finished product's nature was apparent from its parts. "Customs has weaponized the Energizer decision to disallow even extensive assembly operations from being 'substantial transformations,'" the analysis said. "This leaves the 'Energizer Bunny' dead, or on life support with bad prospects." As a result, more and more companies will seek Section 301 refunds on the grounds that their goods are not actually from China, the firm said.