Cyber Power Systems (USA) Inc. v. United States , 2023 CIT 24 ( 2023 )

Slip Op. 23-24
UNITED STATES COURT OF INTERNATIONAL TRADE
CYBER POWER SYSTEMS (USA) INC.,
Plaintiff,
Before: Leo M. Gordon, Judge
v.
UNITED STATES, Court No. 20-00124
Defendant.
OPINION
[Following trial on the issue of substantial transformation for purposes of determining
country of origin under 19 U.S.C. § 1304(a), judgment for Plaintiff as to the origin of one
model of subject merchandise, and judgment for Defendant as to the remaining five.]
Dated: February 27, 2023
John M. Peterson, Richard F. O’Neill, and Patrick B. Klein, Neville Peterson LLP,
of New York, N.Y., for Plaintiff Cyber Power Systems (USA) Inc.
Luke Mathers, Trial Attorney, and Beverly A. Farrell, Senior Trial Attorney,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York,
N.Y., argued for Defendant United States. With them on the brief were Brian M. Boynton,
Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, and Justin
R. Miller, Attorney-in-Charge. Of counsel was Yelena Slepak, Attorney, Office of the
Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border
Protection, of New York, N.Y.
Gordon, Judge: Plaintiff Cyber Power Systems (USA) Inc. (“Cyber Power”)
commenced this action contesting a denied protest regarding the country of origin
marking of five models of uninterruptible power supplies (“UPS”) and one model of surge
voltage protectors (“SVP”). Upon entry of the subject merchandise, which Plaintiff had
marked as “Made in the Philippines,” U.S. Customs and Border Protection (“Customs”)
Court No. 20-00124 Page 2
determined that the country of origin for the five UPSs and one SVP was China and
excluded their entry when Cyber Power refused to change its markings. Cyber Power
contended before Customs, and now before the court, that its operations in the
Philippines, conducted by Cyber Power Systems Manufacturing, Inc. (“Cyber Power
Philippines”), resulted in a “substantial transformation” of the merchandise into Philippine
origin, having a name, character, and use different from each device’s Chinese
components.
The court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (2018). The court
presumes familiarity with its prior opinions in this action. See Cyber Power Sys. (USA)
Inc. v. United States, 44 CIT ___, ___, 471 F. Supp. 3d 1371 (2020); Cyber Power Sys.
(USA) Inc. v. United States, 46 CIT ___, ___, 560 F. Supp. 3d 1347 (2022). For the
reasons that follow, the court enters judgment for Plaintiff as to the Philippine origin of
one model of subject merchandise, UPS Model No. CP600LCDa, and judgment for
Defendant as to the Chinese origin of the remaining five models.
I. Standard of Review and Legal Framework
A. Standard of Review
The court reviews Customs’ protest decisions de novo. 28 U.S.C.
§ 2640(a)(1) (2018). For contested factual issues, a statutory presumption of correctness
imposes the burden of proof on Plaintiff. See id. § 2639(a)(1); Universal Elecs., Inc.
v. United States, 112 F.3d 488, 492 n.2 (Fed. Cir. 1997); Chrysler Corp. v. United States,
33 CIT 90, 97, 601 F. Supp. 2d 1347, 1353–54 (2009), aff’d, 592 F.3d 1330 (Fed. Cir.
2010). Despite its name, the statutory presumption of correctness is not a true evidentiary
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presumption governed by Federal Rule of Evidence 301, but rather an “assumption” that
allocates to Plaintiff the burden of proof on contested factual issues that arise from the
protest decision. Universal Elecs., 112 F.3d at 492 n.2; 21B Charles A. Wright & Kenneth
W. Graham, Jr., Fed. Prac. & Proc. Evid. § 5124 (2d ed. 2022) (“Rule 301 does not apply
to ‘assumptions’—rules for allocating the burden of proof that are often mislabeled as
‘presumptions.’ . . . [T]he best known include: . . . the ‘assumption’ that official duty has
been regularly performed.” (footnotes omitted)). Plaintiff’s burden of proof carries an
initial burden of production (to make an evidentiary proffer), and an ultimate burden of
persuasion to establish the operative facts by a preponderance of the evidence.
Universal Elecs., 112 F.3d at 492.
B. The Marking Statute (19 U.S.C. § 1304(a))
Section 304(a) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1304(a), 1
requires that all merchandise imported into the United States be marked permanently,
legibly, indelibly, and in a conspicuous place, to indicate to the ultimate purchaser the
English name of the product’s country of origin. The implementing regulation, 19 C.F.R.
§ 134.1(b), defines the term “country of origin” as “the country of manufacture, production,
or growth of any article of foreign origin entering the United States.” Section 134.1(b)
explains that “[f]urther 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’
within the meaning of this part.” 19 C.F.R. § 134.1(b) (emphasis added). Simply stated,
1Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2018 edition.
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imported merchandise originates for marking purposes in the last country in which it
underwent a “substantial transformation” prior to importation into the United States.
Merchandise not marked with the proper country of origin may be excluded by Customs
from entry into the United States. See 19 U.S.C. § 1304(j); see also 19 C.F.R. § 134.3(a). 2
C. Substantial Transformation
Plaintiff must establish by a preponderance of the evidence that its subject
merchandise is substantially transformed in the country it wishes to represent as the
merchandise’s country of origin. See 28 U.S.C. § 2639(a)(1); Universal Elecs., 112 F.3d
at 492 (plaintiff bears burden of proof on contested factual issues arising from underlying
protest decision).
2 Additionally, effective July 6, 2018, the Office of the United States Trade Representative
imposed an additional tariff—twenty-five percent ad valorem—on certain products from
China, including those in issue in this action, that are classified in the subheadings
enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(b), Harmonized
Tariff Schedule of the United States.
In ruling on cross-motions for summary judgment, the court articulated the purpose of the
Section 301 tariffs:
[T]he purpose of the imposition of the Section 301 tariffs was to promote a
change in the “government of China's acts, policies and practices related to
technology transfer, intellectual property and innovation.” . . . Additionally,
the Section 301 tariffs were intended to encourage a partial de-coupling of
China’s economy from that of the United States, by discouraging investment
in, and trade with, China.
Cyber Power, 46 CIT at ___, 560 F. Supp. 3d at 1352 (citations omitted). It is evident to
the court that Cyber Power was engaging in that decoupling process. However, the mere
fact that Cyber Power was attempting to meet the policy objective does not overcome its
inability to demonstrate that five of the six devices were substantially transformed in the
Philippines.
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A substantial transformation occurs “when an article emerges from a
manufacturing process with a name, character, or use which differs from those of the
original material subjected to the process.” Torrington, Co. v. United States, 764 F.2d
1563, 1568 (Fed. Cir. 1985) (citing Tex. Instruments, Inc. v. United States, 681 F.2d
778, 782 (C.C.P.A. 1982)); see also United States v. Gibson-Thomsen Co., 27 C.C.P.A.
267, 273 (1940) (clarifying that marking statute did not “require that an imported article,
which is to be used in the United States as material in the manufacture of a new article
having a new name, character, and use, and which, when so used, becomes an integral
part of the new article, be so marked as to indicate to the retail purchaser of the new
article that such imported article or material was produced in a foreign country”).
Substantial transformation is fact-specific and determined on a case-by-case basis.
See Belcrest Linens v. United States, 741 F.2d 1368, 1373 (Fed. Cir. 1984).
While the test is expressed in the disjunctive, courts consider all three factors, and
have generally found a change in name to be “the weakest evidence of substantial
transformation.” See, e.g., Koru N. Am. v. United States, 12 CIT 1120, 1126,
701 F. Supp. 229, 234 (1988) (quoting Nat’l Juice Prods. Ass’n v. United States, 10 CIT
48, 59, 628 F. Supp. 978, 989 (1986)). Indeed, a finding of substantial transformation
frequently rests on multiple factors because a change in character often results in a
change in use, and a change in character or use generally necessitates a change in
name. See id. 12 CIT at 1127, 701 F. Supp. at 235 (“The fish’s name has been changed
as the result of the processing method which occurred in Korea. . . . The fish’s character,
after its journey through Korea, is also vastly different.’” (internal citations omitted));
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see also Belcrest Linens, 741 F.2d at 1374 (“[T]he identity of the merchandise changed
as did its character and use: embroidered fabric was transformed into pillowcases which
are clearly distinguishable in character and use from the fabric of which they were
made.”); Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535,
541 (1987) (“Based on the totality of the evidence, showing that the continuous hot-dip
galvanizing process effects changes in the name, character and use of the processed
steel sheet, the Court holds that the changes constitute a substantial transformation and
that hot-dipped galvanized steel sheet is a new and different article of commerce from full
hard cold-rolled steel sheet.”); Uniden Am. Corp. v. United States, 24 CIT 1191, 1194,
120 F. Supp. 2d 1091, 1095 (2000) (“Here, each cordless telephone has experienced a
change in both name and use from its original materials.”).
In applying the test, the U.S. Court of Appeals for the Federal Circuit has
emphasized the requirement that there be a “new and different” article that emerges from
the manufacturing process. See, e.g., Acetris Health LLC v. United States, 949 F.3d 719(Fed. Cir. 2020); Zuniga v. United States, 996 F.2d 1203 (Fed. Cir. 1993); Azteca Milling
Co. v. United States, 890 F.2d 1150 (Fed. Cir. 1989); see also Anheuser-Busch Brewing
Ass’n v. United States, 207 U.S. 556, 562 (1908) (“There must be transformation; a new
and different article must emerge.”).
II. Discussion
The dispositive question in this action, as noted over the course of the litigation, is
whether the subject merchandise was substantially transformed at the Cyber Power
Philippines factory. In denying cross-motions for summary judgment, the court found that,
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while the subject merchandise underwent a change in name in the Philippines, that
“change . . . alone [did] not appear sufficient to constitute a ‘substantial transformation,’”
and “that a determination as to the resulting ‘character’ and ‘use’ of the subject
merchandise after production at Plaintiff’s Philippine facility require[d] analysis and
adjudication.” Cyber Power, 46 CIT at ___, 560 F. Supp. 3d at 1356–57 (“[T]he factual
details as to the extent and nature of Cyber Power’s operations regarding the subject
merchandise in the Philippines also remain in dispute.”); see also Pl.’s Mot. for Summ. J.,
ECF No. 48; Def.’s Cross-Mot. for Summ. J., ECF No. 60.
A. Findings of Fact
On August 8–11, 2022, the court held a bench trial to decide whether the subject
merchandise was properly marked under 19 U.S.C. § 1304(a) as “Made in Philippines.”
Trial, ECF Nos. 144–47. Thereafter, the parties submitted proposed findings of fact and
conclusions of law. See Plaintiff’s Proposed Findings of Fact and Conclusions of Law,
ECF No. 157 (“Pl.’s FOF & COL”); Defendant’s Proposed Findings of Fact and
Conclusions of Law, ECF No. 158 (“Def.’s FOF & COL”).
1. Uncontested Facts Regarding the Subject Merchandise
Before trial, the court delineated the uncontested facts in its Pretrial Order.
See Pretrial Order, Schedule C, ECF No. 142 (“Jt. Uncontested Facts”). The UPS
devices at issue are Model Nos. CP600LCDa, CBN50U48A-1, CST135XLU,
OR500LCDRM1U, and SX650U, and the SVP device is Model No. HT1206UC2RC1.
See Jt. Uncontested Facts ¶¶ 1–2.
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The UPS devices essentially serve as backup batteries for a range of electronic
devices and electrical appliances. See, e.g., Jt. Uncontested Facts ¶ 14 (Model
No. OR500LCDRM1U); see, e.g., id. ¶ 17 (“If power to a connected device is lost, [this
model] activates a lead acid battery, which provides emergency power to the connected
device until power is restored[.]”). These devices assist in a “graceful shutdown” during
a power failure so as “to protect against the loss of data and damage to valuable
electronics.” Id. ¶¶ 25, 33, 41, 48. To make the UPSs function as intended, all five subject
models contain “firmware”—computer code—that is written in Taiwan and programmed
on the main PCBAs of each device. Id. ¶¶ 19, 27, 35, 43 & 51; see also Trial Vol. III at
377–80 (Plaintiff’s witness Thomas L. Fuehrer explaining general function of firmware).
The surge protector, SVP Model No. HT1206UC2RC1, provides “surge protection
of up to 2880 joules to connected devices.” Jt. Uncontested Facts ¶ 56. Unlike the UPS
devices, it contains neither firmware nor a battery. Trial Vol. III at 436, ECF No. 151;
Deposition Transcript of Chi-Ting (Tim) Huang at 149, ECF No. 153 (“Huang Dep.”).
With respect to four of the UPS devices and the single SVP device, it is undisputed
that the majority of their components, including the main printed circuit board assemblies
(“PCBAs”), were manufactured in China. Jt. Uncontested Facts ¶¶ 18, 20–23, 26, 28–31,
34, 36–39, 50, 52–55, 58, 60–63. Throughout this litigation, Plaintiff contended, and
Defendant disputed, that the main PCBA for UPS Model No. CP600LCDa was
manufactured in the Philippines. See Huang Dep. at 40. 3
3 Mr. Huang’s deposition was used as the majority of his direct testimony at trial.
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The main PCBA controls all the functions of the device in which it is installed.
See Huang Dep. at 40; Trial Vol. III at 417. In its presentation of the case, Plaintiff
identified multiple other PCBAs within certain of the models of the subject merchandise,
in addition to the main PCBAs. See, e.g., Huang Dep. at 87–93. Plaintiff also presented
testimony generally addressing the specifications and functions of PCBAs—namely, that
“a printed circuit board assembly is the fiberglass board [inside a UPS, for example] with
the copper traces attached to it that are embedded inside it. Those copper traces connect
the components that are also located on the printed circuit board. . . . [T]he assembly is
the board plus all the components.” Trial Vol. III at 375–76.
2. Trial Witnesses and Admitted Evidence
Plaintiff’s principal witness, Chi-Ting “Tim” Huang, is an employee of Cyber Power
Systems Inc. (“Cyber Power Taiwan”), who is assigned to and serves as the general
manager of Cyber Power Philippines. 4 Huang Dep. at 6–8, 13; Trial Vol. I at 46–48, ECF
No. 149. Mr. Huang testified that he “manage[s] all the departments at the [Philippines]
factory[,] execute[s] the short-term, medium-term, and long-term plans of the
company[, and] appl[ies] for all the relevant documents for the company from the
Philippines government.” Trial Vol. I at 46. Mr. Huang’s testimony primarily consisted of
a review of Plaintiff’s trial exhibits relating to each model of the subject merchandise.
See generally Huang Dep.; Plaintiff’s Trial Exhibits (“PTX”) 6–63. During trial, Mr. Huang
also guided the court through a demonstrative video depicting the operations in July 2020
4 Cyber Power Taiwan is the parent company of Plaintiff, Cyber Power Philippines, and
other entities. Jt. Uncontested Facts ¶ 64; Huang Dep. at 13; Trial Vol. III at 522, 527.
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at the Cyber Power Philippines factory. 5 Trial Vol. I at 48–122; Trial Vol. II at 128–222,
ECF No. 150; Jt. Trial Exhibit 1.
At trial, and as memorialized in its Proposed Findings of Fact and Conclusions of
Law, Defendant challenged Mr. Huang’s credibility on the basis of discrepancies in his
signature used to sign various documents, inconsistencies in his testimony about the
relationship between Cyber Power Philippines and a related entity, Phisonic, and errors
in his explanation of the July 2020 demonstrative video. See Def.’s FOF & COL at 24–27
(“These examples of implausible testimony reveal a witness whose testimony should be
seen as untrustworthy and, thus, not credited unless corroborated by other,
unimpeachable evidence.”).
As a threshold matter, the court notes the limited relevance of any testimony
regarding Cyber Power’s corporate structure and relationship with Phisonic to the
substantial transformation issue. As explained below, the court finds that Mr. Huang’s
testimony contained evidentiary gaps regarding certain aspects of the assembly of the
subject merchandise during the relevant time period. See infra pp. 18–24. Even though
these gaps detract from his credibility, the court finds that Mr. Huang’s demeanor on the
stand, along with his direct answers regarding the technically complex subject
merchandise, rendered him a credible witness overall.
5 As a demonstrative exhibit, the video was not entered into evidence. See, e.g., Trial
Vol. II at 188, ECF No. 150; Pre-Trial Order, Schedule C-1, ¶ 69 (Plaintiff’s Statement of
Material Facts in Dispute) (“The video record does not purport to depict the manufacture
of the specific goods which are the subject of this action, but is proffered as a
demonstrative or pedagogical exhibit, in accordance with Rule 611 of the Federal Rules
of Evidence.”).
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Plaintiff’s remaining witnesses were Thomas L. Fuehrer, the electrical project
manager at Cyber Power, and Brent A. Lovett, the general manager and president of
Cyber Power. Trial Vol. III at 360, 362, 478. The Government’s witnesses were Linda
Horacek, an import specialist on Customs’ electronic enforcement team, and Karl
Moosbrugger, a national import specialist at Customs, who were involved in the
administrative investigation and protest determination. Id. at 596, 608, 611–17; Trial
Vol. IV at 789, 825, ECF No. 152.
At trial, Cyber Power again raised its relevance objection to testimony by
Defendant’s witnesses “dealing with the administrative process by which the protest was
decided.” Trial Vol. III at 593. This objection was previously denied by the court.
See ECF Nos. 135, 136. As the court explained at trial, and reiterates now, in presiding
over a bench trial the court maintains the ability to ignore any testimony that it finds to be
irrelevant. Here, every witness other than Mr. Huang lacked personal knowledge as to
the operations at the Cyber Power Philippines factory. Accordingly, the probative value
of their respective testimony is minimal because it does not assist the court in resolving
the central question—whether those operations, occurring in early 2020, constituted a
substantial transformation of the subject merchandise.
3. Operations in the Philippines
To determine whether substantial transformation of the subject merchandise
occurred in the Philippines, the court has reviewed the admitted evidence and testimony
pertaining to the manufacture of each model of subject merchandise during the relevant
time period—early 2020 up to the date of entry, March 27, 2020. Jt. Uncontested
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Facts ¶ 1; ECF No. 20-1; see also Trial Vol. III at 452, 454 (establishing that UPS Model
No. CBN50U48A-1 went into production and entered marketplace in March 2020).
Although the parties do not identify exact dates, they appear to be in agreement that the
subject merchandise was manufactured in early 2020. See, e.g., Huang Dep. at 36, 65,
68, 84; Trial Vol. II at 153, 295 (questioning by Defendant making reference to early 2020
as relevant time period).
During direct examination, Mr. Huang identified and described the contents of
various documentary exhibits associated with the production process of each model of
UPS or SVP in issue. He also testified that Cyber Power Philippines began
“manufacturing” UPSs and SVPs in October 2018, and that Phisonic, a related entity
operating in the same building as Cyber Power Philippines, was incorporated in
March 2019 and has been manufacturing PCBAs since September 2019. Id. at 26–29;
see PTX 8.
For each of the six devices at issue, Plaintiff submitted the following information as
separate exhibits: “Spec Sheets” for each device (PTX 9, 18, 20, 28, 37, 46, and 55);
“User Manuals” (PTX 10, 19, 29, 38, 47, and 56); Bills of Materials for the components of
each device (UPS or SVP) (PTX 11, 21, 30, 39, 48, and 57); and Bills of Materials for the
components of each PCBA (main boards and other boards, if applicable) (PTX 12, 22,
31, 40, 49, and 58). Plaintiff also introduced exhibits purporting to show the
manufacturing process for each device: “Production Timelines” (PTX 13, 23, 32, 41, 50,
and 59); “Manufacturing Process Flowcharts” (PTX 14, 26, 35, 44, and 53, and 62); and
“Standard Operating Procedures” for both the PCBA(s) and device assembly processes
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(PTX 15, 24, 25, 33, 34, 42, 43, 51, 52, 60, and 61). Finally, for each device, Plaintiff
submitted schematics for each device’s PCBA(s), dimension drawings, and “exploded”
view diagrams of the finished UPS and SVP devices (PTX 17, 27, 36, 45, 54, and 63).
For five of the six models of subject merchandise, it is undisputed that the main
PCBAs were manufactured in China. Before discussing the assembly process for all of
the UPS and SVP devices, the court addresses the disputed origin of UPS Model
No. CP600LCDa’s main PCBA.
i. Origin of UPS Model No. CP600LCDa’s Main PCBA
To support its position that the CP600LCDa was manufactured in the Philippines
from the PCBA stage onward, Plaintiff submitted additional documentary evidence—
specifically, “work orders” and “set issuing” records—that purport to show the production
of PCBAs by Phisonic. See PTX 16. This additional evidence, together with the contents
of the core documentary exhibits and Mr. Huang’s testimony, permits the court to draw
the necessary factual inferences to conclude that the main PCBAs for the subject
CP600LCDa devices were manufactured in the Philippines.
For the CP600LCDa, the Spec Sheet and User Manual are consumer-facing
documents that reveal nothing about the manufacture or country of origin for the subject
devices or their main PCBAs. 6 See PTX 9 & 10. Mr. Huang testified, based on these
6Both the Spec Sheet and User Manual refer to the device as “CP600LCD,” which the
parties appear to treat as an interchangeable name for the CP600LCDa. See, e.g., Pl.’s
FOF & COL ¶ 45; Def.’s FOF & COL ¶ 22. The same seems true for a different UPS
device, Model No. OR500LCDRM1U. Compare PTX 37 (Spec Sheet for
OR500LCDRM1U), with PTX 39 (Bill of Materials for OR500LCDRM1Ua).
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exhibits and his personal knowledge, that the CP600LCDa was “manufactured” at Cyber
Power Philippines as of early 2020 and is still in production there, and that the User
Manual would be packed with each device before shipping. Huang Dep. at 35–36.
The CP600LCDa’s Bills of Materials (i.e., “component lists” for both the main PCBA
and the UPS in its entirety) are undated, but provide references to the country of origin
for each type of component. PTX 11 & 12. Notably, both Bills of Materials state that the
device’s firmware (Part No. 0PA-0000506-03) “is designed and coded in Taiwan; [and]
loaded in Philippines.” PTX 11 & 12 (emphasis added). Mr. Huang specifically testified
that the Bill of Materials for the CP600LCDa’s main PCBA showed 128 types of
components that were combined by Phisonic employees in the Philippines to produce
that main PCBA. Huang Dep. at 39–40, 45.
The Manufacturing Procedure Flowchart for the CP600LCDa corroborates the
foregoing exhibits by listing the Philippines as the country where firmware is loaded.
See PTX 14; see also PTX 15 at 01089 (Standard Operating Procedure) (showing, as
general matter, that firmware burning for CP600LCDa is step of PCBA manufacturing
process). Mr. Huang testified that he personally observed the processes shown in the
Flowchart, and that “descriptions of the operations that are performed” in the Philippines
were accurate. Huang Dep. 46–47. While the component lists and the Flowchart lack
dates, when these exhibits are read together with the remaining exhibits pertaining to the
CP600LCDa’s manufacture, the court can draw key inferences as to the origin of the
subject model’s main PCBA.
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Turning next to the Production Timeline for the CP600LCDa, this exhibit lists the
Philippines as the country location for both the PCBA operations (Surface Mount Device
(“SMD” or “SMT” for “Surface Mount Technology”), Auto-Insertion (“AI”), and Dual in-line
package (“DIP”)) and the assembly and testing of that model of UPS. PTX 13. Mr. Huang
testified that Phisonic employees conducted the SMD, AI, and DIP operations in the
Philippines, while Cyber Power Philippines employees completed the UPS assembly,
testing, and packaging. Huang Dep. at 45–46.
While the production timeline lacks dates, it includes a production quantity—1,440
units—that also appears in the additional documentation provided for the CP600LCDa:
the “work orders” and “set lists.” See PTX 13 & 16; Huang Dep. at 43 (“[Y]ou can see the
quantity for the purchase order[,] which is 1,440.”). These work orders and set lists reflect
each stage of the PCBA manufacturing process—SMD, AI, and DIP assembly—for a total
quantity of 1,440 PCBA boards. 7 PTX 16. Further, these work orders and set lists include
a date range—September 2019 through February 2020—for the PCBA manufacturing
process as a whole that is consistent with Plaintiff’s claimed timeline for manufacture of
the subject merchandise. Id.; see also Huang Dep. at 29 (testifying that Phisonic began
manufacturing PCBAs in Philippines in September 2019). Finally, the work orders and
set lists repeatedly reference “Phisonic,” as the company conducting the listed operations,
which again is consistent with Mr. Huang’s testimony that the main PCBAs for the subject
CP600LCDa UPSs were manufactured by Phisonic in the Philippines as of early 2020.
7The CP600LCDa is the only model of subject merchandise for which a production
quantity can be consistently traced across multiple documents.
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Huang Dep. at 55 (testifying that PCBA manufacturing machines shown in PTX 16 were
Phisonic’s machines).
The remaining exhibits pertaining to the CP600LCDa—Standard Operating
Procedures for main PCBA and UPS assembly, and diagrams showing PCBA circuitry
and the UPS components—provide little additional support for the country of origin of the
PCBAs, as they are generalized instructional and informational documents. See PTX 15
& PTX 17. Mr. Huang testified that the Standard Operating Procedures are posted at
workstations at the Cyber Power Philippines factory and that “the operator or the worker
of that workstation would then perform the job according to the manual.” Huang Dep.
at 51–52. Although the Procedures are dated “First draft: 2018, Revised in 2019,”
Mr. Huang failed to confirm whether the workers who manufactured the subject
merchandise in early 2020 acted in accordance with them. See id.; PTX 15. There is
nothing contained in the Procedures, such as the identification of a specific order or
quantity, to tie them to the subject merchandise. Likewise, the circuit diagrams for all of
the PCBAs (dated 2018) and UPS assembly diagrams (undated) for the CP600LCDa do
not provide information establishing the country of origin for its main PCBA. PTX 17.
For its part, Defendant argues that Plaintiff has failed to establish that the main
PCBAs for the subject CP600LCDa devices were manufactured in the Philippines.
According to Defendant, “Cyber Power’s failure to provide sufficient documentation
actually tied to the articles comprising the subject merchandise detained by [Customs]
leaves the Court with no ability to evaluate this claim with confidence.” Def.’s FOF & COL
at 32. Specifically, the Government points to (1) an invoice purporting to show that a part
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of the main PCBA for the CP600LCDa was shipped to China rather than the Philippines
(Defendant’s Trial Exhibits (“DTX”) 4 & 5), and (2) a report from an audit of the Cyber
Power Philippines factory in February 2020 (DTX 9). See Def.’s FOF & COL at 32–34.
The audit report states that, as of February 28, 2020, there were PCBA manufacturing
operations taking place in the Philippines, but those operations appeared to be less than
fully organized. See, e.g., DTX 9 at 02055 (“Although responsibilities for the new
processes were assigned, there were no records to demonstrate who are assigned to
specific process . . . . Moreover, Job Descriptions for these processes were not
available.”).
The court finds that it is unable to draw Defendant’s preferred factual inferences
from the cited exhibits. The invoice, which appears to show a part of the main PCBA for
the CP600LCDa, is dated June 27, 2019—prior to the dated work orders and set lists for
the CP600LCDa on which Plaintiff relies. DTX 5. Without additional context, it is unclear
what the invoice can prove about the manufacture of the CP600LCDa’s main PCBA in
later 2019 and early 2020. As to the audit report, the court’s findings with respect to the
country of origin of the CP600LCDa’s main PCBA do not depend on a thorough
understanding of Phisonic’s corporate structure or the sophistication of its operations.
Rather, the court merely concludes that Phisonic is indisputably located in the Philippines.
See, e.g., PTX 7 (showing Phisonic’s factory layout in Philippines); Def.’s FOF & COL
at 24 (arguing that Phisonic may be a mere “proxy” for Cyber Power Philippines). Thus,
the watermark “Phisonic” on Plaintiff’s admitted work orders and set lists from late 2019
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to early 2020 tilts the scales in favor of a finding that the main PCBAs for the subject
CP600LCDa devices were manufactured in the Philippines.
As a whole, Plaintiff’s documentary evidence contains consistent references to the
Philippine production of the main PCBA for the CP600LCDa, quantity-specific work orders
and set lists showing dates corresponding with the approximate timeframe during which
the subject merchandise was manufactured, and comports with Mr. Huang’s testimony
as to his personal knowledge of operations occurring at Phisonic and Cyber Power
Philippines in early 2020. Based on the totality of this evidence, the court concludes that
Plaintiff has proven that the main PCBAs for the subject CP600LCDa devices were
manufactured in the Philippines.
The Philippine origin of the CP600LCDa from the main PCBA process onwards
distinguishes it from the remaining UPS and SVP devices, for which it is undisputed that
the main PCBAs originated in China. Before the court reaches its substantial
transformation determination, however, it will address the evidence on the record that
purports to establish the nature and extent of the assembly processes for each UPS and
SVP device.
ii. Device Assembly and Testing of All Subject Models
Unlike the evidence establishing the origin of the CP600LCDa’s main PCBA,
Plaintiff’s evidence of subsequent assembly and testing of the subject UPSs and SVPs
does not permit the court to piece together a coherent and detailed manufacturing timeline
for the subject merchandise in the Philippines as of the relevant time period (early 2020).
The court now addresses the deficiency of each set of exhibits.
Court No. 20-00124 Page 19
First, the Spec Sheets and User Manuals for each model contain no information
about the manufacturing process for the subject merchandise. See PTX 9, 10, 18, 19,
20, 28, 29, 37, 38, 46, 47, 55 & 56. Mr. Huang’s testimony based on these exhibits
confirmed only that he recognized these devices and the general timeline of their
manufacture. See, e.g., Huang Dep. at 62–65 (UPS Model No. CBN50U48A-1 was being
manufactured at Cyber Power Philippines in early 2020, but has since been “phased out”).
The next exhibits—Bills of Materials for the devices and their respective PCBAs,
including main PCBAs—do not describe the manufacture of the subject merchandise, but
rather, list the types of components that are part of each device or PCBA. See PTX 11,
12, 21, 22, 30, 31, 39, 40, 48, 49, 57, & 58. While they provide the country of origin for
each type of component generally, these Bills lack any information to link them to the
subject merchandise specifically. They are undated, and do not indicate a total quantity
or order of finished merchandise. Indeed, as the Government points out, there is
non-specific country of origin information provided for certain components in some of the
Bills. See, e.g., PTX 30 at 00032 ln.123 (showing, for “electrolytic cap,” that country of
origin is “4% from Taiwan, 18% from Japan/Korean, 78% from CHINA); Def.’s FOF & COL
at 29. Mr. Huang testified that the percentages represent the relative chance of a given
part being from a particular country, and that to confirm the actual country of origin, one
must review a “procurement order” to identify the part’s supplier. Trial Vol. II at 324–25.
From Mr. Huang’s testimony, the court infers that the Bills provided are summary-type
documents, further distancing them from the subject merchandise. On direct, Mr. Huang
testified only as a general matter that these Bills of Materials show the parts used to make
Court No. 20-00124 Page 20
each PCBA—including the main PCBAs—and UPS or SVP device, and confirmed that
(for the devices other than CP600LCDa) the PCBAs were assembled in China as of early
2020, while the assembly, testing, and packaging of each device occurred in the
Philippines. See Huang Dep. at 66–68 (CBN50U48A-1); id. at 85, 89–90, 92–93
(CST135XLU); id. at 111–13, 116–18 (OR500LCDRM1U); 131–33 (SX650U); id. at
153–55 (HT1206UC2RC1); see also id. at 37–41 (discussing CP600LCDa’s Bills of
Materials and testifying that PCBA components are assembled in Philippines).
Turning next to the Production Timelines and Manufacturing Process Flowcharts
that ostensibly show how the UPS and SVP devices are assembled, the court is faced
with the conundrum of similarly weak “connective tissue” between generalized
descriptions of the operations at the Cyber Power Philippines factory and the actual
assembly of the subject merchandise as it occurred in early 2020. Both sets of exhibits
are undated, and lack any additional documentation to confirm that these timelines
specifically show the assembly process of the subject merchandise. See PTX 13, 14, 23,
26, 32, 35, 41, 44, 50, 53, 59 & 62. The production quantities and work hours in these
exhibits also lack further context to tie them to the subject merchandise. See PTX 13, 23,
32, 41, 50 & 59.
The Standard Operating Procedures, circuit diagrams, dimension drawings, and
“exploded” diagrams for each model suffer from similar issues: there is nothing to link
these exhibits to specific quantities of merchandise, and no testimony to confirm whether
or not these processes were being followed by the workers who assembled the subject
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merchandise at the Cyber Power Philippines factory in early 2020. See PTX 15, 17, 24,
25, 27, 33, 34, 36, 42, 43, 45, 51, 52, 54, 60, 61 & 63.
Mr. Huang’s testimony regarding these exhibits is noticeably lacking when
compared to his testimony on the CP600LCDa. Mr. Huang repeatedly confirmed that he
was “familiar” with the operations in each exhibit, that they occurred in China (as to the
PCBAs) and the Philippines (as to the UPS and SVP devices), and that the exhibits
themselves were “accurate.” See Huang Dep. at 69–82 (CBN50U48A-1); id. at 95–107
(CST135XLU); id. at 114–28 (OR500LCDRM1Ua); id. at 137–44 (SX650U); id. at 150–65
(HT1206UC2RC1). He failed to testify, however, that he had personally observed the
manufacture of the subject merchandise, or to point to any other evidence that could link
its production to these summary, “guidelines”-type exhibits, especially with reference to
the necessary timeframe: early 2020. See generally id. The need to tie the evidence to
that timeframe is critical because Mr. Huang repeatedly acknowledged that Cyber
Power’s operations continued to shift from China to the Philippines. For instance, with
respect to the CST135XLU, Mr. Huang testified that all of its PCBAs (main board, control
board, USB charging board, COAX board, and NTVS board) were manufactured in China
as of early 2020, but as of the time of the trial were manufactured by Phisonic in the
Philippines. Id. at 87–93. Because many of the documentary exhibits are undated,
however, it is difficult to discern which exhibits are concurrent with each other, and which
describe operations occurring in different countries.
The questions raised by the lack of consistent dates and other links between the
documentary evidence and Mr. Huang’s testimony also confuses the operational timeline
Court No. 20-00124 Page 22
with respect to “firmware burning.” These inconsistencies and gaps in the record are
illustrative of Plaintiff’s evidentiary failures. Importantly, Plaintiff argues that the
“[f]irmware is applied to the PCBAs in all the subject UPS models. . . . at [the Cyber Power
Philippines] plant in the Philippines, using firmware code which was created . . . in Taiwan
by Taiwanese firmware engineers.” Pl.’s FOF & COL ¶ 85 (emphasis added). Plaintiff
goes on to argue that once firmware is burned into a particular Cyber Power device, it
cannot be overridden by additional firmware. See Trial Vol. III at 463 (“Q. Once you burn
firmware the door is shut? A. That’s correct.”).
The evidence, however, appears to present a less clear picture. For all of the
subject UPS devices, at least some firmware burning occurs during the PCBA
manufacturing process, a stage of production that—except for the
CP600LCDa—undisputedly occurs in China. See PTX 23, 25, 32, 33, 41, 42, 50, & 51.
This is borne out by the documentary evidence: the Bills of Materials for the
CBN50U48A-1 list firmware as designed in Taiwan, with the same part number
(#0HU-5048017-00) appearing in the Bills for the finished UPS device and the main
PCBA. PTX 21, ln.157; PTX 22, ln.157. The Standard Operating Procedure for the
CBN50U48A-1’s main PCBA lists “Firmware Burn-In” as a step in the main board
manufacture, and identifies the firmware by the same part number as the
Bills: 0HU-504817-00. PTX 24 at 01032. As of 2020, Plaintiff concedes that these
operations took place in China. See Huang Dep. at 68. CBN50U48A-1’s Standard
Operating Procedure for UPS assembly does not mention firmware. See PTX 25.
Nevertheless, Plaintiff contends that the firmware for this device is loaded in the
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Philippines, where only UPS assembly, testing, and packaging occurred. Pl.’s FOF
& COL ¶ 59 (“The assembled UPS Model No. CBN50U48A-1 is then programmed in the
Philippines with firmware which is produced in Taiwan and which enables the electronic
components of the UPS to function.”).
As another example, the Bill of Materials for the main PCBA of the SX650U states
that its firmware was “designed and coded in Taiwan, loaded in Philippines.” PTX 49.
The Standard Operating Procedures for both PCBA and UPS assembly show firmware
burning as a step in the UPS assembly process. PTX 51 at 01210; PTX 52 at 01228. Mr.
Huang testified, however, that the firmware burning for the SX650U “[i]nitially . . . was
done in China.” Huang Dep. at 140 (“Q. So when you made this main board in China,
you did some firmware burning in China? A. Yes.”). Plaintiff has failed to explain this
seeming contradiction.
Based on the foregoing, the court concludes that Plaintiff has failed to carry its
burden of producing evidence to show that five of the six models of subject
merchandise—UPS Model Nos. CBN50U48A-1, CST135XLU, OR500LCDRM1U,
SX650U, and SVP Model No. HT1206UC2RC1—were substantially transformed in the
Philippines. Plaintiff’s evidence does not establish what operations occurred in the
Philippines to produce these subject devices to permit the court to conduct a substantial
transformation analysis.
A distinction must be made, however, for the CP600LCDa. Having determined
that its main PCBA originates in the Philippines, the court is able to infer that the majority
of its manufacture—multi-phase assembly of its main board, and assembly and testing of
Court No. 20-00124 Page 24
the ultimate UPS device—took place in the Philippines. Accordingly, the court proceeds
to a substantial transformation analysis for the CP600LCDa.
B. Conclusions of Law
In a civil action, preponderance of the evidence means “the greater weight of
evidence, evidence which is more convincing than the evidence which is offered in
opposition to it.” Bosun Tools Co. v. United States, 43 CIT ___, ___, 405 F. Supp. 3d
1312, 1315 (2019) (quoting Hale v. Dep’t of Transp., 772 F.2d 882, 885 (Fed. Cir. 1985)).
Here, Plaintiff Cyber Power bore the burden of proof that the assembly it alleged took
place in the Philippines with respect to the six models of subject merchandise constituted
“substantial transformation” under the “name, character, or use” test, such that “new and
different” articles emerged.
1. UPS Model No. CP600LCDa Was Substantially Transformed in the Philippines
As the court articulated in its summary judgment opinion, the substantial
transformation test is not straightforward to apply. Cyber Power, 46 CIT at ___, 560
F. Supp. 3d at 1351. Nevertheless, courts deciding issues of substantial transformation
have established several guiding tenets and consistently emphasized the case-by-case
nature of the test. See, e.g., Nat’l Hand Tool v. United States, 16 CIT 308, 311 (1992),
aff’d 989 F.2d 1201 (Fed. Cir. 1993) (“To determine whether a substantial transformation
of an article has occurred . . . each case must be decided on its own particular facts.”
(quoting Uniroyal, Inc. v. United States, 3 CIT 220, 224, 542 F. Supp. 1026, 1029 (1982))).
The court reiterates its prior rejection of two potential alternatives to the
substantial transformation test of name, character, or use: first, an “essence”-based
Court No. 20-00124 Page 25
approach that would look only to whether the essential or critical component of a product
had been transformed; and second, an approach that would per se decide whether
substantial transformation had occurred on a component-by-component basis.
See Cyber Power, 46 CIT at ___, 560 F. Supp. 3d at 1354 (“The court agrees with
Plaintiff that Defendant’s proposed focus on the PCBA and the application of an
‘essence’ or ‘critical component’ test here is without merit. The Government’s
suggestion to focus solely on the PCBA components[8] of the subject merchandise may
well undermine the objective of the ‘substantial transformation’ test, namely to focus on
a change in name, character, or use.”); id. (“While the intended use of components may
provide some insight as to whether the assembly of those components into the finished
merchandise accomplishes a change in use that indicates a ‘substantial transformation,’
such a consideration is but one of many for the court to consider as part of the ‘totality
of the evidence.’” (citation omitted)). The Government’s approach does not promote
uniformity, consistency, and predictability in the application of the substantial
transformation test. Consequently, the court does not read the prior caselaw on that
test as having altered the fundamental requirements of “name, character, or use” by
narrowing it to an essence- or component-based interpretation.
8 To be functional, the subject UPS devices require multiple components in addition to
the main PCBA—including, but not limited to, firmware unique to each model, and a
battery. Without these components, the main PCBA cannot individually perform the
functions of a UPS. See, e.g., Huang Dep. at 61, 82, 147; Trial Vol. III at 385–86; Trial
Vol. IV at 911.
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Rather, a change in name, character, or use turns on the nature of the potentially
transformative processing, considered in the context of the particular kind of
merchandise being manufactured. See Meyer Corp., U.S. v. United States, 43 F.4th
1325, 1331 (Fed. Cir. 2022) (holding that “the trial court correctly focused its inquiry on
manufacturing steps that changed the shape, form, chemical properties, and mechanical
properties” of a product).
Because the court finds that the entirety of the CP600LCDa’s manufacture
occurred in the Philippines, the court need not make a determination as to whether its
UPS assembly process alone constituted a substantial transformation. The CP600LCDa
began its manufacturing journey in the Philippines as a set of components not yet
functional as a power source of any kind. See Huang Dep. at 39–40, 45 (128 types of
components were combined in Philippines to assemble CP600LCDa’s main PCBA). After
several stages of manufacturing, each involving numerous steps directed toward
changing the electronic properties of the device as a whole, the CP600LCDa left the
Philippines as a fully functioning UPS. It is undisputed that that the CP600LCDa is
capable of providing “battery backup (using simulated sine wave output) and surge
protection for desktop computers, workstations, networking devices, and home
entertainment systems,” and that, thanks to its programming, “is able to provide real time
status and alerts of potential problems.” Jt. Uncontested Facts ¶¶ 40, 42. Even without
detailed evidence describing the assembly stage of UPS production, the change from all
of its components to its ultimate finished product as a UPS device is a change so marked
as to shift the burden of proof in Plaintiff’s favor.
Court No. 20-00124 Page 27
Thus, the court holds that Cyber Power’s operations in the Philippines resulted in
a “new and different article”: the CP600LCDa. Indeed, the CP600LCDa’s Philippine
manufacture satisfies all three prongs of the substantial transformation test: a change in
name (from a set of PCBA and UPS component parts to the finished, functioning UPS
Model No. CP600LCDa), a change in character (from component parts not yet capable
of being electronically programmed to a device capable of performing a number of
intelligent functions), and a change in use (from component parts to a device geared
towards a specifically identified purpose: protecting against power outages).
Accordingly, the subject UPS Model No. CP600LCDa devices should be marked
as products originating from the Philippines under 19 U.S.C. § 1304(a).
2. Plaintiff Failed to Carry Its Burden of Proof as to UPS Model Nos.
CBN50U48A-1, CST135XLU, OR500LCDRM1U, SX650U, and SVP Model
No. HT1206UC2RC1
The court now turns to the country of origin of the remaining models of subject
merchandise. As articulated in its Findings of Fact, the court determined that Plaintiff’s
evidence in this case is undercut by its lack of connection to the subject merchandise and
the existence of unanswered questions and unresolved conflicts among the documentary
evidence, Mr. Huang’s testimony, and Plaintiff’s contentions in its Proposed Findings of
Fact and Conclusions of Law.
Before trial, the court was faced with many questions pertaining to the subject UPS
and SVP devices: how the production process in the Philippines evolved as more of Cyber
Power’s operations shifted there; when and where discrete steps of the so-called
“assembly” process, such as firmware burning, were taken; and whether Plaintiff could
Court No. 20-00124 Page 28
submit evidence of assembly procedures that depicted the manufacturing process of the
subject merchandise.
Based on Mr. Huang’s testimony and Plaintiff’s admitted exhibits, the trial did not
provide answers to these questions. The court thus holds that Plaintiff has failed to prove,
by a preponderance of the evidence, that five of the six subject models are products of
the Philippines. The court cannot reliably discern how the parts of the remaining four
UPS devices, or the single SVP device at issue, were assembled into fully functioning
products. Plaintiff failed to present the specific testimony describing the assembly
process of the subject devices for the relevant time period, and instead focused on a
general overview of its product types and manufacturing operations. See, e.g., Huang
Dep. at 74–75, 104–05, 123–25, 138, 161–65. Thus, no witness with personal knowledge
confirmed that the assembly operations depicted in the documentary exhibits fully
reflected the manufacture of the subject merchandise. Without such testimony, the
documentary evidence alone does not establish what the assembly process for the
subject UPS and SVP devices looked like in early 2020.
Furthermore, discrepancies between the exhibits and Mr. Huang’s testimony with
respect to where and at what stage certain steps were performed, along with the absence
of dates, quantities, and other merchandise-specific information, leave the court unable
to determine whether the devices were substantially transformed in the Philippines. That
the devices left the Philippines with new names cannot suffice to prove that “new and
different article[s] emerged” from the operations at Cyber Power Philippines factory.
Court No. 20-00124 Page 29
Simply put, with the exception of the CP600LCDa, this is a case in which Plaintiff has
failed in its burden of proof from the outset.
III. Conclusion
For the foregoing reasons, the court finds that country of origin for UPS Model
No. CP600LCDa is the Philippines, and the country of origin for the remaining five models
of subject merchandise is China. Judgment will enter accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: February 27, 2023
New York, New York