H304419

 HQ H304419 December 11, 2024 OT:RR:CTF:VS H304419 RSD CATEGORY: CLASSIFICATION John P. Fonder, Esq. Christensen, Fonder & Dardi 33 South Sixth Street, Suite 4540 Minneapolis, MN 55402 RE: Revocation of HQ H303773, HQ H303816, and NY N299944; Incandescent string lights; Generalized System of Preferences (GSP) Dear Mr. Fonder: This is in response to your letters, dated June 26, 2019, and November 12, 2019, on behalf of the Willis Electric Co. Ltd. (Willis) of Taiwan, requesting reconsideration of Headquarters Ruling Letter (HQ) H303773, dated June 13, 2019, with respect to U.S. Customs and Border Protection’s (CBP) determination of whether incandescent string lights imported directly from Cambodia qualified for preferential duty treatment under the Generalized System of Preferences (GSP). A meeting was held on October 29, 2019, with you, a co-counsel, an executive from Willis, and members of my staff to discuss your request for reconsideration. We have also received a number of samples of three different types of string lights and other alternative products that use lights bulbs that are similar to the light bulbs used in the string lights. This letter also concerns the following rulings: In HQ H303816, dated June 14, 2019, the string light sets at issue were found not to be products of the Philippines because the bulbs of the light sets were not substantially transformed in the Philippines and retained their origin. Furthermore, in NY N299944, dated August 24, 2018, CBP determined that light sets assembled in Cambodia using Chinese and U.S. components, including lamp husks/bases made from imported polypropylene pellets, did not result in a substantial transformation. We have reconsidered these rulings and now believe that they are incorrect. For the reasons that follow, we hereby revoke HQ H303773, HQ H303816, and NY N299944. Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, a notice proposing to revoke HQ H30773, H303816, and NY N299944 was published on September 18, 2024, in Volume 58, No. 37 of the Customs Bulletin. No comments were received in response to the proposed action. FACTS: In your reconsideration request, you state that the facts set forth in HQ H303773 are basically correct with one omission. HQ H303773 concerned five items: (1) 150-count Incandescent Steady-on Miniature Christmas Net Lights – Clear (#779320); (2) 150-count Incandescent Steady-on Miniature Christmas Net Lights – Multicolor (#779319); (3) 300-count Incandescent Steady-on Miniature Christmas Icicle Light String – Clear (#3752); (4) 25-count Incandescent Steady-on C9 Christmas Light String – Clear (#99506); and, (5) 25-count Incandescent Steady-on C9 Christmas Light String – Ceramic Multicolor (#99505). The production process for all of the string lights is substantially similar and incorporates components from Cambodia and China. After assembly, Underwriters Laboratories (UL) labels from the United States are attached to each string light. The production process for the various string lights begins in Cambodia with inserting Chinese-origin polypropylene pellets into an injection molding machine to produce lamp bases, lamp holders, and wire clips by melting the polypropylene and forming the components. After the lamp base and lamp holder components are produced, Chinese-origin bulbs are inserted into them. The insulated copper wire, which is obtained from both China (20%) and Cambodia (80%), is cut to length, peeled as necessary, and brass terminals, imported from China on spools, are attached at the ends of the wire. The light bulbs in lamp bases and lamp holders are assembled with the processed insulated wire to create incomplete string lights. Insulated copper wire is cut, peeled as necessary, and brass terminals are attached to the ends to create plug wires. Plugs, which are obtained from both China (40%) and Cambodia (60%), are attached to the plug wires. The wires undergo twisting. The plug wires are connected to incomplete string lights. The wires are combined to form the icicle light string or linked with wire clips and PVC wire (which is sourced from China (20%) and Cambodia (80%)) to form net strings. The completed string lights are tested, inspected, labeled with UL labels and caution labels, and packaged in Cambodian-origin packaging materials with a Cambodian produced instruction manual and a packet of replacement parts (spare fuse, spare bulbs, plastic bag) imported from China. The C9 string lights differ slightly in their production. After the lamp bases and lamp holders are produced in Cambodia, the insulated copper wire undergoes wire cutting, peeling and connection to the plug. The lamp holder contains the terminal, which is assembled inside the lamp holder and then connected to the insulated copper wire. The C9 bulbs are screwed into the lamp holders on the string light. The string light is packaged using a plastic bulb holder (produced in Cambodia). The string light is tested, labeled and packaged. You claim that the facts as stated in HQ H303773 fail to sufficiently indicate the production processes that occur in one country, Cambodia. HQ H303816 and NY N299944 discussed similar assembly processes, including making lamp husks/lamp bases from polypropylene pellets. ISSUE: Whether the incandescent string lights are eligible for duty-free treatment under the GSP. LAW AND ANALYSIS: Under the GSP, eligible articles grown, produced, or manufactured in a designated beneficiary developing country (BDC), which are imported directly into the customs territory of the United States from a BDC, may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the United States. See 19 U.S.C. § 2463(a)(2)(A). As stated in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS), Cambodia is a designated BDC. In addition, at the time HQ H303773 was issued, items 1, 2, and 3 were classifiable under subheading 9405.40.84, HTSUS. Items 4 and 5 were classifiable under subheading 9405.30.00, HTSUS. We note that the classification of these articles has changed, but the new subheadings still remain eligible for GSP, although at this time, Congress has not renewed the GSP. Nonetheless, for purposes of discussing the other requirements of the GSP, articles classified under these subheadings are eligible for duty-free treatment under the GSP provided that they are a “product of” Cambodia, are “imported directly” and satisfy the 35 percent value-content requirement. The cost or value of materials which are imported into the BDC to be used in the production of the article, as in this case, may be included in the 35 percent value-content computation only if the imported materials undergo a double substantial transformation in the BDC. That is, the non-Cambodian components must be substantially transformed in Cambodia into a new and different intermediate article of commerce, which is then used in Cambodia in the production of the final imported article – the incandescent string lights. See Section 10.177(a), CBP Regulations (19 CFR 10.177(a)), and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff’d, 890 F.2d 1150 (Fed. Cir. 1989). The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982). In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The c

Under the GSP, eligible articles grown, produced, or manufactured in a designated beneficiary developing country (BDC), which are imported directly into the customs territory of the United States from a BDC, may receive duty-free treatment if the sum of (1) the cost or value of materials produced in the BDC, plus (2) the direct costs of the processing operations performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the United States. See 19 U.S.C. § 2463(a)(2)(A).As stated in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS), Cambodia is a designated BDC. In addition, at the time HQ H303773 was issued, items 1, 2, and 3 were classifiable under subheading 9405.40.84, HTSUS. Items 4 and 5 were classifiable under subheading 9405.30.00, HTSUS. We note that the classification of these articles has changed, but the new subheadings still remain eligible for GSP, although at this time, Congress has not renewed the GSP. Nonetheless, for purposes of discussing the other requirements of the GSP, articles classified under these subheadings are eligible for duty-free treatment under the GSP provided that they are a “product of” Cambodia, are “imported directly” and satisfy the 35 percent value-content requirement.The cost or value of materials which are imported into the BDC to be used in the production of the article, as in this case, may be included in the 35 percent value-content computation only if the imported materials undergo a double substantial transformation in the BDC. That is, the non-Cambodian components must be substantially transformed in Cambodia into a new and different intermediate article of commerce, which is then used in Cambodia in the production of the final imported article – the incandescent string lights. See Section 10.177(a), CBP Regulations (19 CFR 10.177(a)), and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff’d, 890 F.2d 1150 (Fed. Cir.