H312432

HQ H312432 March 24, 2021 OT:RR:CTF:VS H312432 AP CATEGORY: Origin Adrienne Braumiller, Esq. Braumiller Law Group PLLC 5220 Spring Valley Road Dallas, Texas 75254 RE: Country of origin; Gasoline-powered horizontal shaft engine; Section 301 trade remedy; 9903.88.02, HTSUS Dear Ms. Braumiller: This is in response to your June 19, 2020 ruling request, on behalf of MTD Products, Inc. (“MTD”), regarding the country of origin of a certain gasoline-powered horizontal shaft engine (“gasoline engine”) for a snow thrower for purposes of application of subheading 9903.88.02, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “… articles the product of China, as provided for in U.S. note 20(c) to this subchapter and as provided for in the subheadings enumerated in U.S. note 20(d)” and that applies an additional 25 percent ad valorem rate of duty. FACTS: The subject merchandise is a gasoline-powered, carbureted or fuel injected, horizontal shaft engine for a snow thrower classifiable under subheading 8407.90.90, HTSUS. The engine is made from component parts all sourced from China that include a crankcase, a crankshaft, a camshaft, cylinders, pistons, a fuel system, a starter system, a lubrication system, an exhaust system, a starter, and controls. You state that over 100 separate assembly, quality control, calibration, testing, and finishing steps are necessary to produce the final engine. You submitted a list of the engine components and how they are used to make the final engine, but have requested confidential treatment on the specific steps utilized. The finished engine is assembled in Mexico. During the assembly process involving cleaning and installation, the individual component parts of Chinese origin are first used to create sub-assemblies, which are further incorporated into larger sub-assemblies, and to a finished engine assembly. For example, the crankcase is the main component of the crankcase subassembly and the crankcase cover and a crankshaft are the main components of the crankcase cover subassembly. The crankcase and the crankcase cover subassemblies form the short block, which together with a cylinder head assembly creates the long block assembly incorporated into the finished engine. ISSUE: What is the country of origin of the subject engine assembled in Mexico for purposes of application of the Section 301 trade remedy for goods under subheading 9903.88.02, HTSUS? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(d), HTSUS. Among the subheadings listed in U.S. Note 20(d) of Subchapter III, Chapter 99, HTSUS, is 8407.90.90. When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur 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. Texas Instruments, Inc. v. United States, 69 CCPA 151, 681 F.2d 778 (1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of the operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors, which may be relevant in this evaluation, may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one, which leaves the identity of the article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). U.S. Customs and Border Protection (“CBP”) has held that whether an assembly process is sufficiently complex to rise to the level of substantial transformation is determined upon consideration of all the operations that occur within that country, including any subassembly processes that take place in that country. For example, in Headquarters Ruling Letter (“HQ”) H303866, dated Feb. 13, 2020, CBP examined the production of an automobile windshield washer pump. In that ruling, approximately half of the discrete parts from foreign countries were shipped to Mexico to be combined with components from Mexico into subassemblies. These subassemblies and the plastic pump components were then combined to form the finished centrifugal windshield washer pump. The assembly process was complex and involved soldering, fusing, machining, plastic injection molding, and crimping. Most importantly, both the rotor and stator were produced in Mexico, and were then used in the assembly of the pumps. CBP found that the extent of the operations in Mexico resulted in a finished centrifugal pump as a product of Mexico. By contrast, assembly operations that are minimal or simple, and incorporate components with a pre-determined end-use, will generally not result in a substantial transformation. In HQ H303864, Dec. 26, 2019, the assembly of a Chinese motor with an impeller, a seal, and a plastic housing to form a finished pump assembly in Mexico did not result in a substantial transformation because the assembly involved press fitting the parts into each other. Similarly, in HQ H302821, dated July 26, 2019, the assembly of five subassemblies and other components from China with a pre-determined end-use into passenger vehicles in Sweden was not complex and the individual components did not undergo a change in use. Also, in HQ H301619, dated Nov. 6, 2018, a stator or rear housing, a rotor or armature assembly, and an end cap assembly manufactured in China and assembled into an electric motor in Mexico had a pre-determined end-use as parts and components of the electric motor and the production process in Mexico was a simple assembly. In addition, in New York Ruling Letter (“NY”) N126155, dated Oct. 29, 2010, a marine thrust assembly serving as a mechanical coupling between a boat’s propeller and a boat’s engine was assembled in Germany from Swedish and German components. The components were first painted, and then dried, cleaned, and assembled. The Swedish components effected the mechanical coupling within the completed trust assembly and were visible upon examination of the final assembly. The operations performed in Germany required limited assembly operations and the Swedish components did not lose their identity as a result of the operations performed. In the instant matter, you believe that the assembly operations in Mexico are “sufficiently complex and meaningful” and will result in a substantial transformation. You argue that the Chinese components, once assembled into an engine in Mexico, take on a new name, character, and use, and none of the original components impart the “very essence” of the engine. Even though the gasoline engine involves an assembly of various components into subassemblies and the finished product, based on the information presented, we find that no substantial transformation will occur in Mexico. All component parts are of Chinese origin and are already cut, wel

The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(d), HTSUS. Among the subheadings listed in U.S. Note 20(d) of Subchapter III, Chapter 99, HTSUS, is 8407.90.90. When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur 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. Texas Instruments, Inc. v. United States, 69 CCPA 151, 681 F.2d 778 (1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of the operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors, which may be relevant in this evaluation, may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one, which leaves the identity of the article intact, a substantial transformation has not occurred. See