H313595

HQ H313595 December 18, 2020 CLA-2 OT:RR:CTF:VS H313595 EGJ CATEGORY: Origin James T. Griffin Navco Logistics, LLC 2500 Courage Blvd. Brownsville, TX 78521 RE: Country of origin of a Solid-State Storage Drive; Section 301 trade remedy; 9903.88.15, HTSUS; USMCA Eligibility; Marking Dear Mr. Griffin: This is in response to your request, dated August 15, 2020, filed on behalf of your client Avant Technology Inc. (“the importer”). In your letter, you request a binding ruling on the applicability of Section 301 trade remedies, the eligibility for duty-free treatment under the U.S.-Mexico-Canada Agreement, and the country of origin for marking purposes for a solid state storage drive. FACTS: The subject merchandise is a solid-state non-volatile storage drive (“SSD”) designed to accept, store, or deliver electronic data using flash memory semiconductors. The SSD will eventually be incorporated into other devices, such as servers, laptops, desk-tops, and tablets. It contains NAND (short for “NOT AND”) flash memory circuit assemblies that function as data storage drives. The SSD also includes a flash controller in the form of an integrated circuit, as well as a connecting socket to connect to a host device. The importer plans to enter blank flash drives in-bond into the United States. The blank drives will be manufactured in one of three different countries. One country is a party to the U.S.-Mexico-Canada Agreement (“USMCA”), but the other two countries are not parties to the USMCA. These flash drives will either be transferred into a foreign trade zone (“FTZ”) in the U.S. or exported to Mexico, where the drives are processed into the finished SSDs. The production process in the FTZ or Mexico primarily involves downloading software and testing the drives. The processing steps are as follows: Programs MST Functional Test (“PMF”): The operator inserts the blank drive into a motherboard and performs a functional test. Manufacturing Self-Test (“MST”): After passing the PMF process, the operator inserts the drive into a motherboard and performs the manufacturing self-test, which is a software-based “stress test.” Serialization: Drives that have passed both the PMF and MST processes are inserted into a motherboard and installed with firmware which gives each drive a unique identity and serial number. Labeling: An operator prints data labels based on the serial numbers and attaches them to the corresponding drives. Burn-In Drive: For drives that have passed all previous processes, the operator inserts the drive into a motherboard and performs a software based “burn in” that writes and verifies data through the drive’s external interface. Drives that pass the “burn in” process become functional SSDs. The “burn in” software is written and developed by the importer in the United States. Validation: The operator inserts SSDs into a motherboard and validates the firmware, programming, and serialization. Packaging: Operators follow the work order guidelines for either bulk or retail packaging. SSDs for retail are packaged in clamshells, whereas bulk SSDs are not put into clamshells. You state that the blank drives should be classified under subheading 8471.70.1000 of the Harmonized Tariff Schedule of the United States (“HTSUS”), which provides, in pertinent part, for: “Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included: storage units: magnetic disk drive units: for a disk of a diameter exceeding 21 cm: Without read-write unit assembled therein; read-write units entered separately.” You state that the finished SSDs should be classified under subheading 8523.51.0000, HTSUS, which provides, in pertinent part, for: “Discs, tapes, solid-state non-volatile storage devices, “smart cards” and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs …. Semiconductor media: Solid-state non-volatile storage devices.” ISSUES: Whether the SSD processed in Mexico qualifies for duty-free treatment under the U.S.-Mexico-Canada Agreement? What is the country of origin of the SSD for marking purposes? What is the country of origin of the SSD for the purposes of applying Section 301 trade remedies? LAW AND ANALYSIS: Eligibility for USMCA Duty-free Treatment The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if— the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or … In your request letter, you note that the blank drives may be manufactured in a country which is a party to the USMCA. Moreover, the software which will be burned onto the blank drive to make it functional will be developed in the United States. Finally, you note that the production process described above will take place in Mexico. Based on the information provided, we find that the SSD is eligible for duty-free treatment under GN 11(b)(ii) because it will be produced from originating materials in the territory of a USMCA member country. However, you note that the blank drives may be manufactured in one of two other countries that are not parties to the USMCA. In this case, the finished SSDs will contain some non-originating materials. Thus, we must next determine whether these SSDs qualify under GN 11(b)(iii). It is undisputed that the finished SSDs are classified under subheading 8523.51.0000, HTSUS, which provides, in pertinent part, for: “Discs, tapes, solid-state non-volatile storage devices, “smart cards” and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs …. Semiconductor media: Solid-state non-volatile storage devices.” You take the view that the blank drives should be classified under subheading 8471.71.00, HTSUS, which provides for “Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included: storage units: magnetic disk drive units: for a disk of a diameter exceeding 21 cm: Without read-write unit assembled therein; read-write units entered separately.” We disagree. In Headquarters Ruling Letter (“HQ”) H308234, dated June 3, 2020, we classified a blank flash drive in subheading 8523.51.00, HTSUS, as a solid state-storage drive. The heading provides for both recorded and unrecorded media, so blank drives are still classifiable in this heading. The applicable rule of origin for SSDs classified under subheading 8523.51, HTSUS, is in GN 11(o)/85.58, HTSUS, which provide

Eligibility for USMCA Duty-free Treatment The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if— the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or… In your request letter, you note that the blank drives may be manufactured in a country which is a party to the USMCA. Moreover, the software which will be burned onto the blank drive to make it functional will be developed in the United States. Finally, you note that the production process described above will take place in Mexico. Based on the information provided, we find that the SSD is eligible for duty-free treatment under GN 11(b)(ii) because it will be produced from originating materials in the territory of a USMCA member country. However, you note that the blank d