H319601

HQ H319601 July 16, 2021 OT:RR:CTF:VS H319601 JMV CATEGORY: Origin Aaron M. Marx Crowell & Moring, LLP 1001 Pennsylvania Ave NW Washington, DC 20004 RE: Country of origin of an Evaporator Assembly for an Automobile Air Conditioner; Section 301 trade remedy; 9903.88.01, HTSUS Dear Mr. Marx: This is in response to your request, dated June 4, 2021, filed on behalf of your client Valeo North America (“the importer”). In your letter, you request a binding ruling on the applicability of Section 301 trade remedies. FACTS: The importer, Valeo is an original equipment manufacturer. The item that is the subject of this ruling is an evaporator brushless motor assembly, internal part number T456490, to be used in passenger vehicles and light trucks. Each evaporator assembly consists of a brushless direct current (“DC”) motor stacked together with a coil assembly, an impeller, and other components. The finished evaporator assembly and its major components are all circular in shape. The impeller has fan blades around its circumference. After import into the United States, these goods are further assembled into an automobile air conditioning unit (“HVAC”), where it is used for creating air flow through the system. On May 28, 2021, Valeo obtained a ruling on the country of origin of the stator assembly and rotor assembly that are component parts of the goods subject to this ruling. See New York Ruling Letter (“NY”) N319473, May 28, 2021. Valeo asks for a ruling on the origin of the evaporator brushless assemblies under five different manufacturing scenarios. In all five manufacturing scenarios, the production of the evaporator brushless assemblies begins with the production of the stator assembly and the rotor assembly. The production of both the stator and rotor assemblies is identical to the production of these parts in NY N319473. In the first manufacturing scenario, the production process begins with manufacturing the stator assembly in Vietnam with the production of the stator core. In Vietnam, as described in NY N319473, sheet steel is stamped, pressed, and laminated into a stator core. The stator cores are then exported to China where front and rear plastic covers are added, electrical terminals are soldered, and magnet wire is wound around the stator posts to produce a stator assembly. The core covers, terminals, and magnet wire are sourced from China. Prior to export from China, the stator assembly is inspected and packaged. The manufacturing process of the rotor assembly also begins in Vietnam and is also described in NY N319473. In Vietnam, sheet steel is stamped and pressed into a rotor yoke. The rotor yoke consists of a metal circle with drilled holes that is connected to an outer metal cylinder by uniform, alternating metal arms and airgaps. The rotor yokes are then exported to China where a shaft, magnets, and a snap ring, all sourced from China, are joined to produce a rotor assembly. Prior to export from China, the rotor assembly is inspected, cured, tested, cleaned, and packaged. The stator and rotor assemblies are then exported to Mexico where they are assembled into the evaporator brushless assembly. In Mexico, the stator and rotor assemblies are combined with Thai-origin ball bearings and the following Chinese origin goods: a printed wire board assembly (“PWB assembly”), end stopper, aluminum cover, balance clip, screws, and washers. They are further assembled with an impeller, motor holder, and flange that are manufactured in Mexico. The manufacturing operations include welding, magnetizing, machine pressing, printed circuit board data control, balancing measurement and corrections, noise and vibration inspection, and final motor performance inspection. Production in the remaining four scenarios is identical to the first; however, the origin of each part varies. In the second scenario, the rotor yoke and stator core lamination are manufactured in Japan and then imported into China for assembly. Final assembly of the evaporator brushless motor assembly takes place in Mexico. Otherwise, this scenario is identical to the detailed description of scenario one. In the third scenario, the rotor yoke and stator core are manufactured in South Korea and then imported into China for assembly. Final assembly of the evaporator brushless motor assembly takes place in Mexico. In the fourth scenario, the rotor yoke and stator core are manufactured in Thailand and then imported into China for assembly. Final assembly of the evaporator brushless motor assembly takes place in Mexico. In the fifth scenario, the rotor yoke and stator core are manufactured in Vietnam and then imported into China for assembly. Final assembly of the evaporator brushless motor assembly takes place in China. ISSUES: What is the country of origin of the finished evaporator assembly for the purposes of applying Section 301 trade remedies? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% 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(e), Harmonized Tariff Schedule of the United States (“HTSUS”). Among the subheadings listed in U.S. Note 20(e) of Subchapter III, Chapter 99, HTSUS, is 8414.59.65, HTSUS, where these goods are classified. 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. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 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, and the essence of the article is considered. Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982), aff’d 702 F.2d 1022 (Fed. Cir. 1983). In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight, under the TAA. All the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight. The court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred and reviewed various court decisions involving substantial transformation determinations. The 

The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25% 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(e), Harmonized Tariff Schedule of the United States (“HTSUS”). Among the subheadings listed in U.S. Note 20(e) of Subchapter III, Chapter 99, HTSUS, is 8414.59.65, HTSUS, where these goods are classified. 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. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Belcrest Linens v. United States, 573 F. Supp. 1149 (Ct. Int’l Trade 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 iden