H320037

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H320037 November 18, 2021 OT:RR:CTF:VS H320037 EE CATEGORY: Classification Ms. Lauren Wyszomierski White & Case LLP 701 Thirteenth Street NW Washington, DC 20005 RE: Country of Origin; Section 301; Portable Air Conditioners Dear Ms. Wyszomierski: This is in response to your letters, dated April 6, 2021, and June 7, 2021, on behalf of your client, Midea America Corporation (“Midea”), concerning the country of origin of certain portable air conditioner units for purposes of Section 301 trade remedies. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below. FACTS: The products at issue are various models of portable air conditioner units referred to as model platforms PH and PD. You state that the models are similar in cost and share the same key material production processes. The self-contained units feature a control panel with a light-emitting diode (“LED”), casters, a filter, a drain outlet, and a cooling system. Each portable unit is imported packaged ready for sale with a remote control and accessories, such as an adaptor, an exhaust hose, a window slider, foam, a screw, drain hose, a power cord buckle, and bolt. The energy usage of the portable air conditioner units model platform PH and model platform PD ranges between 0.53 to 1.33 kilowatts. The production of each portable air conditioner unit begins in Thailand with the production of the plastic components consisting of the exterior parts used for exterior decoration, such as the front panel and the rear panel, and the internal parts used for structural support, including the air supply volute, exhaust volute cover, and the intermediate separator using a plastic injection process. The production process of the unit in Thailand continues with the heat exchange units and printed circuit assembly. The heat exchange units, which function as the evaporator and condenser units, are formed by subjecting copper and aluminum material from China to stamping, bending, tubing, expanding, and welding processes. The manufacture of the printed circuit assembly, which controls the operation of the portable air conditioner’s electronic components, involves mounting, inserting, affixing, brushing soldering paste, and welding various electronic components, e.g., resistors, capacitors, regulators, relays, a fuse, and thermistors. The final assembly of each portable air conditioner unit, which also occurs in Thailand, begins by screwing a Chinese compressor to the chassis of the unit. Copper wire is then welded to the compressor’s exhaust and return ports. The exhaust wind tunnel and supply are installed to the condenser, and the condenser is then installed to the unit. Afterwards, the evaporator is installed. The unit is then subjected to a vacuuming process and filled with refrigerant. The PCB is installed and connected to Chinese wiring. The Chinese temperature sensors, along with the Chinese air supply volute, the Chinese exhaust volute cover, and intermediate separator are installed. The front and rear panels are screwed into place. Once complete, each unit undergoes testing, is labeled, and is packaged with a Chinese air filter, an exhaust hose assembly from China, a plug, plates, connectors, and a remote control from Thailand. You submitted the owner’s & installation manuals for the portable air conditioners; costed bills of materials; process flowcharts; and tools and equipment lists. ISSUE: What is the country of origin of portable air conditioners for purposes of Section 301 trade remedies? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty 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(f), HTSUS. Among the subheadings listed in U.S. Note 20(f) are 8415.81.01 and 8415.82.01, Harmonized Tariff Schedule of the United States (“HTSUS”). 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, 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, and the essence of the article is considered. Uniroyal, Inc. v. United States, 3 CIT 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 (CIT 2016), the court interpreted the meaning of “substantial transformation.” The court reviewed the “name, character, or use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc. v. United States, 3 CIT 220, 226, 542 F. Supp. 1026, 1031 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer Battery at 1318. The court stated that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Id. at 1319, citing Nat’l Hand Tool Corp., 16 CIT at 311-12 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). In New York Ruling Letter (“NY”) N317895, dated March 26, 2021, portable AC units were assembled in Taiwan from components that originated in China and Taiwan. The assembly of each AC unit began with the assembly of the compressor, which occurred in Taiwan. CBP stated that in determining the country of origin of air conditioning units for the purpose of applying 301 trade remedies, the country of origin of the cooling unit, which is the essence of an air conditioning unit, is considered. CBP found the cooling unit components, which consisted of a compressor from Taiwan, and a condenser and evaporator from China, were not substantially transformed in Taiwan since the assembly operations to make air conditioning units in Taiwan were not complex and meaningful enough. As such, CBP held that the country of origin of the portable air conditioner units was China since two of the cooling unit components were from China. In the instant case, each portable air conditioner unit is assembled in Thailand from components from China and Thailand. The processing in Thailand includes the production of certain plastic parts, subassemblies such as the printed circuit board assembly and heat exchanger assembly, as well as 

The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty 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(f), HTSUS. Among the subheadings listed in U.S. Note 20(f) are 8415.81.01 and 8415.82.01, Harmonized Tariff Schedule of the United States (“HTSUS”). 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, 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 occ