H322417

HQ H322417 February 23, 2022 OT:RR:CTF:FTM H322417 PJG CATEGORY: Origin Ms. Suzanne Kane Mr. Nicholai Diamond Akin Gump Strauss Hauer & Feld LLP 2001 K Street, N.W. Washington, DC 20006-1037 Re: Country of origin marking of a smartwatch; Section 301 Dear Ms. Kane and Mr. Diamond: This is in response to your correspondence, dated December 10, 2021, requesting a binding ruling, on behalf of your client, [***,] concerning the country of origin for marking purposes and the applicability of the Section 301 measures set forth in U.S. Note 20 to Subchapter III, Chapter 99, Harmonized Tariff Schedule of the United States (“HTSUS”), to a certain wireless, wrist-wearable, electronic communications device (“smartwatch”), model number [***]. Your client initially requested a binding ruling concerning the country of origin for marking purposes of the smartwatch from the National Commodity Specialist Division (“NCSD”) in a request filed on October 8, 2021, and the NCSD recommended that you submit your request to Headquarters along with additional information. You have requested that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. Specifically, we are granting your request for confidential treatment with respect to the bracketed information and gray-highlighted text in your submissions, the submitted product renderings, diagrams, Attachments 2-9, and any references to the aforementioned information when it appears in the Attachment associated with your submission dated January 26, 2022. These specified items will not be released to the public and will be withheld from the published version of this decision. FACTS: You describe the smartwatch as a “wrist-wearable ‘smart’ communication device with extensive wireless-communicative functionality.” At the time of importation, the smartwatch will be comprised of: 1) the case, which includes a touchscreen, the electronic components of the smartwatch, and the enclosure that is designed to protect the components in the case from damage; and 2) the silicon wristband, which is attached to a cradle [***]. You indicate that the [***]. You have indicated that the [***]. Production of the smartwatch will occur in three main stages: (a) the production of individual components in seven different countries—China, Germany, Japan, Malaysia, Malta, The Philippines, and Taiwan; (b) production of the two printed circuit board assembly (“PCBAs”) (a main logic board (“MLB”) and a sensor board) in Taiwan by means of surface-mount technology (“SMT”); and (c) final assembly, final software upload, testing, and packout (“FATP”) in China. The smartwatch is comprised of approximately between 800 and 900 components that will be produced in China, Germany, the Philippines, Japan, Malaysia, Malta, and Taiwan. SMT is used to integrate components such as capacitors, diodes, transistors, and resistors onto a raw printed circuit board (“PCB”). The fully populated printed circuit board is known as a PCBA. You state that the smartwatch contains two PCBAs that will be produced by SMT in Taiwan, specifically: 1) a MLB, and 2) a sensor board. The MLB components include “a central processing unit (‘CPU’) that runs an …operating system …flash memory chip, … a Wi-Fi and Bluetooth integrated circuit, an altimeter, an inertial measurement unit …, various resistors, thermistors, capacitors, inductors, and other integrated circuits – as well as a unique ‘shielding cover’ that protects the electrical elements from damage.” The MLB contains between 680 and 700 components, and the components used in the MLB are produced in Taiwan, Germany, the Philippines, Malta and China. You indicate that the SMT process for the MLB requires approximately 3 hours to complete. The sensor board components include a heart rate monitor, resistors, capacitors, diodes. The sensor board contains between 50 and 60 components, and the components used in the sensor board are produced in Taiwan, Germany, the Philippines, and China. You indicate that the SMT process for the sensor board requires approximately 1-2 hours to complete. You further state that approximately 200 hours of training are necessary for workers who will be involved in the SMT process. The SMT process for the MLB and the sensor board PCBAs involves component surface-mounting, laser-etching, post-etch cleaning, adhering of components using solder paste, inspection, and function testing, most of which will occur on both sides of the circuit board. For the MLB, the SMT process taking place in Taiwan will also include the placement of a protective shield on one side of the circuit board, loading of “a limited version of the OS that is developed in the United States and allows testing of the [s]martwatch,” and testing to confirm functionality of subcomponents such as the LTE, GPS, Wi-Fi and Bluetooth. The PCBAs will then undergo “function test[ing], singulation by laser de-paneling, labeling, and packing of the finished PCBA for shipment.” The smartwatch also includes a [***], microphone, speakers, a haptics module, a rechargeable lithium-ion battery, and a “touchscreen display consist[ing] of an active matrix organic light-emitting diode (‘AMOLED’) cell panel, a touch controller to render the panel touch-sensitive, and additional components.” [***]. The country of origin of the microphone components, haptics module, and lithium-ion battery is China, and the country of origin for the AMOLED cell panel for the display and the touch controller is Taiwan. The touchscreen display also contains components produced in China and Malaysia. The [***]. The speakers are produced of components from Germany, Malta and China. The enclosure, cradle and silicon wristband are produced in China. The “final assembly, final software/firmware upload, testing, and packout (‘FATP’)” also occur in China. You indicate that the FATP “will involve the assembly of certain modules …and the joining of these modules with other preassembled or prefabricated components” using techniques such as “screwing, gluing, heating, UV curing, rolling, pressing, fastening, buckling and limited laser soldering.” The final assembly of the silicon watchband, enclosure and cradle will also occur in China. During the FATP process in China, firmware containing the operating system will be uploaded to the smartwatch, but in some cases, a post-importation update by the user in the United States will also be necessary. You indicate that the FATP process requires approximately 2-3 hours to complete and approximately 70 hours of training for the workers involved in the process. ISSUES: What is the country of origin for marking purposes of the smartwatch? Is the smartwatch subject to Section 301 measures? LAW AND ANALYSIS: What is the country of origin for marking purposes of the smartwatch? The marking statute, Section 304(a), Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), provides that unless excepted, “every article of foreign origin (or its container …) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.” Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940). Part 134 of Title 19 of the Code of Federal Regulations (19 C.F.R. Part 1

What is the country of origin for marking purposes of the smartwatch?The marking statute, Section 304(a), Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), provides that unless excepted, “every article of foreign origin (or its container …) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.” Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940). Part 134 of Title 19 of the Code of Federal Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b) (19 C.F.R. § 134.1(b)) provides as follows:(b) Country of origin. “Country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of this part; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.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