H323941

HQ H323941 February 15, 2023 OT:RR:CTF:VS H323941 JMV CATEGORY: Origin Center Director Electronics Center of Excellence and Expertise U.S. Customs and Border Protection 301 E. Ocean Blvd. Suite 1400 Long Beach, CA 90802 RE: Internal Advice; Country of Origin of Solid-State Drives; Section 301 Trade Remedy Dear Center Director: This is in response to your e-mail referral of February 11, 2022, forwarding an internal advice request regarding the country of origin of solid-state drives (“SSDs”) imported by Kioxia America, Inc. (“Kioxia”). This internal advice arises out of a question of whether, for purposes of Section 301 Trade Remedies, the SSDs at issue originate where the NAND flash memory chips originate or where the PCBA is assembled. Kioxia requested that certain information submitted in connection with this internal advice be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the importer’s request for confidentiality is approved. The information contained within brackets in the internal advice decision and all attachments to the internal advice request forwarded to our office will not be released to the public and will be withheld from published versions of this decision. FACTS: An SSD is designed to operate in a host device such as a computer, laptop, tablet, or server by providing rewritable memory storage, meaning data can be stored then deleted to make room for new data. SSDs store data in interconnected flash memory chips, which can achieve faster performance and higher storage densities than older hard disk drives (“HDD”). The SSDs at issue are referred to as “enterprise SSDs,” which are intended for larger volume business applications and have larger storage capacities. The writing, erasing, and rewriting of data in an SSD, which occurs more often in an enterprise environment, causes damage to the memory cells. Therefore, enterprise SSDs provide greater endurance than a consumer SSD with improved wear leveling algorithms. The major components of the SSD are the NAND flash memory chips, the Dynamic Random Access Memory (“DRAM”) chips, the controller chip, and printed circuit boards (“PCB”). These parts along with many other parts of various origin, such as resistors, capacitators, power inductors, etc. are assembled in Country A [XXXXXXXXX] via surface mount technology (“SMT”). For the purpose of this internal advice ruling, Kioxia provided a Bill of Materials for one of their SSD models but noted that all manufacturing steps (SMT process, final assembly, downloading of firmware, significant testing, and packaging/shipping) occur in the same physical location. The NAND flash memory is made up of charge trap flash (“CTF”) memory cells wherein digital data, expressed as 0s and 1s, is stored by moving electrons into and out of a charge storage film. When the power is turned off, this state of stored electrons remains, which is a key characteristic of flash memory. Another distinguishing feature of the NAND flash memory is that it can be erased and re-written. The NAND flash memory chips in this case originate in either China, Country B or C [XXXXXXXXX]. The next major component of the SSD is the DRAM. Unlike flash memory, DRAM is volatile memory meaning that any data stored in the DRAM is lost when power the DRAM is removed from a power source. While the DRAM is not necessary for an SSD to function, DRAM makes the SSD quicker and enhances the performance of the SSD. The DRAM memory chips are from either China, Country D or C [XXXXXXXXXX]. The SSD controller chip, also referred to as the “System on a Chip,” performs the basic function of managing the host systems’ request for data storage and retrieval from the NAND flash memory. The controller includes both hardware and firmware. Another important function of the controller is a process called wear levelling, which increases the functional life of the SSD. Since flash memory cells can only withstand a certain number of write, erase, and rewrite cycles before they degrade, wear levelling evenly distributes the write and erase cycles among all the block of memory cells within the SSD. The controller also houses the error correction code (“ECC”) which is an algorithm to identify and correct errors in the binary data. The controller chip in this instance is from Country C [XXXXX]. The final major component is the PCB which consists of conductive lines printed or etched onto a non-conductive material. Electronic components are mounted on the board and the conductive lines connect the components to form a working circuit. In this case, the PCBs are from China. The SSDs at issue are manufactured in Country A [XXXXXXXXXXX], where the components are mounted onto the PCB to form a printed circuit board assembly (“PCBA”) via SMT. SMT is a method of manufacturing PCBAs whereby components are placed and soldered to the surface of the PCB rather than placed into holes on the PCB. After the PCBA assembly is complete, the PCBA is inspected and then sent for final assembly. During final assembly, the SSDs are encased in a cover and base plate. For some models of SSDs, the PCBA is connected to a second “daughter” PCBA before it is encased by the cover and base plates. [XXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.] After the SSD is fully assembled, the SSD is tested for its ability to reliably send and receive data. After this initial round of tests, the customer firmware is downloaded onto the SSD and a final round of testing occurs before the product is packed and shipped. ISSUE: Whether the SSDs at issue originate where the NAND flash memory chips originate, which is China, Country B or C [XXXXXXXXXX], or in Country A [XXXXXXXXX], where the PCBA is assembled. 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”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), HTSUS. When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis applies. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018. The substantial transformation test 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, 681 F.2d 778 (CCPA 1982). The issue of substantial transformation is a “mixed question of technology and customs law, mostly the latter.” 681 F.2d at 783. To determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. See, e.g., HQ H311606, dated June 16, 2021. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process may be considered when determining whether a substantial transformation has occurred. No one factor is determinative. The Court of International Trade has indicated that “[f]or courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the article or components.” See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (CIT 2016) (citing Ran-Paige Co., Inc. v. United States, 35

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”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), HTSUS. When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis applies. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018. The substantial transformation test 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, 681 F.2d 778 (CCPA 1982). The issue of substantial transformation is a “mixed question of technology and customs law, mostly the latter.” 681 F.2d at 783. To determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. See, e.g., HQ H311606, dated June 16, 2021. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process may be considered when determining whether a substantial transformation has occurred. No one factor is determinative.The Court of International Trade has indicated that “[f]or courts to find a change in character, there often needs to be