H325450

 HQ H325450 November 17, 2022 OT:RR:CTF:VS H325450 CATEGORY: Origin Juan Moreno Director, Trade Compliance Sandler, Travis & Rosenberg P.A. 601 Montgomery St., Suite 1208 San Francisco, CA 94111 RE: Country of Origin; Stud Finders; Section 301 Measures Dear Mr. Moreno: This is in response to your letter, dated May 13, 2022, on behalf of Zircon Corp. In your letter, you request a binding ruling pursuant to 19 C.F.R. Part 177 on the country of origin, for purposes of the Section 301 measures, of an electronic stud finder that will be imported from Mexico. FACTS: According to the information provided, Zircon develops and manufactures electronic stud finders, metal detectors, and electrical scanners. At issue here is the “StudSensor HD 55,” which is a handheld device used to locate framing studs behind walls. The StudSensor HD 55 is equipped with an LCD display and a “Target SpotLite” that projects light on a surface to indicate the edge of a stud. The unit, which is powered by a 9-volt alkaline battery, allows the user to select from two different scanning modes. The production process for the StudSensor HD 55 spans the United States, Canada, South Korea, China, and Mexico. The application-specific integrated circuit (“ASIC”) chip is manufactured in the United States by X-FAB Texas, Inc. You state that the ASIC is “an integrated circuit chip customized for a particular use, rather than intended for general-purpose use.” The ASIC is sent to Canada, where it is tested and electronically mapped to identify functional and defective chips. Once the testing is complete, the ASIC is shipped to South Korea, where it undergoes a “dicing process, wire bonding, trimming, and packaging into the ASIC device carrier.” You state that once this process is complete, the ASIC becomes suitable for use in electronic devices. The completed ASIC is then shipped to China. In China, the ASIC is surface mounted onto a bare printed circuit board along with components such as diodes, capacitors, resistors, switches, a transducer, a battery contact, and an LED. Except for the ASIC, all electrical components incorporated into the PCBA are of Chinese origin. In addition to the production of the PCBA, the creation of the plastic case of the device, as well as final assembly, occurs in China. The case of the device is produced by injection molding and dying ABS resin materials. Final assembly involves placing the PCBA into the case, sealing the case, securing the case with a screw, placing the finished units into plastic bags, and then boxing the finished units for transportation. The finished stud finders are then bulk shipped to Mexico, where they undergo retail packaging before exportation to the United States. You state that the finished products will be entered under 8531.80.90, Harmonized Tariff Schedule of the United States (“HTSUS”). ISSUE: What is the country of origin of the stud sensors for purposes of the Section 301 measures? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that additional duties 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”). In accordance with U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified in subheading 8531.80.90, HTSUS, unless specifically excluded, are subject to an additional 7.5% ad valorem rate of duty. 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. 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 Fed. Cl. 117, 121 (1996) and Nat’l Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308, 311 (1992)). Courts have also considered “the ‘essence’ of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing.” Id. (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-1098 (CIT 2000) and Uniroyal, Inc., v. United States, 542 F. Supp. 1026, 1030 (CIT 1982). In Uniroyal, the court determined that the shoe upper was “the very essence of the completed shoe” and that the attachment of the imported shoe uppers to an outer sole in the United States was a “minor manufacturing or combining process which leaves the identity of the upper intact,” therefore, the shoe upper was not substantially transformed in the United States. The court also noted that the minor assembly operation in the United States “require[d] only a small fraction of the time and cost involved in producing the uppers.” Id. at 1030. Here, you assert that “the USA origin ASIC is the essential functional component of the finished article.” In other words, you argue that the ASIC imparts the essential character to the finished stud finder. In your view, while the production of the PCBA and the final assembly of the product are “integral” to the stud finder’s function, they do not substantially transform the ASIC into a new and different article of commerce with a name, character, and use distinct from the ASIC. Accordingly, you submit that the country of origin of the stud finder is the United States. In support of this view, you quote HQ H287548, dated March 23, 2018, concerning the country of origin of monochrome laser printers, in which we stated that: “[a]dditionally, the overall structure and each functional circuit of the ASIC, the main component of the PCB, will be designed and manufactured in Japan.” You state that this case “clearly establishes that the importance of the ASIC is critical to the overall function of the complete stud finder and is the main component of a printed circuit board assembly.” Even assuming that the ASIC retains its U.S. origin after undergoing significant processing in South Korea, HQ H287548 does not support a conclusion that the ASIC imparts the essential character to the finished product. To the contrary, in holding that the printers underwent their last substantial transformation in Japan, we noted that “the main PCB assembly is the motherboard of the printers, which communicates with the PC, houses the memory in the printer, and forms the image printed on the page. It also includes key functional circuits, including mechanical control and printing data processing.” Accordingly, we held that “[t]ogether, the firmware and the main PCB, which serve major functions and are high in value, constitute the essential character of the printers.” See also HQ H302801, dated October 3, 2019 (holding that the PCBA imparted the essential character to a smartwatch). HQ H287548 is consistent with other decisions holding that surface mounting of components onto a PCBA results in a substantial transformation. See, e.g., HQ H311447, dated September 

The United States Trade Representative (“USTR”) has determined that additional duties 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”). In accordance with U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified in subheading 8531.80.90, HTSUS, unless specifically excluded, are subject to an additional 7.5% ad valorem rate of duty. 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. 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 Fed. Cl. 117, 121 (1996) and Nat’l Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308, 311 (1992)). Courts have also considered “the ‘essence’ of a complet