H335829

HQ H335829 February 26, 2025 OT:RR:CTF:VS H335829 AMW CATEGORY: Origin Mr. Randy Rucker, Esq. Faegre Drinker Biddle & Reath LLP 320 South Canal Street Suite 3300 Chicago, IL 60606 RE: Country of Origin; Optical Transceivers Dear Mr. Rucker: This is in response to your request dated November 7, 2023, on behalf of your client, Eoptolink Technology, Inc. (“Eoptolink”), regarding the country of origin of several models of optical transceiver modules for purposes of importation into the United States. Your request, originally submitted as an electronic ruling request to the National Commodity Specialist Division, was forwarded to this office for review. FACTS: The following facts are based on the information provided in your November 7, 2023, submission and follow-up information provided on February 11, 2025. In addition, a meeting was held on December 18, 2024. Eoptolink is a provider of optical transceiver modules and optical components used for a variety of applications, including data centers, telecom networks, security monitoring, and smart grids. The subject transceiver devices provide interface connection within a local area network, ethernet, or wide area network, through the transmission and receipt of data. An optical transceiver functions by converting electrical signals to optical (light) signals (the transmitter function), and from optical signals to electrical signals (the receiver function). The request relates to four different foreign-manufactured optical transceiver modules, which are distinguished by their data speeds and operating wavelengths: (1) 800G Transceiver and Active Optical Cable (“AOC”); (2) 400G Transceiver and AOC; (3) 200G Transceiver and AOC; and (4) 100G Transceiver and AOC. The subject transceiver models all have substantially the same design and manufacturing process flow. Each model consists of a metal and/or plastic housing and interfaces, as well as the following subassemblies: Printed circuit board assembly (“PCBA”) containing the control circuitry necessary to operate the device; Transmit Optical Sub-Assembly (“TOSA”) consisting of a laser diode, optical lenses, an optical multiplexer, a monitor photodiode, a thermoelectric cooler, a metal and/or plastic housing, and an electrical interface; and Receiver Optical Sub-Assembly (“ROSA”) consisting of an optical connector, optical demultiplexer, optical lenses, a pin diode, amplifier, metal or plastic housing, and an electrical interface. Each unit is completely manufactured in China, with raw materials sourced from a variety of countries. The Chinese manufacturing process involves the following steps: PCBA Assembly: The device’s PCBA is assembled via surface mount technology (“SMT”) from multiple components, including a microcontroller unit, digital signal processor, crystal oscillator, thermoelectric cooler controller, DC-DC converter, integrated circuit, resistors, capacitors, and a ferrite bead. Optical Sub-Assembly (“OSA”) Packaging: The OSA consists of the TOSA and ROSA subassemblies described above. During the “packaging” process, the components are assembled onto the PCBA with epoxy or eutectic technology followed by a wire bonding process to enable an electrical connection between the laser, PIN diode, and the PCBA; Module Assembly: The PCBA and OSA are combined with the device’s housing, screws and a latch for the optical transceiver to form a “blank” transceiver; and Temp Cycling: the “blank” transceiver is thermally cycled from -40 C to 85 C for ten cycles to confirm whether the components and solder connections will withstand exposure to extreme temperatures. After the devices are manufactured in China, they are exported to Thailand for programming, firmware downloading, additional testing, and packaging. Specifically, the Thailand process involves the following: MCU Firmware Programing: Thail-developed firmware is uploaded to the PCBA’s MCU. The firmware contains program instructions that enable the subject transceivers to process data; Tuning: A transceiver unit “tuned” to meet specific settings (also referred to as operating points). In doing so, a piece of test equipment is used to measure the optical transmitter characteristics, adjust the laser drive and DSP settings, and measure optical transmitter characteristics; Electrically Erasable Programmable Read-Only Memory (“EEPROM”) Parameter Programming: EEPROM programming previously developed in Thailand is loaded onto the transceiver; Aging: Each device undergoes an aging test in which the device is run at a specified temperature (e.g., 12-24 hours at a temperature of 70 C or 85 C) to detect problems; Final Testing: Each device is tested to confirm it meets all specifications; and Final Processing/Packing: Technicians clean the fiber and end shell, dust cap, and outer shell; the device is labeled, packed, and shipped to a warehouse. ISSUE: What is the country of origin of the subject optical transceivers? 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, Harmonized Tariff Schedule of the United States (“HTSUS”). When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018. 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, 681 F.2d 778 (C.C.P.A. 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, U.S. Customs and Border Protection (“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 U.S. Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016). Energizer Battery involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. All components of the flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States and assembled into the finished Generation II flashlight. The Energizer Battery court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc., 3 C.I.T. at 226, 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. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a

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, Harmonized Tariff Schedule of the United States (“HTSUS”).When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018. 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, 681 F.2d 778 (C.C.P.A. 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, U.S. Customs and Border Protection (“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 U.S. Court of International