H339851

H339851 December 8, 2025 OT:RR:CTF:VS H339851 RRB CATEGORY: Origin Center Director Electronics Center of Excellence and Expertise U.S. Customs and Border Protection 1 World Trade Center Long Beach, CA 90831 Attn: Sorbrina Vilsain, Import Specialist RE: Application for Further Review of Protest No. 2720-24-105155; Country of Origin of Drones; Section 301 Measures Dear Center Director: This is in response to the Application for Further Review (“AFR”) of Protest No. 2720-24-105155, timely filed on April 10, 2024, by Crowell & Moring, LLP, on behalf of DJI Service LLC (“Protestant” or “DJI”). This decision concerns U.S. Customs and Border Protection’s (“CBP”) liquidation and assessment of duties pursuant to Section 301 of the Trade Act of 1974 for two entries of commercial hand-held drones, also referred to as unmanned aerial vehicles (“UAV’s”). This protest is designated as the lead protest and addresses similar facts, issues, and arguments presented in Protest No. 2720-24-105162. The AFR was forwarded to our office for consideration. FACTS: The protested merchandise consists of remotely-controlled drones that are used by consumers for aerial photography and videography. The specific models at issue are the “DJI Mini 2” and the “DJI Mini 3 Pro.” Both drones are equipped with a fully stabilized 3-axis gimbal and a sensor camera that allow the user to take photos while the drone is in flight. Both drone models are controlled through a remote controller connected to a mobile device running an app called DJI Fly. In order to import the subject drones, DJI uses an affiliate entity that has a tolling agreement with third-party manufacturers. DJI explains that two related third-party manufacturers, one of which is based in Malaysia and the other which is based in Country A, provide tolling services to DJI’s affiliate. DJI states that since 2022, it has imported into the United States more products produced by the third-party manufacturer based in Malaysia and fewer products by the third-party manufacturer based in Country A. When the third-party manufacturer based in Malaysia manufactures the subject drones, it ships the products to DJI and invoices its related party manufacturer in Country A, which in turn invoices DJI’s affiliate, and then invoices DJI. DJI further explains that it places orders with its affiliate pursuant to a purchasing agreement. Orders placed pursuant to this purchase agreement are referred to as transfer orders, which serve as purchase orders between DJI and its affiliate and can be tied to the specific commercial invoices issued to DJI by its affiliate that were included in the entry documentation for the protested entries. According to the protestant, the drones consist of a number of key features. First, the propulsion control system on both models enables four-axis stable flights, flight safety and enhances the remote control experience of users. As part of this propulsion control system, the electronic speed controller (“ESC”) drives the four electrical motors for each of the propellers to rotate and generate lift or upward force to raise the drone. Second, by calculating, allocating, and outputting specific power among each of the four propellers, the ESC board drives the propulsion system and the drone to fly in three dimensions safely and steadily, even in inferior environments such as wind or high altitude. Third, the Mini 2 and Mini 3 Pro models are considered “ultra- light” portable drones with a take-off weight of 249 grams and maximum flight time of 31 minutes, 34 minutes, or 47 minutes, depending on the model of the drone and batteries. The protestant explains that such high efficiency of power output is due to the algorithm on the ESC board. The drones also feature a number of flight safety features, many of which are controlled by the ESC board. For example, the ESC board runs a thorough check of the propulsion system, stops take-off, and alerts the pilot about abnormalities. It can also detect overheated or overloaded electric motors with frozen propellers, lost propellers, and other factors that can lead to safety incidents. In such cases, the ESC board gives feedback to the system and the pilot to prevent crashes. The subject drones also incorporate a transmission system to allow remote control of the drones, which is driven by the ESC board. Lastly, the subject drones feature Intelligent Flight Modes that can track certain subjects and automatically fly in a preset route while recording professional-level videos. DJI explains that the Mini 2 and Mini 3 Pro drones in the protested entries are produced at its third-party manufacturer’s facility in Malaysia. The manufacturing process that occurs in Malaysia has several steps, including the production of the Main Printed Circuit Board (“PCB”) Assembly (“Main PCBA subassembly”), the ESC Board subassembly, the Airframe Integration and Assembly, and System Calibration and Product Testing. 2 Main PCBA Subassembly DJI explains that although the majority of the Main PCBA subassemblies were assembled in Malaysia, for a small number of the subject drones, the Main PCBA subassemblies were assembled in China, not Malaysia. DJI provided documentation describing the various manufacturing steps for the Main PCBA subassembly. ESC Board Subassembly DJI explains that in order to create the ESC Board, skilled technicians and engineers in Malaysia incorporate several hardware chips that are crucial to the function of the drones. In support of its assertion that the ESC Boards are manufactured in Malaysia, DJI provided documentation describing the various manufacturing steps for the ESC Board in Malaysia. DJI also states that without the ESC Board, the drones are unable to properly accelerate through the air, and thus, using them for aerial photography would not be possible. In addition to enabling proper acceleration of the drone through the air, the ESC Board enables the Return to Home function of the drones by automatically bringing the aircraft back to the last recorded Home Point. It also enables the drones’ various Intelligent Flight Modes. Airframe Integration and Assembly DJI explains that manufacture of the Main PCBA and ESC Board subassemblies in Malaysia is followed by integration of several subassemblies into the subject drones, which is performed by technicians and engineers in Malaysia. DJI provided documentation that details the various airframe integration and assembly steps for integrating these subassemblies with the Main PCBA and ESC Board and into the final products. Some of the components involved in the final airframe integration and assembly include what the protestant describes as “non-functioning foreign components,” including the main body plastic frame and arms. Other subassemblies or components manufactured in or sourced from China and integrated with the Main PCBA and ESC Board into the final products include the gimbal camera and the GPS subassembly. DJI explains that after the gimbal module is assembled as part of the drone, this module facilitates mechanical stabilization for aerial photography. After the GPS subassembly is assembled as part of the drone, it supports the drone’s positioning. According to DJI, however, the gimbal module and GPS subassembly are not exclusively compatible with the subject drones and can be used in different consumer electronics. DJI states that the Main PCBA and the ESC Board, together, constitute the majority of the value of the drones. They also explain that labor time and costs of production are higher in Malaysia than in China. In support, DJI provided a spreadsheet confirming that a majority of work hours for each model of drones is completed in Malaysia (regardless of where the Main PCBA was assembled), 3 System Calibration and Product Testing Lastly, DJI states that both the Mini 2 and Mini 3 Pro drones must undergo a complex calibration process in Malysia in order to function properly. This also includes the downloadi

We note that this matter is protestable under 19 U.S.C. § 1514(a)(5) as a decision relating to the liquidation or reliquidation of an entry. The protest was timely filed within 180 days of liquidation. See 19 U.S.C. § 1514(c)(3). Further Review of Protest Number 2720-24-105155 was properly accorded to the Protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the protest was filed is alleged to involve questions of law or fact which have not been decided on by CBP or by the Customs courts. Regarding the entries at issue, the United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent 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(b), HTSUS. When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. See Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018. The test for determining whether a substantial transformation will occur is whether an article 5 

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). 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. See 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