H339955

HQ H339955 September 6, 2024 OT:RR:CTF:VS H339955 AP CATEGORY: Origin Center Director Machinery Center of Excellence and Expertise U.S. Customs and Border Protection 109 Shiloh Drive, Suite 300 Laredo, Texas 78045 RE: AFR of Protest No. 1703-23-116022; Finished Water Filters; Origin; Section 301 Dear Center Director: The following is our decision regarding the Application for Further Review (“AFR”) of Protest Number 1703-23-116022, timely filed on September 11, 2023, on behalf of Paragon Water Systems, Inc. (“importer”). The protest concerns the origin of a water filtration system and a water filtration replacement cartridge (collectively “finished water filters”), which were classified in subheading 8421.21.00, Harmonized Tariff Schedule of the United States (“HTSUS”) upon entry. FACTS: At issue in this AFR/Protest are: (1) part no. 22010372, A.O. Smith Clean Water 4-stage Carbon Block Reverse Osmosis Filtration System, and (2) part no. 22000332, replacement cartridge (reverse osmosis membrane filter type) for Aquasana 3-Stage. The finished water filters are intended to be used for residential drinking water systems installed underneath a household sink. A.O. Smith part no. 22010372 contained carbon block and reverse osmosis (“RO”) membrane type filters while Aquasana part no. 22000332 only had a RO membrane filter. The carbon block and RO membrane filters were designed to perform a contaminant-removal function and did not require electricity to function. The carbon block was manufactured in the United States and the RO membrane filter was manufactured in South Korea. The production process in South Korea to produce the RO membrane filters involved “a series of chemical reactions, material cutting (permeate collection material, membrane, feed channel spacer, outer wrap, etc.), and spinning operations.” The RO membrane filter was then shipped to China where it was assembled with other components to produce the finished water filters, which were then tested, packed, and imported into the United States. The assembly process in China involved combining the RO membrane filter together with mostly small plastic components such as O-rings, flow controllers/regulators, filter bodies/cartridges, and caps. The total amount of time that it took to assemble the finished water filters in China ranged from 30 seconds to 10 minutes. The assembly steps involved primarily screwing and gluing operations, in addition to pressing/inserting components into place. The finished water filters were entered on April 25 and May 23, 2022, as originating from China and subject to 25 percent ad valorem Section 301 duty under subheading 9903.88.01, HTSUS, based on the importer’s belief that the country of origin of the filters was the country where the final assembly occurred, which was China. After the entries were liquidated as entered on March 17 and April 21, 2023, the importer reevaluated and filed a protest/AFR claiming that the country of origin of the finished water filters should be South Korea, where the RO membrane filters were manufactured. U.S. Customs and Border Protection’s (“CBP”) Machinery Center of Excellence and Expertise (“CEE”) denied the protest due to lack of supporting documentation showing where the RO membrane filters were manufactured and forwarded the AFR to our office for review. On June 21, 2024, our office contacted the importer’s counsel to request supporting documentation to determine the origin of the RO membrane filters and the finished water filters. On July 26, 2024, importer’s counsel supplemented the protest/AFR and submitted the requested supporting documentation. ISSUE: What is the origin of the imported A.O. Smith and Aquasana finished water filters for purposes of Section 301 measures? LAW AND ANALYSIS: This matter is protestable under 19 U.S.C. § 1514(a)(1) as a decision on the value of merchandise. The protest was timely filed, within 180 days of liquidation for the entries. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further review of the protest is properly accorded to the importer pursuant to 19 C.F.R. § 174.24(b) because the issue protested involves questions of law or fact, which have not been ruled upon. 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 its 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. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 8421.21.00, HTSUS. When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis is applicable. The 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. Texas Instruments, Inc. v. United States, 681 F.2d 778 (CCPA 1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). If the manufacturing process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. In Uniroyal, Inc. v. United States, 3 CIT 220 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), the U.S. Court of International Trade (“CIT”) concluded that a finished shoe upper was not substantially transformed when it was combined with the shoe’s outer sole. The process of attaching the shoe upper was a minor manufacturing or combining process which left the identity of the upper intact and was “conceptually no different than (for example) attaching buttons to a man’s dress shirt or attaching handles to a finished piece of luggage.” Id. at 224. The CIT further stated that “the upper – which in its condition as imported is already a substantially complete shoe – is readily recognizable as a distinct item apart from the outsole to which it is attached.” Id. The CIT concluded that the uppers did not lose their identity and were the “very essence of the finished shoe.” Id. at 225. The CIT interpreted the meaning of “substantial transformation” in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016). Energizer involved the determination of the country of origin of a flashlight. All its components were of Chinese origin, except for a white light-emitting diode and a hydrogen getter. The components were imported into the United States and assembled into the finished flashlight. The court reviewed the “name, character and use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, 3 CIT 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 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 change in use.” Energizer at 1319, citing Nat’l Hand Tool Corp., 16 CIT at 311-312. When considering the origin of finished water filters, CBP has found the country of origin of the water filter component to be significant. In New York Ruling (“NY”) N333554, dated July 10, 2023, the country of origin of an A.O. Smith Direct Connect Single-Stage Carbon Block Under Sink Water Filtration System for marking purposes was the country where the carbon block was manufactured. The finished water filter was assembled in China using components manufactured in various countries, including the United States, Germany, and China. The assembly process in China involved screwing, gluing and pressin

This matter is protestable under 19 U.S.C. § 1514(a)(1) as a decision on the value of merchandise. The protest was timely filed, within 180 days of liquidation for the entries. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, § 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further review of the protest is properly accorded to the importer pursuant to 19 C.F.R. § 174.24(b) because the issue protested involves questions of law or fact, which have not been ruled upon. 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 its 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. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 8421.21.00, HTSUS. When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis is applicable. The 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. Texas Instruments, Inc. v. United States, 681 F.2d 778 (CCPA 1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). If the manufacturing process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. In Uniroyal, Inc. v. United States, 3 CIT 220 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), the U.S. Court of International Trade (“CIT”) concluded that a finished shoe upper was not substantially transformed when it was combined with the shoe’s outer sole. The process of attaching the shoe upper was a mi