N342790

N342790 October 21, 2024 CLA-2-84:OT:RR:NC:N2:220 CATEGORY: Classification; Origin; Marking; Trade Agreement; Trade Remedies TARIFF NO.: 8471.70.9000 Olga Torres Torres Trade Law, PLLC 1201 Main St Dallas, TX 75202 RE: The tariff classification, country of origin marking, status under the United States-Mexico-Canada Trade Agreement (USMCA), and applicability of Section 301 Trade Remedies of a Server Rack Dear Ms. Torres: In your letter dated September 23, 2024. you requested a ruling on behalf of your client, BDT de México, S. De R.L. de C.V. The merchandise under consideration is identified as the Osmium 35U Stack, Configuration 5, PN 950 072 101-01, which you refer to as a Server Rack, and consists of a single metal cabinet having six processing servers, a network switch, a power supply shelf, and seven magnetic tape storage units. The storage units consist of one Base Module, four Drive Expansion Modules, one I/E Expansion Module, and one Cartridge Expansion Module, where the Modules are mounted within the cabinet and stacked vertically. Each of the Modules are interconnected physically and electrically, and all house an array of magazines that are populated with magnetic tape storage cartridges. Internal to the stack of Modules is a robotic mechanism that navigates within the vertical chamber of all seven interconnected Modules to select and relocate cartridges from a magazine storage location to a tape drive and/or return cartridges to a magazine for storage. In use, the Server Rack functions as a mass digital tape storage system. Each of the processing servers are dedicated to the functional control of the reading/writing of digital data stored on the individual cartridges, while also functioning to communicate/transfer data to and from external systems/networks. In your request, you suggest the Server Rack is considered an automatic data processing (ADP) machine of subheading 8471.50.0150, Harmonized Tariff Schedule of the United States (HTSUS). We disagree. Based on the information provided, the Server Rack is populated with a number of machines that work together to perform a single dedicated function. While there are machines incorporated into the Server Rack that you suggest may satisfy the requirements set forth in Note 6 (A) to Chapter 84, it is our view that those machines do not satisfy Note 6 (A). Furthermore, the principal function of the Server Rack is data storage, and subheading 8471.50.0150, HTSUS, is not appropriate. The applicable subheading for the Osmium 35U Stack, Configuration 5, PN 950 072 101-01, will be 8471.70.9000, HTSUS, which provides for "Automatic data processing machines and units thereof…Storage units: Other storage units: Other." The rate of duty will be free. Regarding the country of origin and marking of the Server Rack, the marking statute, Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940). Section 134.1(b), CBP Regulations (19 CFR 134.1(b)), defines “country of origin” as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the ‘country of origin’ within the meaning of this part.” Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in sections 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile and apparel goods which are subject to the provisions of 19 CFR 102.21. See 19 CFR 102.11. Applied in sequential order, 19 CFR 102.11(a) provides that the country of origin of a good is the country in which: (1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. Since the Server Rack is neither “wholly obtained or produced” nor “produced exclusively from domestic materials”, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the subject merchandise and paragraph (a)(3) must be applied to determine the origin of the finished article. As the Server Rack is classified under subheading 8471.70.9000, HTSUS, the applicable tariff shift requirement in Part 102.20 for the assemblies under consideration here states: A change to subheading 8471.60 through 8472.90 from any other subheading within that group or from subheading 8504.90 or from heading 8473, provided that the change is not the result of simple assembly; Based on the information provided, the individual drive units that are incorporated into the Base Module and the Drive Expansion Module, which are designated as foreign material, are each classifiable under subheading 8471.70, HTSUS. Additionally, the unpopulated Module frames are classified under subheading 8473.30, HTSUS. As a result, the tariff shift requirement under Part 102.20 is not met and paragraph 102.11(a) is not applicable. Because paragraph 102.11(a) cannot be used to determine the origin of the Server Rack, we turn next to paragraph 102.11(b), which states, in pertinent part: (1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good. Based on the submitted information with a detailed explanation of the design and construction of the Server Rack, it is the opinion of this office that no single material imparts its essential character of the finished Server Rack. Here, we have multiple machines and subassemblies that are joined together to produce a data storage system that is unique and different from the individual components that make the finished machine. Consequently, paragraph 102.11(b) cannot be used to determine the origin of the Server Rack. Likewise, the Server Rack is neither a set, mixture, nor a composite good, and paragraph (c) is not applicable. Continuing on, paragraph 102.11(d) states as follows: (d) Where the country of origin of a good cannot be determined under paragraph (a), (b) or (c) of this section, the country of origin of the good shall be determined as follows: (1) If the good was produced only as a result of minor processing, the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good; (2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of 

is applicable.  See, e.g., Headquarters Ruling Letter (“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).  This determination is based on the totality of the evidence.  See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).You state in your submission that the Server Rack is assembled in Mexico at your client’s facility by mounting six U.S. origin servers, a Chinese origin communications switch, various foreign origin components, cables, brackets, etc. into the Chinese origin metal cabinet.  Also in Mexico, each of the empty Module frames are manufactured by populating with foreign components, such as magazines, cartridges, drives, and more.  While the drives are also of Chinese origin, the process of assembling the individual drives into their carriers, and then further assembling the drive subassemblies into the Modules, followed by the combining of each of the Modules into a single interdependent storage system, is complex and meaningful work that in our opinion, substantially transforms the individual components into a mass digital tape storage system that you refer to as the Server Rack.  As a result, it is the opinion of this office that the Osmium 35U Stack, Configuration 5, PN 950 072 101-01, is not subject to additional duties pursuant to Section 301 upon importation into the United States.The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information fu