OT:RR:CTF:VS H316187JMV
Aaron M. Marx
Crowell & Moring, LLP
1001 Pennsylvania Ave NW
Washington, DC 20004
RE: Country of origin Marking of an Evaporator Assembly for an Automobile Air Conditioner; USMCA Eligibility
Dear Mr. Marx:
This is in response to your request, dated January 21, 2021, filed on behalf of your client Valeo North America (“the importer”). In your letter, you request a binding ruling on the eligibility for duty-free treatment under the U.S.-Mexico-Canada Agreement, and the country of origin for marking purposes for the evaporator assembly.
The importer has requested confidential treatment for certain information contained in its submission and in the file. Pursuant to 19 C.F.R. § 177.2(b)(7), the identified information has been bracketed and will be redacted in the public version of this ruling. All attachments to the ruling request will also be considered confidential.
FACTS:
The importer is an original equipment manufacturer for [XXXXXXXXXXX] company. The subject merchandise is an evaporator brushless motor assembly, part number DRF-10238-005A-G (internal part number T456486), to be used in passenger vehicles and light trucks. Each evaporator assembly consists of a brushless direct current (“DC”) motor stacked together with a coil assembly, an impeller, and other components. The finished evaporator assembly and its major components are all circular in shape. The impeller has fan blades around its circumference. The evaporator assemblies will be used in automobile centrifugal air conditioning units (“HVACs”) to provide air flow through the system. You note that the impeller and its built-in blades are solely designed for a specific HVAC and cannot be used for any other purpose. You also note that the plastic housing is unique to the particular HVAC unit to which it is attached.
The discrete parts of the evaporator assemblies are sourced from different countries. The coil assembly, rotor assembly, printed wire board (“PWB”) assembly, end stopper, aluminum cover, balance clip, screws, and washers are made in China. The ball bearing is made in Thailand. The impeller, motor holder, and flange are made in Mexico. At a facility in Mexico, all of the discrete parts are combined and processed into the finished evaporator assemblies.
In Mexico, the first phase of processing involves building the motor subassembly. Using heat welding, workers combine the motor holder, housing, flange, and end stopper together. Next, workers attach the copper coil assembly to the heat welded unit. After the copper coil assembly is fixed, workers place the motor subassembly into a machine which magnetizes the copper coil assembly. Then, a press fitting machine presses the ball bearing into the motor subassembly. After press fitting the ball bearing, workers fix the rotor assembly to the motor subassembly. Then, workers weld the PWB’s terminals and fix the snap ring to finish the motor subassembly.
After the motor’s performance undergoes testing, the impeller is fixed to the motor subassembly. The impeller undergoes a run-out and height inspection. Then, the finished evaporator assembly is tested, labeled, and packaged for shipment to the United States.
The evaporator assembly is classified under subheading 8414.59.65 of the Harmonized Tariff Schedule of the United States (“HTSUS”), which provides, in pertinent part, for “Air or vacuum pumps, air or other gas compressors and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted with filters…: Fans: Other: Other: Other: Suitable for a motor vehicle.” You have proposed the following tariff classifications under the Harmonized Tariff Schedule of the United States (“HTSUS”) for the remaining components sourced from China and Thailand:
Coil assembly and rotor assembly under subheading 8503, HTSUS, which provides, in pertinent part, for “Parts suitable for use solely or principally with the machines of heading 8501 or 8502”;
PWB assembly under heading 8503, HTSUS, which provides, in pertinent part, for “Parts suitable for use solely or principally with the machines of heading 8501 or 8502”;
End stopper under heading 3926, HTSUS, which provides, in pertinent part, for “Other articles of plastics”;
Aluminum cover under heading 8503, HTSUS, which provides, in pertinent part, for “Parts suitable for use solely or principally with articles of heading 8501 [XXXXXXXXX] …”;
Ball bearing under heading 8482, HTSUS, which provides, in pertinent part, for “Ball or roller bearings …”; and,
Balance clip, screws, and washers, under heading 7318, HTSUS, which provides, in pertinent part, for “Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers (including spring washers) and similar articles, of iron or steel.”
ISSUES:
Whether the evaporator assembly qualifies for duty-free treatment under the U.S.-Mexico-Canada Agreement?
What is the country of origin of the evaporator assembly for marking purposes?
LAW AND ANALYSIS:
Eligibility for USMCA Duty-free Treatment
The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
…
Since the evaporator assemblies contain non-originating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and GN 11(b)(ii). Thus, we must next determine whether the evaporator assemblies qualify under GN 11(b)(iii). It is undisputed that the finished evaporator assemblies are classified under subheading 8414.59.65, HTSUS, which provides, in pertinent part, for “Air or vacuum pumps, air or other gas compressors and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted with filters…: Fans: Other: Other: Other: Suitable for a motor vehicle.” See New York Ruling Letter (NY) N299670, dated August 28, 2018, and NY N305338, dated August 14, 2019.
The applicable rule of origin for evaporator assemblies for automobile HVACs classified under subheading 8414.59, HTSUS, is in GN 11(o)/84.47, HTSUS, which provides as follows:
Subheading rule:
The underscoring of the designations in subdivision 47 pertain to goods provided for in subheadings 8414.59 through 8414.80 for use in a motor vehicle of chapter 87.
47.(A) A change to subheadings 8414.59 through 8414.80 from any other heading; or
(B) A change to subheadings 8414.59 through 8414.80 from subheading 8414.90, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:
60 percent where the transaction value method is used; or
50 percent where the net cost method is used.
Chapter rule 7 of GN 11(o)/84 states, “For the purposes of the subdivisions pertaining to this chapter, whenever the subdivision designation is underscored, the provisions of subdivision (k) of this note may apply to goods for use in a motor vehicle of chapter 87.” Since the evaporator assemblies are for use in motor vehicles of chapter 87, subdivision (k) of GN 11 applies. GN 11(k)(iii)(D) states:
Notwithstanding subdivision (o) of this note, the regional value content requirement for a part listed in Table B of the automotive appendix that is for use in a passenger vehicle or light truck is:
62.5 percent under the net cost method or 72.5 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method, beginning on July 1, 2020;
65 percent under the net cost method or 75 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method, beginning on July 1, 2021;
67.5 percent under the net cost method or 77.5 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method, beginning on January 1, 2022; or
70 percent under the net cost method or 80 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method, beginning on January 1, 2023, and thereafter.
Notwithstanding any regional value content requirement in this subparagraph, a part listed in Table B of the automotive appendix is originating if it meets the applicable change in tariff classification requirement provided in subdivision (o) of this note.
Emphasis added.
Section 14(15) of the USMCA Rules of Origin Regulations, Appendix A to Part 182, Customs Regulations (19 C.F.R. Part 182. App., Part VI, Sec. 14(15)) provides further guidance on the applicability of GN 11(k)(iii)(D). 85 Fed. Reg. 39690, 39721 (July 1, 2020). Section 14(15) provides in pertinent part that the RVC requirements for automotive goods listed in Table B of the Automotive Appendix apply to goods for use as OEM parts. We note that the subject evaporator assembly is for use as an OEM part in a passenger vehicle or light truck and goods of 8414.59 are listed in Table B of the automotive appendix. However, since none of the non-originating components are classified under subheadings 8414.59 through 8414.80, HTSUS, we look to Rule 47(A) above, which does not include an RVC requirement. Therefore, the RVC requirements of GN 11(k)(iii)(D) do not apply.
Since none of the non-originating components are classified under subheadings 8414.59 through 8414.80, HTSUS, the instant evaporator assembly meets to tariff shift requirement GN 11(o)/84.47(A). Therefore, is eligible for preferential tariff treatment under the USMCA the instant evaporator assembly.
Marking
To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 CFR Part 102, with the exception of 19 CFR § 102.19, for purposes of country of origin marking with respect to goods from Canada and Mexico. Section 102.11(a)(3) provides that the country of origin of a good is the country in which:
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material” is defined in § 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” The applicable tariff shift requirement in § 102.20 for the evaporator assembly at issue is:
A change to subheading 8414.10 through 8414.80 from any other subheading, including another subheading within that group.
The applicable tariff shift rule requires a shift to subheading 8414.59, HTSUS, from any other subheading. We note that all of the foreign materials are classified in subheadings other than 8414.59, HTSUS. Therefore, the foreign materials undergo the requisite tariff shift, and the evaporator assembly should be marked as a product of Mexico.
However, while the evaporator assembly may be marked as a product of Mexico, we note that some of the components are sourced from China. This ruling does not address whether the Chinese parts have been substantially transformed by its incorporation into the evaporator assembly in Mexico, and therefore, exempt from the additional tariff on certain products of China classified in the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(a), HTSUS.
HOLDING:
The evaporator assembly qualifies for duty-free treatment under the USMCA and should be marked as a product of Mexico.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch