OT:RR:CTF:VS H319823 EE
Mr. Jonathan M. Freed
Trade Pacific PLLC
700 Pennsylvania Ave SE, Suite 500
Washington DC 20003
RE: Country of Origin; Section 301; Portable Air Conditioners
Dear Mr. Freed:
This is in response to your correspondence, dated April 26, 2021 and June 15, 2021, on behalf of your client, New Widetech Industries Co., Ltd. (“Widetech”), concerning the country of origin of certain portable air conditioners for purposes of Section 301 trade remedies. Your request was forwarded to this office from the National Commodity Specialist Division for review. Our ruling is set forth below.
FACTS:
The products at issue are various models of portable air conditioners. Each portable air conditioner is air-cooled, cord-connected, and contains a hermetically sealed self-contained refrigeration system. All units feature wheels or castors. The output of the portable air conditioner units range from 850 to 1200 kilowatts per hour. Each portable air conditioner unit is packaged with accessories from China, e.g., a remote control assembly, a heat exhaust hose, connectors, screws and nuts, a soft cap, plug and window plates, which allow the portable air conditioner units to be used as window units. The portable air conditioner series are available in different models such that some models are for cooling only, and other models are for cooling and heating.
The production of each air conditioner unit begins with the production of the compressor assembly, which consists of an impeller, referred to as the pump assembly, and a motor. The components of the compressor assembly are primarily from China, with the exception of the silicon steel material and the rotor core assembly from Taiwan.
The assembly of each compressor assembly begins in China with the assembly of the rotor and stator assemblies. The production of the rotor assembly consists of punching of rotor core, annealing, pressing of oil, die casting, air cooling, aluminum end brushing, outer diameter brushing, tempering, hole lining, straightening of outer diameter, testing, and riveting of balance weight. The production of the stator assembly consists of punching of stator core, pressing of oil, annealing, engraving of iron core, inserting of slot insulation paper, rewinding, inserting of interphase paper, main winding, main coil forming, coil insulation, outlet connection, wire cutting and welding, primary shaping, wire bending, and inspection. Upon completion, the rotor and stator assemblies are exported to Taiwan.
In Taiwan, the rotor and stator assemblies and the Chinese pump assembly are connected to each other. This process begins by pressing or connecting the Chinese pump assembly to the rotor assembly. Next, the stator assembly is connected to the shell assembly. Then, the shell assembly is connected to the rotor/pump subassembly.
The manufactured compressor then undergoes a pre-final assembly process, in which stick foam, anti-collision foam, and a terminal cushion are installed onto the compressor. Lead wiring is then connected, and ground wire is screwed onto the compressor.
The front and rear panels, along with heat exchange units, which function as the evaporator and condenser units, are also produced in Taiwan. The heat exchange units are formed by subjecting copper and aluminum material from Taiwan to stamping, bending, inserting, tubing, expanding, and welding processes. The front and rear panels are formed using a plastic injection process.
The final assembly of each portable air conditioner unit, which also occurs in Taiwan, begins by placing a gasket and anti-vibration rubber component onto the Chinese base pan with castors. The compressor and the Taiwanese condenser are then screwed into place, and a Chinese power cord is then installed. Next, a blower housing assembly from China is screwed onto the base pan and the condenser’s anti-rubber and metal bracket are installed.
For the portable air conditioner units that complete a cooling and heating process, a Chinese 4-way valve assembly, together with the required piping, is installed and connected. Otherwise, the final assembly process continues with the installation and welding of Chinese discharge and suction pipes to the compressor, and the Chinese inlet pipes to the condenser. Next, the bulkhead components are assembled and screwed to the condenser side blower housing, which is manufactured in China. The evaporator from Taiwan, along with a discharge pipe, are installed, which is followed by the installation and welding of a Chinese capillary tube into the inlet of the evaporator. Subsequently, a Chinese fan and motor are installed onto the evaporator side. Wiring is then installed and connected as required. During the aforementioned steps, a Vietnamese printed circuit board assembly, Chinese capacitors, a Chinese water level switch and a Chinese sensor are installed. The unit is then subjected to a vacuum process and charged with refrigerant. Lastly, Taiwanese front and rear panels are installed and screwed into place. Once complete, each unit is tested, labeled, and packaged with a Chinese remote control and the additional Chinese accessories.
You submitted the models and series list for the portable air conditioners; bill of materials for the portable air conditioners; production processes of the compressor and the portable air conditioners; supplier information; sample inspection records; company brochure; underwriter certificate reports for each of the portable air conditioner series; cost build-up; air conditioning output in kilowatts/hour; accessories list; compressor bill of materials; rotor and stator assembly process flow chart; drawing of internal structure of portable air conditioner units; and fixtures description.
ISSUE:
What is the country of origin of portable air conditioners for purposes of Section 301 trade remedies?
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(f), HTSUS. Among the subheadings listed in U.S. Note 20(f) is 8415.81.01 and 8415.82.01, Harmonized Tariff Schedule of the United States (“HTSUS”).
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. 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, 69 C.C.P.A. 151 (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. 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 this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred, and the essence of the article is considered. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d 702 F.2d 1022 (Fed. Cir. 1983).
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (CIT 2016), the court interpreted the meaning of “substantial transformation.” The court reviewed the “name, character, or use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc. v. United States, 3 CIT 220, 226, 542 F. Supp. 1026, 1031 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983), 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. The court stated that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Id. at 1319, citing Nat’l Hand Tool Corp., 16 CIT at 311-12 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In New York Ruling Letter (“NY”) N317895, dated March 26, 2021, portable AC units were assembled in Taiwan from components that originated in China and Taiwan. The assembly of each AC unit began with the assembly of the compressor, which occurred in Taiwan. CBP stated that in determining the country of origin of air conditioning units for the purpose of applying 301 trade remedies, the country of origin of the cooling unit, which is the essence of an air conditioning unit, is considered. CBP found the cooling unit components, which consisted of a compressor from Taiwan, and a condenser and evaporator from China, were not substantially transformed in Taiwan since the assembly operations to make air conditioning units in Taiwan were not complex and meaningful enough. As such, CBP held that the country of origin of the portable air conditioning units was China since two of the cooling unit components were from China.
In the instant case, components from Vietnam, Taiwan and China are assembled in Taiwan to produce the portable air conditioner units. As we previously noted in NY N317895, the essence of the finished air conditioning unit is the cooling unit which consists of three components: the compressor, the condenser, and the evaporator. In the instant case, the condenser and the evaporator are from Taiwan, and the compressor is from China. Since the majority of the components which constitute the cooling unit are from Taiwan, we find that the country of origin of the air conditioning unit is Taiwan for purposes of Section 301 trade remedies.
HOLDING:
The country of origin of the window air conditioners is Taiwan for purposes of Section 301 trade remedies.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch