OT:RR:CTF:VS HQ H331515 UBB
Richard A. Mojica
Miller & Chevalier Chartered
900 16th Street NW
Washington, D.C. 20006
RE: Country of origin of a refrigerator shelf light
Dear Mr. Mojica,
This is in response to your ruling request dated April 19, 2023, submitted on behalf of your client, SSW Advanced Technologies, LLC (“SSW”). You request a ruling regarding the country of origin of a refrigerator shelf light manufactured by emz Hanauer de México, S.A. de C.V. (“EMZ”) for the purposes of determining the applicability of measures imposed under Section 301 of the Trade Act of 1974 (“Section 301”) and for country-of-origin marking under Section 304 of the Tariff Act of 1930 (“Section 304”). In a subsequent email exchange dated September 13, 2023, you requested that we disregard the request regarding marking under Section 304 and limit our response to your query to a country of origin determination for Section 301 purposes only.
FACTS:
You state that the shelf light is produced by EMZ in Mexico. SSW purchases the shelf light from EMZ and imports it into the United States, where it is mounted to glass or metal shelves and assembled into a shelf assembly designed for installation into sub-zero refrigerators. The shelf light comprises the following components: a light emitting diode (“LED”) strip, bridge rectifier, printed circuit board, and aluminum extrusion from China; stamped contacts and lens profile from Germany; sealant and solder paste from the United States; and, end-caps, wire harness, wire, and fixation pins from Mexico. You state that the production process in Mexico comprises of the following seven steps, each involving either complex machinery or manual labor, and forms various subassemblies before the end-product is created.
Step 1 involves using surface mount technology (“SMT”) to solder bridge rectifiers to the printed circuit board (“PCB”). Workers then separate the panels to create a PCBA. In step 2, workers take LED strips from China and cut them into specific lengths. The PCBA from step 1 is then wired to the stamped contact. The PCBA is also wired to the cut LED. The PCBA joined to the stamped contact and cut LED strip is then placed into the lens profile and the end caps are fixed on both ends in step 3. Each lens profile has specifications that correspond to the relevant LED strip. In step 4, an additional stamped contact terminal and end cap are welded to the assembly. In step 5, EMZ workers perform operations to prevent future corrosion to the finished article. In step 6, the subassembly is inserted into an aluminum extrusion and fixed with two plastic fixation pins. This completes the final assembly of the shelf light. In your submissions, you stated the operations are performed by skilled personnel with specialized training and that EMZ uses both commercially available and custom-built machinery for the production of the shelf light.
ISSUE:
What is the country of origin of the shelf light imported from Mexico for purposes of the application of the section 301 trade remedy duties?
LAW AND ANALYSIS:
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”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(e) and (f), HTSUS. You did not provide a proposed classification for the finished refrigerator shelf light in your ruling request; however, you have asked us to issue a ruling on the country of origin of the shelf light for purposes of the Section 301 measures.
When determining the country of origin for purposes of applying the 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, 69 CCPA 151, 681 F.2d 778 (1982). U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes substantial transformation determinations on a case-by-case basis. CBP has stated that a new and different article of commerce is an article that has undergone a change in commercial designation or identity, fundamental character, or commercial use. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In order to determine whether a substantial transformation occurs, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, the extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process may be considered when determining whether a substantial transformation has occurred. No one factor is determinative.
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 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. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (imported shoe uppers added to an outer sole in the United States were the “very essence of the finished shoe” and the character of the product remained unchanged and did not undergo substantial transformation in the United States).
In C.S.D. 85-25, 19 Cust. Bull. 544 (1985), CBP held that for purposes of the Generalized System of Preferences (“GSP”), the assembly of a large number of fabricated components onto a printed circuit board in a process involving a considerable amount of time and skill resulted in a substantial transformation. In that case, in excess of 50 discrete fabricated components (such as resistors, capacitors, diodes, integrated circuits, sockets, and connectors) were assembled onto a PCB. CBP determined that the assembly of the PCBA involved a very large number of components and a significant number of different operations, required a relatively significant period of time, skill attention to detail, and quality control.
As CBP considers the totality of circumstances in its substantial transformation analysis, considerations, such as the origin of a light source or a PCBA, while not determinative, may be taken into account together with the nature of the overall assembly operations. For example, in Headquarters Ruling Letter (“HQ”) H304910, dated April 21, 2020, CBP determined that the country of origin of LED vehicle lamps was the country in which the PCBA with LED lights were manufactured. In that case, there were three vehicle lamps at issue. For all three products, CBP held that the assembly of the Japanese-origin LEDs and the Mexican-origin PCBAs in Mexico resulted in a substantial transformation in Mexico. CBP found that the SMT and Wave Soldering processes incorporated a large number of discrete components parts onto a printed circuit board, which was a sufficiently “complex and meaningful” operation, so as to result in a substantial transformation of the parts making up the printed circuit board assembly. In that case, LEDs were one of the discrete components that are incorporated into the PCBA. Therefore, the assembly in Mexico resulted in a substantial transformation. Accordingly, CBP concluded that the last substantial transformation had occurred in Mexico and that the country of origin of the vehicle lamps was Mexico for purposes of the Section 301 measures. See also HQ H114395, dated May 18, 2011.
Based on the information submitted, the processing operations in Mexico that result in a PCBA involving the use of SMT and the assembly with the LED strips are analogous to the operations that resulted in a finding of substantial transformation in H304910. As in H304910, the processing here includes soldering components such as bridge rectifiers to the PCB, creating the PCBA which enables the functionality of this key component. Moreover, as in H304910, the LEDs are integrated into the final product in Mexico. As previously noted, the production process of the shelf light, which requires skilled workers with specialized training and the use of both commercially available and custom-built machinery, includes forming various subassemblies involving machining, manual soldering, and ultrasonic welding before the final shelf light is created. Based on the information provided, we conclude that the processing in Mexico results in a product with a new name, character and use, i.e. the refrigerator shelf light capable of generating light at a specific temperature and intensity. Accordingly, we find that the country of origin of the refrigerator shelf light is Mexico and Section 301 measures do not apply.
HOLDING:
Based on the information provided, the country of origin of the refrigerator shelf light is Mexico. Accordingly, Section 301 measures will not apply.
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 [CBP] 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,
Elif Eroglu, Acting Chief
Valuation and Special Programs Branch