OT:RR:CTF:VS H338716 RMC
Kevin Turner
Johnson Electric
47660 Halyard Dr.
Plymouth, MI 48170
RE: Country of Origin and USMCA Eligibility of Integrated Thermal Management System for
Passenger Vehicle or Light Truck; De Minimis; Section 301 Measures
Dear Mr. Turner:
This is in response to your correspondence of March 19, 2024, in which you ask U.S.
Customs and Border Protection (“CBP”) to address the country of origin of an Integrated Thermal
Management System (“ITMS”) for purposes of Section 301 measures and the eligibility of the
merchandise for preferential tariff treatment under the United States-Mexico-Canada Agreement
(“USMCA”). Your request, submitted as an electronic ruling request, was forwarded to this office
from the National Commodity Specialist Division for response.
FACTS:
The ITMS at issue (Part No. 1458-1JH0001) is described as a multi-port manifold box
containing centrifugal pumps for driving fluid and electronically actuated spider valves for regulating
and directing cooling fluid. The ITMS is used in electric vehicles to maintain the battery at the
appropriate temperature, ensuring maximum performance. You state that the unit is intended for
use as original equipment in battery-powered passenger vehicles and light trucks. According to the
information provided, the product will be produced in Mexico and entered into the United States
under subheading 8481.80.90, Harmonized Tariff Schedule of the United States (“HTSUS”).
In your submission, you provided a complete bill of materials that includes a description of
each of the 107 materials used in the production of the good as well as their origin, tariff
classification, and value. The bill of materials indicates that approximately 89.5% of the materials,
by value, are of Chinese origin. Mexico, Hong Kong, Germany, and the United States account for
approximately 8.5%, 1.6%, 0.4%, and 0.05% of the total value of materials, respectively.
You also provided a complete description of the manufacturing process in Mexico, which
begins with the production of subassemblies (the manifold subassembly and three valve
subassemblies) before proceeding to final assembly of the ITMS.
First, the manifold subassembly is produced on an automated molding and hot-plate welding
production line. This production process involves nine steps:
1. Female threaded inserts are over-molded with thermoplastic polypropylene
homopolymer (PP-GF20) using a 400-ton injection molding machine;
2. Two metal sleeves are press-fit into formed holes in the manifold layer and become
locked in place once the plastic contracts through cooling;
3. Manifold layers two and three are formed by injection molding the PP-GF20
thermoplastic resin in a vertical injection molding machine;
4. The fourth manifold layer is formed by over-molding PP-GF20 resin with 12 M4
and six M6 female threaded inserts in an injection molding machine;
5. Five metal sleeves are pressed into formed holes in the manifold layer and become
locked in place once the plastic contracts through cooling;
6. Manifold layers one and two are placed into a hot plate welding machine and
permanently fixed together;
7. Manifold layers three and four are also joined together by hot plate welding;
8. The two pairs of manifold layers are brought together one final time in a hot plate
welding machine and permanently joined together; and
9. The manifold sub assembly is compression-air tested on a specialized test bench at
the end of the line.
Next, the three separate valve subassemblies (11-way, 8-way, and 9-way) are produced in
similar manners using an automated valve production line consisting of ten steps:
1. The valve body and valve bottom plate are formed by injection molding
thermoplastic resin (polyphenylensulfide with 40% glass fibers) in an injection
molding machine;
2. The valve housing is formed by injection molding a polypropylene homopolymer
with 50% glass fibers using an injection molding machine;
3. The three thrust plate components are formed by using a thermal dynamic resin
(polyoxymethylene) in an injection molding machine;
4. The three formed thrust plates are fed into the automated valve line with three
different sized o-rings;
5. The o-rings are mechanically fit within the dynamic plates and the plates are
ultrasonically welded to make a permanent bond;
6. The bottom plate and cylinder body are formed by injection molding and are
ultrasonically welded together;
7. This cylinder subassembly is joined with the formed dynamic thrust plate with a
wave ring;
8. This subassembly is then joined with the injection-molded valve housing, a static
plate, an x-ring, and six metal sleeves;
9. An electric actuator with an internal controller is then attached to the valve top by
six M4 screws; and
10. The completed valve is then air tested with a leak meter.
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Finally, once the manifold and valve subassemblies are complete, the formation of the
completed ITMS begins on an automated assembly line. This production process involves the
following eight steps:
1. The manifold subassembly is combined with an 8-way rubber ring, a 9-way rubber
ring, an 11-way rubber ring, and three o-rings;
2. The rubber rings are press-fit into their respective seat in the manifold and an o-ring
is fit around the outside of the manifold valve seat;
3. Within the automated line, the 8-way actuator valve, the 9-way actuator valve, and
the 11-way actuator valve are fit into their respective manifold seats and secured with
a total of 18 M4 screws;
4. Six o-rings are fitted on the inlets and outlets of three centrifugal water pumps;
5. The three pumps are seated into the respective manifold seats and secured with 12
M4 screws;
6. The ITMS subassembly has two seals press-fit into the rear portals on the ITMS;
7. Two metal brackets are attached to the outer sides of the ITMS with M4 screws; and
8. The finished ITMS then completes end-of-line testing.
In your ruling request, you ask whether the ITMS qualifies for preferential tariff treatment
under the USMCA and seek confirmation that the merchandise is not a product of China for
purposes of Section 301 measures.
ISSUES:
I. Whether the ITMS eligible for USMCA preferential tariff treatment under the USMCA
when imported from Mexico into the United States.
II. What is the country of origin of the ITMS for purposes of Section 301 measures?
LAW AND ANALYSIS:
I. USMCA Eligibility
The 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(a) provides that:
Goods originating in the territory of a country named herein, pursuant to the
United States-Mexico-Canada Agreement (USMCA), are subject to duty as
provided herein, including any treatment set forth in subchapter XXIII of
chapter 98 and subchapter XXII of chapter 99 of the tariff schedule. For the
purposes of this note, as provided in the tariff schedule—
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(i) Goods that originate in the territory of Mexico, Canada or the United States (hereinafter
referred to as “USMCA country” or “USMCA countries” as further defined in
subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and
regulations issued by the Secretary of the Treasury (including Uniform Regulations
provided for in the USMCA), and goods enumerated in subdivision (p) of this note,
when such goods are imported into the customs territoryof [sic] the United States and
are entered under a subheading for which a rate of duty appears in the “Special”
subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in
accordance with section 202 of the United States-Mexico-Canada Agreement
Implementation Act; and . . .
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—
(i) the good is a good wholly obtained or produced entirely in the territory of one
or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more USMCA
countries, exclusively from originating materials;
(iii) 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
…
Here, the merchandise will be produced in Mexico using originating and nonoriginating
materials. Therefore, the merchandise will not qualify as originating pursuant to GN 11(b)(i) or (ii).
We must therefore consider whether the merchandise qualifies as originating pursuant to GN
11(b)(iii).
As noted above, you state that the ITMS units are classified in 8481.80.90, HTSUS. The
applicable product-specific rule of origin in GN 11(o)/84.244 is underscored and requires:
244. (A) A change to subheadings 8481.40 through 8481.80 from any other heading; or
(B) A change to subheadings 8481.40 through 8481.80 from subheading 8481.90,
whether or not there is also a change from any other heading, provided there is a
regional value content of not less than:
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(1) 45 percent where the transaction value method is used; or
(2) 35 percent where the net cost method is used.
The applicable subheading rule provides that “[t]he underscoring the the desiginations in
subdivision 244 pertain to goods provided for in subheadings 8481.40 through 8481.80 for use in a
motor vehicle of chapter 87.” Furthermore, Chapter rule 7 for goods of Chapter 84 provides that
“[f]or 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.” Here, because the product-specific rule is underscored and the
merchandise is for use in a motor vehicle of chapter 87 (namely, a passenger vehicle or light truck),
the provisions of subdivision (k) may apply.
GN 11(k) provides special rules for automotive goods. GN 11(k)(i) provides that:
An automotive good and other motor vehicles and parts described herein shall
be subject to applicable requirements set forth in this paragraph, including,
with respect to a passenger vehicle or light truck that has been authorized to
use the alternative staging regime described under subparagraph (viii),
applicable requirements for the duration of the alternative staging period
specified in the approval.
GN 11(k)(ii)(E)(2) includes in the definition of an “automotive good” any “part, component
or material listed in table A.1, A.2, B, C, D, or E of the automotive appendix, subject to any
provisions that may be included in regulations issued by the Secretary of the Treasury.” GN
11(k)(ii)(D) defines “automotive appendix” as “. . . the Appendix to Annex 4-B of the USMCA
(relating to the product-specific rules of origin for automotive goods, as reflected in subdivision (o)
of this note).”
Examining Table C of the automotive appendix, entitled “Complementary Parts for
Passenger Vehicles and Light Trucks,” the subject merchandise is listed (“8481.80 – Other taps,
cocks, valves and similar appliances, including pressure-reducing valves and thermostatically
controlled valves”), and the merchandise is for use as original equipment in the production of a
passenger vehicle or light truck. The Note to Table C in the automotive appendix provides that
“[t]he Regional Value Content requirements set out in Article 3 of this Appendix apply to a good for
use in a passenger vehicle or light truck.”
Article 3.5 of the automotive appendix states that:
Notwithstanding the Product-Specific Rules of Origin in Annex 4-B, each
Party shall provide that the regional value content requirement for a part listed
in Table C of this Appendix that is for use in a passenger vehicle or light truck
is:
...
(a) 65 percent under the net cost method or 75 percent under the
transaction value method, if the corresponding rule includes a
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transaction value method, beginning on January 1, 2023 or three years
after the date of entry into force of this Agreement, whichever is later,
and thereafter.
Notwithstanding any regional value content requirement in this
paragraph, a part listed in Table C is originating if it meets the
applicable change in tariff classification requirement provided in
Annex 4-B.
Article 3.5 of the automotive appendix correlates to GN 11(k)(iii)(E), which repeats the
regional value content requirements for goods listed in Table C, and also notes that “a part listed in
Table C of the automotive appendix is originating if it meets the applicable change in tariff
classification requirement provided in subdivision (o) of this note.”
Here, you acknowledge that the tariff shift rule in GN 11(o)/84.244, which requires a change
in heading, cannot be satisfied because a nonoriginating material of heading 8481 (specifically, a
plastic static plate of subheading 8481.90) is used in the production of the good. Accordingly, the
goods do not qualify as originating pursuant to subdivision (o) of GN 11. However, you argue that
the goods qualify as originating pursuant to the USMCA de minimis provision.
GN 11(e), HTSUS, provides that:
De minimis amounts of nonoriginating materials.
(i) In general.—Except as provided in subparagraphs (e)(ii) through (iv)
below, a good that does not undergo a change in tariff classification or
satisfy a regional value content requirement set forth in subdivision (o) of
this note is an originating good if—
(A) the value of all nonoriginating materials that are used in the
production of the good, and do not undergo the applicable
change in tariff classification set forth in subdivision (o) of this
note—
(1) does not exceed 10 percent of the transaction value of the
good, adjusted to exclude any costs incurred in the
international shipment of the good; or
(2) does not exceed 10 percent of the total cost of the good;
(B) the good meets all other applicable requirements of this note; and
...
Here, although neither the transaction value nor the total cost of the good was provided, the
bill of materials indicates that the nonoriginating material that failed to meet the required tariff shift
represents less than 1.59% of the total value of materials used in the production of the good. As
both the transaction value and the total cost incorporate costs in addition to the total value of
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materials used in the production of the good, the percentage would therefore be lower than 1.59%
under either method. Accordingly, the goods qualify as originating under GN 11(e)(i) and will be
eligible for USMCA preferential tariff treatment, provided all other applicable requirements are met.
II. Country of Origin for Purposes of Section 301 Measures
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 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) of Subchapter III, Chapter 99,
HTSUS, is 8481.80.90.
When determining the country of origin for purposes of applying trade measures under
Section 301, the substantial transformation analysis applies. 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. Texas Instruments,
Inc. v. United States, 69 CCPA 151, 681 F.2d 778 (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. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022.
For example, in HQ H303866, dated February 13, 2020, we examined the production of an
automobile windshield washer pump. In that ruling, approximately half of the discrete parts from
foreign countries were shipped to Mexico to be combined with components from Mexico into
subassemblies. These subassemblies and the plastic pump components were then combined to
form the finished centrifugal windshield washer pump. We noted that the assembly process was
complex and involved soldering, fusing, machining, plastic injection molding, and crimping.
Therefore, we found that the discrete parts were substantially transformed when they were
combined to form a finished centrifugal pump in Mexico.
Similarly, in HQ 563236, dated July 6, 2005, multi-line telephone sets were assembled from
of individual parts and more complex subassemblies in Mexico. Some of the parts were
manufactured within Mexico and others were imported from Malaysia, China, and the U.S. The
handsets, LCD assemblies, microphone assemblies and stands were manufactured in Mexico. Prior
to assembly, none of the component parts were capable of performing any useful function or
performing the function of a telephone. We found that the components imported into Mexico for
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use in the multi-line telephone sets were substantially transformed when assembled in Mexico and
were a product of Mexico for government procurement purposes.
By contrast, in HQ H301619, dated November 6, 2018, we found that Chinese
subassemblies did not undergo a substantial transformation in Mexico when assembled into a
finished electric motor. The stator or rear housing, rotor or armature assembly, and end cap
assembly each had a pre-determined end-use as parts and components of an electric motor.
Furthermore, the production process in Mexico consisted of simple assembly operations.
Accordingly, we found that the electric motors’ country of origin was China.
Here, the manufacturing of the manifold subassembly and the three valve subassemblies,
and the subsequent assembly into the finished ITMS units, results in an article with a new name,
character, and use. As in H303866, this case involves complex and meaningful assembly operations
that include injection molding, hot-plate welding, and ultrasonic welding. The assembly operations
incorporate more than 100 different materials and numerous sophisticated manufacturing operations
on automated production lines. Moreover, as a result of this process, the individual materials lose
their separate identities and become integral parts to the new article—namely, the ITMS.
Accordingly, we find that a substantial transformation occurs in Mexico, and the goods are
considered a product of Mexico for purposes of Section 301 measures.
HOLDING:
Based on the information provided, the subject merchandise qualifies as USMCA originating
goods and will be eligible for preferential tariff treatment under the USMCA, provided that all other
applicable requirements are met. Because a substantial transformation occurs in Mexico, the
merchandise is a product of Mexico for purposes of Section 301 measures.
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
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