OT:RR:CTF:VS H339398 AMW
Larissa Andrade
Mobile Climate Control Inc.
7540 Jane Street
Vaughan, Ontario, Canada
RE: USMCA Eligibility of Receiver Dryer Units
Dear Ms. Andrade:
This is in response to your request, dated May 3, 2024, filed on behalf of Mobile Climate
Control Inc. (“MCC”). You request a binding ruling regarding whether certain receiver dryer units
imported from Canada are eligible 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 (“NCSD”) for response.
FACTS:
The following facts are based on your May 3, 2024, ruling request as well as follow-up
information provided to this office on August 7, 2024, August 29, 2024, and May 22, 2025. The
product under consideration is a receiver dryer unit designed to filter out contaminates and moisture
in air conditioning systems. The subject receiver dryer consists of a cylindrical tank with a solid core
filter inside, which contains a drying agent. The request states that the receiver dryer is assembled in
Canada from three main components: (1) a Chinese-origin receiver dryer, (2) a Chinese-origin
pressure switch, and (3) a United States-origin harness. When asked by CBP to describe the
Canadian assembly process, MCC responded that the process “involves the addition of harness and
pressure switch.”
You have confirmed that MCC purchases the Chinese-origin components from a related
party, Ningbo Mobile Climate Control-China (“MCC China”). The finished receiver dryer units are
sold to various unrelated importers in the United States. You provided the “costed bill of materials”
for the subject receiver dryer units, as well as exemplary purchase orders and invoices related to (1)
MCC’s purchase of the underlying components from MCC China, and (2) the purchase of the
finished receiver dryer units by unrelated U.S. importers.
ISSUE:
Whether the subject receiver dryer units are eligible for preferential tariff treatment under the
USMCA when imported from Canada into the United States.
LAW & ANALYSIS:
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)(i) provides:
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 territory of 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
…
When the receiver dryer units contain nonoriginating materials, they are not considered a good
wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor are the goods
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produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the
goods qualify under GN 11(b)(iii). To qualify for preferential tariff treatment under GN 11(b)(iii), a
good must meet a product specific rule of origin, which often includes a regional value content (“RVC”).
Based on the description of the receiver dryer model included in your submission, we agree
that the applicable subheading for the subject merchandise is 8421.29.00, Harmonized Tariff
Schedule of the United States (“HTSUS”), which provides for: “Centrifuges, including centrifugal
dryers; filtering or purifying machinery and apparatus, for liquids or gasses; parts thereof: Other….”
The applicable rule of origin for goods classified under subheadings 8421.29.00, HTSUS, is in
GN 11(o)/ 84.70(A)-(B), HTSUS, which provides, in relevant part:
70. (A) A change to subheadings 8421.19 through 8421.39 from any other heading; or
(B) A change to subheadings 8421.19 through 8421.39 from subheadings 8421.91 through
8421.99, whether or not there is also a change from any other heading, provided there is a
regional value content of not less than:
(1) 60 percent where the transaction value method is used; or
(2) 50 percent where the net cost method is used.
The finished receiver dryer unit is assembled in Canada from three main components: a
Chinese receiver dryer classified in subheading 8421.29.00, HTSUS; a Chinese-origin pressure
switch classified in Chapter 85, HTSUS; and a United States-origin harness also classified in Chapter
85, HTSUS. The Canadian assembly results in a finished receiver dryer unit also classified in
subheading 8421.29.00, HTSUS. As a result, GN 11(o)/84.70(A) is inapplicable and we instead
apply GN 11(o)/84.70(B), which provides for a regional value content requirement of not less than
60 percent using the transaction value method or 50 percent using the net cost method.
You have provided us with information pertaining to the cost of the materials, and you
utilized the transaction value in your calculations to calculate the RVC of the originating materials.
Under GN 11(c)(ii), the transaction value method is set forth as follows:
Transaction value method: An importer, exporter, or producer of a good may
calculate the regional value content of a good on the basis of the following the
transaction value method:
RVC = ((TV - VNM)/TV) x 100
where RVC means the regional value content of the good, expressed as a percentage;
TV means the transaction value of the good adjusted to exclude any costs incurred in
the international shipment of the good; and VNM means the value of nonoriginating
materials, including materials of undetermined origin, used by the producer in the
production of the good.
For the overall transaction value, you have provided a purchase order from an unrelated U.S.
importer for the amount of $22.19. For the VNM, the available documentation shows the amount
ranges up to $9.307. In your initial submission, you provided a “bill of materials” listing the “FOB
purchase price” of the three components (i.e., Chinese-origin receiver dryer, Chinese-origin switch,
and U.S.-origin wire harness) as well as the relevant freight costs. The “bill of materials” document
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represented a VNM of $7.47. In response to a follow-up inquiry by CBP, however, you also
provided commercial invoices between MCC and MCC China. These invoices do not directly
support the costs provided in the “bill of materials.” Instead, these invoices show MCC has
purchased the underlying components at different times and at different values. Specifically, the
invoices show a maximum FOB unit price of $2.10 for the pressure switch and $7.207 for the
receiver dryer. Using these amounts, the VNM would be $9.307. As such, the RVC is calculated as
follows: (($22.19 - $9.307) /$22.19) * 100 = 58.057%. This is below the 60% minimum required by
GN 11(o)/ 87.59 (B)(1). Accordingly, MCC has not sufficiently demonstrated that its imported
receiver dryer units would satisfy the regional value content necessary to receive preferential tariff
treatment under the USMCA.
HOLDING:
Based on the information provided, the imported receiver dryer units are not eligible for
preferential tariff treatment under USMCA.
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 [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,
Monika Brenner, Chief
Valuation and Special Programs Branch
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