OT:RR:CTF:VS H343750 AMW
Joseph F. Walter
Livingston International Professional Services
670 Young Street
Tonawanda, New York 14150
RE: Outdoor Barrel Saunas; United States-Mexico-Canada Agreement; Section 301 Trade
Remedies
Dear Mr. Walter:
This is in response to your request, dated November 15, 2024, filed on behalf of Red
Rock Outdoors Co. (“Red Rock”) in which you request a binding ruling regarding the eligibility
of certain outdoor barrel saunas 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 November 15, 2025, ruling request. The product
under consideration is an unassembled, prefabricated wooden barrel sauna building (hereinafter,
the “barrel sauna”). The merchandise is described as a “barrel sauna” because, upon final
assembly at the installation site in the United States, the units resemble a wooden barrel. Based
on its referral memorandum, the NCSD determined that the unassembled barrel saunas would be
classifiable under subheading 9406.10.10, Harmonized Tariff Schedule of the United States
(“HTSUS”), which provides for prefabricated buildings of wood.
According to your request, each barrel sauna is manufactured in both China and Mexico
using Canadian-origin hemlock and cedar woods. In China, the wood is kiln-dried, sawed into
boards, and sanded. The boards are then fashioned into the following prefabricated components:
front sauna panel (door end), back sauna panel, indoor floor, bench and bench back, and the
cradles for holding the barrel sauna’s body in place. The NCSD has advised that the wood
boards completed in China are classified under heading 4407, Harmonized Tariff Schedule of the
United States (“HTSUS”), which provides for “Wood sawn or chipped lengthwise, sliced or
peeled….” The boards that are further manufactured into the prefabricated components would
be classified under heading 4418, HTSUS, which provides for “Builders’ joiner and carpentry of
wood, including cellular wood panels and assembled flooring panels…”, and heading 9401,
HTSUS, which provides for “Seats…, whether or not convertible into beds, and parts thereof….”
The barrel sauna’s stainless steel and glass components are also sourced from manufacturers in
China. These include the following: fasteners, barrel hoops, glass door, windows, light fixtures,
and asphalt shingles.
After manufacturing in China, the components, door, fasteners, fixtures, accessories, and
remaining wood boards are exported to Mexico. In Mexico, the boards that will form the outer
circumference of the barrel sauna are continuously shaped to add a dado joint near each board
end, which is a rounded shape that permits one section of wood to connect with another. These
curved edges will allow the façade boards to fit together and form the round outer surface of the
barrel sauna. Here, the NCSD has advised that the continuous shaping of the boards in Mexico
causes a tariff shift from heading 4407, HTSUS, to either heading 4409, HTSUS, which relates
to “Wood…continuously shaped…” or heading 4416, HTSUS, which relates to “Casks,
barrels…and parts thereof, of wood, including staves….”
After the stave boards are shaped in Mexico, they are packed together with the remaining
Chinese-origin components (e.g., prefabricated doors, floors, benches, metal components, and
windows) for shipment to the United States. Outside of the continuously shaped stave boards,
the remainder of the Chinese-origin components are not further manufactured in Mexico.
Finally, the costed bill of materials provided by the requestor indicates that the value of the
components totals $856.40 from China and $809 from Mexico.
ISSUE:
Are the imported sauna barrels eligible for preferential tariff treatment under the USMCA
when imported from Mexico into the United States?
What is the country of origin of the subject barrel saunas for the purpose of Section 301
remedies?
LAW & ANALYSIS:
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)(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
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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
…
Here, the subject barrel saunas contain non-originating materials. As such, they are not
considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i),
nor are they goods produced exclusively from originating materials per GN 11(b)(ii). Thus, we
must determine whether the goods qualify under GN 11(b)(iii).
With respect to GN 11(b)(iii), the subject barrel saunas are not “a good produced entirely
in the territory of one or more USMCA countries using nonoriginating materials” under GN
11(b)(iii) because they do not satisfy “all applicable requirements.” Under GN 11(l)(xvi),
“production” means “growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting,
capturing, breeding, extracting, manufacturing, processing or assembling a good” or “the
farming of aquatic organisms through aquaculture,” and does not include the term “packaging.”
Thus, the nonoriginating materials packaged as part of the kits in Mexico will not satisfy “all
applicable requirements” of GN 11. See Headquarters Ruling (“HQ”) H321859, dated August 5,
2021 (determining that unassembled dog pens and extension kits assembled in Mexico with
Chinese and USMCA-origin materials was not “produced” in a USMCA country).
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Next, GN 11(b)(iv) provides exceptions to the tariff shift rule under GN 11(b)(iii), noting
in relevant part that products that are imported into the United States in an unassembled state but
are classified as assembled goods pursuant to GRI 2(a), HTSUS, may qualify as USMCA-
originating goods pursuant to GN 11(b)(iv)(B)(2) and (C) if the regional value content (“RVC”)
calculated under GN 11(c)(i)-(ii) is not less than 60 percent if the transaction value is used or 50
percent if the net cost method is used. Here, the importer’s costed BOM indicates that a majority
of the value of the barrel saunas are imparted by the Chinese-origin components (i.e., $856.40
from China and $809 from Mexico). Based on the transaction value formula RVC =
((Transaction Value – Value of Nonoriginating Materials)/Transaction Value) X 100 provided in
GN 11(c)(ii), HTSUS, and the documentation submitted by the importer, the RVC of the barrel
saunas is less than 60 percent. Accordingly, the barrel saunas do not qualify as USMCA-
originating goods.
Country of Origin for Purposes of Section 301 Remedies
The U.S. 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”). See Section XXII, Chapter 99,
Subchapter III, U.S. Note 20(r), HTSUS. The Section 301 measures apply to products of China
enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(s)(i), HTSUS. Among the
subheadings listed in subheading 9903.88.03 are prefabricated buildings of wood classified
under subheading 9406.10.00, HTSUS. Such goods from China are subject to additional duties.
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, 681 F.2d 778 (CCPA 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. See Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp.
1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). 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).
In Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d per curiam, 989 F.2d
1201 (Fed. Cir. 1993), the court determined that certain hand tool components used to make flex
sockets, speeder handles, and flex handles were not substantially transformed within the United
States. The components were cold-formed or hot-forged into their final shape prior to
importation, with the exception of speeder handle bars, which were reshaped by a power press
after importation, and the grips of the flex handles, which were knurled in the U.S. After entry,
the imported items were heat treated to strengthen the components, sand-blasted to clean the
components, and electroplated to better enable the components to resist rust and corrosion. The
court noted that the processing which occurred within the United States did not alter the name of
the imported components, the character of the parts remained substantially unchanged upon the
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completion of such processing, and the intended use of the articles was predetermined at the time
of importation.
The individual components of the barrel saunas are manufactured in China and Mexico.
A majority of the components (e.g., wooden prefabricated components, metal components, and
other accessories) are manufactured in China whereas the barrel staves are continuously shaped
in Mexico. Just like the hand tool components in Nat’l Hand Tool Corp., the components of the
barrel saunas have a predetermined use and their character and use remain unchanged after they
are packaged in Mexico. In addition, the continuous shaping of the wooden staves and
packaging occurring in Mexico is a relatively simple combining operation that does not change
the name, character, or use of the individual Chinese-origin components. See Texas Instruments;
Belcrest Linens; Uniroyal, supra. Therefore, we find the country of origin for the application of
Section 301 trade remedy duties is China.
HOLDING:
Based on the information provided, the subject barrel saunas are not eligible for
preferential tariff treatment under USMCA. In addition the barrel saunas originate in China for
the purposes of applying Section 301 trade remedies.
Please note that 19 CFR 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 R. Brenner, Chief
Valuation and Special Programs Branch
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