MAR-2 OT:RR:NC:N1:102
Lauren E. Wyszomierski
White & Case LLP
701 13th Street NW
Washington, D.C. 20005
RE: The country of origin of units used in air conditioning systems and the applicability of certain trade remedies under Section 301; Correction to Ruling Number N311041
Dear Ms. Wyszomierski:
This replaces Ruling Number N311041, dated April 16, 2020, which contained a product description error. A complete corrected ruling letter follows.
In your letter dated April 2, 2020, on behalf of Midea India Private Unlimited, you requested a ruling on the country of origin of units that complete an air conditioning (AC) system. A detailed description of the production process was submitted for our review.
The products under consideration are three AC model categories, model numbers 13SEER AC, 14SEER AC, and 16SEER AC, and two AC/HP (heat pump) model categories, model numbers 14SEER HP, and 16SEER HP. The five units are referred to as Outdoor Series units and are paired with a separate air handler to form “split systems” that circulate cooled air. The AC/HP systems are also designed to circulate heated air. The AC units are typically paired with a separate furnace or heating appliance to provide heat.
Each unit is assembled in India by combining subassemblies formed in India with components from India, China, and South Korea. The production of each unit begins with the assembly of various subassemblies in India. The subassemblies produced in India, include the four way valve assembly for some models, the throttle assembly, the suction pipe assembly, and the heat exchange coils, which are key components of the condenser assembly. The production of the heat exchange coils involves fin punching, the bending of long U-tubes, fin piercing, pipe expansion, coil drying, coil brazing, coil bending, pipe assembly brazing and coil installation. Once complete, the heat exchange coils are combined with other components to form the condenser assembly.
The throttle assembly is formed by cutting and bending copper tubing. The tubing is then assembled and welded to the Chinese throttle valve. The throttle valve assembly is only used in the AC/HP units.
The suction pipe assembly is formed by cutting and being copper tubing. For the AC/HP models, the tubing also undergoes a punching process and is welded to a pressure switch. The completed tubing is then welded to the Chinese block valve.
The condenser output pipe assembly consists of the distributer being assembled and welded to the output capillary. The welded distributor and capillary are then brazed to an output pipe.
The condenser input pipe assembly consists of cutting and bending copper tubes and then assembling the tubes to a high pressure valve.
The four-way valve assembly is made when copper tubing is cut, bent, and then, affixed and welded to a Chinese valve. The throttle valve assembly is only used in the AC/HP units.
The high pressure switch assembly is made when copper tubing is cut and bent. The block valve and switch components are connected and welded to the formed tubes.
The base assembly of the chassis is then constructed. This process consists of cutting, punching, shaping and painting of metal sheets.
The final assembly for each unit begins by affixing the accumulator to the base assembly. A compressor from South Korea is installed onto the base assembly and the compressor wires are then connected. A low pressure valve assembly is then connected to the compressor’s liquid storage tank and afterwards, a discharge pipe and a suction pipe assembly are welded to the compressor.
Next, two vacuum tubes are inserted into the quick connectors of the high and low pressure valves and the Indian produced condenser is screwed onto the chassis. For the AC/HP unit, a 4-way valve assembly that is included in the low pressure valve assembly and joints 1 and 2 of the accumulator are also soldered. Next, the nitrogen blanketing valve is inserted to the block valve pipe and then various joints are soldered to the compressor and condenser. Side plates made in India are then affixed to the unit using screws and this process is followed by the installation of the unit’s outer side column, which is also produced in India. A wire holder, a Chinese blower capacitor and clamp are then fastened to an electric control metal sheet, which is then installed into the unit. For the AC/HP units, an electric control board is fastened to a side plate installed near the condenser and the associated wire groups are then positioned and connected accordingly. Certain models also require the installation of an Indian produced e-box assembly.
The following step consists of a Chinese motor and a Chinese fan being screwed to an Indian manufactured top cover, which is then installed to the unit’s framework. Subsequent to the aforementioned installation processes, the unit is charged with refrigerant and wiring is positioned and connected to the Chinese main control board. It is noted that the assembly of each AC/HP unit also, involves the installation and connection of a throttle valve assembly. Once complete, each unit undergoes testing and an inspection.
With regard to your request for the appropriate country of origin of the AC and AC/HP units, 19 C.F.R. § 134.1(b) provides in pertinent part as follows: Country of origin means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of this part. As stated in HQ 735009, dated July 30, 1993, “The country of origin is the country where the article last underwent a “substantial transformation” that is, processing which results in a change in the article's name, character, or use”.
The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character and 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). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, all factors such as the components used to create the product and manufacturing processes that these components undergo are considered in order to determine whether a product with a new name, character, and use has been produced. No one factor is decisive, and assembly operations that are minimal will generally not result in a substantial transformation.
In this instance, various sub-assemblies produced in India are combined with components from India, South Korea and China during the final assembly in India. The South Korean and Chinese components are substantially transformed in India when they are combined with Indian components and subassemblies in India because the assembly operations to make the units in India are complex and meaningful. Therefore, it is our view that the nature of the processing performed in India is one in which the foreign components lose their separate identities to become new articles, i.e., outdoor units used in a split AC system. As such, the country of origin of the subject units, model numbers 13SEER AC, 14SEER AC, 16SEER AC, 14SEER HP, and 16SEER HP, will be India. Accordingly, these units are not subject to the Section 301 trade remedy.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. Part 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Sandra Martinez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division