CLA-2 OT:RR:NC:N1:102
Kyle Fonjemie
Wiczer Sheldon & Jacobs, LLC
500 Skokie Blvd.
Northbrook, Illinois 60062
RE: The country of origin of portable air conditioning units and the applicability of certain trade remedies under Section 301
Dear Mr. Fonjemie:
In your letter dated January 8, 2021, on behalf of Hisense USA Corporation, you requested a ruling on the country of origin of portable air conditioning (AC) units. A description of the assembly process was submitted for our review.
The products under consideration are AC units, referred to the as the “AP Series” line, model numbers: AP0621CR1W, AP0721CR1W, AP0821CR1W, AP0921CR1G, AP1021CW1G, AP1021TR1GD, HAP55021HR1W, AP1021HR1GD, AP1221CR1W and AP70020HR1GD. The self-contained units are mounted on castors and are designed to cool and heat homes, and other structures without central air conditioning units. The output of the each unit does not exceed 17.58 kW per hour. The AP Series units are imported packaged with a remote control.
Model number: AP0621CR1W, AP0721CR1W, AP0821CR1W, AP0921CR1G, AP1021CW1G, AP1021TR1GD incorporate a refrigerating unit.
Model numbers HAP55021HR1W, AP1021HR1GD, AP70020HR1GD incorporate a refrigerating unit and a four-valve for reversal of the cooling/heating cycle.
In regards to country of origin, it is explained that each unit is assembled in Thailand from components of China and subassemblies or components from Thailand. The following subassemblies or components are manufactured in Thailand:
The chassis (outer front, back, side, top and base panels), PCBA, volutes, referred to as vanes, louvers or fan covers, air outlet, filter frame and fan snail shell are manufactured in Thailand using an injection molding process.
Two fan subassemblies are assembled in Thailand from a fan, a fan hub and blades from Thailand. The hub and blades are assembled in Thailand using manual ultrasonic welding and heat treatment.
A condenser and evaporator, which are manufactured in China, are exported to Thailand to be connected to inlet and outlet tubing. The inlet and outlet tubing is formed from globally-sourced copper tubes that are cut, bent, reamed, formed and then joined by brazing to the ends of the evaporator and the condenser. The evaporator is also placed in a bending machine to be fitted into the chassis.
The pre-assembly of the unit occurs in Thailand, and this begins with the installation of the castors onto the bottom panel of the unit, which is followed by the installation of the water level switch, the motor cover, and a gear. The pole motor is then screwed into place. The lower and upper fans are then installed and electronically connected to a motor. The protective net is installed and the air outlet is fixed. Next, the display PCB, the receiver, and the display panel are installed into the outer top cover, which is followed by the installation of the upper and lower filters.
The final assembly, which also occurs in Thailand, begins with the installation of the compressor foot pads onto the base holder of the bottom of the chassis, and the compressor, which is of Chinese origin. The evaporator and the condenser with the connected tubing, are screwed to the chassis of the unit, and subjected to welding processes. The compressor wiring is then connected. The Thai upper and lower air fans with volutes are then installed. The electrical box is then installed, and the wiring is connected, as required. Next, the required tubes and pipes are subjected to vacuum pumping and filled with refrigerant. The remaining panels, which are from Thailand, and the digital display component are then installed. A plug with a drain cover are then inserted into the unit. Model numbers HAP55021HR1W, AP1021HR1GD, AP70020HR1GD also involve a process of installing and connecting a Chinese 4-way valve. Once complete, each unit is labeled, and undergoes testing and an inspection. Each unit is packaged with a remote control from China.
With regard to your request for the appropriate country of origin of the “AP Series” air conditioning 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 scenario, components from Thailand and China are joined or assembled to each other during the final assembly in Thailand, including components of the cooling unit. However, it is noted that in determining the country of origin of air conditioning units for the purpose of applying 301 trade remedies, the country of origin of the cooling unit is considered the essence of an air conditioning unit. Here, the country of origin of the cooling unit, consisting of a compressor from China, and an incomplete condenser and evaporator from China, cannot yet be considered as the essence of the air conditioners because when imported into Thailand these components are unfinished. Once they are completed with the other components to make the finished cooling unit in Thailand, the Chinese components will be substantially transformed. It is the additional processing in Thailand that completes the cooling unit of the AC unit, which results in the substantial transformation of the Chinese made components of the cooling unit.
Thus, the country of origin of the finished air conditioners will be Thailand for the purpose of applying current 301 trade remedies. Accordingly the country of origin for the subject portable units, model numbers AP0621CR1W, AP0721CR1W, AP0821CR1W, AP0921CR1G, AP1021CW1G, AP1021TR1GD, HAP55021HR1W, AP1021HR1GD, AP1221CR1W and AP70020HR1GD will be Thailand. As such, these units are not subject to the Section 301 trade remedies.
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