CLA-2-85:OT:RR:NC:N2:212
Terry Meehan
Masimo Corporation
52 Discovery
Irvine, CA 92618
RE: The tariff classification, marking, and country of origin of patient cables
Dear Mr. Meehan:
In your letter dated February 11, 2020, you requested a ruling addressing tariff classification and country of origin.
The merchandise at issue is identified as the Red Diamond Patient Cable. The cable is comprised of an insulated wire conductor fitted with connectors at each end. One connector is a standard 20-pin D-style connector while the other is a proprietary, red diamond connector meant to fit specific medical devices.
In use, the proprietary red diamond connector is attached to a Masimo pulse oximeter designed to be worn on the finger of a patient. The monitor end of the cable is then connected to an output device that displays registered patient pulse and oxygen levels to a clinician. We note that neither the pulse oximeter, nor the monitor is part of this ruling request, as they are not imported with the subject cable.
As an initial matter, you suggest that the correct subheading for the patient cable is 8544.42.2000, Harmonized Tariff Schedule of the United States (HTSUS). We agree.
The applicable subheading for the Red Diamond Patient Cable will be 8544.42.2000, HTSUS, which provides for “Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fiber cables, made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors: Other electrical conductors, for a voltage not exceeding 1,000V: Fitted with connectors: Other: Of a kind used in telecommunications.” The general rate of duty will be free.
Within your request, you provide an explanation of the manufacturing process of the subject cables. The process begins with bulk, unterminated, insulated wire conductor cable of Chinese origin imported into Mexico. In Mexico, the cable is cut to the desired length, the ends are exposed, and the individual strands are prepared for the connector assembly. A US origin D-style connector is then added to one end by soldering the strands to the connector and assembling the shell. The proprietary instrument-end connector is then assembled on the other end of the cable. The individual wire strands are soldered to a PCBA, the assembly is shielded, and the remaining parts are molded onto the connector. The finished cable is then electrically tested for function.
With regard to your request that the subject cables be eligible to be marked as a product of Mexico, we note that, as Mexico is a NAFTA country, the NAFTA Marking Rules must be applied in determining the country of origin for marking purposes.
Part 102, Customs and Border Protection Regulations (19 C.F.R. Part 102), sets forth the NAFTA Marking Rules. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(a)(1) The good is wholly obtained or produced;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the cables are neither wholly obtained nor produced exclusively from “domestic” materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). “Foreign material” is defined in 19 C.F.R. § 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” In this case, the subject cables are classified under subheading 8544.42.2000, HTSUS. The applicable rule for subheading 8544.42.2000, HTSUS, in section 102.20 requires:
A change to subheading 8544.42 from any other good of subheading 8544.42, except when resulting from simple assembly; or
A change to subheading 8544.11 through 8544.70 from any other subheading, including another subheading within that group, except when resulting from simple assembly.
We note that the Chinese originating insulated cable conductor is classified under subheading 8544.49, HTSUS, as imported into Mexico. The components that make up the connectors, regardless of origin, would be classified outside of heading 8544, HTSUS. As such, the second part of the rule listed above is relevant in this instance. The assembly and attachment of the connectors, in our view, extends beyond the scope of “simple assembly” as defined in 19 CFR 102.1(o). The assembly contains a number of parts and steps that are significantly complex. Based on the information presented, the subject cable would meet the tariff-specific rules set forth in 19 CFR 102.20. Therefore, the Red Diamond patient cable is eligible to be marked a product of Mexico.
While the NAFTA marking rules contained in 19 C.F.R. Part 102 will determine the country of origin for marking purposes, the substantial transformation test will determine the country of origin for purposes of the Section 301 measures. See, e.g., Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018.
The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer, the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted, “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
Based on the facts presented with this case, it is the opinion of this office that the Chinese origin conductor imparts the essence of the finished cable assembly. The addition of the connectors in Mexico does not substantially transform the conductor into a new and different article of commerce with a name, character, and use distinct from that of the imported article. For the purposes of the application of Section 301 trade remedies under 9903.88.02, HTSUS, the country of origin of the finished cable assembly is China. Therefore, the Red Diamond Patient Cable is subject to the Section 301 trade remedies as provided for under 9903.88.02, HTSUS.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 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 Luke LePage at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division