CLA-2 OT:RR:NC:N1:102
Kyle Fonjemie
Wiczer Sheldon & Jacobs, LLC
500 Skokie Blvd. Suite 325
Northbrook, Illinois 60062
RE: The country of origin of window air conditioning units and the applicability of certain trade remedies under Section 301
Dear Mr. Fonjemie:
In your letter dated October 15, 2021, on behalf of Hisense USA Corporation, you requested a ruling on the country of origin of window air conditioning (AC) units. A description of the assembly process was submitted for our review.
The products under consideration are window AC units referred to as the AW/HAW Series: models WAC06, MAW06, AW0822CW1W, WAC08W and MAW08. The self-contained 5,000 to 25,000 BTU units are used in homes, apartments, and other structures for consumers without access to central air conditioning. The AW/HAW series units provide a cooling output that does not exceed 17.58 kWs per hour. The units feature a cooling system.
In regard to country of origin, it is explained that each air conditioning unit is assembled in Thailand from components that originate in China and Thailand, including sub-assemblies from Thailand.
For each unit, two fan subassemblies are produced in Thailand. The fan hub, blades, louvers, air outlet, filter frame and snail shell of each fan are formed using a plastic injection process from globally-sourced pellets. The components are welded and joined to each other to form a complete fan. The fans are later connected to a Chinese motor.
The chassis of each AC unit will be molded and formed from sheet metal part in Thailand. A plastic injection process is used to form other plastic components of the AC, including panels.
Inlet and outlet tubing for the condenser and evaporator is formed from globally-sourced copper tube that is cut, bent, reamed, and formed. Once the inlet and outlet tubing are formed, they are welded to the Chinese condenser and Chinese evaporator.
The final assembly of each unit takes place in Thailand and begins by installing and screwing the press rubber pad, a water drain, a capillary assembly, a Chinese compressor, the evaporator, and the condenser to the AC’s chassis. The applicable tubing of the compressor and evaporator are installed and connected. The return port and exhaust tube ports are then connected and welded into place. Nitrogen is added. The air duct plate parts are installed, which is followed by the installation of the lower and upper volutes, and the terminal cover. The electrical system, and a temperature sensor are then installed and connected. The unit is then subjected to a vacuum sealing and refrigerant charging process. Wiring is connected throughout the various steps. Afterwards, the outer casing and front panel are installed and screwed into place. Upon completion, each unit is subjected to testing and inspections.
With regard to your request for the appropriate country of origin of the window 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 the scenario described above, components from Thailand and China are joined or assembled to each other during the unit’s final assembly that occurs in Thailand. The final assembly operations that occur in Thailand are not complex and meaningful enough.
Instead, when 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, which is the essence of an air conditioning unit, is considered. In this instance, the cooling unit consists of a compressor from China, and an unfinished condenser and evaporator from China that are welded to the input and output tubing in Thailand.
New York ruling N316843, dated February 5, 2021, discusses a similar scenario in which the condenser and evaporator are manufactured in China, and then exported to Thailand to be connected to inlet and outlet tubing. The inlet and outlet tubing are 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. Ruling N316843 explains that 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 the evaporator and condenser are unfinished.
The same rationale applies here. The Chinese condenser and evaporator become finished articles in Thailand, where the inlet and outlet tubings are cut, bent, reamed, formed, and welded to the Chinese condenser and evaporator. It is these additional processes, which occur in Thailand, that substantially transform the Chinese evaporator and condenser of the AC’s cooling unit into a finished condenser and evaporator.
Therefore, in considering that the majority of the cooling components are from Thailand, we believe the country of origin of the subject window AC units for the purpose of applying current 301 Trade Remedies is Thailand.
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