MAR-2 OT: RR: NC: N4:410
Mr. Robert Casey
Action Worldwide Inc.
1 Lincoln Blvd.
Rouses Point, NY 12979
RE: The tariff classification, country of origin, and eligibility of the United States-Mexico Canada Agreement (USMCA) of an LED module from Canada
Dear Mr. Casey:
This is in response to your letter dated April 20, 2022, on behalf of Colorbeam Northamerica Inc., requesting a classification, United States-Mexico-Canada Agreement (USMCA) eligibility for preferential treatment, country of origin determination for marking purposes and Section 301 applicability for an LED module.
The merchandise under consideration is identified as the LED Bulb Assembly. The LED Bulb Assembly, which is an LED module, consists of an arrangement of Light Emitting Diodes (COB’s), an aluminum heat sink, diffuser lens and an aluminum housing. It is stated that the assembly does not contain an LED driver or power control switches. It is also stated that there are no smartcards in the LED bulb assembly. The LED Bulb Assembly is used in conjunction with the centrally located Gateway Controller and will be installed onto the housing fitting (“can”, which is preinstalled on the ceiling) as light source of the ceiling lighting fixture. A decorative “rim” fitting will be then installed onto the “can” to form a complete ceiling fixture. The housing fitting/“can” and the decorative “rim” are not shipped together with the LED Bulb Assembly.
The applicable subheading for the LED Bulb Assembly will be 8539.51.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Electrical filament or discharge lamps, including sealed beam lamp units and ultraviolet or infrared lamps; arc lamps; light-emitting diode (LED) light sources; parts thereof: Light-emitting diode (LED) light sources: Light-emitting diode (LED) modules”. The rate of duty will be free.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8539.51.0000, HTSUS, unless specifically excluded, are subject to an additional 25% ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 8539.51.0000, HTSUS, listed above.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china respectively.
Regarding the LED module’s eligibility for preferential treatment, the USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018, and approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act. General Note (GN) 11 of the HTSUS implements the USMCA. 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));
…
The subject module contains non-originating materials and is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the module is not a good produced entirely in Canada exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o).
A detailed review shows that no product specific rule exists for the noted classification in subheading 8539.51.00. We note that the following is found on page 2 of the General Notes of the HTSUS:
Compiler’s Note: …Other agreements, including the new United States-Mexico-Canada Free Trade Agreement, are set forth in terms of HS 2012 and may not contain current tariff numbers. However, the rules for the North American Free Trade Agreement [expired; retained for reference through June 30, 2021], the United States-Australia Free Trade Agreement, the United States-Chile Free Trade Agreement, the United States-Bahrain Free Trade Agreement, and the United States-Korea Free Trade Agreement have been updated, and the pertinent general notes do reflect proclaimed rectifications through 2007 or 2012, depending on the agreement…
Further, CSMS message 17-000270 entitled “FTA Origination Analysis and Certification when no Tariff Change Rule (TCR)” states that “tariff-shift origination analysis should classify the good and its materials using the most recent HTSUS in which the tariff item has a corresponding TCR and perform the origination analysis using that year’s HTSUS.”
Per the above, we found that the corresponding subheading for the subject LED modules enumerated within the 2012 HTSUS would be 8543.70, HTSUS. As such, we look to the applicable tariff shift rule for merchandise classifiable under subheading 8543.70, HTSUS, in GN 11(o), HTSUS, which provides, in relevant part:
A change to subheading 8543.70 from any other subheading, except from “smart” cards, other than those containing a single integrated circuit, of subheading 8523.59.
Based upon the information provided, all non-originating parts included in the manufacture of the finished module are classified outside of subheading 8543.70, HTSUS. As such, the finished modules are considered originating goods under the USMCA and eligible for preferential treatment.
The marking statute, Section 304, Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
Pursuant to 19 C.F.R Section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 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 LED Bulb Assembly is neither wholly obtained or produced nor produced exclusively from “domestic” (Canada, in this case) 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). Section 102.11(a)(3) provides that the country of origin of a good is the country in which:
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material” is defined in § 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.”
As with the USMCA examination above, we similarly find that we must use the product specific rule for the previous classification of subheading 8543.70, HTSUS, represented in section 102.20. This rule states:
A change to subheading 8543.70 from any other subheading, except from proximity cards or tags of subheading 8523.52 and except from other machines or apparatus of subheading 8486.10 through 8486.20.
As stated above, all parts involved in the manufacture of the finished product are classified outside of subheading 8543.70, HTSUS, the foreign materials or non-originating parts undergo the requisite tariff shift. Further, we note that no parts used in the manufacture appear to be classified within the noted exclusionary subheadings. As such, the finished LED Bulb Assemblies are considered products of Canada for marking purposes.
Regarding the applicability of Section 301 trade remedies to the LED Bulb Assembly under consideration, CBP relies on the substantial transformation analysis when determining the country of origin for purposes of applying Section 301 trade remedies. 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) (Uniroyal). 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).
The provided Bill of Materials indicates that the LED Bulb Assembly is comprised of the following components or materials: heat sink and aluminum substrate, back cover, rocket front ring, LED holders, lens (diffuser), LED card-4 Pins CCT (color changing tunable), LED chip (LEDs and a resistor populated on a board, there are circuits on the board that connect the LED chips to the soldering points), thermal paste, transfer connector, shortpin, screws, washers, wires, aluminum trim, and carton and foam. All are made in China except that the thermal paste is from the United States and that the washers are from Canada.
The above individual components are assembled into the finished LED Bulb Assembly in Canada. The assembly process in Canada includes: the inspection of the heatsink surface and thread the wire; performing the LED power-on test; soldering wire; inspecting the solder joint, aluminum base board and heatsink; affixing the base board to heatsink; performing the RJ-45 power-on test and connecting the back cover rivet; connecting the back cover with cards and rivets; pressing the back cover into the heatsink; performing the heatsink parts power-on test; connecting the lens assembly, front ring and heatsink; checking the finished product and performing the aging test; and packing the products.
We are of the opinion that, the majority of the parts and components are of Chinese origin, especially the LED chip (LEDs, circuits and resistor populated on a board), is the single most important and critical component of the LED Bulb Assembly. It possesses the predetermined end-use for the making of the LED Bulb Assembly. The use of the article has already been pre-determined upon importation from China to Canada. The assembly operations performed in Canada do not substantially transform the Chinese originating components into Canadian products. The assembly in Canada of the individual components to produce the finished LED Bulb Assembly does not create a new and different article of commerce with a distinct character and use that is not inherent in the components imported into Canada. The components of the LED Bulb Assembly, e.g., the LED chip, do not lose the individual identity as a result of the assembly process in Canada. See N325101(4/13/2022), N309443 (3/4/2020), N304390 (6/12/2019), etc.
As a result, it is the opinion of this office that no substantial transformation occurs in this case.
Regarding the applicability of Section 301 remedies, it is the decision of this office that the manufacturing and/or assembly operations described, in sum, do not substantially transform the individual components into a new and different article of commerce with a changed name, character, and use. Therefore, the LED Bulb Assembly will be considered as a product of China, which will be subject to the additional duties under Section 301of the Trade Act of 1974, as amended, upon importation.
Please note that 19 C.F.R. § 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 a Customs and Border Protection 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.”
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 CFR 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 Michael Chen at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division