CLA-2-94:OT:RR:NC:1:130
Mr. Brandon French
Braumiller Law Group, PLLC
5220 Spring Valley Rd., Ste 200
Dallas, TX 75254
RE: The country of origin of prefabricated houses
Dear Mr. French:
In your letter, dated February 9, 2023, you requested a binding tariff classification ruling on behalf of your client, Momo Homes Limited. The ruling was requested for prefabricated houses of metal. Product information and photos were provided for our review.
The item under consideration is a complete prefabricated metal-stud/frame house that is assembled on site in the U.S. In your letter, you suggest that the building is a “modular building”, classifiable under subheading 9406.20.0000, Harmonized Tariff Schedule of the United States (HTSUS) which provides for Prefabricated buildings: Modular building units, of steel. The buildings, however, do not meet the definition of “modular building units”, as set forth in Note 4 to Chapter 94, HTSUS:
Prefabricated buildings include “modular building units” of steel, normally presented in the size and shape of a standard shipping container, but substantially or completely pre-fitted internally. Such modular building units are normally designed to be assembled together to form permanent buildings.
The instant buildings are not presented in the size and shape of a shipping container and are not designed to be assembled together to form permanent buildings. The instant building is a fully designed building with metal framing that is assembled on site.
The applicable subheading for the prefabricated buildings will be 9406.90.0130, HTSUS, which provides for Prefabricated buildings: Other: Of metal: Other. The rate of duty will be 2.7 percent ad valorem.
Please note that not all installed components may be classified with the building. The Explanatory Notes to the Harmonized System for heading 9406 state:
The buildings of this heading may or may not be equipped. However, only built‑in equipment normally supplied is to be classified with the buildings. This includes electrical fittings (wiring, sockets, switches, circuit‑breakers, bells, etc.), heating and air conditioning equipment (boilers, radiators, air conditioners, etc.), sanitary equipment (baths, showers, water heaters, etc.), kitchen equipment (sinks, hoods, cookers, etc.) and items of furniture which are built in or designed to be built in (cupboards, etc.).
The note indicates that only built-in equipment normally supplied with a building may be classified with the building. Generally, electrical appliances are not classifiable with the building and must be separately declared.
In your letter, you request a determination of the country of origin of the prefabricated house. You describe a scenario wherein cold rolled steel sheet from Vietnam is transformed in Panama into steel studs and diagonal supports. The studs and supports are then manufactured into structural wall panels, roof trusses, and floor joists. The wall panels are assembled into complete walls. Wall faces and insulation are added and cement and reinforcing fiber are applied to the exterior wall surfaces. Windows and doors are then installed into the wall units. The wall, floor and roof components form the complete framework of the house unit. All of the above manufacturing and assembly takes place in Panama. Steel pile footings are also manufactured in Panama.
There are many additional components that are incorporated into the house. These components originate in many countries including China, Vietnam, and Malaysia. The components include doors and hardware, windows, wiring and plumbing equipment, kitchen and bath components, countertops, flooring, and more. All of the components are assembled into the house in Panama.
Section 134.1(b) of the Customs Regulations (19 CFR 134.1(b)) provides that the "[c]ountry 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 Part 134, Customs Regulations (19 CFR Part 134). Substantial transformation requires that "[t]here must be a transformation; a new and different article must emerge, ‘having distinctive name, character, or use.’" Anheuser-Busch Brewing Association v. United States, 207 U.S. 556, 28 S. Ct 204 (1908). We must therefore determine if or where a substantial transformation of materials occurs in order to determine country of origin.
The manufacturing of steel framing, wall panels, roof trusses, and floor joists in Panama results in the creation of the full structure of the house. While it may not yet be complete, the walls, floors, and roof are the complete framework of a house, and together are recognizable as an incomplete house of heading 9406. Therefore, the manufacturing of the steel sheet into wall, floor, and roof components in Panama effects a substantial transformation wherein a new and different article – a house - emerges from the steel sheet. The plumbing, electrical, flooring, and other materials serve to enhance the prefabricated home, and therefore do not impart the house’s essential character or alter its identity. As such, the country of origin of the prefabricated building is Panama.
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 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 Laurel Duvall at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division