CLA-2-90:OT:RR:NC:N2:212
H. Michael Leightman
Ernst & Young LLP
1401 McKinney Street
Houston, TX 77010
RE: The country of origin of TFT-LCD modules
Dear Mr. Leightman:
In your letter dated August 21, 2020, you requested a country of origin ruling on behalf of your client, AU Optronics Corporation.
There are five items at issue with this request that are all described as Thin Film Transistor (TFT)-Liquid Crystal Display (LCD) modules. The subject modules are identified by part numbers P370IVN02.2, P750QVN02.3, P650QVN06.0, P430QVR01.0, and P850MVN01.0. You state that the five modules are virtually identical in composition as they are comprised of a TFT-LCD cell, a drive and control PCBA, a backlight, and structural bezel. The only difference is that the five are manufactured in varying sizes and resolutions. You state that, after importation, the finished modules are used in a variety of displays including digital signage, electronic advertising, and public information systems.
In your request, you state that the manufacturing process is virtually identical for all five models, with only one variance that will be discussed in the following description. The process begins for all models in Taiwan where the TFT-LCD cell is manufactured. The TFT is manufactured by depositing transistors onto a glass substrate prior to adding a photo resistive coating. The substrate is then exposed to light, etched, and stripped to complete the TFT process. The color filter is then produced by coating a second glass substrate with a photo restive resin, black matrix, and various color pigments. The TFT and color filter are then combined and liquid crystals are deposited between them to create the finished TFT-LCD cell.
The TFT-LCD cell is then bonded to the PCBA, which contains the driver and control circuitry. This bonding process is completed in Taiwan for four of the models, while for model P430QVR01.0 it is completed in China. However, for all five models, the integrated circuits and PCBA are sourced in Taiwan. For all models, the cell with the PCBA is then combined with a backlight, tested, and packaged in China.
The “country of origin” is defined in 19 CFR 134.1(b), in pertinent part, as “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.”
For tariff purposes, 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).
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.
Regarding the origin of the subject modules, it is our opinion that the TFT-LCD cell imparts the essential functional component of the finished device. The complex manufacturing process performed in Taiwan renders the end-use of the cell predetermined, as it could not be used for any other purpose than a display. Further, the assembly processes performed in China would not substantially transform the cell into a new and different article of commerce with a name, character, and use distinct from that of the exported good. Therefore, based upon the facts presented, the country of origin of the TFT-LCD modules, part numbers P370IVN02.2, P750QVN02.3, P650QVN06.0, P430QVR01.0, and P850MVN01.0, is Taiwan.
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