Country of Origin; CATV Amplifiers; Section 301 trade remedy

H336031 AMW CATEGORY: Origin Mr. Josh Beker, Esq. Roberts & Kehagiaras LLP 2339 Commerce St. Suite 162 Houston, TX 77003 RE: Country of Origin; CATV Amplifiers; Section 301 trade remedy Dear Mr. Beker: This is in response to your request dated November 16, 2023 , on behalf of your client, Applied Optoelectronics, Inc. (“AOI”), regarding the country of origin of several models of cable television broadband (“CATV”) amplifiers for purposes of Section 301 measures. Your request, originally submitted as an electronic ruling request to the National Commodity Specialist Division, was forwarded to this office for review. FACTS: The following facts are based on the information provided in your November 16, 2023, submission and follow-up information provided on February 5, 2024, and February 16, 2024. AOI is a manufacturer and importer of fiberoptic network products servicing a wide range of end markets. You state that the physical components and characteristics of the subject products are similar to those subject to a prior ruling obtained by AOI, HQ H326574, dated June 21, 2023. Nevertheless, the locations of assembly and manufacturing for various components differ from those discussed in HQ H326574. Your request involves three different foreign-manufactured articles: 1. Quantum12 High Gain Balance Triple 1.2 GHz System Amplifier (the “HGBT”); 2. Quantum12 High Gain Dual 1.2 GHz Amplifier (the “HGD”); and 3. Quantum12 LE 1.2 GHz Line Extender (the “LE” or “Line Extender”). The HGBT and HGD are system amplifiers used by cable operators to optimize hybrid fiber-coaxial networks. The Line Extender, meanwhile, is a broadband amplifier designed to assist cable operators in evolving their HFC networks to meet subscriber demand. The HGBT offers three radio frequency (“RF”) outputs while the HGD provides two high-level outputs with an option to create a third RF output by using the optional plug-in auxiliary path signal director. Both devices are factory configured with reverse amplifiers, diplex filters, thermal compensation circuits, forward interstate pads, and equalizers to promote optimal performance. The Line Extender only offers one high-level RF output. Your request indicates that the subject system amplifiers (the HGBT and HGD) and the Line Extender have almost identical production processes with slightly different processing times and components used. Each device is comprised of a main printed circuit board assembly (“PCBA”) and other structural component parts. The HGBT and HGD models contain a Chinese-origin reverse amplifier module (i.e., the “reverse AMP”), which is a secondary PCBA used to transmit and amplify signals in the reverse path from the user end to operators. The system amplifiers and Line Extender are manufactured in a series of approximately nine steps occurring in either China or “Vietnam, Taiwan, or a country other than China.”1 In addition to describing the manufacturing steps, you provided information concerning the time it takes to conduct the various operations. The steps are as follows: Step One – Preliminary PCB Priming and SMD Process (Vietnam, Taiwan, or country other than China): the PCBA is produced by a third-party manufacturer using a two-step surface mount technology (“SMT”) and dual-in-line package (“DIP”) process. First, solder paste is applied onto the topside of a raw printed circuit board (“PCB”) and various electrical and electronic components are mounted and soldered onto the PCB to create a surface mount device (“SMD”) assembly. The SMD assembly is then inspected for imperfections and passed down the assembly line. Additional components are added to the SMD assembly via the DIP process to create the “generic” PCBA (i.e., one capable of use in a variety of amplifiers). The components added to the PCBA of each device type at this stage differ slightly. For the Line Extender, seven types of components are added: resistors, capacitors, an inductor, an RF connector, fuses, amplifier chips, wires, and power connector. For the HGD, eight component types are added: resistors, capacitors, an inductor, an RF connector, fuses, amplifier chips, wires, and power connectors. For the HGBT, seven component types are added: resistors, capacitors, an RF connector, fuses, amplifier chips, wires, and power connectors. Step Two – PCBA Setup (Vietnam, Taiwan, or country other than China): A soldering iron is used to affix the alternating current (“AC”) wires onto the PCBA as well as etched capacitors according to radio frequency (“RF”) characteristic requirements. This step results in the final completion of the main PCBA, which can be used for a variety of amplifier functions. At this stage, press-fit holes are added to the PCBA where components will be attached during later assembly stages. Following this step, the PCBA is transported to China for incorporation into the final product. 1 Once again, you indicate that the production process and steps occurring in this request are the same as those described in your prior ruling, HQ H326574, dated June 21, 2023. However, your present request removes the “full station test” described in step eight as a standalone step and integrates this test into the “packaging process.” To maintain consistency with the process as described in HQ H326574, this ruling continues to describe these processes as separate steps. 2 Step Three – Signal Path Setup (China): An AOI employee uses a screwdriver to assemble RF connectors onto the device’s chassis. The PCBA is then mounted onto the chassis with screws and soldered into place. For the HGD and HGBT units, the Chinese-origin reverse AMP module is placed onto the bottom of the chassis using a screwdriver and attached with 12 screws. The low pass filter trim module (“LPFT”) is then plugged into the reverse AMP via pins. Subsequently, a soldering iron is used to affix the RF connectors and feed-through capacitors onto the PCBA. The remaining electrical components (e.g., mirrored and non-mirrored diplexers, HPFT, system trim jumper) are added and installed onto the PCBA via push-pin assembly into the sockets pre-drilled into the PCBA during step two. For the Line Extender, no reverse AMP module is added. Instead, the PCBA is mounted onto the chassis, the metal cover is assembled onto the housing, and various pushpin accessories are attached to the PCBA (e.g., mirrored and non-mirrored diplexer and system trim jumper). Step Four – PCBA Burn-In (China): AOI tests the product’s power consumption with a 60-volt AC power input at 50 degrees celsius. The power test is intended to create a baseline reading for the assembled PCBA. The test is run at an elevated temperature to allow time for minor changes in electrical values to settle close to their final values. Step Five – Automatic Gain Control (“AGC”) Test (China): AGC is installed on many, but not all, units based on customer specification and model number. It is used to maintain the output gain at a specified level and in an active manner. Step Six – Launch Amplifier Final Assembly, Tuning, and Testing (China): The amplifier module (reverse amplifier combined with forward amplifier) is tuned to customer specifications to be functional in a Cable Television Network environment. During this stage, a technician may alter the physical characteristics of the PCBA assembled in steps one and two above. For instance, circuit traces may be modified, etched capacitors connected, and component positioning adjusted. The full extent of the changes per unit will vary by customer specifications. Following the board tuning, a metal cover is placed onto the chassis and a screwdriver used to fasten screws and tighten clamps to the metal cover. Step Seven – Full Station Assembly (China): The launch amplifier is installed in a housing along with a power supply and cables, and routed to their proper position. The full assembly is sealed using an electric screwdriver. Step Eight – Full Station Test (China): A visual inspection is performed to ensure the device configuration is correct. Step Nine – Packaging (China): The devices are placed into cardboard boxes, labels attached, and are secured for shipment. AOI has also provided a bill of materials (“BOM”) for both the system amplifier units (the HGBT and HGD) and the Line Extender. These documents indicate that most components, including those added during the PCBA assembly, originate in China. The remaining components are sourced from a variety of other countries, including Taiwan and Vietnam. 3 ISSUE: What is the country of origin of the subject HGBT, HGD, and line extender? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20, HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), HTSUS. When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis applies. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018. The substantial transformation test is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 681 F.2d 778 (CCPA 1982). The issue of substantial transformation is a “mixed question of technology and customs law, mostly the latter.” 681 F.2d at 783. To determine whether a substantial transformation occurs when components of various origins are assembled into completed products, U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. See, e.g., HQ H311606, dated June 16, 2021. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process may be considered when determining whether a substantial transformation has occurred. No one factor is determinative. The Court of International Trade interpreted the meaning of “substantial transformation” in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016). Energizer Battery involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. All components of the flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States and assembled into the finished Generation II flashlight. The Energizer Battery court reviewed the “name, character and use” test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc., 3 C.I.T. at 226, 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 Battery at 1318. In addition, the court noted that “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer Battery at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a 4 simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article. In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), CBP held that for purposes of the Generalized System of Preferences (“GSP”), the assembly of multiple fabricated components onto a PCB in a process involving a considerable amount of time and skill resulted in a substantial transformation. In that case, more than 50 discrete fabricated components (such as resistors, capacitors, diodes, integrated circuits, sockets, and connectors) were assembled onto a PCB. CBP determined that the assembly of the PCBA involved a very large number of components and a significant number of different operations, required a relatively significant period of time, skill attention to detail, and quality control. AOI asserts that the country of origin of the subject merchandise for purposes of Section 301 trade remedies is the country in which the products’ main PCBA originates (in this case, “Vietnam, Taiwan, or a country other than China”). In support, AOI cites CBP ruling HQ H326574, dated June 21, 2023, which was issued to AOI in relation to three similar products, an HGD, HGBT, and Line Extender. In H326574, AOI proposed to manufacture the main PCBA in China before exporting the component to Taiwan where the final assembly and tuning would occur. In determining the country of origin of the devices to be China, we observed that the Chinese-origin PCBA enabled the devices to function as amplifiers and, therefore, imparted the character of the devices. In addition, we noted that the Taiwan operations (e.g., fitting, assembling) were relatively simple in nature and did not impart a physical change to the Chinese-origin PCBAs. In the present matter, AOI’s proposed manufacturing process is the inverse of that discussed in H326574. Instead of manufacturing the PCBA in China and assembling the devices in Taiwan, AOI now proposes to purchase third-party-sourced PCBAs manufactured in “Vietnam, Taiwan, or a country other than China,” which will then be exported to China for final assembly. In accordance with H326574, we determine that the relevant substantial transformation occurs in the country in which the main PCBAs are manufactured. First, we find that the Chinese assembly process does not result in a change in name. As in Energizer Battery, the individual components such as the PCB and PCBA components (e.g., transistors, capacitors) undergo a change in name when they are incorporated into the PCBA via SMT. As a result, when incorporated into the printed circuit board, the individual components and the blank printed circuit board develop a new name, a PCBA. In contrast, as in Energizer Battery and HQ H326574, the PCBA itself does not undergo a change in name when it is assembled into the final unit in China. With respect to character, as outlined above, for courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the articles or components. See e.g., Energizer Battery, 190 F. Supp. 3d at 1318 (citing National Hand Tool, 16 C.I.T. at 311). Courts have not found a change in character when changes are cosmetic or when the “form of the components remained the same.” Energizer Battery at 1318. In other cases, courts have looked to the “essence” of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing. Energizer Battery, Inc. v. United 5 States, 190 F. Supp. 3d 1308, 1318 (2016) (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-1098 (2000) and Uniroyal, Inc. v. United States, 3 C.I.T. 220, aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (imported shoe uppers were the ‘essence of the finished shoe’ and were not substantially transformed by the addition of an outer sole in the United States”)). With respect to the incorporation of an imported PCBA in a third country, CBP has frequently determined that the PCBA imparts the character of a device when it possesses the components necessary to impart a device’s functionality. In HQ H322417, dated February 23, 2022, furthermore, CBP considered the country of origin of an imported smartwatch. CBP determined that the smartwatch’s PCBA represents the essence of the device because it incorporates the electronic components that together give the device its functionality and allow the device to operate as intended. In rendering its determination, CBP observed that once the various components are incorporated into the smartwatch, they “‘become an integral part of the new article’ and develop the functionality of the smartwatch capable of capturing and exchanging data and tracking the user’s fitness and activity, among other functions.” See HQ H322417, citing HQ H287548, dated March 23, 2018, NY N303008, dated March 8, 2019, and HQ H301910, dated August 5, 2019. Here, we determine that the various components undergo a change in character via the PCBA creation, and that no change of character occurs via assembly in China. As it did in H326574, AOI indicates that a variety of electronic components are added to the raw PCB via SMT to create the subject PCBAs. This includes amplifier chips that enable the subject devices to function as an amplifier or Line Extender when complete. As a result, we determine that the PCBA that is created in Vietnam, Taiwan, or a country other than China, which incorporates the amplifier chips and various other components that enable the devices to function as an amplifier, imparts the character of the subject devices. Furthermore, as with H326574, the processing in China does not appear to impart a physical change in the imported PCBA. See Energizer Battery at 1318, citing Uniroyal, Inc., 3 C.I.T. at 226 (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.”) Instead, the components added in China are typically added via “pushpin assembly” into pre-drilled holes or via soldering while the housing, power supply, and chassis are attached with screws. As in Energizer Battery, this level of assembly is not sufficient to create a change in character because various components are assembled together but no physical change is imparted on the imported articles. With respect to use, courts have found that a change in use has occurred when the end use of the imported product was no longer interchangeable with the end use of the product after post importation processing; in contrast, when the end use was predetermined at the time of importation, courts have generally not found a change in use. See Energizer Battery, 190 F. Supp. 3d at 1319 (citing Ferrostaal Metals Corp. v. United States, 664 F. Supp. 535, 540-41 (1987); National Hand Tool, 16 C.I.T. at 311-12; Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121-22 (1996); Uniroyal, 3 C.I.T. at 226). “When articles are imported in prefabricated form with a pre-determined use, the assembly of those articles into the final product, without more, may not rise to the level of substantial transformation.” Id. (citing Uniroyal, 3 C.I.T. at 226). 6 Here, the use of the Vietnam or Taiwan-origin PCBA remains the same after assembly and tuning in China. As noted in the request, the PCBAs are imported into China capable of being used in a variety of amplifiers. The tuning process occurring in China, meanwhile, enables the PCBAs to be used for a narrower subset of amplification applications, namely as a CATV amplifier or Line Extender. The process does not, however, change the fact that the basic use of the PCBA is in an amplifier. As such, the device does not undergo a change in use via assembly and tuning in China. In addition to the name, character, and use criteria, courts have also considered subsidiary or additional factors, such as the country of origin of the item’s components, the extent and nature of operations performed, value added during processing, a change from producer to consumer goods, or a shift in tariff provisions. See, e.g., Energizer Battery at 1319. Some courts have attempted to distinguish between minor manufacturing and combining operations or simple assembly, and processing that is more complex and meaningful. Id. (citing, e.g., Uniroyal, 3 CIT at 226, 542 F. Supp. At 1301). Consideration of subsidiary or additional factors is not consistent, and there is no uniform or exhaustive list of acceptable factors. Id. Indeed, CBP has never outlined a bright line rule in which the number of manufacturing steps or time taken in a country would render an article substantially transformed. See, e.g., HQ H317645, dated October 5, 2021 (“a review of each ruling reveals that the outcomes do not rely simply on the number of components, the number of assembly steps, the time it takes to complete assembly, or the number of workers.”) With respect to the country of origin of the item’s components, the BOMs provided by AOI indicate that a majority of components used in manufacturing and packaging the devices, including those incorporated into the PCBA, originate in China. Although this factor weighs in favor of a determination that China is the country of origin, it is not sufficient in its own right. With respect to the complexity of the assembly operations, we find that the Chinese processing and assembly operations are relatively simple in nature. As outlined in the request, the process in China involves simple actions such as attaching items with screws, affixing pushpin components into pre-made holes, soldering, optional AGC testing, and “connecting” and “adjusting” objects during the tuning process. Based on the foregoing, we find that the main PCBA for the subject HGD, HGBT, and Line Extender, which are to be produced in Vietnam, Taiwan, or a country other than China are not substantially transformed as the result of assembly performed in China, and the country of origin of these devices is therefore the country in which the main PCBA is manufactured. HOLDING: Based on the information provided, we find that the country of origin of the HGD, HGBT, and Line Extender is the country in which the main PCBA is manufactured (i.e., “Vietnam, Taiwan, or a country other than China”). 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 7 complete in every material respect. The application of a ruling letter by [CBP] 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.” A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika Brenner, Chief Valuation and Special Programs Branch 8