The country of origin of air conditioning units and the applicability of certain trade remedies under Section 301

N307512 December 5, 2019 MAR-2 OT:RR:NC:N1:102 CATEGORY: Country of Origin Ms. Allison Kepkay White & Case LLP 701 13th Street NW Washington, DC 20005 RE: The country of origin of air conditioning units and the applicability of certain trade remedies under Section 301 Dear Ms. Kepkay: In your letter dated November 8, 2019, on behalf of Midea India Private Unlimited, you requested a ruling on the country of origin of air conditioning units. A detailed description of the production process was submitted for our review. The products under consideration are Package Heat Pump and Air Conditioners, referred to as residential HP Package Series units, model numbers M4PH4024A1000AA, M4PH4030A1000AA, M4PH4036A1000A, M4PH4042A1000A, M4PH4048A1000A and M4PH4060A1000A. The single, self-contained units are designed to heat and cool and have an output that does not exceed 17.56 kW per hour. The production of each unit begins with the assembly of various subassemblies in India. The subassemblies produced in India, include the throttle assembly, the suction pipe assembly for certain models, the e-box part assembly, the condenser and evaporator assemblies and heat exchange coils, which are key components of the condenser and evaporator assemblies. The production of the heat exchange coils involves fin punching, the bending of long U-tubes, fin piercing, pipe nozzle pipe expansion, coil drying, coil brazing, coil bending and coil installation. Once complete, the heat exchange coils are combined with other components to include, an input pipe assembly and an output assembly to form the condenser and evaporator assemblies. The final assembly process for each unit, which also occurs in India, begins by installing and affixing the air duct components, the drainage pan and a separating plate onto the unit’s chassis. The evaporator assembly and the compressor, which depending on the model number is either of Chinese or South Korean origin, are then installed and affixed onto the chassis. The final assembly process continues by affixing and interconnecting additional primary components onto the unit and each other, such components include a four-way valve assembly from China, the throttle assembly, the suction pipe assembly for certain model numbers, the condenser assembly, a blower from China, the motors, which are either of Chinese or Mexican origin, the electrical control, the top cover and four side panels. During the aforementioned installation processes, the unit is charged with refrigerant and wiring is positioned and connected to the Chinese main control board. Once complete, each heating and cooling unit undergoes testing and an inspection. With regard to your request for the appropriate country of origin of the HP Package Series 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 this instance, various sub-assemblies produced in India are combined with components from India and foreign components during the final assembly in India. It is our view that the nature of the processing performed in India is one in which the foreign components lose their separate identities to become new articles, i.e., self-contained HP Package Series units that heat and cool residential dwellings. As such, the country of origin of the subject self-contained HP Package Series units, model numbers M4PH4024A1000AA, M4PH4030A1000AA, M4PH4036A1000A, M4PH4042A1000A, M4PH4048A1000A and M4PH4060A1000A, will be India. Accordingly, these units are not subject to the Section 301 trade remedy. 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 Sandra Martinez at Sandra.Martinez@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division