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

N310716 April 13, 2020 MAR-2 OT:RR:NC:N1:102 CATEGORY: Country of Origin Linda Weinberg Barnes & Thornburg LLP 1717 Pennsylvania Ave. NW Suite 500 Washington, D.C. 20006 RE: The country of origin of self-contained air conditioning units and the applicability of certain trade remedies under Section 301 Dear Ms. Weinberg: In your letter dated March 16, 2020, on behalf of Hisense USA Corporation, you requested a ruling on the country of origin of certain air conditioning units. A detailed description of the production process was submitted for our review. The products under consideration are portable Air Conditioner units, referred to as “AP Series units”, model numbers AP1419CR1G, AP1319HRlG, APl2l9CRlW, and APl0l9CRlG. The self-contained units are mounted on castors and are designed to cool and heat homes, apartments and other structures without central air conditioning units. In addition to a cooling process, Model AP1319HR1G completes a heating process using a four way valve to reverse between the heating and cooling processes. The production of each unit begins with the assembly of various subassemblies and components in Thailand. The subassemblies and components produced in Thailand are the chassis, the fan subassembly, the printed circuit board assembly (PCBA), and the inlets and outlets of the condenser and evaporators. The chassis, which is made-up of front and back panels, and a base, are manufactured using an injection molded process. The centrifugal and crossflow fans are then manufactured. The volutes (vanes), hubs, blades, fan covers (louvers), air outlet and the fan snail shells are manufactured using an injection molding process. A Chinese motor is installed to the lower fan shell and a centrifugal fan is connected to the motor shaft. The upper and lower fan shells are then screwed to each other and then mounted to a mounting plate. A Chinese motor is then attached to the upper crossflow fan and the upper fan shell is installed to the lower fan’s volute. A protective net for the air outlet of the upper shell is then installed and an air outlet is installed to the shell of the upper fan. The PCBA is then assembled by soldering and gluing approximately 76 components. Upon completion, the PCBA is installed and affixed to the Chinese electrical box. Afterwards, globally sourced copper tubes are bent and shaped to form the inlets and outlets of the Chinese condenser and Chinese evaporator and afterwards, the inlets and outlets are brazed to the ends of the condenser and evaporator. Once the aforementioned process is complete, the condenser is installed and the evaporator undergoes a bending process to fit into the chassis. The final assembly of each unit begins by screwing the Chinese castors to the base of the unit. The Chinese compressor, which includes a liquid storage tank, is then screwed to the chassis and the discharge or exhaust tube is welded to the condenser. The compressor’s suction tube is connected and welded to the evaporator and the discharge tubes of both, the compressor and the condenser, are then welded to the chassis. Afterwards, the fan assembly is installed and screwed to the condenser and the pipes of the evaporator assembly are then connected and welded to other components. Subsequently, a cover motor is attached to the base of the unit, which is followed by the attachment of the motor and gearing assembly to the cover. The next step involves the installation and connection of a water level switch and various temperature sensors. Wiring from China is then connected to the electrical box assembly, the compressor, and other components, such as the motors. Afterwards, the motors are connected to a fuse and the unit’s power cord. The PCBA is then connected and wired to the display panel and the upper and lower filter nets are then installed and connected to the unit. Next, tubes and pipes are subjected to a vacuum pumping process and filled with refrigerant and the remaining plastic panels, along with the filter cover, are then screwed onto the unit. It is noted that Model number AP1319HR1G, also, involves a process of installing and connecting a Chinese 4-way valve. Each unit undergoes various testing and inspections. With regard to your request for the appropriate country of origin of the AP 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 Thailand are combined with components from Thailand and foreign components, such as from China, during the final assembly of the units in Thailand. Furthermore, the manufacturing and assembly operations performed in China are not complex or meaningful enough, as the units are not transformed in China into a new and different article of commerce with a name, character, and use distinct from the article exported from China. It is our view that the nature of the processing performed in Thailand is one in which the foreign components lose their separate identities to become new articles, i.e., self-contained AP Series units that cool or heat and cool residences. As such, the country of origin of the subject self-contained HP Package Series units, model numbers AP1419CR1G, AP1319HRlG, APl2l9CRlW, and APl0l9CRlG, will be Thailand. 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