The country of origin and marking of smart speaker assemblies

N313560 August 19, 2020 MAR-2-85:OT:RR:NC:N2:209 CATEGORY: Marking, Country of Origin Sydney Mintzer Mayer Brown LLP. 1999 K Street, NW Washington, DC 20001 RE: The country of origin and marking of smart speaker assemblies Dear Mr. Mintzer: In your letter dated July 29, 2020, you requested a country of origin and marking ruling on behalf or your client, Sonos, Inc. The items concerned are referred to as the Sonos One and the Sonos Beam. Each item is a smart speaker assembly that operates within the Sonos mesh network. The production process for these products generally consists of three steps: Manufacturing printed circuit board assemblies (“PCBA”) using surface mount technology (“SMT”). Creating key subassemblies (i.e., “modules”). Performing the final assembly, conducting product testing (e.g., the air leak test and Wi-Fi test), and downloading proprietary software. The key subassemblies for the Sonos One are: Heatsink Module incorporating the central processing unit (“CPU”) PCBA, Wi-Fi PCBA and heatsink. Top Cover Module incorporating the SCI (touch sensor) PCBA that enables the voice control, Bluetooth and touch sensor functionalities. Speaker Module consisting of the loudspeaker components. The key subassemblies for the Sonos Beam are: Frame Cover Module incorporating the CPU PCBA, power PCBA, radio PCBA, and the heatsink. Top Cover Module incorporating the SCI (touch sensor) PCBA, microphones and LED. Speaker Module consisting of the loudspeaker components. The Sonos Beam has two additional PCBA-control modules – the Volume Control Module (for volume adjustment by a TV remote control) and the Join Button Module (for connection to the household network) – which are assembled into the finished product during the final assembly. It is stated that for both the Sonos One and the Sonos Beam, the PCBAs enable both the networking and audio playback functions that, in turn, form the “brain” of the devices. You have requested a determination pertaining to two manufacturing/assembly scenarios. The first entails producing all PCBAs used in the finished goods in Malaysia while performing subassembly and final assembly processes in China. The second entails producing all PCBAs used in the finished goods in Malaysia and performing subassembly and final assembly processes in Malaysia. For the first scenario, which involves manufacturing all PCBAs in Malaysia and then performing the subassembly and final assembly in China, the manufacturing process is as follows: For the Sonos One, a variety of electrical elements/components of mixed origin will be mounted onto bare printed circuit boards within Malaysia resulting in the manufacture of three PCBAs – the CPU PCBA, Wi-Fi PCBA, and touch sensor PCBA – that will be incorporated into the Heatsink Module and Top Cover Module. For the Sonos Beam a variety of electrical elements/components of mixed origin will be mounted onto the bare boards in Malaysia to manufacture the six PCBAs – the touch sensor PCBA, CPU PCBA, radio/antenna PCBA, power Supply PCBA, infrared PCBA and connector button PCBA – that will be incorporated into the Top Cover Module, Frame Cover Module, Volume Control Module and Join Button Module. Then the PCBAs will be exported to China where the subassembly process and final assembly will be performed. During the subassembly process the various PCBAs will be mounted/installed within the various module housings (i.e. top cover, heat sink module, bottom cover, frame cover, volume control module, etc.) forming finished sub component parts. Then in the final assembly process the various subcomponents will be interconnected/mounted to each other (speaker cabinet, top cover, bottom cover, heat sink module, etc.) forming the finished product, testing will be conducted and software will be installed/upgraded. Most of the non-PCBA components (plastic housing components, speakers, etc.) incorporated during the assembly processes are of Chinese origin. Attachments have been submitted detailing the manufacturing process. For the second scenario which involves manufacturing all PCBAs (as described above) in Malaysia and also performing the subassembly and final assembly processes in Malaysia the manufacturing process is as follows: The manufacturing of all PCBAs through the SMT process (as previously described) will be performed entirely in Malaysia. The PCBAs will then undergo the subassembly process which involves mounting/installing the PCBAs within the various module housings (i.e. top cover, heat sink module, bottom cover, frame cover, volume control module, etc.) forming finished subcomponent parts. Then in the final assembly process the various subcomponents will be interconnected/mounted to each other (speaker cabinet, top cover, bottom cover, heat sink module, etc.) forming the finished product, testing will be conducted and software will be installed/upgraded. Most of the non-PCBA components (plastic housing components, speakers, etc.) incorporated during the assembly processes are of Chinese origin. Attachments have been submitted detailing the manufacturing process. The marking statute, Section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. The “country of origin” is defined in 19 CFR 134.1(b) 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). However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987). Regarding scenario 1, based upon the facts presented, it is the opinion of this office that PCBAs are the dominant components for these devices. Each PCBA is manufactured within Malaysia. The subsequent manufacturing steps undertaken in China do not affect a substantial transformation. Each PCBA retains its own identity with a predetermined end use. Therefore, since a substantial transformation does not occur as a result of the Chinese processing, the country of origin of the finished Sonos One and the Sonos Beam smart speakers will be Malaysia for origin and marking purposes at time of importation into the United States. Regarding scenario 2, based upon the facts presented, it is the opinion of this office that PCBAs are the dominant components for these devices. Each PCBA is manufactured within Malaysia and the subsequent manufacturing/assembly processes also takes place within Malaysia. As a result, the country of origin of the finished Sonos One and the Sonos Beam smart speakers will be Malaysia for origin and marking purposes at time of importation into the United States. For the purposes of the application of Section 301 trade remedies the country of origin of the completed Sonos One and the Sonos Beam smart speaker assemblies is Malaysia. Therefore, they would not be subject to the Section 301 trade remedies. 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 Steven Pollichino at steven.pollichino@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division