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

N316844 February 5, 2021 CLA-2 OT:RR:NC:N1:102 CATEGORY: Origin Kyle Fonjemie Wiczer Sheldon & Jacobs, LLC 500 Skokie Blvd. Northbrook, Illinois 60062 RE: The country of origin of window air conditioning units and the applicability of certain trade remedies under Section 301 Dear Mr. Fonjemie: In your letter dated January 8, 2021, on behalf of Hisense USA Corporation, you requested a ruling on the country of origin of air conditioning (AC) units. A description of the assembly process was submitted for our review. The products under consideration are Window AC Units, also referred to as the "AW/HAW Series”, model numbers AW0521CK1W, AW0621CR1W, AW0821CW1W, HAW0821CW1W, AW1021CW1W, AW1221CW1W, AW1521CW1W, AW1821CW3W, AW2521CW3W, AW0821DR1W, AW1221DR3W, AW1821DR3W, AW2421DR3W. The units are used in homes, apartments, and other structures for consumers without access to central air conditioning. The output of the AW/HAW units does not exceed 17.58 kW per hour. Each unit is imported packaged with a remote control. In regards to country of origin, it is explained that each unit is assembled in Thailand from components of China and subassemblies and components from Thailand. The following subassemblies and components are manufactured in Thailand: The chassis (outer panels), PCBA, volutes, referred to as vanes, louvers or fan covers, air outlet, filter frame and fan snail shell are manufactured in Thailand using an injection molding process. Two fan subassemblies are assembled in Thailand from a fan, a fan hub and blades from Thailand. The hub and blades are assembled in Thailand using manual ultrasonic welding and heat treatment. An incomplete condenser and evaporator, which are manufactured in China, are exported to Thailand to be completed by connecting inlet and outlet tubing. The inlet and outlet tubes are formed from globally-sourced copper tubes that are cut, bent, reamed, formed and then joined by brazing to the ends of the evaporator and the condenser. Afterwards, the evaporator is placed in a bending machine to be fitted into the chassis. The electric system is pre-assembled, which entails installing the compressor capacitor, the power board, and wiring. The PTC electric heater, along with collector parts, are screwed onto the evaporator unit. The final assembly begins with the installation of the compressor foot pads onto the bottom of the chassis. The water tray foam is then clamped into the grooves of the base holder of the chassis. The compressor, which is from China, is installed and the evaporator and the condenser with the connected tubing, are screwed to the chassis of the unit. The capillary assembly is then installed, and welded into the outlet pipe of the condenser. The air duct plates and defector assembly are then installed, followed by installation of the upper and middle air fans with volutes. The electrical box assembly, the PCBA, various temperature sensors, and a water level switch are installed. Afterwards, the required tubes and pipes are subject to vacuum pumping and filled with refrigerant. Next, the upper and lower volutes are connected, and the electrical box, the power cable, and the temperature sensor seat are installed. The remaining panels, which are from Thailand, and the digital display component are installed. Throughout the various assembly processes, wiring is connected, as required. Once complete, each unit is labeled, and undergoes testing and an inspection. Each unit is packaged with a remote control from China. With regard to your request for the appropriate country of origin of the AW/HAW air conditioning 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 scenario, components from Thailand and China are joined or assembled to each other during the final assembly in Thailand, including components of the cooling unit. However, it is noted that in determining the country of origin of air conditioning units for the purpose of applying 301 trade remedies, the country of origin of the cooling unit is considered, as it is the essence of an air conditioning unit. Here, the country of origin of the cooling unit, consisting of a compressor from China, and an incomplete condenser and evaporator from China, cannot yet be considered as the essence of the air conditioners because when imported into Thailand these components are unfinished.  Once they are completed with the other components to make the finished cooling unit in Thailand, the Chinese components will be substantially transformed.  It is the additional processing in Thailand that completes the cooling unit of the AC unit, which results in the substantial transformation of the Chinese made components of the cooling unit.  Thus, the country of origin of the finished air conditioners will be Thailand for the purpose of applying current 301 trade remedies. Accordingly the country of origin for the subject window units, model numbers AW0521CK1W, AW0621CR1W, AW0821CW1W, HAW0821CW1W, AW1021CW1W, AW1221CW1W, AW1521CW1W, AW1821CW3W, AW2521CW3W, AW0821DR1W, AW1221DR3W, AW1821DR3W, AW2421DR3W will be Thailand. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 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