The country of origin of indoor air conditioning (AC) units for the purpose of trade remedies under Section 301

N322108 November 5, 2021 CLA-2 OT:RR:NC:N1:102 CATEGORY: Origin Lauren Wyszomierski White & Case LLP 701 Thirteenth Street NW Washington, District of Columbia 20005 RE: The country of origin of indoor air conditioning (AC) units for the purpose of trade remedies under Section 301 Dear Ms. Wyszomierski: In your letter dated October 7, 2021, on behalf of Midea America Corporation, you requested a ruling concerning only the country of origin of indoor AC units for the purpose of 301 Trade Remedies when imported separately from their corresponding outdoor AC units. This ruling letter does not apply to scenarios concerning AC systems, in which the indoor units and their corresponding outdoor units are imported together. The products at issue are four indoor units of the Platform “35 AG” AC system, model numbers: US-KFR35G/BP3N1Y-AG11B(S0)-W, US1-KFR35G/BP3N1Y-AG11B(S0)-W, US-KFR35G/BP3N1Y-AG11B(U5)-W, and US1-KFR35G/BP3N1Y-AG11B(V0)-W(GA). Once imported, the indoor units are paired with their respective outdoor compressor/condenser units to make a complete AC system that solely cools. The indoor units consist of a chassis that primarily contains a PCB assembly, a filter, a temperature sensor, and a heat exchange unit (evaporator). Each unit is packaged with a remote control from Thailand. With regard to the country of origin for 301 Trade Remedy purposes, it is explained that each unit is assembled in Thailand from components that originate in China and Thailand, such as the chassis, the evaporator, the PCB assembly, and some exterior components. The indoor chassis and exterior components, such as panel, surface frame, cover board of the surface frame and wind guide strip are manufactured in Thailand using a plastic injection process. Plastic particles are mixed with a color master feed and then processed using an injection molding machine. The heat exchange unit (evaporator) is constructed of Chinese-origin copper and aluminum. The aluminum foil coil is cut, stamped, bent and formed into fins. The copper pipe is cut and shaped into U-tubes. The copper tubes are then inserted into the aluminum fins, and the assembled unit undergoes an expansion process, followed by a drying process. Afterwards, rings are soldered onto the open ends of the heat exchanger unit. The PCB assembly is formed in Thailand by mounting, affixing, gluing, and welding electrical components from China on an electrical board. The Chinese radiator is also connected to the components. Once completed, the PCB assembly undergoes inspections and testing. The final assembly of each outdoor unit occurs in Thailand and begins by affixing and screwing the Chinese motor to the Chinese fan. Afterwards, the motor cover is screwed onto the chassis. The heat exchange unit (evaporator) is then installed and screwed into place. The electric control box is then installed and connected to the chassis. Grounding wire is then installed and connected to the appropriate connections. The installation plate is screwed to the chassis. The face frame is connected to the display board and afterwards, installed to the face frame of the chassis. The display panel is connected to the panel and the front panel is assembled to the panel frame. The panel frame is screwed to the chassis. A Chinese filter and louver are installed, and the cover of the electrical equipment is then installed. Amongst the aforementioned steps, the PCB assembly and the temperature sensor are installed. Each completed unit undergoes testing and inspections during the steps of the final assembly. With regard to the request for the appropriate country of origin, 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, each indoor unit is assembled in Thailand from components that originate in China and Thailand. However, the final assembly is rather simple and therefore, we believe the origin of the indoor unit should be determined by its dominant component, which is the component that contributes to the cooling process, e.g., the Thai heat exchange unit (evaporator). As such, we believe the country of origin of the subject indoor units is Thailand when the units are imported separately from the outdoor units of the Platform “35 AG” AC system. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. Part 177). The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request.  This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1).  This section states that a ruling letter is issued on the assumption that all the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect.  In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2.  You should also be aware that the material facts described in the foregoing ruling may be subject to periodic verification by CBP. 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