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

N322263 November 12, 2021 CLA-2 OT:RR:NC:N1:102 CATEGORY: Origin Kyle Fonjemie Wiczer Sheldon & Jacobs, LLC 500 Skokie Blvd. Suite 325 Northbrook, Illinois 60062 RE: The country of origin of portable air conditioning units and the applicability of certain trade remedies under Section 301 Dear Mr. Fonjemie: In your letter dated October 15, 2021, on behalf of Hisense USA Corporation, you requested a ruling on the country of origin of portable air conditioning units. A description of the assembly process was submitted for our review. The products under consideration are portable air conditioning (PAC) units referred to as the AP Series: AP0522CR1W, PAC06, MAP06, AP0722CW1W, and AP1022CW1G. The self-contained 5,000 to 25,000 BTU units are used in homes, apartments, and other structures for consumers without access to central air conditioning. The AP series provide cooling output of less than 17.58 Kilowatts. The units feature a display panel, casters, filters, and a cooling system. In regard to the country of origin, it is explained that each PAC unit is assembled in Thailand from components that originate in China and Thailand, including sub-assemblies from Thailand. For each unit, two fan subassemblies are produced in Thailand. The volutes (vanes), louvers, air outlet, filter frame and snail shell of each fan are formed using a plastic injection process from globally-sourced pellets. The fan hub and blades are welded to each other and then joined to other components, such as the louvers, the snail shell, air outlet, and filter frame to form a complete fan. The fans are later connected to a Chinese motor. The chassis of each AC unit, along with other metal components, will be molded and formed from sheet metal part in Thailand. A plastic injection process is used to form other plastic components of the AC, including panels. In addition, inlet and outlet tubing for the condenser and evaporator are formed from globally-sourced copper tube that is cut, bent, reamed and formed. Once the inlet and outlet tubing are formed, they are welded to the Chinese condenser and evaporator. The final assembly of each unit takes place in Thailand and begins by installing and screwing the Chinese casters, the Chinese motor cover, a water level switch, a Chinese compressor, the evaporator and condenser to the AC’s chassis. The discharge and suction tubes from China are then connected and welded into place. Nitrogen is added. The lower and upper fans, the protective net, and the air outlet are installed. Wiring is then connected to the PCB assembly and other required components. The electrical box, PCB assembly, display, filters and receiver are installed. The unit is then subjected to vacuum and refrigerant charging processes. Afterwards, the display panel is wired to the PCB assembly and front panel. Lastly, the Thai manufactured panels, the lower and upper filters, and filter cover are installed and screwed into place. Upon completion, each unit is subjected to testing and inspections. With regard to the request for the appropriate country of origin of the PAC 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 the scenario described above, components from Thailand and China are joined or assembled to each other during the unit’s final assembly that occurs in Thailand. The final assembly operations that occur in Thailand are not complex and meaningful enough. Instead, when 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, which is the essence of an air conditioning unit, is considered. In this instance, the cooling unit consists of a compressor from China, and an unfinished condenser and evaporator from China that are welded to the input and output tubing in Thailand. New York ruling N316843, dated February 5, 2021, discusses a similar scenario in which the condenser and evaporator are manufactured in China, and then exported to Thailand to be connected to inlet and outlet tubing. The inlet and outlet tubing 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. The evaporator is also placed in a bending machine to be fitted into the chassis. Ruling N316843 explains that 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 the evaporator and condenser are unfinished. The same rationale applies here. The Chinese condenser and evaporator become finished articles in Thailand, where the inlet and outlet tubings are cut, bent, reamed, formed, and welded to the Chinese condenser and evaporator.  It is these additional processes, which occur in Thailand, that substantially transform the Chinese evaporator and condenser of the AC’s cooling unit into a finished condenser and evaporator.   Therefore, in considering that the majority of the cooling components are from Thailand, we believe the country of origin of the subject portable AC units for the purpose of applying current 301 Trade Remedies is 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