The country of origin of electronic cigarettes

N341338 August 1, 2024 CLA-2-85:OT:RR:NC:N2:212 CATEGORY: Country of Origin Lynlee Brown Ernst & Young LLP 4365 Executive Drive, Suite 1600San Diego, CA  92122 RE:  The country of origin of electronic cigarettes Dear Ms. Brown: In your letter dated July 16, 2024, you requested a country of origin ruling on behalf of your client, Power Source, Inc. There are five items at issue with this request that are identified by part numbers DS1110-U, DS2710-U, DS2105-U, DS2810-U, and DS3120-U, which are all described as disposable electronic cigarettes. You state that the five models are virtually identical in form and function with only minor differences in the components and size. The subject devices are comprised of a heating module within a sealed housing, which also contains the lithium battery and the location for the storage of the substance. At one end of the device is a mouthpiece designed to allow the user to inhale the vaporized substance. We note that the device is not entered with any liquid substance for vaporization as this will be added after importation. In your request, you state that the manufacturing process is substantially similar for all five devices and begins in Indonesia with the manufacture of the heating module and control module. In Indonesia, the heating module, which is comprised of a heater base, ceramic matrix, and fabric strip, is created by wrapping the ceramic matrix with the fabric strip and then placing this subassembly onto the heater base. We note that this process creates the complete heat module that is used to atomize the desired e-liquid. Further in Indonesia, the control module is created. This consists of a fixing seat, airflow sensor, and USB port. These units are assembled together by wiring the airflow sensor to the fixing seat and soldering the USB socket to the electrical connections of the sensor and seat. This creates the finished module, which will be responsible for the activation of the vaporization function created within the heating module. Upon completion, the heating and control modules are sent to China for further processing. In China, the heating and control modules are connected through a specialized bracket. The lithium battery is then soldered to the USB within the control module before all parts are enclosed within the housing. The finished device is then tested for function and packaged for shipment to the United States. The “country of origin” is defined in 19 CFR 134.1(b), in pertinent part, 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). Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade (“CIT”) interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 (“TAA”) for purposes of government procurement. In Energizer, the court reviewed the “name, character and use” test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff’d, 702 F.2d 1022 (Fed. Cir. 1983), that when “the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change.” Energizer at 1318. In addition, the court noted, “when the end-use was pre-determined at the time of importation, courts have generally not found a change in use.” Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff’d 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article. Regarding the origin of the subject disposable electronic cigarettes, it is the opinion of this office that the heating module and control module are the essential components of the finished article. Further, the creation of these modules in Indonesia renders their end use predetermined and all subsequent assembly performed in China is not significantly complex to change the name, character, or use of the subassemblies. As such, based on the facts presented, the country of origin of the e-cigarettes, part numbers DS1110-U, DS2710-U, DS2105-U, DS2810-U, and DS3120-U, will be Indonesia. 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 of 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. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP. This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection 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, please contact National Import Specialist Luke LePage at luke.lepage@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division