The country of origin of gas furnaces

N347270 April 29, 2025 OT:RR:NC:N5:121 CATEGORY: Origin Nate Bolin K&L Gates LLP 1601 K Street, N.W. Washington, DC 20006 RE: The country of origin of gas furnaces Dear Mr. Bolin: In your letter dated March 31, 2025, you requested a country of origin ruling on five models of gas furnaces on behalf of Midea Intelligent Manufacturing Co. Ltd. The merchandise under consideration is identified as a gas furnace unit, model numbers MGV96U060B3C, MGV96U080B3C, MGV96U080C4C, MGV80M100C5A and MGV80M120D5A. The models differ only in terms of size and energy efficiency rating. Each model is a self-contained heater that burns natural gas to generate warm air and uses a motor driven fan to distribute that air throughout a living/office space. These furnaces are sold individually in single, packaged units. You describe a scenario in which these gas furnaces would be assembled in Thailand from raw materials and components sourced from China, Mexico, and Thailand. The main control board for the gas furnace, DC motor, exhaust fan and motor, centrifugal fan, and the primary and secondary heat exchangers are sourced in China; the burner, thermostat, special sensor, and three switches are sourced in Mexico. Based on your provided documentation, the furnaces are produced in two main stages. In the first stage the following components are produced in Thailand from Thai-origin steel: the top, bottom, left, right, front, and back panels of the chassis and the differential pressure switch fixed plate, the water board fixed plate, the base seal plate, the support plate, and the electric installation board. The manufacturing process for the metal parts in Thailand include stamping, bending, welding, and powder coating. Then the following key subassemblies are manufactured in Thailand from raw materials and components sourced from China, Mexico, and Thailand: the cabinet subassembly, burner subassembly, heat exchanger subassembly, gas pipe subassembly, and electric control subassembly. The manufacturing process for these subassemblies in Thailand include assembly, installing, securing and wiring. In the second stage the Thai components and subassemblies and the remaining components sourced from China, Mexico and Thailand are used to produce the finished furnaces. The completed furnaces undergo testing and inspection and are then packaged for export to the United States. The components, subassemblies, and completed furnaces are manufactured in Thailand by an assembly line of approximately 55 workers including an electrical engineer, a field process engineer, a product process engineer and a quality engineer. The assembly line produces approximately 20 finished furnaces an hour. When determining the country of origin for purposes of applying current trade remedies under Section 301, and any additional duties, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling Letter H301619, dated November 6, 2018. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 681 F.2d 778 (C.C.P.A. 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 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/manufacturing operations that are minimal will generally not result in a substantial transformation. Regarding the country of origin of the subject gas furnace units, in our opinion the assembly operations performed in Thailand, beginning with raw materials processed into components and individual components processed into subassemblies, and then final assembly into functional gas furnace units, is significant and effects a change in the components. In our view, the assembly process described transforms the individual components into a new and different product having a new function and purpose. Therefore, based upon the facts presented, it is the opinion of this office that the assembly process performed in Thailand results in a substantial transformation of the individual components into a new and different article of commerce with a name, character, and use distinct from the components used in the production of the gas furnace units. As such, the subject gas furnaces are considered a product of Thailand for origin at the time of importation into the United States. As a result, the gas furnace units, model numbers MGV96U060B3C, MGV96U080B3C, MGV96U080C4C, MGV80M100C5A and MGV80M120D5A are not subject to Section 301 trade remedies applicable to products of China, Executive Order (E.O) 14195 of February 1, 2025, or EO 14257 of April 2, 2025. However, we note that the gas furnace units are currently subject to Section 232 trade remedies for steel and derivatives as set forth in Presidential Proclamation 10896. 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 Jennifer Jameson at jennifer.d.jameson@cbp.dhs.gov. Sincerely, Steven A. Mack Director National Commodity Specialist Division