OT:RR:CTF:VS H314961 AP
Assistant Center Director
Machinery Center of Excellence and Expertise
U.S. Customs and Border Protection 109 Shiloh Drive, Suite 300 Laredo, TX 78045
Attn: Wilbert D. Jones, Supervisory Import Specialist
RE: Internal advice; Country of origin of a Cartomizer Pre-Filled with E-Liquid
Dear Assistant Center Director:
This is in response to the September 21, 2020 request for an internal advice, which was filed on behalf of [ ] (the “importer”), regarding the country of origin of a cartomizer pre-filled with U.S.-origin formulated liquid containing nicotine (“e-liquid”) for use in a personal electric or electronic vaporizing device (“vape”).
The importer has asked that certain information submitted in connection with this internal advice request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets in italics and all attachments to this internal advice request, forwarded to our office, will not be released to the public and will be withheld from published versions of this decision.
FACTS:
The merchandise at issue is a cartomizer, which is a cartridge with a heater filled with e-liquid, for use in a vape that is purchased separately. The individual components of the cartomizer are the heater, the heater top cover, the heating holder, the tube, the holder top, the thimble, and the bottom cover. The cartomizer is pre-filled with e-liquid containing nicotine and is not refillable. The heater vaporizes the e-liquid held in the cartridge. To activate the heater, the consumer inserts the cartomizer containing e-liquid in the vape’s power unit. The cartomizer is discarded after the pre-filled e-liquid is consumed.
The components of the cartomizer are of Chinese origin except for the U.S. e-liquid, which was shipped from the United States to China in bulk containers. The importer states that the e-liquid was “at all times a finished, purified solution of uniform potency that [was] not poisonous and already [was] suitable for administration to humans. The e-liquid [underwent] no further processing in China and there [was] no physical or chemical change to the product.” In China, the U.S. e-liquid was poured from the bulk container into the cartomizer tube of the cartomizer. After filling of the tube with e-liquid, the complete cartomizer was assembled, cleaned, inspected, and imported into the U.S. under subheading 3824.99.9280, Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”).
ISSUE:
What is the country of origin for the subject non-refillable cartomizer containing e-liquid?
LAW AND ANALYSIS:
The United States Trade Representative has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (“Section 301”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(f), Harmonized Tariff Schedule of the United States (“HTSUS”).
When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. A substantial transformation occurs “when as a result of a process an article emerges, having a distinctive name, character or use” from the original material subjected to the process. Belcrest Linens v. United States, 741 F.2d 1368, 1372 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. U.S. Customs and Border Protection (“CBP”) considers the totality of the circumstances and makes such determinations on a case-by-case basis.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (CIT 2016), the court found that articles imported in a pre-fabricated form with a predetermined use were not substantially transformed by simple assembly into the final product. All components of the flashlight were of Chinese origin, except for a white light-emitting diode (“LED”) and a hydrogen getter. The components were imported and assembled into the finished flashlight in the U.S. The court noted that the assembly operations were not complex and that the imported components retained their names after they were assembled into the finished flashlight. China (the source of all but two components) was the country of origin of the finished flashlights for purposes of government procurement.
The court applied the “essence test” in Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d per curiam, 702 F.2d 1022 (Fed. Cir. 1983). The court held that imported shoe uppers added to an outer sole in the U.S. were the “very essence of the finished shoe” and were not substantially transformed into a product of the U.S. The attachment of the outsole to the upper was a minor manufacturing or combining process which left the identity of the upper intact.
We concur that the sole “processing of a pharmaceutical product from bulk form into measured doses does not result in a substantial transformation of the product.” See Headquarters Ruling Letter (“HQ”) H073995, dated Oct. 29, 2009. In HQ H197582, dated Aug. 9, 2012, Amoxicillin, Amoxicillin Related Compound A, Prednisone, Endotoxin, and Hypromellose Acetate Succinate imported in bulk form did not undergo a substantial transformation when tested, characterized, and placed and sealed into vials in the U.S. See also HQ 561975, dated Apr. 3, 2002 (no substantial transformation resulted from the U.S. processing of an anesthetic drug from bulk form into measured doses). However, unlike the vials/bottles in HQ H197582 and HQ 561975, it is not just the e-liquid that is put in a measured dose in a packaged form ready for use. Rather, the cartomizer containing the e-liquid is more than a storage container. The situation here is akin to where the processing significantly increases the effectiveness of the final product. In HQ H218797, dated Oct. 10, 2012, bulk L-Menthol and non-woven fabric were imported from China and Japan, and made into pain-relieving patches in Taiwan. The processes in Taiwan altered the L-Menthol concentration to make it fit for human use as an analgesic, and as a result the bulk L-Menthol and non-woven fabric were substantially transformed in Taiwan. In HQ 562316, dated Apr. 1, 2002, bulk nicotine was substantially transformed in Sweden where it was used to make patches, inhalers, and sprays. There was change in character from a bulk ingredient into an adhesive dressing formulated for timed release, a cigarette-shaped cartridge and mouthpiece, or an aerosol spray. The processing in Sweden allowed the bulk nicotine to become a purified solution of uniform potency. It underwent a change in use from an ingredient that was unsuitable to be administered to humans to a form that could aid in breaking a person’s addiction to smoking.
In the instant matter, although the e-liquid was stated to be in its final form and suitable for human use, and retained the same chemical composition and physical properties after it was exported to China from the U.S., unlike the bulk L-Menthol in HQ H218797 and bulk nicotine in HQ 562316 that were processed to make them suitable for human use, the addition of the cartomizer enables the e-liquid to be used similar to the patches, inhalers, and sprays in
HQ H218797 and HQ 562316. Here, the cartomizer containing the e-liquid is more than a storage container. The cartomizer cartridge has a heater at the bottom, which heats the e-liquid to produce vapor after the cartomizer is placed in the battery-powered vape. The e-liquid is virtually useless without being heated and the heat allows the user to inhale the vapor. Just like the shoe uppers in Uniroyal, the heater of Chinese origin is the most important component of the cartomizer and imparts its essence because it allows the e-liquid to be turned into a vapor so that it may be inhaled.
The importer maintains that the U.S.-origin e-liquid is not substantially transformed as a result of the operations performed in China and remains a product of the U.S. However, the e-liquid is not just packaged in China. Rather, the e-liquid is made into a component of a vaping product. Without the cartomizer and its heater, the e-liquid cannot be inhaled. This is more like HQ H011662, dated June 14, 2007, where U.S. origin tobacco underwent a substantial transformation when it was made into cigarettes in the Dominican Republic. Since the Chinese heater is the “essence” of the cartomizer, all remaining components of the cartomizer (except for the e-liquid) are of Chinese origin and the cartomizer is put together in China, we find that the country of origin of the Chinese cartomizer with the e-liquid is China.
The importer cites to several rulings in support of its preposition that the U.S. e-liquid imparts the cartomizer’s essential character. However, these rulings are either irrelevant or confirm that the heater is the “essence” of the cartomizer.
New York Ruling Letter (“NY”) N257479, dated Oct. 9, 2014, is a ruling on the tariff classification of a cartomizer containing a liquid chamber and a heating element. The cartomizer was imported prefilled with the vaporizing liquid or empty under subheading 8543.90.8880, HTSUSA (2014). The ruling entirely pertains to tariff classification and does not provide insights as to the country of origin of the cartomizer.
NY N302526, dated Mar. 4, 2019, which is also cited, involved a handheld battery-operated electrical appliance for whitening teeth. The U.S.-origin LED strip was the most important component because it provided the device with its character and function to whiten teeth. Therefore, the assembly of the strip into the finished device in China did not result in its substantial transformation. HQ H305552, dated Mar. 31, 2020, involved a toner cartridge assembled in China from parts of various origins, including an electrically charged Japanese toner powder made of plastic and pigment. The pigment provided the toner’s color while the plastic enabled the pigment to stick to paper when the plastic was heated and melted. CBP found that the toner powder imparted the essence of the toner cartridge, which was simply referred to as a toner. In addition, in HQ H305552, the cartridge itself was made up of different components from various countries. While we acknowledge that the toner cartridge is more than a holder of toner, it is only in conjunction with a machine that it becomes functional to transfer the toner to paper. Here, the cartomizer with its heat unit is the very essence of the vaping device. The consumer only needs to later connect the battery power unit to the cartomizer to allow the heater to warm up the e-liquid and vaporize it. The e-liquid in its pre-vapor state cannot be inhaled. In sum, the heater inside the cartomizer represents the most important component of the cartomizer which provides the finished product with its character and function.
Accordingly, the country of origin of the cartomizer with a built-in Chinese heater containing e-liquid is China.
HOLDING:
The country of origin of the instant cartomizer prefilled with e-liquid is China and Section 301 duties apply.
This decision should be mailed by your office to the importer, through its counsel, no later than 60 days from the date of this letter. On that date, Regulations and Rulings, Office of Trade, will make the decision available to CBP personnel and the public at www.cbp.gov, by means of the Freedom of Information Act and other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch