OT:RR:CTF:VS H318255 UBB
Porfirio Waters
TECMA Customs Solutions LLC
2000 Wyoming Ave.
El Paso, TX 79903
RE: Country of origin of a fan blower
Dear Mr. Waters,
This is in response to your eRuling Request, submitted on behalf of your client, Shinano Kenshi Corporation (“Shinano”), on March 17, 2021, and modified per your request on September 22, 2021. You requested a country of origin marking determination and a country of origin determination for the purposes of the application of Section 301 remedies. Per your request, your query regarding the application of United States Mexico Canada Agreement (“USMCA”) preferential treatment was withdrawn on September 22, 2021. The subject merchandise is identified as a Pinnacle Fan Blower (“fan blower”) with an internal part number IDRF-3432-504-M. You classify the completed fan blower in subheading 8414.59.65, Harmonized Tariff Schedule of the United States (“HTSUS”).
FACTS:
The fan blower assembly primarily consists of a centrifugal impeller, a housing, an inlet and outlet, a printed circuit board assembly (PCBA), a lead wire assembly, anti-friction bearings, and a motor.
You state that the fan blower is for use in a continuous positive airway pressure (CPAP) machine which is a medical device that provides continuous air flow and positive pressure for patients that suffer from obstructive sleep apnea. The fan blower is a custom design to meet performance specifications for a specific CPAP device program that is manufactured by your customer, Philips. The fan blower fits inside the CPAP machine and is designed to generate a precise air flow to help patients breathe easier during sleep. The device is intended to be placed on a nightstand, but can be packed in a travel bag and used anywhere. Only the fan blower assembly is at issue in this case.
The fan blower is assembled at Shinano’s plant located in Guanajuato, Mexico from subassemblies that are also assembled in Mexico. The subassemblies include the rotor assembly, the stator assembly, a fan assembly, and a magnet yoke assembly. The components of the fan blower assembly are sourced from various countries, including China, Japan, Mexico, and the United States.
In order to produce a completed fan blower, Shinano imports a stator core, two insulators, magnet wire, lead wire, bottom housing, bearing housing, a shaft, ball bearings, a thrust washer, a magnet, a rotor yoke, an impeller, top housing and a nut from China. Additionally, Shinano imports solder, wire solder, bottom housing seal, a wavy washer, adhesive, screw and lubricant from Japan. Finally, Shinano acquires (or imports) a printed circuit board assembly (PCBA), insulation sheet, adhesive, and split washers from the United States or Mexico. These materials are then combined to create subassemblies, which are combined into the fan blower. First the rotor assembly is created, followed by the magnet yoke assembly, to which the rotor assembly is joined. An impeller is then fit to the combined magnet yoke and rotor assemblies and the three are coupled to the stator assembly which is assembled separately, also at the Shinano plant in Mexico.
To assemble the rotor, first a retaining ring is installed to a shaft. A ball bearing and bearing housing are then bonded to the shaft. The parts are inspected and cured. Next, a wave washer and a thrust washer are installed onto the bearing housing and the assembly is cured a second time. To assemble the magnet yoke assembly, a magnet is bonded to a rotor yoke. These parts are then cured and cooled. After testing, the magnet yoke assembly is magnetized using specialized high voltage equipment. This completes the magnet yoke assembly. The magnet yoke assembly and the rotor assembly are then coupled, bonded, and cured. Next, an impeller is checked for balance, and if needed, material from the impeller is removed using a drilling process. Then, the impeller is press-fit to the magnet yoke and rotor assemblies to form a fan assembly.
To produce the stator assembly, magnetic wire is wound and soldered onto a stator. Next, a PCBA and an insulator sheet are connected and soldered to the stator. The stator assembly is then press-fit to the bottom housing of the fan blower. A lead wire harness is then soldered to the PCBA. Finally, the bottom housing seal is installed to the stator assembly. The stator assembly is then cured.
For the final fan blower assembly, the fan assembly, which is already connected to the magnet yoke and rotor assemblies, is coupled to the stator assembly. Next, the top and bottom housings of the fan blower, are screwed to each other. Each completed fan blower assembly then undergoes various inspections and is packaged.
As a preliminary matter, we note that based on the facts provided, while we agree with the proposed classification for the fan blower assembly, we do not agree that all the non-originating components are properly classified in your submission. However, for the purposes of the marking analysis under 19 C.F.R. 102, it is sufficient to note that none of your input components are classified under HTSUS 8414.59. As you did not request confirmation of classification in your eRuling Request, however, this ruling will not address the classification issue further.
ISSUE:
What is the country of origin of the fan blower assembly for marking purposes?
What is the country of origin of the fan blower assembly for the purposes of Section 301 remedies?
LAW AND ANALYSIS:
Marking
Section 304(a) of the Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), provides that, unless excepted, every article of foreign origin imported into the United States “shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.” Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940); American Burtonizing Co. v. United States, 13 Ct. Cust. 652, 654 (Ct. Cust. App. 1926).
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
. . .
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the fan blower is neither wholly obtained or produced nor produced exclusively from “domestic” (Mexican, in this case) materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). Section 102.11(a)(3) provides that the country of origin of a good is the country in which:
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material” is defined in § 102.1(e) as:
a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.
The applicable tariff shift requirement in § 102.20 for the fan blower assembly at issue is:
A change to subheading 8414.10 through 8414.80 from any other subheading, including another subheading within that group.
The applicable tariff shift rule requires a shift to subheading 8414.59, HTSUS, from any other subheading. We note that all of the foreign materials are classified in subheadings other than 8414.59, HTSUS. Therefore, the foreign materials undergo the requisite tariff shift, and the fan blower should be marked as a product of Mexico.
Section 301
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20(e), HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(e), HTSUS. Among the subheadings listed in U.S. Note 20(e) of Subchapter III, Chapter 99, HTSUS, is 8414.59.65, HTSUS.
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. 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 (CCPA 1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. See Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
CBP has found that a simple assembly process, for example, an assembly that involves press fitting parts into each other, does not rise to the level of substantial transformation. See HQ H303864 (Dec. 26, 2019). In examining assembly operations, CBP has looked to the nature of the assembly, as well as the origin of the component that imparts “essential character” to the end product. Id. In fan or pump assembly cases, CBP has found that the motor imparts the essence of these types of assemblies. See HQ H304126 (Feb. 13, 2020). Further, it is generally CBP’s position that the country of origin of a motor will be determined by where the essential components of that motor, i.e. the stator and rotor, are made. See NY N305251 (Aug. 1, 2019). However, whether an assembly process is sufficiently complex to rise to the level of substantial transformation is determined upon consideration of all of the operations that occur in a particular country, including any subassembly processes that take place in that country. HQ H303529 (June 6, 2019); see also NY N317575 (March 5, 2021).
In HQ H303529, CBP considered the country of origin of an incomplete postage meter made up of a number of subassemblies, all but one of which were assembled in China, with primarily Chinese-made components. The remaining subassembly, the print axis, was assembled in Malaysia and the importer argued that it imparted the essential character of the subject merchandise. CBP disagreed and found instead that the assembly in China, including the assembly of the subassemblies, was extensive and complex and that the print axis was substantially transformed when it was joined with the other components of the incomplete postage meter. In its ruling, CBP noted that the question of the complexity of the assembly process which occurs in China is not limited to an examination of the assembly of the various subassemblies to one another, as initially presented in the requestor’s submission, but includes an examination of all of the assembly processes that take place in China in the production of the incomplete postage meter. Thus, by analogy, when evaluating assembly in fan or pump assembly cases, as considered in NY N309707 (March 11, 2020), a ruling issued to you on another fan blower model, the extent of processing that occurs after the stator and rotor core are created must also be taken into account.
In NY N309707, a fan blower was produced in Mexico from parts largely of Chinese origin. The stator core and the rotor shaft and yoke, as well as the magnetic wire, insulator sheets, bottom housing, bearing housing, ball bearings and lead wire harness were all sourced from China. However, the motor’s stator subassembly was itself assembled in Mexico by winding magnetic wire onto the Chinese stator core. The PCBA (printed circuit board assembly) and the Chinese insulator sheets were then connected and soldered onto the stator assembly, and the stator assembly was in turn installed and bonded to the Chinese bottom housing. A lead wire harness from China was then soldered to the contacts of the PCBA assembly and a Japanese seal was installed in the bottom housing. The stator assembly then underwent a curing process. Next, the rotor assembly was created by installing a retaining ring on a Chinese shaft to form a shaft assembly. Washers from Mexico or the United States were then installed onto the shaft and ball bearings were bonded to bearing housings and the shaft using adhesive. During the rotor assembly curing process, a magnet yoke assembly was created by bonding a magnet to the rotor yoke using adhesive, and then magnetizing the magnet using specialized equipment. The magnetic yoke assembly was then bonded to the rotor assembly. Finally, once the completed rotor assembly was cured, a Chinese impeller was press fitted and bonded onto the rotor assembly with adhesive and cured. Then, the fan assembly and the rotor assembly were fastened to the stator assembly and a Chinese top housing was fitted and screwed onto the impeller attached to the completed rotor and stator assemblies, thus completing the fan blower. Each complete fan blower assembly was then tested. CBP found that the various manufacturing and assembly processes in Mexico created a new and different article of commerce, as the air circulating and motor components of each unit, to include the Chinese and Japanese components, were subjected to operations resulting in the individual parts losing their separate identities to become a new article, i.e., a fan blower assembly that consisted of an impeller and a motor.
This case is similar to NY N309707. Here, Shinano obtains the fan blower components from China, Japan and the U.S. or Mexico. Similarly to N309707, the stator core, rotor yoke and the impeller, while important components, are first assembled into four subassemblies (the rotor assembly, the stator assembly, a fan assembly, and a magnet yoke assembly) using a variety of processes including bonding and curing, soldering, winding, screwing, press-fitting and magnetization. The subassemblies are then assembled together to form the fan blower. As in N309707, where the facts are nearly identical, we find that the various components of the fan blower assembly are substantially transformed as a result of these processes. Therefore, for the purposes of Section 301 the country of origin of the fan blower is Mexico.
HOLDING:
Pursuant to 19 C.F.R. §102.11(a)(3), the country of origin of the fan blower for marking purposes is Mexico. The fan blower must be marked “Made in Mexico” under 19 U.S.C. §1304.
The country of origin of the fan blower for the purposes of the application of subheading 9903.88.03, HTSUS, is Mexico. As the merchandise will be a product of Mexico, Section 301 measures will not apply.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a [CBP] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch