OT:RR:CTF:VS H337456 AMW
Center Director
Electronics CEE
U.S. Customs and Border Protection
1 World Trade Center
Long Beach, CA 90831
Attn: Sorbrina Vilsain, Import Specialist, Electronics CEE
RE: Application for Further Review of Protest No. 330323100897; Ubiquiti Inc.; Country of Origin of High-Performance Wi-Fi Bridges; Section 301 Trade Remedy
Dear Center Director:
This is in response to an Application for Further Review ("AFR") of Protest Number 330323100897, timely filed on behalf of Ubiquiti Inc. ("Ubiquiti" or the "protestant"), concerning liquidation and assessment of duties pursuant to Section 301 of the Trade Act of 1974 for the entry of certain high-performance Wi-Fi bridge devices.
The protestant asked that certain information submitted in connection with the protest be treated as confidential. Inasmuch as this request conforms to the requirements of 19 CFR 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this decision.
FACTS:
The following facts are based on Ubiquiti's protest submitted on November 8, 2023, a prior disclosure submitted the same day, and follow-up submissions provided on April 9, 2024, April 10, 2024, April 15, 2024, May 20, 2024, and July 24, 2024. Ubiquiti is an importer of various electronics, including those related to wireless data communication. On February 12, 2023, Ubiquiti entered into the United States various 5 GHz high-performance Wi-Fi bridges sold as the PowerBeam 5AC Gen2 (the "PowerBeam") and the NanoBeam 5AC Gen2 (the "NanoBeam") (collectively, the "products" or "devices"). Ubiquiti declared the country of origin of the imported products to be Country A [ ].
The products in the subject entry were purchased via a multi-tier transaction involving two Ubiquiti entities. Specifically, the subject products were initially purchased from
[ ] (the "contract manufacturer") located in Country A by a Ubiquiti entity based in Country B [ ] ("Ubiquiti Country B"), which then sold the merchandise to Ubiquiti, the importer of record, for importation into the United States.[1] As such, the subject entry involves three intercompany invoices issued by a related company, Ubiquity Country B, to Ubiquiti via "Ubiquiti's production planning portal" operated by Ubiquiti [ ] Sales Ltd. The invoices are numbered as follows: 2917691, 2917692, and 2917693, each dated December 29, 2022.
The products are used by wireless internet service providers ("WISPs") to supply wireless connectivity to their customers. The products utilize separate Wi-Fi management radios, allowing WISPs to use Ubiquiti's proprietary airOS firmware to manage their networks. The products, which are imported as unassembled kits, are classified under subheading 8517.62.00, Harmonized Tariff Schedule of the United States ("HTSUS"), which provides for, "[t]elephone sets, including smartphones and other telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527, or 8528; parts thereof: Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wires or wireless network (such as a local or wide area network): Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching or routing apparatus...."
As imported, the products consist of the following components:
. The PowerBeam includes: (1) dish reflector; (2) antenna feed, which houses the device's printed circuit board assembly ("PCBA"); (3) rear housing; (4) mounting bracket; (5) four hex bolts with washers; (6) pole clamp; (7) two carriage bolts; (8) two flange nuts; (9) a power over ethernet source; and (10) a power cord.
. The NanoBeam includes: (1) Wi-Fi bridge (also called the NanoBeam 5AC Gen 2), which contains the device's PCBA; (2) ball joint mount; (3) lock ring; (4) metal strap; (5) power over ethernet source; and (6) a power cord.
For both products, the individual components are placed separately into the same box in which they will be sold to end-users in the United States. The raw materials and components used to manufacture the products are sourced from a variety of countries, including China, Country A [ ]), Country C [ ], and several other countries.
Ubiquiti states that the components are assembled in Country A at a facility owned by the unrelated contract manufacturer. Specifically, Ubiquiti explains that the following steps occur at the contract manufacturer's Country A facility: (1) imported components and raw materials undergo quality control; (2) device PCBA is assembled via surface-mount technology ("SMT"); (3) PCBA is assembled into the main device (i.e., the antenna feed or Wi-Fi bridge); (4) firmware (mainly developed in Country C [ ]) and operation system uploaded; and (5) packing.
In a corresponding prior disclosure, Ubiquiti concedes that it had previously sourced NanoBeam and PowerBeam devices from manufacturers in China, including the Country A contract manufacturer's Chinese affiliate, [ ]. Beginning in 2019, however, Ubiquiti claims it started shifting production from China to Country A. In an April 9, 2024, follow-up submission Ubiquiti clarified that manufacturing operations were moved out of China in stages; the production of NanoBeam and PowerBeam devices in Country A began in 2021 with the first export shipment occurring in May 2021. The last shipment of NanoBeam devices from China occurred on October 15, 2022, and the last shipment of PowerBeam devices occurred on October 31, 2022. In its May 14, 2024, submission, Ubiquiti clarified that the October shipment dates represent "the last date the Products left [ ] China, and it is not necessarily the last date the Products left China as the company still had in its inventory...certain Products manufactured by [ ] China, and those Chinese-origin products continued to ship to the United States for some time."
After reviewing the subject entry, U.S. Customs and Border Protection ("CBP") personnel found that at least one of the products' components was labeled as originating in China. As a result, CBP submitted to Ubiquiti three CBP Form 28 ("CF-28") Requests for Information. First, on April 20, 2023, CBP requested product samples. Second, on May 5, 2023, CBP requested information regarding the products' retail packaging and "documentation to support the claim of the country of origin label made in [Country A]." Third, on June 30, 2023, CBP requested information related to the pricing of the products. In response to these inquiries, Ubiquiti asserted that the products were manufactured at the contract manufacturer's Country A facility [ ], and provided the following documents:
. A "Certificate of Origin" issued by the Country A Chamber of Commerce and Industry dated June 13, 2023.
. Purchase orders TW1023410 and TW1021589 relating to Ubiquiti Country B's purchase of NanoBeam and PowerBeam devices from the contract manufacturer in Country A and an Excel document connecting these purchase orders to Ubiquiti invoice no. 2917692, which is one of the three intercompany invoice numbers associated with the subject entry.
On May 25, 2023, CBP issued a CBP Form 29 ("CF-29") Notice of Action informing Ubiquiti that the documentation submitted in response to the May 5, 2023, CF-28 contained insufficient evidence demonstrating the products originated in Country A. CBP warned Ubiquiti that without further information the country of origin would be changed to China. On June 16, 2023, CBP issued a CF-29 again advising Ubiquiti that it had failed to "validate the claim that (the products) country of origin to be [Country A]" and that additional information had been uncovered indicating Ubiquiti sourced some of its products from China. On August 23, 2023, CBP issued a CF-29 advising that the products would be reliquidated as originating in China. In accordance with the determined country of origin and Section 301 of the Trade Act, CBP assessed additional duties of 7.5 percent ad valorem.
In reviewing the subject imports, CBP identified several entries involving NanoBeam and PowerBeam devices imported by non-Ubiquiti third parties dated after the subject entry and declaring the devices to be Chinese origin. See, e.g., entries dated March 2, 2023, March 13, 2023, and September 27, 2023. In addition, these entries are typically accompanied by invoices issued by Ubiquiti for the sale of PowerBeam and NanoBeam devices identifying China as the applicable country of origin, sometimes with the designation "CN-2." This includes invoices dated August 31, 2022, and November 17, 2022. For instance, one entry, dated March 14, 2023, includes an entry for 500 PowerBeam devices, which the Ubiquiti invoice (dated January 28, 2023) identifies as originating in China. In addition, the entry form indicates the devices were laden in Yantian, Shenzen, China, exported on February 1, 2023, and imported on March 14, 2023. Ubiquiti's May 14, 2024, follow-up response addresses these documents, clarifying that, as outlined above, some NanoBeam and PowerBeam devices produced in China remained in stock at various third-party facilities in China after the contract manufacturer [ ] China ceased shipment of such items in October 2022, and that, as of March 20, 2024, 2,801 Chinese-manufactured PowerBeam units remain in inventory in China. Ubiquiti does not dispute, for instance, that the PowerBeam devices imported under the March 14, 2023, entry originated in China. Ubiquiti also states that those shipments involving a "CN-2" designation, which were imported after the July 2023 reliquidation, represent Country A-origin products that are awaiting disposition of this protest.
In its protest, Ubiquiti concedes that "based on an inadvertent misunderstanding, the Company provided insufficient information in response to CBP's Requests for Information...." Accordingly, Ubiquiti's protest includes the following supplemental documentation:
. PowerBeam product datasheet and sales literature;
. NanoBeam product datasheet and sales literature;
. Photographs of the products' retail packaging;
. CBP CF-28 Requests for Information, dated April 20, 2023; May 5, 2023; and June 30, 2023;
. CBP CF-29 Notices of Action, dated May 25, 2023; June 16, 2023; and August 23, 2023;
. PowerBeam bill of materials;
. NanoBeam bill of materials; and
. Standard operating procedures for the manufacture of PowerBeam and NanoBeam products at the contract manufacturer Country A [ ] facility.
In response to follow-up requests from both CBP's Electronics Center for Excellence and Expertise ("the CEE") and from this office, Ubiquiti provided further information related to the subject devices, the underlying raw materials used in their production, and the shipment of the devices from Country A. In relevant part, these documents include:
. Underlying CF 7501 Entry Form dated February 12, 2023, including supporting documentation (i.e., intercompany invoices, bill of lading, arrival notice/freight notice, and packing lists);
. A "MAC ID Report" generated by the contract manufacturer in Country A, which provides the unique "MAC ID" serial number assigned to each NanoBeam or PowerBeam product involved in the protested entry. The document also identifies the corresponding intercompany invoice, purchase order, and shipping carton for each device;
. A Master Manufacturing and Purchase Agreement between Ubiquiti Country B and the Country A contract manufacturer;
. Purchase orders issued by Ubiquiti Country B to the Country A contract manufacturer;
. Invoices issued by the Country A contract manufacturer to Ubiquiti Country B;
. Payment documents, including a "payment voucher" and bank statements, substantiating payments from Ubiquiti Country B to the Country A contract manufacturer during the relevant time period;
. Intercompany purchase orders issued by Ubiquiti to Ubiquiti Country B;
. Payment documents, including bank statements, demonstrating payment by Ubiquiti to Ubiquiti Country B;
. "Equipment interchange receipts" issued by a container terminal located in Country A, which corroborates the products subject to the protested intercompany invoices were placed in the containers listed in the entry documents before being exported from Country A;
. "Loading plans" for each shipping container listed in the entry form, which correspond with each invoice and cross reference the "equipment interchange receipts;"
. Shipping and transactional documents (e.g., purchase orders, invoices, packing lists) memorializing the purchase by and shipment of select raw materials used in the production of the products (i.e., the top 10 components representing approximately 20% of the total cost) to the contract manufacturer's Country A facility ranging in date from April 2, 2021, to October 13, 2022; and
. Videos and photographs taken at the contract manufacturer's Country A facility showing the manufacture of PCBAs via a SMT process, assembly, testing, and packing.
ISSUE:
Whether the country of origin for the subject devices is China or Country A for the application Section 301 duties.
LAW AND ANALYSIS:
We note that this matter is protestable under 19 U.S.C. 1514(a)(5) as a decision relating to the liquidation or reliquidation of an entry. The protest was timely filed, within 180 days of liquidation for the entry. See Miscellaneous Trade and Technical Corrections Act of 2004, Pub. L. 108-429, 2103(2)(B)(ii)-(iii) (codified as amended at 19 U.S.C. 1514(c)(3) (2006)). Further review of this protest is properly accorded to the importer pursuant to 19 CFR 174.24(b) because the issues protested involve questions of law or fact, which have not been ruled upon.
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, HTSUS. The relevant Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(r), which provides in pertinent part that for the purposes of subheading 9903.88.15, products of China that are classified in the subheadings enumerated in U.S. note 20(s), shall be subject to an additional 7.5 percent ad valorem rate of duty. Products of China classifiable in subheading 8517.62.0090, HTSUS, are subject to the additional tariff under subheading 9903.88.15, HTSUS. Therefore, when determining the country of origin for applying trade remedies under Section 301, the substantial transformation analysis is applicable.
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, and use which differs from the original material subjected to the process. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments, Inc. v. United States, 681 F.2d 778, 782 (1982). If the manufacturing or combining process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F. Supp. 1026 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983).
The Court of International Trade more recently interpreted the meaning of "substantial transformation" in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016). Energizer Battery involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight. All of the components of the flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States and assembled into the finished Generation II flashlight. The Energizer Battery court reviewed the "name, character and use" test utilized in determining whether a substantial transformation had occurred and noted, citing Uniroyal, Inc., 3 C.I.T. at 226, 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 Battery at 1318. In addition, the court noted that "when the end-use was pre-determined at the time of importation, courts have generally not found a change in use." Energizer Battery at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 312 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993).
In a number of rulings, CBP has stated: "in our experience these inquiries are highly fact and product specific; generalizations are troublesome and potentially misleading." See e.g., Headquarters Ruling Letter ("HQ") 735608 (Apr. 27, 1995) and HQ 559089 (Aug. 24, 1995). The determination is in this instance 'a mixed question of technology and Customs law, mostly the latter.'" Texas Instruments, Inc. v. United States, 681 F.2d 778, 783 (CCPA 1982).
In the instant case, the protestant claims that the raw materials are substantially transformed when they are manufactured into the products' main PCBA in Country A. See C.S.D. 85-25, 19 Cust. Bull. 544 (1985), (the assembly of a large number of fabricated components onto a printed circuit board in a process involving a considerable amount of time and skill resulted in a substantial transformation); see also, HQ H326574, dated June 21, 2023 (holding that the country of origin of a network CATV amplifier is that in which the PCBA is manufactured via SMT).
At issue is whether Ubiquiti has provided sufficient evidence showing the subject devices, including the underlying PCBAs, were manufactured in Country A. Ubiquiti claims that the subject NanoBean and PowerBeam devices originated in Country A, where it asserts the assembly and PCBA printing occurs. However, the Electronics CEE denied the subject protest on the basis Ubiquiti did not provide sufficient information demonstrating the instant products originated in Country A, including verification of the certificate of origin and a complete set of purchase orders between Ubiquiti and the contract manufacturer in Country A.
Pursuant to 19 U.S.C. 1509, "[i]n any investigation or inquiry conducted for the purpose of ascertaining the correctness of any entry, for determining the liability of any person for duty, fees and taxes due or duties, fees and taxes which may be due the United States," CBP may "examine, or cause to be examined, upon reasonable notice, any record (which for purposes of this section, includes, but is not limited to, any statement, declaration, document, or electronically generated or machine readable data) described in the notice with reasonable specificity, which may be relevant to such investigation or inquiry...."
In communication with the Electronics CEE and this office, Ubiquiti has subsequently provided additional information to substantiate its claim the devices were produced in Country A. As outlined in the FACTS above, Ubiquiti provided documentation related to both the February 12, 2023, entry as well as general information substantiating the contract manufacturer's [ ] manufacturing capacity in Country A. In relation to the subject merchandise, the "MAC ID Report," Equipment Interchange Receipt, and Loading Plan documents substantiate that the subject NanoBeam and PowerBeam devices were transported from the contract manufacturer's facility in Country A to the port of export in Country A, loaded into the shipping containers listed on the February 2023 entry form, and exported to the United States. Importantly, the MAC ID report also clarifies the purchase order to which each invoice is associated, each of which has been provided by Ubiquiti. Ubiquiti also provided purchase orders, invoices, and payment confirmation for each step of the transaction, including the initial transaction between Ubiquiti Country B and the contract manufacturer as well as the subsequent sale between Ubiquiti Country B and Ubiquiti. The purchase orders indicate that Ubiquiti Country B ordered the subject products from the contract manufacturer in Country A with shipping terms FOB Country A and the associated invoices specify shipment to the United States.
In addition, Ubiquiti has provided information substantiating that the contract manufacturer's Country A facility imports raw materials and conducts manufacturing operations consistent with those necessary to produce the devices. Ubiquiti provided shipping and transactional documents for the period of April 2, 2021, to October 13, 2022, such as invoices, purchase orders, and bills of lading, relating to the ten raw materials or components most utilized in manufacturing the devices, including several used in printing the products' PCBA. For instance, Ubiquiti provided a purchase order dated August 9, 2022, memorializing the purchase by the contract manufacturer in Country A of 10,000 bare PCB boards and specifying shipment to contract manufacturer's Country A facility as well as an invoice and packing/weight list dated September 9, 2022, relating to the same boards. Taken together, these documents demonstrate the contract manufacturer imported raw materials related to the production of NanoBeam and PowerBeam devices, including those used in the production of the main PCBA. In combination with these documents, Ubiquiti provided video and photographic evidence of the manufacturing operations occurring at the contract manufacturer's Country A facility. This includes a video titled "PBE-5AC-Gen2-SMT.MOV" which depicts the production of PCBAs via surface mount technology. As a result, we determine that Ubiquiti has provided sufficient evidence demonstrating that (1) the NanoBeam and PowerBeam devices subject to the February 2023 entry were exported to the United States from the contract manufacturer's Country A facility, and (2) the contract manufacturer's Country A facility imported sufficient raw materials and conducted manufacturing operations consistent with the assembly of PCBAs and the NanoBeam and PowerBeam devices.
Importantly, Ubiquiti also addressed CBP's concern regarding the concurrent importation of NanoBeam and PowerBeam devices labeled as having originated from China. As outlined in the FACTS above, CBP identified several entries of NanoBeam and PowerBeam devices imported by non-Ubiquiti third parties that are dated after the subject entry and are marked as having originated in China. See, e.g., entries dated March 2, 2023, March 13, 2023, and September 27, 2023. In response, Ubiquiti confirmed that such entries exist, but argued these entries represent shipments of NanoBeam and PowerBeam devices remaining in stock at third-party warehouses in China manufactured before the company transitioned production from China to Country A. In support, Ubiquiti provided documentation indicating that the contract manufacturer last shipped NanoBeam or PowerBeam devices from its Chinese plant in October 2022. These documents include a purchase order, Excel excerpt of a spreadsheet entitled "CN [contract manufacturer] Ship Dates (including PBE)," and a purchase order showing NanoBeam and PowerBeam devices were transported to a third-party warehouse in China. In addition, unlike the subject entry, for those entries of NanoBeam and PowerBeam devices identifying China as the country of origin, China is also listed as the country from which the merchandise was exported. For instance, in the March 14, 2023, entry discussed in the FACTS above, the entry form indicates the devices were laded in Yantian, Shenzen, China, exported on February 1, 2023, and imported on March 14, 2023.
Ubiquiti also clarified that many entries occurring after July 2023 are labeled as Chinese origin to comply with CBP's liquidation of the subject entry as Chinese origin. For several shipments of NanoBeam and PowerBeam devices occurring after July 2023, Ubiquiti asserts that, after CBP issued the July 2023 CF-29 liquidating the subject devices as Chinese origin, the company instructed importers to identify future imports as Chinese COO pending a determination by CBP. In support, Ubiquiti provided commercial invoices for shipments of PowerBeam and NanoBeam units that it maintains are of Country A-origin, which nevertheless identify the products as "CN-2" origin. Ubiquiti maintains that this was done to communicate to third parties that the COO should be declared as China but that these entries might be protested later. Based on the foregoing, Ubiquiti has provided sufficient clarification indicating that the separate, concurrent entries in which certain NanoBeam and PowerBeam devices are declared as having originated in China either represent true shipments of Chinese-origin devices drawn from pre-existing stocks or are devices that Ubiquiti maintains are produced in Country A but are declared as Chinese-origin pending the disposition of this protest (i.e., "CN-2" shipments).
Finally, Ubiquiti addressed CBP's initial concern that certain items included in the subject shipment were labeled as originating in China. Ubiquiti explained that the products are imported as a set and that certain components (e.g., the power cord and power over ethernet cord) are sourced from China and may be labeled as such. Ubiquiti avers that these components are minor elements that aid the function of the products but are secondary to the PCBA, which imparts the character of the devices. As outlined in the rationale above, we agree.
Based on the foregoing, we determine that the manufacturing process occurring in Country A constitutes a substantial transformation such that the country of origin of the products is Country A. In addition, we determine Ubiquiti has provided sufficient evidence demonstrating that this process actually occurs in Country A. As a result, Section 301 remedies are not applicable to the subject devices.
HOLDING:
This protest should be GRANTED. Based on the analysis above, the protestant has provided sufficient information demonstrating that the subject merchandise was produced in COUNTRY A. Protest No. 330323100897 is referred back to your Center for appropriate action.
You are instructed to notify the importer, through the importer's counsel, of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System ("CROSS") at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
For Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division
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[1] Ubiquiti has submitted a separate prior disclosure, dated June 17, 2024, related to whether the proper valuation should be based on the transaction value paid by Ubiquiti Country B to the contract manufacturer or by Ubiquiti to Ubiquiti Country B. We note that this question is not a subject to the instant protest.