CLA-2-90:OT:RR:NC:N1:105
Mr. Adam Mook
Logistics Plus, Inc.
1406 Peach Street
Erie, PA 16501
RE: The country of origin determination of a temperature sensor from Mexico
Dear Mr. Mook:
In your letter dated November 27, 2018, on behalf of Amphenol Advanced Sensors, you requested a country of origin determination.
The temperature sensor is designed to monitor fill water temperature in a top load clothes washing machine. The device contains components such as a thermistor, insulated vinyl tubing cable with fitted connectors and a temperature chip at the tip.
The assembly of the temperature sensor is said to occur in two separate countries. The thermistor is manufactured in the United Kingdom and exported from the United Kingdom to China. In China, light assembly is performed, i.e., short wires of Chinese origin are added to the thermistor chip. The article is then shipped to Mexico where electrical wire, a sleeve, an electrical shell connector and a shrink tube are added. These components originate in China and the United States. The finished product is then shipped from Mexico to the United States.
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the North American Free Trade Agreement (NAFTA). General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if--
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; or
(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the nonoriginating materials falling under provisions for “parts” and used in the production of such goods does not undergo a change in tariff classification because--
(A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or
(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts,
provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note.
While the temperature sensor is assembled in Mexico, it contains non-originating components (i.e. those that were produced in countries other than Canada, the United States, or Mexico). As a result, to qualify for NAFTA treatment under the terms of General Note 12(b)(ii)(a), each non-originating material must undergo the change in tariff classification set forth in General Note 12(t). The relevant change in tariff classification rule for subheading 9025.19, i.e., General Note 12(t) Chapter 90/57(A), where the temperature sensor at issue is classified, states the following: (A) A change to subheadings 9025.11 through 9025.80 from any other heading; or (B) A change to subheadings 9025.11 through 9025.80 from subheading 9025.90, whether or not there is also a change from any other heading, provied there is a regional value content of not less than:
45 percent where the transction value method is used, or
35 percent where the net cost method is used.
Based on the facts provided, the non-originating components of the temperature sensor meet the requisite change in tariff classification outlined above. As a result, the temperature sensor at issue is considered a product of Mexico by qualifying for preferential treatment under the NAFTA because all components made the requisite tariff shift per General Note 12(b). The question remains, pursuant to this request, as to whether or not the components used in the production of the temperature sensor are substantially transformed for the purposes of determining the application of the trade remedies under 9903.88.01, HTSUS. Effective July 6, 2018, the Office of the United States Trade Representative (USTR) imposed an additional tariff on certain products of China classified in the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(b), HTSUS. The USTR imposed additional tariffs, effective August 23, 2018, on products classified under the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(d), HTSUS. Subsequently, the USTR imposed further tariffs, effective September 24, 2018, on products classified under the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(f) and U.S. Note 20(g), HTSUS. For additional information, please see the relevant Federal Register notices dated June 20, 2018 (83 F.R. 28710), August 16, 2018 (83 F.R. 40823), and September 21, 2018 (83 F.R. 47974). Products of China that are provided for in subheading 9903.88.01, 9903.88.02, 9903.88.03, or 9903.88.04 and classified in one of the subheadings enumerated in U.S. Note 20(b), U.S. Note 20(d), U.S. Note 20(f) or U.S. Note 20(g) to subchapter III shall continue to be subject to antidumping, countervailing, or other duties, fees and charges that apply to such products, as well as to those imposed by the aforementioned Chapter 99 subheadings.
Products of China classified under subheading 9025.19.8080, HTSUS, unless specifically excluded, are subject to the additional 25 percent ad valorem rate of duty.
When considering a product that may be subject to antidumping, countervailing, or other safeguard measures, the substantial transformation analysis is applied to determine the country of origin. See 19 C.F.R. § 102.0; HQ 563205, dated June 28, 2006; see also Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (finding that “the term ‘product of’ at the least includes manufactured articles of such country or area” and that substantial transformation “is essentially the test used…in determining whether an article is a manufacture of a given country”). In accordance with 19 C.F.R. § 102.0, the 102 marking rules are applicable for the limited purposes of: “country of origin marking; determining the rate of duty and staging category applicable to originating textile and apparel products as set out in Section 2 (Tariff Elimination) of Annex 300–B (Textile and Apparel Goods); and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2 (Tariff Elimination).” The 102 marking rules do however continue to be applicable for purposes of country of origin marking of NAFTA goods, as defined in 19 C.F.R. § 134.1. 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 that “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. This office notes that the temperature sensor under consideration was assembled in Mexico from goods which originated in the United Kingdom, India, Vietnam, China and the United States. The individual parts have lost their separate identities. They have become integral parts of a new article, i.e., a temperature sensor, assembled in Mexico. Based upon the submitted information, this office is of the opinion that the manufacturing operations performed in Mexico substantially transform the various components into the temperature sensor of Mexican origin. Thus, the temperature sensor is not subject to additional duties enumerated in U.S. Note 20(b), HTSUS, referenced in subheading 9903.88.01, HTSUS.
This ruling is being issued under the provisions of Part 177 of the Customs 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, contact National Import Specialist Patricia O’Donnell at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division