CLA-2-90:OT:RR:NC:N1:105
Santi Lara
Heraeus Incorporated
770 Township Line Road
Yardley, PA 19067
RE: The country of origin of the CX4R oxygen sensor
Dear Mr. Lara:
In your letter dated October 10, 2019, you requested a country of origin ruling. A detailed description of the manufacturing process to which the components are subjected to was submitted for our review.
The merchandise under consideration is identified as the CX4R oxygen sensor. From the information you provided, the oxygen sensor is used to determine the amount of oxygen present in steel during production. Steel mills require low oxygen conditions at high temperatures to prevent oxidation of the steel. The CX4R oxygen sensor is able to detect the change in carbon and store the information for reading. Detecting and monitoring the level of carbon in steel is important because it indicates the level of oxygen, which as noted must remain low.
You state in your request that the CX4R oxygen sensor is classified in subheading 9027.90.5695, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes; parts and accessories thereof: Parts and accessories: Of instruments and apparatus of subheading 9027.20, 9027.30, 9027.50 or 9027.80: Other.” The rate of duty is free.
In regards to the country of origin of the CX4R oxygen sensor, it is said that the initial five phases of the manufacturing process are completed in China. This includes initial assembly and welding of the thermocouple wires, copper extension wires, stainless steel wire and plastic connectors. The assembled articles are then shipped to the United States for additional processing. The U.S. manufacturing involves ten separate steps including the addition of a specific amount of the highly specialized “reference” powder that gives the oxygen sensor the ability to detect the changes in carbon. However, when the U.S. processing is complete the item is not a functional sensor because there is no ability to read or record the data once the changes in carbon are detected. After testing the products, the final stages in the U.S. are packing the unfinished articles for shipping to China. The final ten phases to the manufacturing process are completed in China and are required for the sensor to function. Most of the steps are assembly procedures such as welding additional wires, manually assembling the ceramic body with additional rings and connectors, and adding the refractory cement. Several of these steps require weeks of training to properly perform the tasks.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the “ultimate purchaser” in the U.S. the English name of the country of origin of the article. In enacting 19 U.S.C. 1304, Congress intended 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). Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 C.F.R. 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of this part. The seminal case of United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), instructs that an article used in manufacture which results in an article having a name, character, or use differing from that of the constituent article will be considered substantially transformed. Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade interpreted the meaning of “substantial transformation” as used in the Trade Agreements Act of 1979 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, 190 F. Supp. 3d at 1318. Furthermore, the 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.
In this instance, the manufacturing process described above results in a substantial transformation of the CX4R oxygen sensor manufactured in China. The minimally assembled product when leaving the United States is not capable of performing as a sensor. There is no ability to read or record the data once the changes in carbon are detected. Without this key ability, the sensor is not functional. The additional processing and assembly completed in China substantially transforms the item because only after such processing is the article able to read and record changes in carbon, which allows the user to determine oxygen levels.
The assembly completed in China requires the need for multiple steps and several weeks of training to perform. For example, in order for step seventeen to be completed, which accounts for welding steel plate to an alloy copper lead using a manual resistance-welding machine, the employee attends several weeks of training on the highly complex welding machinery. Another example is step twenty, which requires manually mixing refractory cement and filling bottles for cement potting. In this step, there is also several weeks of training required so that the proper mix is created. Steps twenty one through twenty three each involve several weeks of training to perfect the processing. These steps involve manually filling pot assemblies with refractory cement, hours of oven curing and placing plastic cartridges into the open end of the connector. The training involves not only the procedures of how to perform the task but also the way to operate highly specialized machines. The machines utilized in these processes include ovens for curing, various sophisticated welding machines, and wire bending machines.
The sensor emerging from China is a new and different article of commerce with a name, character, and use distinct from the article coming from the US. Therefore, it is the opinion of this office that the country of origin of the CX4R oxygen sensor is China.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 9027.90.5695, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.01, in addition to subheading 9027.90.5695, HTSUS, listed above.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading.
For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china respectively.
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 Jason Christie at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division