CLA-2-85:OT:RR:NC:N2:212
Lucas Rock
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
599 Lexington Avenue
New York, NY 10022
RE: The tariff classification, country of origin, and status under the United States-Mexico-Canada Trade Agreement (USMCA) of a center information display module
Dear Mr. Rock:
In your letter dated March 3, 2022, you requested a tariff classification, country of origin and a determination on the eligibility of duty-free treatment ruling on behalf of your client, Alpine Electronics of America, Inc.
The merchandise under consideration, identified by model number QH00159A, is described as a center information display (CID) module. The unit is comprised of a 12-inch flat panel touchscreen liquid crystal display (LCD) and a printed circuit board assembly (PCBA) within a housing. The PCBA is populated with various components including a microcontroller, deserializer, voltage generator, and scaler IC, which when attached to the LCD touch screen provides power and controls the LCD commands. The finished device is designed to be incorporated within a vehicle in order to allow the driver to view various information such as audio, climate control, navigation, and backup camera footage. Further, the unit allows the user to control and interact with these various systems.
In your request, you state that the LCD display portion of the finished item is manufactured in China and sent to Mexico. In Mexico, a bare PCB of Chinese origin is populated with the microcontroller, deserializer, voltage regulator, scaler IC, and various other electronic components via surface mount technology. You state that the electronics that populate the finished PCBA are from various countries. Further in Mexico, the LCD portion and PCBA are combined along with installation brackets, chassis, and top/rear casing from various countries to complete the finished article.
As an initial matter, you suggest that the CID unit is properly classified under subheading 8543.70.9860, Harmonized Tariff Schedule of the United States (HTSUS). We agree.
The applicable subheading for the CID module, model number QH00159A will be 8543.70.9860, HTSUS, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other: Other: Other.” The general rate of duty will be 2.6% ad valorem.
Regarding the CID module’s eligibility for preferential treatment, the USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018, and approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act. General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if –
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o))
The subject CID module contains non-originating materials and is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the module is not a good produced entirely in Mexico exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o)
The applicable tariff shift rule for merchandise classifiable under subheading 8543.70, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
A change to subheading 8543.70 from any other subheading, except from “smart” cards, other than those containing a single integrated circuit, of subheading 8523.59.
Based upon the information provided, all non-originating parts included in the manufacture of the finished module, particularly the Chinese LCD display, are classified outside of subheading 8543.70, HTSUS. As such, the finished modules are considered originating goods under the USMCA and eligible for preferential treatment.
Regarding the origin of the module, the marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its 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.
The “country of origin” is defined in 19 CFR 134.1(b) as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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.”
To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods 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:
(a)(1) The good is wholly obtained or produced;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(3) Each foreign material incorporated in that good undergoes an applicable change in
tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to this case as the subject CID modules are neither wholly obtained or produced or produced exclusively from “domestic” 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). “Foreign material” is defined in section 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 under Section 102.20 for goods classified in subheading 8543.70, HTSUS, states:
A change to subheading 8543.70 from any other subheading,
except from proximity cards or tags of subheading 8523.52 and
except from other machines or apparatus of subheading 8486.10
through 8486.20.
As previously stated, none of the foreign components are classified within subheading 8543.70, HTSUS, nor are they classified within the other enumerated subheadings above. As such, we find that the CID modules are products of Mexico for marking purposes.
The United States Trade Representative has determined that an additional ad valorem duty of 25% will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 (Section 301 measures). When determining the country of origin for purposes of applying current 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, 69 C.C.P.A. 151 (1982). To determine whether a substantial transformation has occurred, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. CBP has stated that a new and different article of commerce is an article that has undergone a change in commercial designation or identity, fundamental character, or commercial use.
Regarding the applicability of Section 301 trade remedies, in our view, the Chinese LCD display and other foreign components are substantially transformed into a new and different article of commerce by the manufacturing process performed in Mexico. Particularly, the manufacture of the PCBA, which contains the significant and necessary electronics for the finished component, create the essential functional component of the module. As such, the CID module is considered a product of Mexico and is not subject to additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
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 Luke LePage at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division