OT:RR:NC:N4:463
TARIFF: 9403.20.0050; 9903.88.03
Sydney H. Mintzer
Mayer Brown LLP
1999 K Street, NW
Washington, DC 20006
RE: The country of origin of two Sonos speaker floor stands
Dear Mr. Mintzer:
This ruling is being issued in reply to your letter dated October 3, 2023, on behalf of your client, Sonos, Inc, requesting a country-of-origin and Section 301 applicability ruling on two Sonos speaker floor stands, the Optimo1 Stand and the Optimo 2 Stand. In lieu of samples, illustrative literature, spreadsheets, and product descriptions were provided.
FACTS
The Optimo 1 and Optimo 2 are floor stands designed to hold Sonos speakers. The primary differences between the stands are (1) the method of the speaker’s attachment (platform v. stem), and (2) their heights. Both stands are comprised of three main parts: a base subassembly, a vertical post, and a top subassembly.
The base subassembly consists of a plastic base bottom, a weight, and a steel top cover. The vertical post is an aluminum post with a plastic cap. On the Optimo 1, the top assembly is made up of a zinc alloy platform ring and a plastic bottom cover, and in the Optimo 2, the top assembly is an aluminum stem with mounting holes.
OPTIMO 1 COMPONENTS AND THEIR MATERIALS
Base Bottom (plastic)
Base Weight (steel)
Base Cover (steel)
Post (aluminum)
Post Cap (plastic)
Platform Ring (zinc alloy)
Platform Ring Bottom Cover (plastic)
Washer (aluminum)
Foot (silicone, primer)
Miscellaneous Fasteners (various)
OPTIMO 2 COMPONENTS AND THEIR MATERIALS
Base Bottom (plastic)
Base Weight (steel)
Base Cover (steel)
Post (aluminum)
Post Cap (plastic)
Stem (aluminum)
Washer (aluminum)
Landing Pad (silicone)
Miscellaneous Fasteners (various)
OPTIMO 1 MANUFACTURING SCENARIOS
SCENARIO 1
The post is made in Malaysia and shipped to China. All other parts are made in China and all assembly and packaging operations occur in China.
SCENARIO 2
The post, platform bottom and platform ring are made in Malaysia and shipped to China. All other parts are made in China and all assembly and packaging operations occur in China.
SCENARIO 3A
The post, platform bottom, platform ring and base cover are made in Malaysia and shipped to China. All other parts are made in China and all assembly and packaging operations occur in China.
SCENARIO 3B
The post, platform bottom, platform ring and base cover are made in Malaysia and shipped to China where the post and platform ring will undergo powder coating (minor processing). All other parts are made in China and all assembly and packaging operations occur in China.
OPTIMO 2 MANUFACTURING SCENARIOS
SCENARIO 1
The post is made in Malaysia and shipped to China. All other parts are made in China and all assembly and packaging operations occur in China.
SCENARIO 2
The post and stem are made in Malaysia and shipped to China. All other parts are made in China and all assembly and packaging operations occur in China.
SCENARIO 3A
The post, stem and base cover are made in Malaysia and shipped to China. All other parts are made in China and all assembly and packaging operations occur in China.
SCENARIO 3B
The post, stem and base cover are made in Malaysia and shipped to China where the post and stem will undergo powder coating (minor processing). All other parts are made in China and all assembly and packaging operations occur in China.
CLASSIFICATION
Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. If the goods cannot be classified solely based on GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and coding System, which constitutes the official interpretation of the Harmonized System at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading and are generally indicative of the proper interpretation of the HTSUS. The ENs to Chapter 94 of the HTSUS state, in relevant part, for the purposes of this Chapter, that the term “furniture” means: (A): Any “movable” articles (not included under other more specific headings of the Nomenclature), which have the essential characteristic that they are constructed for placing on the floor or ground, and which are used, mainly with a utilitarian purpose, to equip private dwellings, hotels, theatres, cinemas, offices…. The articles described above meet this definition of furniture.
The applicable classification for the Optimo 1 Stand and the Optimo 2 Stand will be subheading 9403.20.0050, HTSUS, which provides for “Other furniture and parts thereof: Other metal furniture: Household: Other: Other.” The general rate of duty will be free.
COUNTRY OF ORIGIN
Section 134.1(b), Customs Regulations (19 CFR 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.” A substantial transformation occurs when articles lose their identity and become articles having a new name, character, or use.
Generally, the U.S. Court of International Trade has determined whether a substantial transformation has occurred by asking whether the manufacturing or processing substantially transformed the foreign materials in question into an article having a name, character or use different from the name, character, or use of those materials before such processing.
Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1317 (C.I.T. 2016) (quoting
Precision Specialty Metals, Inc. v. United States, 116 F. Supp. 2d 1350, 1364 (C.I.T. 2000)).
The primary focus of the substantial transformation test is whether the work or material added to an article in another country changed the character or use of the article. See Energizer, 190 F.
Supp. 3d at 1318. A party can show a change in the character of materials added during processing with evidence that the processing substantially altered the form of those materials.
Id. at 1318.
Under the CBP laws, if the article consists of materials produced, derived from, or processed in more than one country, it is considered a product of the country where it last underwent a “substantial transformation.” According to U.S. courts, a substantial transformation occurs when articles lose their identity as such and become new articles having a new “name, character or use.” In order 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. A determinative issue is the extent of the operations performed and whether the materials lose their identity and become an integral part of the new article.
The requester has provided three manufacturing scenarios for each Optimo stand with between one and four components made in Malaysia and the remaining components, final assembly and packaging performed in China. Additionally, the third manufacturing scenario includes a variation (3B) in which additional Chinese processing (powder coating) is performed on the Malaysian metal materials.
Under scenario 1, the requester asserts that the height of the vertical posts is of such paramount importance to the function of the speaker stands that the Malaysian posts impart their essential character to the entire finished speaker stands, notwithstanding that all of the other components are made in China and that the assembly and packaging operations are performed in China.
Under scenario 2, the requester makes the same assertion as in scenario 1 but under this scenario the uppermost component that holds the speaker is also made in Malaysia and shipped to China for assembly and packaging with the other components, which are Chinese.
Under scenario 3A, the requester makes the same assertion as in scenario 2, but under this scenario the base cover is also made in Malaysia and shipped to China for assembly and packaging with the other components, which are Chinese.
Under scenario 3B, the requester makes the same assertion as in scenario 3A, but under this scenario the Malaysian posts and the uppermost components that hold the speaker undergo powder coating in China prior to their assembly and packaging with the other components, which are Chinese.
This office is not in agreement with the requester’s analysis in any of the aforementioned four manufacturing scenarios (1, 2, 3A or 3B) and notes that the post is only one of three major assemblies that comprise the speaker stands, and that all three major components (base, post, and platform/stem) are all required parts of a speaker stand and that no one component is of significantly greater importance than any other.
There is ample precedent in the Customs Ruling On-Line Search System (CROSS) that furniture components produced in one country lose their essential character when assembled with components of similar importance in another country, where they take on a new name, character and function. (See HQRL H330862, HQRL H268491, and NYRL N334531.) This is the case with the subject speaker stands, where the Malaysian components are assembled with Chinese components of similar importance, lose their name, character and function in China, and thus become components of a Chinese speaker stand.
In support of this position, this office notes that both stands, under all four manufacturing scenarios, contain a majority of Chinese parts (from 6 to 9 out of approximately 10), undergo final assembly and packaging in China, and that none of the parts have the essential character of a speaker stand either individually or when grouped by country of origin.
This office also notes that although the cost expended on manufacturing in one country vs. that expended in another is a crude measure with respect to origin, it nonetheless has some utility when considered as one of several factors. For the Optimo 1 Stand, under the four manufacturing scenarios provided, the cost of the Malaysian materials and processing ranged from approximately 17% to 40% of the total processing cost, with the remaining cost (the majority) incurred in China. For the Optimo 2 Stand, under the four manufacturing scenarios provided, the cost of the Malaysian materials and processing ranged from approximately 19% to 38% of the total processing cost, with the remaining cost (the majority) incurred in China.
Based on the foregoing, the country of origin of the Sonos Optimo 1 Stand and the Sonos Optimo 2 Stand, subject of this ruling, is China.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 9403.20.0050, HTSUS, unless specifically excluded, are subject to an additional 25% ad valorem rate of duty. At the time of importation, if the country of origin is China, the importer must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 9403.20.0050, HTSUS, listed above.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at https://hts.usitc.gov/current.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. If the facts are modified in any way, or if the goods do not conform to these facts at the time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of Title 19 of the Code of Federal Regulations (19 CFR Part 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 Seth Mazze at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division