CLA-2-90:OT:RR:NC:N1:105
Joseph Issa Merck & Co. 126 East Lincoln Avenue Rahway, NJ 07065 RE: The tariff classification and country of origin of the SenseHub Tag
Dear Mr. Issa:
In your letter dated October 6, 2023, you requested a tariff classification and country of origin determination ruling.
The item under consideration is described as the “SenseHub Tag” or “Tag,” which is a device designed to monitor a cow’s behavior through a proprietary algorithm that provides the farmer, via the Tag’s software, the necessary information about changes in behavior to make informed farm management decisions. This monitoring is achieved through two sensors (a temperature sensor and a MEMS accelerometer) and an infrared (IR) receiver within the Tags. The temperature sensor updates the Tag with an ambient temperature (i.e., air temperature, not the cow’s body temperature) measurement, which is used for monitoring general environmental conditions. The MEMS accelerometer gathers information on the dairy cow’s activity by sensing velocity, force, vibration (measured in three axes), and acceleration. This information is then processed and transmitted through the overall system, and used to assess the animal’s behavioral state once it reaches the cloud or farmer. Finally, the IR receiver communicates with IR transmitters located at different parts of the farm (e.g., at sorting gates) and receives a unique IR signal from the IR transmitter (2.4 GHz - 802.15.4 Zigbee protocol wireless communication hardware) identifying the Tag’s location. Once the receiver receives the location data, the Tag’s CPU aggregates this location data with other data collected by the Tag. The Tag then processes and transmits the location data in real-time back out of the Tag, specifically, to the Controller, and then to the cloud or farmer.
The Tag additionally contains a central processing unit (CPU) which aggregates and filters the data from the MEMS sensor and contains a short-term memory cache for storing most data for up to 20 minutes. The transmission of data permits the overall system to know the cow’s location and (as needed) open gates or enable milking machines for the cow wearing the particular Tag. A user, on their smart device, can then view a range of reports and graphs, including ones that show how rumen activity for any specific cow wearing the Tag is affected by feeding changes, typical physiological phases (e.g., calving, lactation starting), etc.
The SenseHub Tags will be imported with a belt, belt rings, full rubber weight, and installation instructions. The belt and belt rings allow the Tag to be placed around the neck of the dairy cow. The weight provides a counterbalance to the Tag to ensure the Tag falls on the cow’s neck at the best position for the wireless receipt and transmission of data. The installation instructions are provided to assist the farmer in installing the Tag around the dairy cow’s neck. The SenseHub Controller will be imported separately.
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 and any relevant section or chapter notes. In the event the articles cannot be classified solely on the basis of GRI 1, GRI’s 2 through 6 may be applied in order, as appropriate. The Explanatory Notes to the HTSUS, while not legally binding, may also be consulted to aid in classification. The Tag is considered to be a composite good within the meaning of GRI 3. Goods classifiable under GRI 3(b) shall be classified as if they consisted of the material or a component which gives them their essential character. The Explanatory Note to GRI 3(b)(VIII), states that the factors which determine essential character will vary between different kinds of goods. It may for example, be determined by the nature of the materials or components, its bulk, quantity, weight, or value, or by the role of a constituent material in relation to the use of the goods. GRI 3(c) states that when the essential character of a composite good cannot be determined, classification is based on the heading that occurs last in numerical order among those which equally merit consideration.
In your letter, you suggest the applicable subheading for the SenseHub Tag to be 8517.62.0090, HTSUS. We disagree. The item is used to determine or track the activity/location of cows. It’s a monitoring device that determines the level of physical movement/exertion. The location and activity functions are carried out by various sensors. Without the ability to identify the cow’s location and/or be able to measure the movement of the cow, there would be no need for the transmission function. In other words, the transmission of data is in service of determining a cow’s location and physical activity. It is the opinion of this office that the wireless transmission ability in heading 8517, HTSUS, merits equal consideration to the accelerometer in heading 9031, HTSUS. Consequently, classification will be determined based on the competing heading that occurs last in numerical order.
Therefore, according to GRI 3(c), the applicable subheading for the SenseHub Tag will be 9031.80.8085, HTSUS, which provides for “Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof: Other instruments, appliances and machines: Other: Other.” The general rate of duty will be free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at https://hts.usitc.gov/current.
Regarding the country of origin of the SenseHub Tag, the manufacturing will occur in Mexico from nine subassemblies or components originating in Mexico, Switzerland, and China. The two main subassemblies of the product are a weather-sealed plastic housing (with cover, body, and belt rings) and a printed circuit board assembly (PCBA) contained within the housing. The product’s PCBA will be assembled in Mexico, with surface-mount technology (SMT) equipment used to build up a bare printed circuit board (PCB) into a finished PCBA. Through SMT, numerous individual components will be soldered onto the bare printed circuit board to create a functional motherboard PCBA specifically designed for the Tag. At the facility in Mexico, 49 different components (including both the primary functional components discussed above such as the MEMS accelerometer, as well as secondary components such as ceramic capacitors and resistors, among other components) from numerous different countries (including the Philippines, Singapore, Taiwan, Thailand, the Czech Republic, Israel, and China) will all be surface mounted to form the finished PCBA. After physical assembly of the PCBA in Mexico, the PCBA will also be programmed in Mexico (using software developed in Israel) and tested in Mexico. This programmed PCBA becomes the “brain” of the Tag.
Once the PCBA is completed in Mexico, within the same production facility it will be incorporated into the plastic housing of the final article with components from Switzerland, China, and Mexico. The product’s cover, body, and belt rings will be injection molded in Mexico from plastic raw material sourced from Switzerland. The cover will be made of IR-transparent plastic that filters incoming IR signals from IR transmitters external to the Tag and permits those signals to be received by the IR receiver on the PCBA under the cover. An NFC antenna, belt, and full rubber weight sourced from China are also added as part of the device assembly in Mexico. The belt attached to the housing serves to place the Tag around the cow’s neck, while the weight hangs from the bottom of the belt to ensure that the Tag always remains in the correct location on the left side of the cow’s neck. Additional shock absorbers within the device will also be sourced from Mexico. During the production process in Mexico, a wire from the NFC antenna (the only electronic component in the device not mounted on the PCBA) will be connected to the inside of the product’s plastic housing. After all the internal components are mounted within the housing at the facility in Mexico, the housing components are polymer sealed and then pressure tested to ensure that the housing is watertight and that the PCBA and other internal components are shielded from the environment and external moisture. After assembly, sealing, and testing, the completed Tag will be packaged into a box with an accompanying leaflet, both of which will be sourced from Mexico, as well as with the belt, belt rings, and full rubber weight. The PCBA subassembly and additional Mexican components represent over 70% of the value of the Tag.
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; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.”
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported 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, 19 CFR Part 102.11(a) provides that the country of origin of a good is the country in which: (1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. The SenseHub Tag is neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the Tag, and paragraph (a)(3) must be applied next to determine the origin of the finished article. The Tag is classified under subheading 9031.80, HTSUS. The tariff shift requirement in Part 102.20 for the Tag at issue states: A change to subheading 9031.80 from any other heading. Regarding the wireless SenseHub Tags’ country of origin for marking purposes, the PCBA is constructed of materials from various countries predominately from Chapter 85. Accordingly, the PCBA becomes a Mexican origin domestic material. Additionally, the shock absorbers and packing items are also considered Mexican domestic material. The foreign material consists of an IR-transparent plastic cover, NFC antenna, plastic body, belt rings, belt, and full rubber weight. These components are all classifiable outside of Chapter 90. Since all of the foreign components undergo processing in Mexico to turn it into an article of heading 9031, the tariff shift requirement of section 102.11(a)(3) is met. Accordingly, the country of origin of the SenseHub Tag for marking purposes is Mexico.
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, it is the opinion of this office that the PCBA surface mount technology assembly process, which includes the installation of the MEMS accelerometer and various electronic components (such as ceramic capacitors and resistors), from numerous different countries results in a substantial transformation of the components. The use of the SMT process transforms the individual components into a new and different article capable of providing force and movement data to the farmer. The addition of the Chinese NFC antenna, belt, and full rubber weight added in Mexico do not substantially transform the product. Instead, they are just additional pieces that enhance the product. Thus, the product remains a product of Mexico where the SMT was used to build the PCBA. In view of these facts, the country of origin for Section 301 trade remedies is Mexico.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly 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. In the event that the facts are modified in any way, or if the goods do not conform to these facts at 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 the Customs and Border Protection 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, please contact National Import Specialist Jason Christie at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division