OT:RR:NC:N2:220
Joaquin Barragan
8830 Siempre Viva Road, Suite 100
San Diego, CA 92154
RE: The country of origin marking, status under the United States-Mexico-Canada Trade Agreement (USMCA), and applicability of Section 301 trade remedies for Thermal Modules
Dear Ms. Barragan:
This is in response to your letter dated December 27, 2023, requesting a country of origin marking ruling for two items, identified as the Thermal Module without Vapor Chamber, PN CHP075GB1012, and the Thermal Module with Vapor Chamber, PN CHPA29GB1012. You also inquire whether the Thermal Modules are eligible for duty free treatment under the USMCA and if Section 301 additional duties are applicable. Samples of the Thermal Modules were provided for our review.
The Thermal Module without Vapor Chamber is described as a heat sink assembly that is intended to be mounted to the processor of an automatic data processing machine’s (ADP) central processing unit (CPU) for the purpose of heat dissipation and cooling. The Thermal Module without Vapor Chamber consists of aluminum fins, a copper heat pipe, an aluminum base, a copper plate, and fasteners. Once assembled, the heat sink assembly receives labels and thermal grease.
The Thermal Module with Vapor Chamber is described as a heat sink assembly that is intended to be mounted to the processor of an ADP machine’s CPU for the purpose of heat dissipation and cooling. The Thermal Module with Vapor Chamber consists of aluminum fins, a copper heat pipe, a vapor chamber, an aluminum base, a copper plate, and fasteners. Once assembled, the heat sink assembly receives labels and thermal grease.
Based on the information provided, all of the component parts that make up both Thermal Modules are sourced from China. You state that each device is assembled in Mexico using similar manufacturing processes, as described hereafter.
The assembly process for both Thermal Modules consists of applying solder to the various components via a solder paste machine, manually stacking and arranging the components in an assembly fixture and placing into a high temperature oven. The subassemblies are cleaned and visually inspected throughout the process. Once removed from the oven, the Thermal modules are tested for thermal performance and physical tolerances. Lastly, the Thermal Modules receive labels, thermal grease, and a plastic grease cover.
We note that both the USMCA and country of origin marking analyses require classification of the subject merchandise. Based on the information submitted, you propose classification of the Thermal Modules under subheading 8473.30.5100, Harmonized Tariff Schedule of the United States (HTSUS). We agree. Additionally, you suggest that the individual components that make up the Thermal Modules are each classified outside of heading 8473, HTSUS. We agree.
Eligibility for preferential treatment under the USMCA:
In your letter, you inquire whether the Thermal Modules are eligible for preferential treatment under the USMCA. The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11, 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, in relevant part:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country…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 -
(i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
(iii) the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); ….
In the instant case, the Thermal Modules consist exclusively of non-originating materials and are 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 Thermal Modules are not a good produced entirely in Mexico exclusively from originating materials. Therefore, we must 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 8473.30, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
Chapter 84 – 217. (A) A change to subheading 8473.30 from any other heading
Since all the foreign materials are classified outside of subheading 8473.30, HTSUS, the requisite tariff shift rule is met. As a result, the finished Thermal Modules, identified as the Thermal Module without Vapor Chamber, PN CHP075GB1012, and the Thermal Module with Vapor Chamber, PN CHPA29GB1012, are considered originating goods under the USMCA and eligible for preferential treatment upon importation into the United States.
Regarding your request for the country of origin of the Thermal Modules for marking purposes, we note the marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), which 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:
“[T]he 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.
Since the Thermal Modules are neither “wholly obtained or produced” nor “produced exclusively from domestic materials”, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of these heat sink assemblies and paragraph (a)(3) must be applied to determine the origin of the finished article. As the Thermal Modules are classified under subheading 8473.30.5100, HTSUS, the applicable tariff shift requirement in Part 102.20 for the assemblies under consideration states:
A change to heading 8473 from any other heading, except from heading 8414, 8501, 8504, 8534, 8541, or 8542 when resulting from a simple assembly.
The identified foreign components used in the production of the Thermal Modules are all classified outside of heading 8473, HTSUS. As a result, the country of origin of the Thermal Module without Vapor Chamber, PN CHP075GB1012, and the Thermal Module with Vapor Chamber, PN CHPA29GB1012, will be Mexico at the time of importation into the United States and should be marked accordingly.
Regarding the applicability of Section 301 trade remedies to the Thermal Modules under consideration, Customs and Border Protection relies on the substantial transformation of the assembled components when determining the country of origin for purposes of Section 301. The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).
However, if the manufacturing or combining process is merely a minor one that leaves the identity of the assembled articles intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (Uniroyal). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
In the instant case, all of the materials used in the production of the Thermal Modules are Chinese origin. In Mexico, the process of manually arranging heat conductive materials, assembling by hand, and then heating them in an oven to join the pieces is not a complex process and does not transform the heat dissipating components into a new article that is performing a function different from heat dissipation. Rather, the joining of the aluminum plate, the aluminum fins, the copper heat pipe, and so on, allows the individual components to work together to dissipate heat more effectively. Because the individual components were not substantially transformed as a result of the assembly process, the Thermal Module without Vapor Chamber, PN CHP075GB1012, and the Thermal Module with Vapor Chamber, PN CHPA29GB1012 will be subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8473.30.5100, 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., 9903.88.03, in addition to subheading 8473.30.5100, 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
https://www.cbp.gov/trade/remedies/301-certain-products-china
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 on the World Wide Web at https://hts.usitc.gov/current.
Please note that 19 C.F.R. § 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs and Border Protection field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."
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, contact National Import Specialist Karl Moosbrugger at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division