CLA-2-85:OT:RR:NC:N2:220
Joseph Walter
Livingston International
670 Young Street
Tonawanda, NY 14150
RE: The tariff classification, country of origin, and status under the United States-Mexico-Canada Agreement (USMCA)
Dear Mr. Walter:
In your letter dated September 13, 2024, you requested a tariff classification ruling on behalf of your client, D-Box Technologies, Inc.
The merchandise under consideration is identified as the G5 Haptic Feedback System, which consists of a controller, various numbers of electric actuators, and electric cables. The G5 Haptic Feedback System that is subject to this ruling is specifically recognized as SKU 882-K204 and consists of one controller, identified as the Haptic Bridge, four electric actuator motors, identified as the Haptic Actuators, and an accessory box. The G5 Haptic Feedback Systems are used in a variety of applications, including movie theaters, home entertainment, video gaming and simulation, professional simulation and training, attractions, and theme parks.
The Haptic Bridge is described as a metal enclosure containing a printed circuit board assembly (PCBA) having four RJ-45 sockets on one side, and a USB and power socket on the other side. The Haptic Bridge is imported with an external power supply and two cables. In use, the Haptic Bridge is connected between a personal computer and the Haptic Actuators to facilitate communication and control of the individual actuators.
The Haptic Actuators are described as 400 W DC electric motors having a logic PCBA and power supply PCBA that is mounted inside a housing and attached to each actuator assembly. Attached to the output of each motor is an actuation assembly, identified as the piston assembly, which produces the linear motion. In use, the Haptic Actuators are mounted to a user interactive surface to independently produce movement and/or vibration to enhance the user’s experience to a game, movie, music video, or simulation.
The Accessory Box included in this configuration includes electrical cables, locking connectors, and four aluminum cups.
In your letter, you cite Legal Note 4 to Section 16 and suggest the G5 Haptic Feedback System is properly classified under subheading 8543.70.9860, Harmonized Tariff Schedule of the United Stated (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”. We disagree.
Note 4 to Section 16 states “[w]here a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function”. The G5 Haptic Feedback System is a collection of individual components, having their own functions, which work in concert to produce movement. The controller, the cables, the actuators, etc. each contribute to the production of movement and nothing more. See NY N337453. As a result, it is our view that the function of the system is actuation, which is achieved by the electric motors within the system, and subheading 8543.70.9860, HTSUS, is not appropriate.
The applicable subheading for the G5 Haptic Feedback System, SKU 882-K204, will be 8501.31.4000, HTSUS, which provides for "Electric motors…: Other DC motors…: Of an output not exceeding 750W: Motors: Exceeding 74.6 W but not exceeding 735 W." The general rate of duty will be 4%.
Regarding the country of origin of the G5 Haptic Feedback System, SKU 882-K204, your submission states that the Haptic Bridge, the four Haptic Actuators, and the cables are manufactured in China. In Canada, they receive programming, are tested, and subsequently packaged under a single SKU for export to the United States. You suggest that the subject system is a product of Canada. We disagree.
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."
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).
This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993).
In its entirety, the G5 Haptic Feedback System is made up of foreign components. However, the operations conducted in Canada, described as programming firmware, final testing, inspection, and packaging, do not substantially transform any of the components of the system into a new and different article. Consequently, the G5 Haptic Feedback System is considered a product of China upon importation into the United States.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8501.31.4000, 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., 9903.88.02, in addition to subheading 8501.31.4000, HTSUS, listed above.
Also in your letter, you inquire whether the G5 Haptic Feedback System 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 G5 Haptic Feedback System consists exclusively of 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 G5 Haptic Feedback System is not a good produced entirely in Canada 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 heading 8501, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
Chapter 85 – 1. (A) A change to heading 8501 from any other heading
Since the G5 Haptic Feedback System consists of foreign materials that are classified within heading 8501, HTSUS, the requisite tariff shift rule cannot be met. As a result, the finished G5 Haptic Feedback System is not considered an originating good under the USMCA and is not eligible for preferential treatment upon importation into the United States.
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 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