RE: The country of origin of an indoor unit

U.S. Department of Homeland Security U.S. Customs and Border Protection National Commodity Specialist Division One World Trade Center, Suite 51.201 New York, NY 10007 U.S. Customs and Border Protection N363516 August 18, 2026 OT:RR:NC:N1:102 CATEGORY: Origin Hyung-gi Lee CLK Corporation 55, Hanamsandam 3 Beon-ro Gwangsan-Gu Gwangju, South Korea RE: The country of origin of an indoor unit Dear Mr. Lee: In your letter dated July 22, 2026, you requested a country of origin ruling on behalf of your client, HTNS Customs Corporation. Part number BAQE03MRACAD is identified as an indoor Air Handling Unit (AHU) that is designed to control temperature and humidity levels of indoor spaces. When set to the cooling mode, indoor air passes through an evaporator, allowing refrigerant to absorb heat and cool air to be supplied back into the room. At the same time, moisture in the air condenses on the surface of the evaporator and is drained away. When set to the heating mode, indoor air passes through the evaporator and refrigerant releases heat to the air into the room. Regarding country of origin, the unit is manufactured in China as a semi-finished product, and exported to South Korea, where a component referred to as a duct and sub-panel assembly and other components are incorporated into the structure of this product. The semi-finished product is comprised of Chinese components (exterior covers and panels, a bar support, a bracket fixing drain, a packing support plate, bracket piping with insulation, and an evaporator subassembly). The duct and sub-panel assembly is assembled in South Korea using components from China and Korea (a motorized blower and a control device). The additional production that occurs in South Korea begins by removing screws to remove the exterior covers of the unit. Afterwards, a duct and sub-panel assembly is installed within the structure of semi-finished product and screwed in position. The production process continues by joining a leak sensor from South Korea and leak assembly using screws. Once the wire connections and system configuration are completed, the exterior panels are re-installed using screws. The finished AHU is labeled and packaged ready for shipping. Various tests and inspections are completed during the assembly process. When determining the country of origin for purposes of applying current trade remedies under Section 301 and additional duties, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling Letter H301619, dated November 6, 2018. 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, 681 F.2d 778 (C.C.P.A. 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 this instance, the production processes that occur in South Korea are not complex. The components are simply inserted into the semi-finished product and screwed in place. The components do not lose their individual identities to become an integral part of a new article, possessing a new name, character and use. Instead, this office believes the origin of the indoor unit should be determined by its dominant component, which is the component that contributes to the cycles of changing temperature and humidity levels, i.e., a semi-finished product incorporating a Chinese evaporator. The unit in a semi-finished state clearly has a pre-determined end use prior to the production steps that occur in South Korea. As such, the country of origin of the indoor AHU is China. 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 Sandra Martinez at [email protected]. Sincerely, (for) James P. Forkan Director National Commodity Specialist Division