Modems Assembled in Mexico From Chinese Components Still Subject to Section 301 Tariffs, CBP Says

Cable modems that are made up of Chinese parts but assembled in Mexico are subject to the 10 percent Section 301 tariffs on goods from China, CBP said in a Nov. 27 ruling. The ruling request was submitted by Barnes Richardson lawyer Lawrence Friedman on behalf of Zoom Telephonics. CBP's analysis is on two types of modems, one type that includes a Wi-Fi gateway and one that does not. The modems are Data Over Cable Service Interface Specification (DOCSIS) 3.1 and compatible with several major cable systems, including Comcast and Cox, it said.

All of the materials involved are products of China and "bulk-packed board assemblies will be shipped in separate boxes from the remainder of the components including the case components, feet, screws, and labels," CBP said. After the Chinese parts reach Mexico, the modems will be assembled. That includes programming of the printed circuit board assembly (PCBA) with firmware, enclosing the circuit board in a case and attaching a special Cable Modem Termination System device, it said.

The work done in Mexico does not constitute a "substantial transformation" of the Chinese components, CBP said. The agency uses a "substantial transformation analysis" to determine the country of origin for safeguard measures, including the Section 301 tariffs on goods from China. The modems are classifiable under subheading 8517.62.0010 and therefore subject to the 10 percent tariffs imposed in the third tranche of Section 301 tariffs (see 1809180016).

The product does meet the NAFTA tariff shift requirement and is a product of Mexico for marking purposes, CBP said. The analysis seems to follow CBP's ruling on finished motors also assembled in Mexico (see 1810090035). In fact, CBP apparently mistakenly used language from that ruling within the ruling on the modems, referring to an "electric motor" in one place. Meanwhile, that electric motors ruling was modified by CBP on Nov. 6 "with regard to its articulation of the scope of the applicability of the substantial transformation test," it said. The scope description now says that "[w]hen determining the country of origin for purposes of applying current trade remedies under Section 301, Section 232, and Section 201, the substantial transformation analysis is applicable." The ruling is otherwise the same, it said.