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An air conditioning system having an improved internal heat exchanger (IHX) assembly. The IHX assembly includes an elongated cavity for low pressure refrigerant flow from an evaporator and an interior tube disposed within the cavity for high pressure refrigerant flow from a condenser, and a pressure equalization passage between the low and high pressure sides. The passage is large enough to allow pressures to equalize between the condenser and evaporator while the air conditioning system is inactive, so as to prevent the pressure differential that would otherwise enable the loss of refrigerant oil from the compressor, and small enough not to effect the operation of the air conditioning system. The pressure equalization passage may be a by-pass valve assembly having a reed portion that is normally open when the air conditioning system is inactive and closed when the air conditioning system is active for maximum cooling efficiency.