Problem with Three hierarchical dropdown for country, state city
I was facing the similar issue in my drupal site.
The other issue was the performance especially for IE where it took too much time in rendering the new item.

After some experiments, I made the following module that can help in making three hierarchical dropdown for country state and city. Its developed in a generic way that it can be used for n number of dependent dropdowns and can be used for other dependent data as well.

https://www.drupal.org/project/ajax_chain_select