Electronic Data Systems Corporation, I Solutions Center, Fairborn, OH; Notice of Negative Determination on Remand, 6730-6732 [E5-487]

Agencies

• DEPARTMENT OF LABOR
• Employment and Training Administration

[Federal Register Volume 70, Number 25 (Tuesday, February 8, 2005)]
[Notices]
[Pages 6730-6732]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-487]


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DEPARTMENT OF LABOR

Employment And Training Administration

[TA-W-50,486]


Electronic Data Systems Corporation, I Solutions Center, 
Fairborn, OH; Notice of Negative Determination on Remand

    The United States Court of International Trade (USCIT) remanded to 
the Secretary of Labor for further investigation of the negative 
determination in Former Employees of Electronic Data Systems 
Corporation v. U.S. Secretary of Labor (Court No. 03-00373).
    On January 15, 2003, the Department of Labor (Department) issued a 
negative determination regarding the eligibility of workers at 
Electronic Data Systems (EDS) Corporation, I Solutions Center, 
Fairborn, Ohio to apply for Trade Adjustment Assistance (TAA). The 
determination was based on the Department's finding that the workers at 
the subject facility performed information technology services, and did 
not produce or support the production of an article. Therefore, the 
workers did not satisfy the eligibility criteria of section 222 of the 
Trade Act of 1974. 19 U.S.C. 2272. On February 6, 2003, the Notice of 
Negative Determination Regarding Eligibility to Apply for Worker 
Adjustment Assistance for Electronic Data Systems Corporation, I 
Solutions Center, Fairborn, Ohio was published in the Federal Register 
(68 FR 6211).
    In a letter dated March 4, 2003, the petitioner requested 
administrative reconsideration of the Department's negative 
determination, and included additional information indicating that all 
usage and copyrights of the computer programs, job control language, 
documentation, etc. produced at the Fairborn facility were transferred 
to the client upon sale. The Department determined that the information 
submitted did not constitute an adequate basis for reconsideration and 
affirmed its finding that the workers of Electronic Data Systems 
Corporation, I Solutions Center, Fairborn, Ohio were not eligible to 
apply for TAA, because they did not produce an article within the 
meaning of section 222 of the Trade Act. Accordingly, the Department 
issued a Notice of Negative Determination Regarding Application for 
Reconsideration on April 15, 2003. The notice was published in the 
Federal Register on April 24, 2003 (68 FR 20180). On June 9, 2003, the 
petitioner filed a Summons and Complaint, regarding the Department's 
Negative Determination Regarding Application for Reconsideration with 
the Court of International Trade (USCIT).
    On May 28, 2004, the petitioner filed a Motion for Judgment on the 
Agency Record in the USCIT. The supporting memorandum for the Motion 
stated that the Department's findings ``are not supported by 
substantial evidence or in accordance with the law,'' and that the 
Department ``failed to sufficiently reconsider its denial of the 
Plaintiff's petition to apply for TAA, including determining whether 
certain products alleged by Plaintiffs to constitute `articles' were 
subject to duty under the Harmonized Tariff Schedule of the United 
States (HTSUS).''
    The USCIT remanded the case to the Department on December 1, 2004, 
and ordered the Department to proceed as follows:

    On remand, Labor shall conduct a thorough investigation into 
plaintiffs' claims. In particular, Labor shall (1) determine whether 
computer programs were embodied in any medium when transferred to 
customers, (2) explain the significance of custom-designed software 
as opposed to mass produced computer programs, (3) identify what 
type of documentation was produced by EDS (brochures, manuals, 
etc.), (4) determine what was the production volume of such 
documentation and whether it was considered part of the product 
purchased by EDS's customers, and (5) with respect to each finding 
made in its determination, state with specificity the facts relied 
upon in reaching such finding, including specific references to 
documents in the record.

    Remand Order at 18.
    Accordingly, the Department conducted a remand investigation in 
order to determine whether the subject worker group met the criteria 
set forth in the Trade Act of 1974 for TAA certification as primarily-
affected workers, with particular attention to the inquiries required 
by the remand order. Section 222(a) of the Trade Act (19 U.S.C. 
2272(a)) provides:

    A group of workers (including workers in any agricultural firm 
or subdivision of an agricultural firm) shall be certified by the 
Secretary as eligible to apply for adjustment assistance under this 
part pursuant to a petition filed under section 2271 of this title 
if the Secretary determines that--
    (1) a significant number or proportion of the workers in such 
workers' firm, or an appropriate subdivision of the firm, have 
become totally or partially separated, or are threatened to become 
totally or partially separated; and
    (2)(A)(i) the sales or production, or both, of such firm or 
subdivision have decreased absolutely;
    (ii) imports of articles like or directly competitive with 
articles produced by such firm or subdivision have increased; and
    (iii) the increase in imports described in clause (ii) 
contributed importantly to such workers' separation or threat of 
separation and to the decline in the sales or production of such 
firm or subdivision; or
    (B)(i) there has been a shift in production by such workers' 
firm or subdivision to a foreign country of articles like or 
directly competitive with articles which are produced by such firm 
or subdivision; and
    (ii)(I) the country to which the workers' firm has shifted 
production of the articles is a party to a free trade agreement with 
the United States;
    (II) the country to which the workers' firm has shifted 
production of the articles is a beneficiary country under the Andean 
Trade Preference Act, African Growth and

[[Page 6731]]

Opportunity Act, or the Caribbean Basin Economic Recovery Act; or
    (III) there has been or is likely to be an increase in imports 
of articles that are like or directly competitive with articles 
which are or were produced by such firm or subdivision.

    On December 16, 2004, the Department made initial contact with an 
EDS company official. On December 17, 2004, the Department issued a 
detailed information request to EDS seeking new information as well as 
clarification of previously submitted information. The overall purpose 
of the inquiry was to address the directives of the remand order and 
determine if the petitioning worker group had satisfied the statutory 
criteria for eligibility. In particular, the Department sought to 
ascertain whether the work performed by the petitioning worker group 
was mass replicated on a physical carrier medium, such as books, 
manuals, CD-Rom, or diskette, and if so, whether there was an increase 
in imports or shift in production of articles like or directly 
competitive with those produced at the Fairborn facility. On January 4, 
2005, the Department received a response from EDS (SAR at 11) that has 
enabled the Department to evaluate petitioners' eligibility, including 
consideration of the factors identified by the remand order, as set 
forth below.
    In general, the information supplied by the company on remand 
indicates that the EDS, I Solutions Center, Fairborn, Ohio performed 
information technology services supporting financial systems software 
for a single client. This included the design, development, and 
deployment of new solutions and documentation to meet the requirements 
of the client, as well as maintenance and troubleshooting of the 
existing systems. This work was performed at an EDS facility, and not 
on-site at a client facility.
    In the course of the remand investigation, the Department contacted 
the petitioners by telephone on December 17, 2004; January 25, 2005; 
and January 26, 2005, in order to gather information on the nature of 
the work performed at the subject facility (SAR at 4, 17, 19, 20). 
Further, on January 24, 2005 the Department provided the petitioners 
with a copy of the EDS questionnaire response, so that petitioners 
would have an opportunity to review it and to provide the Department 
with comments for consideration. On January 28, 2005, the Department 
followed up with the petitioners, inquiring as to the status of their 
response. As of January 31, 2005, the petitioners had not commented on 
the EDS questionnaire response.
    (1) Determine whether computer programs were embodied in any medium 
when transferred to customers:
    The remand investigation revealed that the software and 
documentation designed and/or supported by the workers of the subject 
facility was rarely delivered to the client on a physical carrier 
medium, but was normally installed onto a mainframe data center from 
which the client could access it remotely and print it if necessary. 
Software on CDs was virtually never created at the Fairborn facility, 
except in extraordinary circumstances where a technical issue prevented 
normal electronic distribution to the client's data centers (Id). 
Further, the subject facility's client owned the intellectual property 
rights to the software and documentation designed and supported at the 
subject facility, so EDS could not have incorporated that work product 
into products for other clients (Id.).
    The Department has consistently maintained that the design and 
development of software is a service. The Department considers software 
that is mass-replicated on physical media (such as CDs, tapes, or 
diskettes) and widely marketed and commercially available (e.g., 
packaged ``off-the-shelf'' programs) and dutiable under the Harmonized 
Tariff Schedule of the United States (HTSUS) to be an ``article'' for 
the purposes of TAA certification requirements. Those workers designing 
and developing such products are considered to be engaged in services 
supporting the production of an article.
    This policy is consistent with the classification of computer 
programs and software in the HTSUS depending on the media on which they 
are recorded. HTSUS heading 8524 encompasses pre-recorded media 
including those recorded on tape, disks for laser reading systems, and 
nesoi for sound, image, or other phenomena. Subheading 8524 31 00 HTSUS 
provides for ``pre-recorded discs for laser reading systems, 
reproducing other than sound or image,'' and subheading 8524 91 00 
HTSUS provides for ``pre-recorded media, nesoi, with recordings of 
phenomena other than sound or images.''
    Software and information systems that are not embodied in a 
physical carrier medium are not listed on the HTSUS, published by the 
United States International Trade Commission (USITC), Office of Tariff 
Affairs and Trade Agreements, which describes all ``articles'' imported 
to or exported from the United States. This codification represents an 
international standard maintained by most industrialized countries as 
established by the International Convention on the Harmonized Commodity 
Description and Coding (also known as the HS Convention).
    The TAA program was established to help workers who produce 
articles and who lose their jobs as a result of increases in imports or 
a shift in production of articles ``like or directly competitive'' with 
those produced at the workers' firm. An article must have a value that 
makes it marketable, fungible and interchangeable for commercial 
purposes to be subject to a duty on a tariff schedule. Although a wide 
variety of products are described as articles and characterized as 
dutiable in the HTSUS, software and associated information technology 
services that are not embodied in a physical carrier medium are not 
listed in the HTSUS. In fact, such telecommunications transmissions 
(i.e. electronically transmitted computer code) are specifically 
exempted from duty as they ``are not goods subject to the provisions of 
the tariff schedule'' (HTSUS (2004) General Notes, 3e).
    Intellectual property that is not embodied on a physical carrier 
medium is not provided for in the HTSUS, and is not considered an 
article for the purposes of TAA.
    (2) Explain the significance of custom-designed software as opposed 
to mass produced computer programs:
    In order to meet the criteria set forth in the Trade Act of 1974 
for TAA certification as primarily-affected workers, there must be an 
increase in imports or shift in production of articles like or directly 
competitive with those produced by the petitioning worker group. 
Software that is custom designed to meet the constantly changing needs 
of an individual client is an inherently unique product. Therefore, it 
cannot be considered ``like or directly'' competitive with other custom 
designed software, under the definition of this term in 29 CFR 90.2. 
This definition applies to petitions seeking certification based on 
either the ``shift in production'' of an article under section 
222(a)(2)(B) or ``increased imports'' of an article under section 
222(a)(2)(A).
    There is virtually no work activity that does not eventually result 
in the creation of some sort of documentation. For example, a secretary 
may print out a memo for a supervisor, a travel agent may create 
itineraries and print out tickets for a client's travel, and a lawyer 
may create a brief for a particular case. The information contained in 
each of these creations, regardless of what medium they may be embodied 
in, is clearly unique. If unique solutions, which happen to be 
contained on a

[[Page 6732]]

medium, are considered to be ``like or directly competitive'' with 
other custom services, then almost any work can be covered by the Trade 
Act, and the like or directly competitive requirement is effectively 
read out of the Act.
    (3) and (4) Identify what type of documentation was produced by EDS 
(brochures, manuals, etc.), and determine what was the production 
volume of such documentation and whether it was considered part of the 
product purchased by EDS's customers:
    As stated above, the software and documentation designed and/or 
supported by the workers of the subject facility was rarely delivered 
to the client on a physical carrier medium, but was normally installed 
onto a mainframe data center from which the client could access it 
remotely and print it. Documentation was rarely embodied in hardcopy, 
because the client could print such documentation on their own. On the 
rare occasion that the client requested hardcopies of documentation, 
bulk printing was carried out by a third-party copy facility (SAR at 
11). In effect, EDS provided no brochures, manuals, or other physical 
product documentation to its client in the course of serving the 
client's needs. Accordingly, there is no volume to measure or value to 
assess for the documentation the subject facility provided to its 
customer.

Conclusion

    The Department thoroughly investigated the petition for EDS, I 
Solutions Center, Fairborn, Ohio on remand and could not find any 
evidence that workers of the subject facility produced or supported 
production of any article. To the contrary, the evidence presented in 
the SAR supports the conclusion that the EDS workers did not produce an 
article. Indeed, the products designed and/or developed at the Fairborn 
facility were not mass-replicated to any physical carrier medium. In 
any event, as custom designs, the software solutions and documentation 
were inherently unique and, therefore, not ``like or directly 
competitive'' with any other products.
    In the case of EDS, I Solutions Center, Fairborn, Ohio, the 
evidence clearly establishes that the workers of the subject facility 
did not produce an article, nor did they support, either directly or 
through an appropriate subdivision of EDS, the production of an article 
within the meaning of the Trade Act. Because the petitioners are 
employees of a firm or subdivision that does not produce or support 
production of an article within the meaning of the Trade Act, they are 
not eligible for certification.
    As the result of the findings of the investigation on remand, I 
affirm the original notice of negative determination of eligibility to 
apply for adjustment assistance for workers and former workers of 
Electronic Data Systems Corporation, I Solutions Center, Fairborn, 
Ohio.

    Signed in Washington, DC this 31st day of January 2005.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. E5-487 Filed 2-7-05; 8:45 am]
BILLING CODE 4510-30-P