Notice of Issuance of Final Determination Concerning the Engenio 7900 Storage System, 4713-4715 [2011-1674]

Agencies

• DEPARTMENT OF HOMELAND SECURITY
• U.S. Customs and Border Protection

[Federal Register Volume 76, Number 17 (Wednesday, January 26, 2011)]
[Notices]
[Pages 4713-4715]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1674]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning the Engenio 
7900 Storage System

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determination.

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SUMMARY: This document provides notice that U.S. Customs and Border 
Protection (``CBP'') has issued a final determination concerning the 
country of origin of the Engenio 7900 Storage System (the 7900 System). 
Based upon the facts presented, CBP has concluded in the final 
determination that Mexico is the country of origin of the 7900 System 
for purposes of U.S. Government procurement.

DATES: The final determination was issued on January 19, 2011. A copy 
of the final determination is attached. Any party-at-interest, as 
defined in 19 CFR 177.22(d), may seek judicial review of this final 
determination on or before February 25, 2011.

FOR FURTHER INFORMATION CONTACT: Heather K. Pinnock, Valuation and 
Special Programs Branch: (202) 325-0034.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on January 19, 
2011, pursuant to subpart B of part 177, Customs Regulations (19 CFR 
part 177, subpart B), CBP issued a final determination concerning the 
country of origin of the 7900 System which may be offered to the U.S. 
Government under an undesignated government procurement contract. This 
final determination, in HQ H125975, was issued at the request of LSI 
Corporation, under procedures set forth at 19 CFR part 177, subpart B, 
which implements Title III of the Trade Agreements Act of 1979, as 
amended (19 U.S.C. 2511-18). In the final determination, CBP concluded 
that, based upon the facts presented, the 7900 System, assembled to 
completion in Mexico from components made in non-TAA countries and TAA 
countries and programmed with U.S.-origin software in Mexico, is 
substantially transformed in the Mexico, such that Mexico is the 
country of origin of the finished system for purposes of U.S. 
Government procurement.
    Section 177.29, Customs Regulations (19 CFR 177.29), provides that 
notice of final determinations shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any 
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of a final determination within 30 days of publication of such 
determination in the Federal Register.

    Dated: January 21, 2011.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International 
Trade.
HQ H125975
January 19, 2011
VAL-2 OT:RR:CTF:VS H125975 HkP
CATEGORY: Marking
Lisa A. Crosby, Esq.
Sidley Austin LLP
1501 K Street, N.W.
Washington, D.C. 20005
RE: Government Procurement; Country of Origin of the LSI Engenio 7900 
Storage System: Substantial Transformation
Dear Ms. Crosby:
    This is in response to your letter dated September 24, 2010, 
requesting a final determination on behalf of LSI Corporation 
(``LSI''), pursuant to subpart B of part 177 of the U.S. Customs and 
Border Protection Regulations (19 C.F.R. Part 177). Under these 
regulations, which implement Title III of the Trade Agreements Act of 
1979 (TAA), as amended (19 U.S.C. Sec.  2511 et seq.), CBP issues 
country of origin advisory rulings and final determinations as to 
whether an article is or would be a product of a designated country or 
instrumentality for the purposes of granting waivers of certain ``Buy 
American'' restrictions in U.S. law or practice for products offered 
for sale to the U.S. Government.
    This final determination concerns the country of origin of the 
Engenio 7900 Storage System (7900 System). We note that as a U.S. 
importer and manufacturer, LSI is a party-at-interest within the 
meaning of 19 C.F.R. Sec.  177.22 (d)(1) and is entitled to request 
this final determination.
FACTS:
    According to the information submitted, the 7900 System is an 
electronic data storage system that ensures data integrity and 
availability. The system offers drive-level encryption, multiple 
replication options, proactive drive health monitoring, RAID \1\ 6 
technology and persistent cache backup to ensure that data is fully 
protected. Together these features help LSI customers optimize storage 
performance, reduce operational costs and more efficiently manage both 
physical and virtual environments. The 7900 System can support 
transactional applications, such as database and online transaction 
processing, as well as throughput-intensive applications, such as high 
performance computing and rich media. To support these varied 
applications, the 7900 System is designed to be highly configurable, 
although certain system features are standard.
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    For purposes of this request, the Wembley configuration has been 
put forward as representative of the 7900 System and is described as 
having the following components:
     An Engenio Operating System (EOS). It features a complex 
and sophisticated code base including a RAID data protection layer, 
with stored data protected from loss due to power failure, component 
failure and other such events. The EOS also includes a graphical user 
interface that allows users to manage the storage array in the system, 
adjust system settings, and perform management tasks while the system 
is online. The EOS is unique to LSI products and the 7900 System could 
not function without the EOS, which represents approximately 45 percent 
of the overall development cost for the 7900 System. The country of 
origin of the EOS is the United States.
     A controller assembly, which transmits commands to hard 
drives and relays data to and from hard drives. The controller is 
programmed by the supplier with basic firmware that provides generic 
functionality to ensure that the controller works. The country of 
origin is Thailand.
     A mounting assembly, which secures the controller 
assembly. The country of origin is Mexico or China.
     A set of Hard Drives, which provides high-capacity data 
storage. The country of origin is Thailand.
     A Slot Drive Module Assembly, which secures and organizes 
the hard drives. The country of origin is Mexico or Malaysia.

[[Page 4714]]

     A Cabinet assembly, to enclose all of the other 
components. The country of origin is Mexico.
    LSI subcontracts the production of the 7900 System to Flextronics 
Corp., which assembles the components at its technology center in 
Guadalajara, Mexico. Production of the 7900 System begins with the 
receipt and inspection of hardware components that are chosen based on 
the work order and their suitability for the selected configuration. 
Unit-specific labels, the wiring diagram and traveler sheets are 
printed at this time. Next, the mounting assembly, which is supplied 
knocked-down or loosely connected, is installed in the cabinet using 
mounting rails and screws in accordance with the wiring diagram. Clips 
used to secure cabling are also positioned in the rails in accordance 
with the diagram. The slot drive module assembly is then installed in 
the cabinet with screws after a gasket has been used to determine that 
each module is evenly placed. The modules are then covered with 
protective cardboard wrap and fillers. The controller and hard drives 
are then placed in the slot drive module assembly in accordance with 
the wiring diagram. Each unit is attached to rails in the cabinet using 
screws, and accessories for each unit are placed in an accessory bag. 
The cabling is then installed and power cords are attached in two 
positions, with cable bobbins placed at precise intervals. Once cabling 
has been completed, filler panels are installed in the empty spaces in 
the cabinet.
    Once the hardware has been assembled, the U.S.-origin EOS software 
is downloaded to the 7900 System, resulting in the reprogramming of the 
generic firmware pre-loaded onto the controller assembly. The final 
configured version of the EOS flashed onto the 7900 System in Mexico, 
incorporates customer-specific settings and features LSI's latest 
proprietary base code. According to your submission, this software 
imparts the functionality, storage management, performance monitoring, 
access control and other features that enable the 7900 System to 
operate as a high-performance storage solution.
    After the EOS is flashed onto the system, the system is tested 
pursuant to detailed testing procedures. There are seven separate test 
sequences and two optional customer dependent sequences. The first two 
test sequences (Canister level testing) check the individual RAID 
Controller functions and features while the latter test sequences 
(Module level testing) test the dual RAID module system functions. 
Canister level testing involves a review of board configuration and the 
Enterprise Storage Subsystem. Module level testing involves a chassis 
function test, chassis stress test, input/output test, extended 
manufacturing stability test, connectivity test, final configuration 
test, and cabinet test. A quality inspector also reviews the system for 
conformance with LSI requirements.
    Next, finishing touches are made to the system and it is made ready 
for transport. The cabinet assembly containing the fully assembled and 
finished system is packed onto a pallet, along with boxes housing 
accessories, and staged for shipment to the United States. When the 
7900 System is installed at the U.S.-customer's site, the software is 
further customized in accordance with the customer's requirements.
    You have asked us to determine the country of origin of the 7900 
system when:
    (1) The mounting assembly and the slot drive mounting assembly are 
of Mexican origin;
    (2) The mounting assembly is of Mexican origin and the slot drive 
module assembly is of Malaysian origin;
    (3) The mounting assembly is of Chinese origin and the slot drive 
module assembly is of Mexican origin; and
    (4) The mounting assembly is of Chinese origin and the slot drive 
module assembly is of Malaysian origin.

In each of these scenarios, all other production specifications would 
be as previously described, including the origin of the other 
components.
ISSUE:
    What is the country of origin of the 7900 System for purposes of 
U.S. Government procurement?
LAW AND ANALYSIS:
    Pursuant to Subpart B of Part 177, 19 CFR Sec.  177.21 et seq., 
which implements Title III of the Trade Agreements Act of 1979, as 
amended (19 U.S.C. Sec.  2511 et seq.), CBP issues country of origin 
advisory rulings and final determinations as to whether an article is 
or would be a product of a designated country or instrumentality for 
the purposes of granting waivers of certain ``Buy American'' 
restrictions in U.S. law or practice for products offered for sale to 
the U.S. Government.
    Under the rule of origin set forth under 19 U.S.C. Sec.  
2518(4)(B):
    An article is a product of a country or instrumentality only if (i) 
it is wholly the growth, product, or manufacture of that country or 
instrumentality, or (ii) in the case of an article which consists in 
whole or in part of materials from another country or instrumentality, 
it has been substantially transformed into a new and different article 
of commerce with a name, character, or use distinct from that of the 
article or articles from which it was so transformed.

See also 19 C.F.R. Sec.  177.22(a).
    In Data General v. United States, 4 Ct. Int'l Trade 182 (1982), the 
court determined that for purposes of determining eligibility under 
item 807.00, Tariff Schedules of the United States (predecessor to 
subheading 9802.00.80, Harmonized Tariff Schedule of the United 
States), the programming of a foreign PROM (Programmable Read-Only 
Memory chip) in the United States substantially transformed the PROM 
into a U.S. article. In programming the imported PROMs, the U.S. 
engineers systematically caused various distinct electronic 
interconnections to be formed within each integrated circuit. The 
programming bestowed upon each circuit its electronic function, that 
is, its ``memory'' which could be retrieved. A distinct physical change 
was effected in the PROM by the opening or closing of the fuses, 
depending on the method of programming. This physical alteration, not 
visible to the naked eye, could be discerned by electronic testing of 
the PROM. The court noted that the programs were designed by a project 
engineer with many years of experience in ``designing and building 
hardware.'' While replicating the program pattern from a ``master'' 
PROM may be a quick one-step process, the development of the pattern 
and the production of the ``master'' PROM required much time and 
expertise. The court noted that it was undisputed that programming 
altered the character of a PROM. The essence of the article, its 
interconnections or stored memory, was established by programming. The 
court concluded that altering the non-functioning circuitry comprising 
a PROM through technological expertise in order to produce a 
functioning read only memory device, possessing a desired distinctive 
circuit pattern, was no less a ``substantial transformation'' than the 
manual interconnection of transistors, resistors and diodes upon a 
circuit board creating a similar pattern.
    In determining whether the combining of parts or materials 
constitutes a substantial transformation, the determinative issue is 
the extent of operations performed and whether the parts lose their 
identity and become an integral part of the new article. Belcrest 
Linens v. United States, 573 F. Supp. 1149 (Ct. Int'l Trade 1983), 
aff'd, 741 F.2d 1368 (Fed. Cir. 1984). Assembly

[[Page 4715]]

operations that are minimal or simple, as opposed to complex or 
meaningful, will generally not result in a substantial transformation.
    In order to determine whether a substantial transformation occurs 
when components of various origins are assembled into completed 
products, CBP considers the totality of the circumstances and makes 
such determinations on a case-by-case basis. The country of origin of 
the item's components, extent of the processing that occurs within a 
country, and whether such processing renders a product with a new name, 
character, and use are primary considerations in such cases. 
Additionally, factors such as the resources expended on product design 
and development, the extent and nature of post-assembly inspection and 
testing procedures, and worker skill required during the actual 
manufacturing process will be considered when determining whether a 
substantial transformation has occurred. No one factor is 
determinative.
    You argue that the country of origin of the 7900 System is Mexico 
because the components imported into Mexico are substantially 
transformed there as a result of the Mexican assembly operations, 
particularly the downloading of the EOS software. In support of your 
argument, you note that CBP has applied the principle in Data General 
in several rulings, such as in HQ 563012 (May 4, 2004), concerning the 
country of origin of a fabric switch, and in HQ H034843 (May 5, 2009), 
concerning the country of origin of a portable flash drive. However, we 
note the factual difference between these decisions and the instant 
case. In the cited decisions final assembly took place in one country 
and programming in another whereas, in the present case, final assembly 
and programming take place in the same country.
    You also cite several rulings in which final assembly and 
programming of the concerned device took place in the same country, 
which we find to be more on point with the instant case. In HQ H082476 
(May 11, 2010), and in NY N083979 (Dec. 3, 2009), the United States was 
determined to be the country of origin of ICS clustered storage units, 
when foreign components were assembled into the units in the U.S. and 
programmed here. In HQ H025023 (April 1, 2008), CBP determined that the 
Czech Republic was the country of origin of a fabric switch that was 
assembled to completion and programmed in that country. See also HQ 
H089762, dated June 2, 2010 (GTX Mobile and Handheld Computer), and HQ 
H090115, dated August 2, 2010 (Unified Communications Solution).
    In regard to the 7900 System, all the components are assembled into 
the 7900 System in Mexico. Once assembled into the System, the 
previously programmed controller assembly is reprogrammed with the EOS 
software, which is stated to impart the functional intelligence to the 
System to allow for storage management, performance monitoring and 
access control. According to the information submitted, the 7900 System 
cannot function in its intended manner without the EOS software 
downloaded in Mexico.
    We find that the other major operating hardware components are the 
controller assembly and the hard drives set, both of Thai origin. The 
purpose of the other components, the mounting assembly, slot drive 
module assembly, and cabinet assembly, is to mainly hold the operating 
assembly components in place. These may be of Mexican origin or some 
other country of origin. As they are not as important to the overall 
working capabilities of the 7900 System, we do not find that their 
origin affects the outcome of determining the origin of the 7900 
System.
    In prior decisions, the country where the software was developed 
and where the programming occurred, was determined to be important. In 
this case, the software, developed in the U.S., is claimed to be 
important to the function of the 7900 System. However, the downloading 
of the software and assembly of the system occurs in Mexico. In 
addition, considering that the other two operating systems are not of 
Mexican origin, the assembly involves multiple countries of origin with 
development and programming also occurring in two different countries. 
Accordingly, we find that as a result of the assembly and programming 
operations that take place in Mexico, the imported components of 
various origins lose their individual identities and are substantially 
transformed into a new and different article, that is, the 7900 System. 
Therefore, the country of origin of the 7900 System is Mexico.
HOLDING:
    Based on the facts provided, the assembly and programming 
operations performed in Mexico on the components of the 7900 System 
give rise to a new and different article, the 7900 System. As such, the 
7900 System is to be considered a product of Mexico for purposes of 
U.S. Government procurement.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 C.F.R. Sec.  177.29. Any party-at-interest 
other than the party which requested this final determination may 
request, pursuant to 19 C.F.R. Sec.  177.31, that CBP reexamine the 
matter anew and issue a new final determination. Pursuant to 19 C.F.R. 
Sec.  177.30, any party-at-interest may, within 30 days of publication 
of the Federal Register Notice referenced above, seek judicial review 
of this final determination before the Court of International Trade.

Sincerely,

Sandra L. Bell, Executive Director
Regulations and Rulings
Office of International Trade

[FR Doc. 2011-1674 Filed 1-25-11; 8:45 am]
BILLING CODE 9111-14-P