Notice of Issuance of Final Determination Concerning Certain Ethernet Switches, 62431-62433 [2011-25991]
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Federal Register / Vol. 76, No. 195 / Friday, October 7, 2011 / Notices
Notice of Issuance of Final
Determination Concerning Certain
Ethernet Switches
Ethernet switches which may be offered
to the U.S. Government under an
undesignated government procurement
contract. This final determination, HQ
H175415, was issued 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
programming operations performed in
the United States, using U.S.-origin
software, substantially transform the
non-TAA country Ethernet switches.
Therefore, the country of origin of the
switches is the United States for
purposes of U.S. Government
procurement.
Section 177.29, CBP Regulations (19
CFR 177.29), provides that a notice of
final determination 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.
AGENCY:
U.S. Customs and Border
Protection, Department of Homeland
Security.
ACTION: Notice of final determination.
Dated: October 4, 2011.
Sandra L. Bell,
Executive Director, Regulations and Rulings,
Office of International Trade.
This document provides
notice that U.S. Customs and Border
Protection (‘‘CBP’’) has issued a final
determination concerning the country of
origin of certain Ethernet switches.
Based upon the facts presented, CBP has
concluded that the programming
operations performed in the United
States, using U.S.-origin software,
substantially transform the non-TAA
country switches. Therefore, the country
of origin of the switches is the United
States for purposes of U.S. Government
procurement.
DATES: The final determination was
issued on October 4, 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
November 7, 2011.
FOR FURTHER INFORMATION CONTACT:
Heather K. Pinnock, Valuation and
Special Programs Branch: (202) 325–
0034.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that on October 4, 2011,
pursuant to subpart B of Part 177, U.S.
Customs and Border Protection
Regulations (19 CFR Part 177, subpart
B), CBP issued a final determination
concerning the country of origin of
Attachment
information, including the validity of
the methodology and assumptions used;
(c) enhance the quality, utility, and
clarity of the information to be
collected; and (d) minimize the burden
of the collection of information on those
who are to respond, including through
the use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submission of
responses.
Dated: September 30, 2011.
Lesia M. Banks,
Director, Records Management Division,
Mission Support Bureau, Federal Emergency
Management Agency, Department of
Homeland Security.
[FR Doc. 2011–25978 Filed 10–6–11; 8:45 am]
BILLING CODE 9111–23–P
DEPARTMENT OF HOMELAND
SECURITY
U.S. Customs and Border Protection
jlentini on DSK4TPTVN1PROD with NOTICES
SUMMARY:
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October 4, 2011
HQ H175415
MAR OT:RR:CTF:VS H175415 HkP
CATEGORY: Origin
Josephine Aiello LeBeau, Esq.
Anne Seymour, Esq.
Wilson Sonsini Goodrich & Rosati, PC
1700 K Street, NW, Fifth Floor
Washington, DC 20006–3817
RE: U.S. Government Procurement;
Country of Origin of Local Area
Network Switches; Substantial
Transformation
Dear Ms. LeBeau and Ms. Seymour:
This is in response to your letter,
dated July 6, 2011, requesting a final
determination on behalf of Arista
Networks, Inc. (‘‘Arista’’), pursuant to
subpart B of part 177 of the U.S.
Customs and Border Protection (‘‘CBP’’)
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.
§ 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
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Sfmt 4703
62431
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 Arista’s 7048, 7050,
7100, 7124, and 7500 series (‘‘7 Series’’)
local area network (‘‘LAN’’) switches.
We note that as a U.S. importer, Arista
is a party-at-interest within the meaning
of 19 C.F.R. § 177.22(d)(1) and is
entitled to request this final
determination.
FACTS:
Arista is importing 7 Series Ethernet
switches assembled in China. The
switches are designed to interconnect
servers and storage appliances in data
centers. Each switch consists of one or
more printed circuit board assembly
(‘‘PCBAs’’), chassis, top cover, power
supply, and fans. After importation, the
switches will be programmed with U.S.origin software.
The following operations occur in
China:
1. The chassis and top cover are
manufactured from sheet metal.
2. The PCB is populated with various
electronic components to make a
PCBA.
3. The PCBA is tested to ensure
functionality.
4. The power supply and fans are
installed in the chassis.
5. The PCBA is installed in the chassis.
6. The chassis and top cover are
assembled together.
7. The serial numbers of the
components are entered into the
data tracking system, and the
switch is packaged and shipped to
the United States.
The following operations occur in the
United States:
1. U.S.-origin EOSTM software is
downloaded onto the flash memory
on the PCBA.
2. The switch is tested, packaged, and
prepared for shipping.
Arista’s EOSTM (Extensible Operating
System) software is designed to provide
switching functionality, secure
administration, and reliability, and to
optimize network management.
Specifically, EOS software provides the
following capabilities and benefits to
Ethernet switches: in-service software
upgrade, software fault containment,
fault repair, security exploit
containment, and scalable management
interface. According to your submission,
the units imported from China could not
function as network switches without
this software, which was developed in
the United States at considerable cost to
Arista. Since 2005, more than 140
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07OCN1
62432
Federal Register / Vol. 76, No. 195 / Friday, October 7, 2011 / Notices
software engineers have continued to
develop the software and more than 80
percent of Arista’s Research and
Development spending has been on EOS
software development.
jlentini on DSK4TPTVN1PROD with NOTICES
ISSUE:
What is the country of origin of the
Arista’s 7 Series Ethernet switches for
purposes of U.S. Government
procurement?
LAW AND ANALYSIS:
Pursuant to Subpart B of Part 177, 19
CFR § 177.21 et seq., which implements
Title III of the Trade Agreements Act of
1979, as amended (19 U.S.C. § 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. § 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. § 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 ReadOnly 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 U.S.
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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 nonfunctioning 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 Texas Instruments v. United States,
681 F.2d 778, 782 (CCPA 1982), the
court observed that the substantial
transformation issue is a ‘‘mixed
question of technology and customs
law.’’
In C.S.D. 84–85, 18 Cust. B. & Dec.
1044, CBP stated:
We are of the opinion that the rationale
of the court in the Data General case
may be applied in the present case to
support the principle that the essence of
an integrated circuit memory storage
device is established by programming;
… [W]e are of the opinion that the
programming (or reprogramming) of an
EPROM results in a new and different
article of commerce which would be
considered to be a product of the
country where the programming or
reprogramming takes place.
Accordingly, the programming of a
device that changes or defines its use
generally constitutes substantial
transformation. See also Headquarters
Ruling Letter (‘‘HQ’’) 558868, dated
February 23, 1995 (programming of
SecureID Card substantially transforms
the card because it gives the card its
character and use as part of a security
system and the programming is a
permanent change that cannot be
undone); HQ 735027, dated September
7, 1993 (programming blank media
(EEPROM) with instructions that allow
it to perform certain functions that
prevent piracy of software constitute
substantial transformation); and, HQ
733085, dated July 13, 1990; but see HQ
732870, dated March 19, 1990
(formatting a blank diskette does not
constitute substantial transformation
because it does not add value, does not
involve complex or highly technical
operations and did not create a new or
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different product); and, HQ 734518,
dated June 28, 1993, (motherboards are
not substantially transformed by the
implanting of the central processing
unit on the board because, whereas in
Data General use was being assigned to
the PROM, the use of the motherboard
had already been determined when the
importer imports it).
You believe that under the
manufacturing scenario described in the
FACTS section above, Arista’s 7 Series
Ethernet switches are products of the
United States. You argue that without
the EOS software, the units exported
from China lack the intelligence to
perform as network switches. In fact,
you claim that the EOS software gives
the switches their essential character by
providing network switching and
routing functionality, management
functions, network performance
monitoring, security and access control,
and by allowing interaction with other
switches. Further, programming the
switches with the EOS software creates
a permanent change in the PCBAs that
cannot be undone by third parties
during the normal course of business.
The only reprogramming operation that
may be performed during the normal
course of business is either updating the
installed software or entering licensing
keys that enable the activation of
additional EOS software features. In
support of your position, you cite Data
General (supra), HQ H052325 (Feb. 14,
2006) and HQ 735027 (Sept. 7, 1993),
among others.
HQ H052325 concerned the country
of origin of a switch and a switch/
router. The Brocade 7800 Extension
Switch was assembled to completion in
China and programmed in the U.S. with
U.S.-origin operating system (OS)
software and customer specified
firmware and software. The Brocade
FX8–24 switch/router contained a PCBA
that was assembled and programmed in
China and shipped to the U.S., where it
was assembled with other components
to make the final product. The
completed unit was then programmed
with U.S.-origin OS software and
customer firmware and software. In both
cases, the U.S.-origin OS software
provided the devices with their
functionality. Customs found that in
both cases, the processing performed in
the United States, including the
downloading of the U.S.-origin OS
software, resulted in a substantial
transformation of the foreign origin
components, and that the United States
was the country of origin.
In HQ H014068, dated October 9,
2007, CBP determined that a cellular
phone designed in Sweden, assembled
in either China or Malaysia and shipped
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Federal Register / Vol. 76, No. 195 / Friday, October 7, 2011 / Notices
jlentini on DSK4TPTVN1PROD with NOTICES
to Sweden, where it was loaded with
software that enabled it to test
equipment on wireless networks, was a
product of Sweden. Once the software
was installed on the phones in Sweden,
they became devices with a new name,
character and use, that is, network
testing equipment. As a result of the
programming operations performed in
Sweden, CBP found that the country of
origin of the network testing equipment
was Sweden.
In this case, hardware components are
assembled into complete Ethernet
switches in China. The switches are
then shipped to the U.S., where they are
programmed with EOS software,
developed in the U.S. at significant cost
to Arista and over many years. Since
2005, more than 140 software engineers
have continued to develop the software
and more than 80 percent of Arista’s
Research and Development spending
has been on EOS software development.
The U.S.-origin EOS software enables
the imported switches to interact with
other network switches through network
switching and routing, and allows for
the management of functions such as
network performance monitoring and
security and access control. Without
this software, the imported devices
could not function as Ethernet switches.
As a result of the programming
performed in the U.S., with software
developed in the U.S., the imported
switches are substantially transformed
in the U.S. See Data General, C.S.D. 84–
85, HQ 052325, HQ 558868, HQ 735027,
and HQ 733085. The country of origin
of the switches is the United States.
Please be advised, however, that
whether the switches may be marked
‘‘Made in the U.S.A.’’ or with similar
words, is an issue under the authority
of the Federal Trade Commission
(‘‘FTC’’). We suggest that you contact
the FTC, Division of Enforcement, 6th
and Pennsylvania Avenue, NW,
Washington, DC 20508, on the propriety
of markings indicating that articles are
made in the United States.
HOLDING:
Based on the facts provided, the
programming operations performed in
the United States impart the essential
character to Artista’s 7 Series Ethernet
switches. As such, the switches will be
considered products of the United
States 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. § 177.29. Any
party-at-interest other than the party
which requested this final
determination may request, pursuant to
19 C.F.R. § 177.31, that CBP reexamine
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16:33 Oct 06, 2011
Jkt 226001
the matter anew and issue a new final
determination. Pursuant to 19 C.F.R.
§ 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. 2011–25991 Filed 10–6–11; 8:45 am]
BILLING CODE P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–5546–D–01]
Delegation of Authority to the Office of
Disaster Management and National
Security
Office of the Secretary, HUD.
Delegation of Authority.
AGENCY:
ACTION:
Through this notice, the
Secretary delegates authority to the
Chief Disaster and National Security
Officer, Office of Disaster Management
and National Security.
DATES: Effective Date: September 30,
2011.
FOR FURTHER INFORMATION CONTACT:
Laura L. McClure, Acting Chief Disaster
and National Security Officer, Office of
Disaster Management and National
Security, Department of Housing and
Urban Development, 451 7th Street,
SW., Room 10170, Washington, DC
20410–6000, telephone number 202–
402–6300 (this is not a toll free number).
Persons with hearing or speech
impairments may access this number
through TTY by calling the toll-free
Federal Relay Service at telephone
number 1–800–877–8339.
SUPPLEMENTARY INFORMATION:
The Secretary of HUD hereby
delegates to the Chief Disaster and
National Security Officer authority and
responsibility to advise HUD
departmental leadership on all aspects
of disaster and national security
preparedness, response, and recovery; to
identify and mitigate risks; to improve
departmentwide capacity, coordination,
and support for disaster management
and national security; and to ensure that
HUD’s security and disaster
management programs support national
objectives and the security of the United
States while supporting HUD’s mission.
In carrying out this responsibility, the
Chief Disaster and National Security
Officer shall, among other duties:
SUMMARY:
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1. Assess, coordinate and improve
execution of the Department’s disaster
management and national security
programs.
2. Represent the Department’s
interests in interagency committees and
groups that address disaster
management, national security, law
enforcement, and the protective service
detail.
3. Develop criteria to assess and help
improve disaster and national security
preparedness, response, and recovery
and develop policy, program options,
and recommendations together with key
program offices.
4. Develop and coordinate
crosscutting disaster and national
security policies, programs, and plans
that improve departmental
preparedness, response, and recovery
including implementation of the
National Response Framework, National
Continuity Policy, and Presidential
Decision and National Security
Directives.
5. Integrate current and future disaster
and national security programs into
departmentwide response effort.
6. Manage and support the
Department’s Protective Services
functions and related investigation and
law enforcement liaison functions.
7. Manage access to and protect HUD
classified programs and information and
maintain and operate classified systems.
Section A. Authority Delegated
The Secretary hereby delegates all
authority pursuant to the following
authorities to the Chief Disaster and
National Security Officer:
1. Federal Law Enforcement and
Personal Security Protection. Authority
for providing personal security
protection for the Secretary, Deputy
Secretary, and their immediate families,
as warranted, including authorities set
forth in 28 U.S.C. 566(c), 566(d), 566(e),
561(a), 561(f), 561(g), 564, 509, 510; 28
CFR 0.111, 0.112, 0.113; and 18 U.S.C.
115(a)(1), 351, 3053. Authority for law
enforcement and noncriminal
investigations and enforcement of HUD
Handbook 0752.2, Adverse Action,
including authority under 42 U.S.C.
3535(d).
2. National Security and Operations.
Authority to execute and support
departmental preparedness activities
pursuant to White House and
Department of Homeland Security
guidance and requirements, including
but not limited to: Homeland Security
Presidential Directive—20: National
Continuity Policy (2007), Federal
Continuity Directive 1: Federal
Executive Branch National Continuity
Program and Requirements (2008), and
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]]>Agencies
[Federal Register Volume 76, Number 195 (Friday, October 7, 2011)]
[Notices]
[Pages 62431-62433]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25991]
-----------------------------------------------------------------------
DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final Determination Concerning Certain
Ethernet Switches
AGENCY: U.S. Customs and Border Protection, Department of Homeland
Security.
ACTION: Notice of final determination.
-----------------------------------------------------------------------
SUMMARY: This document provides notice that U.S. Customs and Border
Protection (``CBP'') has issued a final determination concerning the
country of origin of certain Ethernet switches. Based upon the facts
presented, CBP has concluded that the programming operations performed
in the United States, using U.S.-origin software, substantially
transform the non-TAA country switches. Therefore, the country of
origin of the switches is the United States for purposes of U.S.
Government procurement.
DATES: The final determination was issued on October 4, 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 November 7, 2011.
FOR FURTHER INFORMATION CONTACT: Heather K. Pinnock, Valuation and
Special Programs Branch: (202) 325-0034.
SUPPLEMENTARY INFORMATION: Notice is hereby given that on October 4,
2011, pursuant to subpart B of Part 177, U.S. Customs and Border
Protection Regulations (19 CFR Part 177, subpart B), CBP issued a final
determination concerning the country of origin of Ethernet switches
which may be offered to the U.S. Government under an undesignated
government procurement contract. This final determination, HQ H175415,
was issued 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 programming operations
performed in the United States, using U.S.-origin software,
substantially transform the non-TAA country Ethernet switches.
Therefore, the country of origin of the switches is the United States
for purposes of U.S. Government procurement.
Section 177.29, CBP Regulations (19 CFR 177.29), provides that a
notice of final determination 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: October 4, 2011.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International
Trade.
Attachment
October 4, 2011
HQ H175415
MAR OT:RR:CTF:VS H175415 HkP
CATEGORY: Origin
Josephine Aiello LeBeau, Esq.
Anne Seymour, Esq.
Wilson Sonsini Goodrich & Rosati, PC
1700 K Street, NW, Fifth Floor
Washington, DC 20006-3817
RE: U.S. Government Procurement; Country of Origin of Local Area
Network Switches; Substantial Transformation
Dear Ms. LeBeau and Ms. Seymour:
This is in response to your letter, dated July 6, 2011, requesting
a final determination on behalf of Arista Networks, Inc. (``Arista''),
pursuant to subpart B of part 177 of the U.S. Customs and Border
Protection (``CBP'') 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 Arista's
7048, 7050, 7100, 7124, and 7500 series (``7 Series'') local area
network (``LAN'') switches. We note that as a U.S. importer, Arista 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:
Arista is importing 7 Series Ethernet switches assembled in China.
The switches are designed to interconnect servers and storage
appliances in data centers. Each switch consists of one or more printed
circuit board assembly (``PCBAs''), chassis, top cover, power supply,
and fans. After importation, the switches will be programmed with U.S.-
origin software.
The following operations occur in China:
1. The chassis and top cover are manufactured from sheet metal.
2. The PCB is populated with various electronic components to make a
PCBA.
3. The PCBA is tested to ensure functionality.
4. The power supply and fans are installed in the chassis.
5. The PCBA is installed in the chassis.
6. The chassis and top cover are assembled together.
7. The serial numbers of the components are entered into the data
tracking system, and the switch is packaged and shipped to the United
States.
The following operations occur in the United States:
1. U.S.-origin EOSTM software is downloaded onto the flash
memory on the PCBA.
2. The switch is tested, packaged, and prepared for shipping.
Arista's EOSTM (Extensible Operating System) software is
designed to provide switching functionality, secure administration, and
reliability, and to optimize network management. Specifically, EOS
software provides the following capabilities and benefits to Ethernet
switches: in-service software upgrade, software fault containment,
fault repair, security exploit containment, and scalable management
interface. According to your submission, the units imported from China
could not function as network switches without this software, which was
developed in the United States at considerable cost to Arista. Since
2005, more than 140
[[Page 62432]]
software engineers have continued to develop the software and more than
80 percent of Arista's Research and Development spending has been on
EOS software development.
ISSUE:
What is the country of origin of the Arista's 7 Series Ethernet
switches 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 U.S.
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 Texas Instruments v. United States, 681 F.2d 778, 782 (CCPA
1982), the court observed that the substantial transformation issue is
a ``mixed question of technology and customs law.''
In C.S.D. 84-85, 18 Cust. B. & Dec. 1044, CBP stated:
We are of the opinion that the rationale of the court in the Data
General case may be applied in the present case to support the
principle that the essence of an integrated circuit memory storage
device is established by programming; [hellip] [W]e are of the opinion
that the programming (or reprogramming) of an EPROM results in a new
and different article of commerce which would be considered to be a
product of the country where the programming or reprogramming takes
place.
Accordingly, the programming of a device that changes or defines
its use generally constitutes substantial transformation. See also
Headquarters Ruling Letter (``HQ'') 558868, dated February 23, 1995
(programming of SecureID Card substantially transforms the card because
it gives the card its character and use as part of a security system
and the programming is a permanent change that cannot be undone); HQ
735027, dated September 7, 1993 (programming blank media (EEPROM) with
instructions that allow it to perform certain functions that prevent
piracy of software constitute substantial transformation); and, HQ
733085, dated July 13, 1990; but see HQ 732870, dated March 19, 1990
(formatting a blank diskette does not constitute substantial
transformation because it does not add value, does not involve complex
or highly technical operations and did not create a new or different
product); and, HQ 734518, dated June 28, 1993, (motherboards are not
substantially transformed by the implanting of the central processing
unit on the board because, whereas in Data General use was being
assigned to the PROM, the use of the motherboard had already been
determined when the importer imports it).
You believe that under the manufacturing scenario described in the
FACTS section above, Arista's 7 Series Ethernet switches are products
of the United States. You argue that without the EOS software, the
units exported from China lack the intelligence to perform as network
switches. In fact, you claim that the EOS software gives the switches
their essential character by providing network switching and routing
functionality, management functions, network performance monitoring,
security and access control, and by allowing interaction with other
switches. Further, programming the switches with the EOS software
creates a permanent change in the PCBAs that cannot be undone by third
parties during the normal course of business. The only reprogramming
operation that may be performed during the normal course of business is
either updating the installed software or entering licensing keys that
enable the activation of additional EOS software features. In support
of your position, you cite Data General (supra), HQ H052325 (Feb. 14,
2006) and HQ 735027 (Sept. 7, 1993), among others.
HQ H052325 concerned the country of origin of a switch and a
switch/router. The Brocade 7800 Extension Switch was assembled to
completion in China and programmed in the U.S. with U.S.-origin
operating system (OS) software and customer specified firmware and
software. The Brocade FX8-24 switch/router contained a PCBA that was
assembled and programmed in China and shipped to the U.S., where it was
assembled with other components to make the final product. The
completed unit was then programmed with U.S.-origin OS software and
customer firmware and software. In both cases, the U.S.-origin OS
software provided the devices with their functionality. Customs found
that in both cases, the processing performed in the United States,
including the downloading of the U.S.-origin OS software, resulted in a
substantial transformation of the foreign origin components, and that
the United States was the country of origin.
In HQ H014068, dated October 9, 2007, CBP determined that a
cellular phone designed in Sweden, assembled in either China or
Malaysia and shipped
[[Page 62433]]
to Sweden, where it was loaded with software that enabled it to test
equipment on wireless networks, was a product of Sweden. Once the
software was installed on the phones in Sweden, they became devices
with a new name, character and use, that is, network testing equipment.
As a result of the programming operations performed in Sweden, CBP
found that the country of origin of the network testing equipment was
Sweden.
In this case, hardware components are assembled into complete
Ethernet switches in China. The switches are then shipped to the U.S.,
where they are programmed with EOS software, developed in the U.S. at
significant cost to Arista and over many years. Since 2005, more than
140 software engineers have continued to develop the software and more
than 80 percent of Arista's Research and Development spending has been
on EOS software development. The U.S.-origin EOS software enables the
imported switches to interact with other network switches through
network switching and routing, and allows for the management of
functions such as network performance monitoring and security and
access control. Without this software, the imported devices could not
function as Ethernet switches. As a result of the programming performed
in the U.S., with software developed in the U.S., the imported switches
are substantially transformed in the U.S. See Data General, C.S.D. 84-
85, HQ 052325, HQ 558868, HQ 735027, and HQ 733085. The country of
origin of the switches is the United States.
Please be advised, however, that whether the switches may be marked
``Made in the U.S.A.'' or with similar words, is an issue under the
authority of the Federal Trade Commission (``FTC''). We suggest that
you contact the FTC, Division of Enforcement, 6th and Pennsylvania
Avenue, NW, Washington, DC 20508, on the propriety of markings
indicating that articles are made in the United States.
HOLDING:
Based on the facts provided, the programming operations performed
in the United States impart the essential character to Artista's 7
Series Ethernet switches. As such, the switches will be considered
products of the United States 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. 2011-25991 Filed 10-6-11; 8:45 am]
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