Notice of Issuance of Final Determination Concerning Certain Ethernet Switch Products, 5139-5141 [2018-02244]
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Federal Register / Vol. 83, No. 24 / Monday, February 5, 2018 / Notices
the United States did not result in a change
in the medicinal use of the finished product
and the active ingredient. The active
ingredient retained its chemical and physical
properties and was merely put into dosage
form and packaged for sale. The active
ingredient did not undergo a change in name,
character or use. Therefore, CBP held that no
substantial transformation occurred in
United States, and Acyclovir tablets were
considered a product of the country in which
the active ingredient was produced.
HQ H215656, dated January 11, 2013,
concerned the country of origin of Rybix
ODT, a pharmaceutical product used for the
management of moderate to moderately
severe pain in adults. The API, tramadol
hydrochloride, manufactured in India, was
shipped to France where it underwent four
processes of manufacturing consisting of the
preparation of the API, preparation of the
tablet blend, tablet compression, and
packaging in blister packs. CBP determined
that the processing in France did not result
in a change in the medicinal use of the
finished product, and the API retained its
chemical and physical properties and was
merely put into dosage form and packaged.
Accordingly, CBP held that no substantial
transformation occurred in France.
HQ H233356, dated December 26, 2012,
concerned the country of origin of Ponstel, a
pharmaceutical product used for the relief of
mild to moderate pain caused by primary
dysmenorrhea. Mefenamic acid, which is the
API in Ponstel, was manufactured in India,
and imported into the United States, where
it was blended with inactive ingredients and
packaged into dosage form. CBP determined
that this process did not substantially
transform the mefenamic acid because its
chemical character remained the same and,
therefore, CBP found that the country of
origin of the Ponstel capsules was India.
You state that the FDA requires that a
unique National Drug Code (‘‘NDC’’) be
assigned to every drug product such as
Donepezil Hydrochloride tablets, but
prohibits that same NDC from being
associated with any API, such as Donepezil
Hydrochloride, that has not been
demonstrated to be safe and effective and
cannot be sold for the treatment of any
human disease condition. You also state that
the FDA requires the name of the drug
product (Donepezil Hydrochloride tablet) to
appear on every drug product label and
prohibits use of that name on the label for the
API. Further, you state that Donepezil
Hydrochloride is intended only for use by
producers for further processing or for
research since it is unstable and not fit for
medical use and may not be sold to
consumers. Additionally, you state that the
API is poisonous and has poor flow
properties. For these reasons, you claim that
extensive additional processing of the API,
sourced in India, with other ingredients must
occur to change the API’s properties and
make it into a stable drug product.
This office consulted with CBP’s
Laboratories and Scientific Services
Directorate concerning the instant case,
which informed us that the imported API,
Donepezil Hydrochloride, retains its
chemical and physical properties upon
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processing in the United States. Increasing
the stability of the API and standardizing its
concentration do not change the API.
Further, the processing performed in the
United States does not affect the medicinal
use of the API. Based on the information
presented, the API does not undergo a change
in name, character or use. Therefore, in
accordance with the rulings cited, we find
that no substantial transformation occurs in
United States, and the Donepezil
Hydrochloride tablets would be considered a
product of India, where the API was
produced, for purposes of U.S. government
procurement.
In addition, you asked whether the
Donepezil Hydrochloride tablets are
‘‘manufactured in the United States’’ within
the meaning of the term ‘‘U.S.-made end
products’’, as set forth in Section 25.003 of
the Federal Acquisition Regulations System,
Title 48, Code of Federal Regulations (48
C.F.R. § 25.003), and implemented in 48
C.F.R. § 52.225–5. As stated in 19 C.F.R.
§ 177.21, subpart B is intended to be applied
consistent with the Federal Acquisition
Regulations (48 C.F.R. chapter 1). The
definition of country of origin in subpart B,
19 C.F.R. § 177.22(a) has two rules (see
above) as does 48 C.F.R. § 25.003. The term
‘‘manufactured in the United States’’ in 48
C.F.R. § 25.003 correlates to the first rule of
19 C.F.R. § 177.22(a) which provides that an
article is a product of a country or
instrumentality if ‘‘it is wholly the growth,
product, or manufacture of that country or
instrumentality’’. Since the production of
Donepezil Hydrochloride tablets partially
occurs in India, we do not find that they are
manufactured in the United States.
HOLDING:
The country of origin of the Donepezil
Hydrochloride tablets for U.S. Government
procurement purposes is India.
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 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 after publication of the Federal Register
notice referenced above, seek judicial review
of this final determination before the Court
of International Trade.
Sincerely,
Alice A. Kipel
Executive Director
Regulations and Rulings
Office of Trade
[FR Doc. 2018–02245 Filed 2–2–18; 8:45 am]
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DEPARTMENT OF HOMELAND
SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final
Determination Concerning Certain
Ethernet Switch Products
U.S. Customs and Border
Protection, Department of Homeland
Security.
ACTION: Notice of final determination.
AGENCY:
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 switch
products known as Nyquist Ethernet
Switches. Based upon the facts
presented, CBP has concluded that the
country of origin of the Nyquist Ethernet
Switches is Mexico for purposes of U.S.
Government procurement.
DATES: The final determination was
issued on January 30, 2018. 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 within March 7,
2018.
FOR FURTHER INFORMATION CONTACT:
Yuliya A. Gulis, Valuation and Special
Programs Branch, Regulations and
Rulings, Office of Trade, at (202) 325–
0042.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that on January 30, 2018
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
certain ethernet switch products known
as Nyquist Ethernet Switches, which
may be offered to the U.S. Government
under an undesignated government
procurement contract. This final
determination, HQ H282390, 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 the last substantial
transformation took place in Mexico.
Therefore, the country of origin of the
Nyquist Ethernet Switches is Mexico 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
SUMMARY:
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Federal Register / Vol. 83, No. 24 / Monday, February 5, 2018 / Notices
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 30, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings,
Office of Trade.
HQ H282390
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January 30, 2018
OT:RR:CTF:VS H282390 YAG
CATEGORY: Origin
Ms. Carolyn Muhlstein
Senior Manager, Global Customs
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
RE: U.S. Government Procurement; Country
of Origin of Ethernet Switch; Substantial
Transformation
Dear Ms. Muhlstein:
This is in response to your letter, dated
May 6, 2016, on behalf of Cisco Systems, Inc.
(‘‘Cisco’’), requesting a final determination
concerning the country of origin of Cisco’s
Nyquist Ethernet Switch (‘‘NES’’), pursuant
to subpart B of Part 177, U.S. Customs and
Border Protection (‘‘CBP’’) Regulations (19
CFR § 177.21, et seq.). As a domestic
importer of merchandise, Cisco is a party-atinterest within the meaning of 19 CFR
§ 177.22(d)(1) and is entitled to request this
final determination. In addition, we have
reviewed and grant the request for
confidentiality pursuant to 19 CFR
§ 177.2(b)(7), with respect to certain
information submitted.
FACTS:
Cisco plans to import the NES from
Mexico. The NES is designed to interconnect
devices on a computer network, while
offering new capabilities, such as enabling
new applications, differentiated security,
dense wireless, and simplified and diverse
network architecture. Each NES consists of
one or more printed circuit board assemblies
(‘‘PCBA’’), two power supplies, an uplink
module, a protective metal housing, and
ancillary devices to support additional
features. The NES is configured with Cisco’s
configuration data. The configuration data
programs the logic gates of the hardware
components on the PCBA, which imparts
physical changes to the patterns of
interconnections in the hardware circuitry,
defining the behavior of each component.
The NES operates using Cisco’s Polaris
Operating System Software (‘‘Polaris OS’’).
In China, PCBAs are manufactured using:
application specific integrated circuit
(‘‘ASIC’’) components, which are assembled
to final form in Korea incorporating materials
from Taiwan and Japan in a process that
takes between 12 and 25 weeks; central
processing unit (‘‘CPU’’) components from
Taiwan; synchronous dynamic random
access memory (‘‘SDRAM’’) components
from Taiwan or Korea; and, flash components
from Korea and China. The PCBAs are tested
to ensure that the PCBA components can
properly interact with one another, and they
are packaged and shipped to Mexico.
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In Mexico, the following operations take
place:
1. One or more PCBAs are installed into
the NES chassis.
2. Two power supplies are installed in the
NES chassis.
3. One uplink module is installed in the
NES chassis.
4. Ancillary devices that support
additional NES features are installed into the
chassis.
5. A metal housing is added to complete
the NES chassis assembly.
6. The power-on and bootloader
initialization take place to activate the power
system and fan modules of the NES, followed
by the activation and preliminary testing of
the CPU, ASIC, and ancillary devices.
7. The Polaris OS and configuration data
developed in the United States are loaded
onto a non-volatile flash memory, and then
pushed out to the components of the PCBA.
8. The NES is tested to ensure the product
functions as designed.
Cisco states that the Polaris OS and
configuration data are downloaded onto the
NES using in-circuit programming.
According to Cisco, traditionally, each
component of a PCBA (e.g., ASICs) is
completely programmed at or prior to
assembly onto the PCBA; however, with incircuit programming the hardware
components are designed to be programmed
after the PCBA is completely assembled.
Cisco states that while the Polaris OS and
configuration data are simultaneously
downloaded onto the NES through the incircuit programming, the Polaris OS and
configuration data have different purposes
and affect the NES differently and in
sequence. Cisco explains that the
configuration data does not operate on the
hardware in the manner that the Polaris OS
does. Rather, the configuration data
completes the hardware programming, and
the Polaris OS runs on the completed
hardware.
According to Cisco, the PCBAs will have
no commercial functionality when exported
from China to Mexico because without the
configuration data and the Polaris OS, the
NES cannot function as intended. Cisco
states that the NES will have large quantities
of configurable elements, which require the
configuration data to provide the firmware,
modes and configuration settings, timing
parameters, and physical properties for the
components to function in the NES. Cisco
states that the Polaris OS will provide I/O
processor, route processor, and forwarding
processor capabilities to the hardware,
allowing the components to communicate
with each other. Cisco notes that
approximately 95 percent of the
configuration data and 70 to 80 percent of the
software code that will be loaded onto the
NES in Mexico will be completely new and
tailored based on customer needs and
specifications.
ISSUE:
What is the country of origin of the NES
for purposes of U.S. Government
procurement?
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LAW AND ANALYSIS:
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, 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.).
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 CFR § 177.22(a). In order to
determine whether a substantial
transformation occurs when the components
of various origins are assembled to form
completed articles, CBP considers the totality
of the circumstances and makes decisions on
a case-by-case basis.
In Data General v. United States, 4 C.I.T.
182 (1982), the court determined that 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
the United States, the programming bestowed
upon each integrated 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. The essence of the
article, its interconnections or stored
memory, was established by programming.
See also, Texas Instruments v. United States,
681 F.2d 778, 782 (CCPA 1982) (stating the
substantial transformation issue is a ‘‘mixed
question of technology and customs law’’).
Accordingly, the programming of a device
that defines its use generally constitutes
substantial transformation. See Headquarters
Ruling (‘‘HQ’’) HQ 735027, dated September
7, 1993 (programming blank media
(EEPROM) with instructions that allow it to
perform certain functions that prevent piracy
of software constitutes a substantial
transformation); but see 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 imported it).
Cisco argues that the country of origin of
the NES will be Mexico because the final
assembly of the NES and installation of the
Polaris OS and configuration data onto the
NES in Mexico will substantially transform
the PCBA into the NES. While the
configuration data is specific to the NES,
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sradovich on DSK3GMQ082PROD with NOTICES
Cisco notes that the ASIC is not, and can be
used in other Cisco products with different
configuration data. Additionally, Cisco states
that the Polaris OS allows the NES to switch
and route packets, which is the critical
functional element of the NES. Cisco states
that the configuration data physically
changes the electrical values of the logic
gates present in the ASICs and other
components, by connecting the gates in
combinations that tell the components how
to function and communicate within the
system. Cisco argues that the configuration
data installed on the NES should be
distinguished from software installations
because the configuration data completes the
hardware programming, physically changing
the hardware itself. Cisco states the
software’s incorporation onto the NES is
different because it runs on the completed
hardware as opposed to being a part of the
hardware itself.
Cisco cites HQ 563012, dated May 4, 2004,
in support of its position. In HQ 563012, CBP
held that the PCBA and casing that were
manufactured for a switch in China, were
substantially transformed in the United
States or Hong Kong, where U.S.-origin
software was loaded, and the PCBA was
further assembled with a power supply, fans,
and an A/C filter of various origins to form
the final fabric switch. CBP noted that in
addition to the actual assembly, the
configuration and software download
operations performed in either Hong Kong or
in the United States transformed the switch
from a non-functional device into a fabric
switch that was capable of performing
various storage network functions.
Similar to the scenario in HQ 563012,
where Hong Kong was found to be the origin,
in this case, the major components of the
NES, particularly the PCBA comprised of the
ASIC, CPU, SDRAM, and flash components,
will be manufactured in China, and then
shipped to another country where the final
assembly (adding the casing, power supply,
uplink modules, and ancillary devices to the
PCBA), software loading, configuration, and
testing take place. Here, the other country is
Mexico, which is different from the country
where the U.S.-origin software is developed.
While CBP has normally focused on where
the origin of the software and where the
programming took place, applying CBP’s
precedent in HQ 563012 to Cisco’s
manufacturing operations in Mexico, we find
that the PCBAs from China will be
substantially transformed by the final
assembly, software loading, configuration,
and testing operations in Mexico, and thus
the country of origin for purposes of U.S.
Government procurement will be Mexico.1
1 See HQ H175415, dated October 4, 2011 (CBP
held that imported Ethernet switches underwent a
substantial transformation after U.S.-origin software
was downloaded onto the devices’ flash memory in
the United States, which allowed the devices to
function); see also HQ H052325, dated March 31,
2009 (holding that imported network devices
underwent a substantial transformation in the
United States after U.S.-origin software was
downloaded onto the devices in the United States,
which gave the devices their functionality); and,
HQ H034843, dated May 5, 2009 (holding that
Chinese USB flash drives underwent a substantial
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HOLDING:
Based on the facts provided, the PCBAs
from China will be substantially transformed
into the NES by the processes that take place
in Mexico. As such, the NES will 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 CFR 177.29. Any party-at-interest other
than the party which requested this final
determination may request, pursuant to 19
CFR 177.31, that CBP reexamine the matter
anew and issue a new final determination.
Pursuant to 19 CFR 177.30, any party-atinterest 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,
Alice A. Kipel,
Executive Director
Regulations and Rulings
Office of Trade
[FR Doc. 2018–02244 Filed 2–2–18; 8:45 am]
BILLING CODE 9111–14–P
INTERNATIONAL TRADE
COMMISSION
[USITC SE–18–007]
Government in the Sunshine Act
Meeting Notice
United
States International Trade Commission.
TIME AND DATE: February 9, 2018 at
11:00 a.m.
PLACE: Room 101, 500 E Street SW,
Washington, DC 20436, Telephone:
(202) 205–2000.
STATUS: Open to the public.
MATTERS TO BE CONSIDERED:
1. Agendas for future meetings: None.
2. Minutes.
3. Ratification List.
4. Vote in Inv. Nos. 701–TA–592 and
731–TA–1400 (Preliminary) (Plastic
Decorative Ribbons from China). The
Commission is currently scheduled to
complete and file its determinations on
February 12, 2018; views of the
Commission are currently scheduled to
be completed and filed on February 20,
2018.
5. Outstanding action jackets: None.
In accordance with Commission
policy, subject matter listed above, not
AGENCY HOLDING THE MEETING:
transformation in Israel when Israeli-origin software
was loaded onto the devices, which made the
devices functional). CBP has also held that when
software is programmed in one country, and loaded
onto a switch in different countries, the process of
loading the software is not a sufficient operation by
itself to result in a substantial transformation. See
HQ H241177, dated December 3, 2013; and, HQ
H240199, dated March 10, 2015.
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5141
disposed of at the scheduled meeting,
may be carried over to the agenda of the
following meeting.
By order of the Commission:
Issued: January 31, 2018.
William R. Bishop,
Supervisory Hearings and Information
Officer.
[FR Doc. 2018–02280 Filed 2–1–18; 11:15 am]
BILLING CODE 7020–02–P
INTERNATIONAL TRADE
COMMISSION
[Investigation No. 337–TA–1099]
Certain Graphics Processors and
Products Containing the Same
Institution of Investigation
U.S. International Trade
Commission.
ACTION: Notice.
AGENCY:
Notice is hereby given that a
complaint was filed with the U.S.
International Trade Commission on
December 29, 2017, under section 337 of
the Tariff Act of 1930, as amended, on
behalf of ZiiLabs Inc., Ltd. of Bermuda.
The complaint alleges violations of
section 337 based upon the importation
into the United States, the sale for
importation, and the sale within the
United States after importation of
certain graphics processors and
products containing the same by reason
of infringement of certain claims of U.S.
Patent No. 6,181,355 (‘‘the ‘355 Patent’’);
U.S. 6,900,800 (‘‘the ‘800 Patent’’); U.S.
Patent No. 8,144,156 (‘‘the ‘156 Patent’’);
and U.S. Patent No. 8,643,659 (‘‘the ‘659
Patent). The complaint further alleges
that an industry in the United States
exists as required by the applicable
Federal Statute.
The complainant requests that the
Commission institute an investigation
and, after the investigation, issue a
limited exclusion order and cease and
desist orders.
ADDRESSES: The complaint, except for
any confidential information contained
therein, is available for inspection
during official business hours (8:45 a.m.
to 5:15 p.m.) in the Office of the
Secretary, U.S. International Trade
Commission, 500 E Street SW, Room
112, Washington, DC 20436, telephone
(202) 205–2000. Hearing impaired
individuals are advised that information
on this matter can be obtained by
contacting the Commission’s TDD
terminal on (202) 205–1810. Persons
with mobility impairments who will
need special assistance in gaining access
to the Commission should contact the
Office of the Secretary at (202) 205–
SUMMARY:
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]]>Agencies
[Federal Register Volume 83, Number 24 (Monday, February 5, 2018)]
[Notices]
[Pages 5139-5141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02244]
-----------------------------------------------------------------------
DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final Determination Concerning Certain
Ethernet Switch Products
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 switch products known as Nyquist
Ethernet Switches. Based upon the facts presented, CBP has concluded
that the country of origin of the Nyquist Ethernet Switches is Mexico
for purposes of U.S. Government procurement.
DATES: The final determination was issued on January 30, 2018. 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 within March 7, 2018.
FOR FURTHER INFORMATION CONTACT: Yuliya A. Gulis, Valuation and Special
Programs Branch, Regulations and Rulings, Office of Trade, at (202)
325-0042.
SUPPLEMENTARY INFORMATION: Notice is hereby given that on January 30,
2018 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 certain ethernet
switch products known as Nyquist Ethernet Switches, which may be
offered to the U.S. Government under an undesignated government
procurement contract. This final determination, HQ H282390, 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 the
last substantial transformation took place in Mexico. Therefore, the
country of origin of the Nyquist Ethernet Switches is Mexico 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
[[Page 5140]]
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 30, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
HQ H282390
January 30, 2018
OT:RR:CTF:VS H282390 YAG
CATEGORY: Origin
Ms. Carolyn Muhlstein
Senior Manager, Global Customs
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
RE: U.S. Government Procurement; Country of Origin of Ethernet
Switch; Substantial Transformation
Dear Ms. Muhlstein:
This is in response to your letter, dated May 6, 2016, on behalf
of Cisco Systems, Inc. (``Cisco''), requesting a final determination
concerning the country of origin of Cisco's Nyquist Ethernet Switch
(``NES''), pursuant to subpart B of Part 177, U.S. Customs and
Border Protection (``CBP'') Regulations (19 CFR Sec. 177.21, et
seq.). As a domestic importer of merchandise, Cisco is a party-at-
interest within the meaning of 19 CFR Sec. 177.22(d)(1) and is
entitled to request this final determination. In addition, we have
reviewed and grant the request for confidentiality pursuant to 19
CFR Sec. 177.2(b)(7), with respect to certain information
submitted.
FACTS:
Cisco plans to import the NES from Mexico. The NES is designed
to interconnect devices on a computer network, while offering new
capabilities, such as enabling new applications, differentiated
security, dense wireless, and simplified and diverse network
architecture. Each NES consists of one or more printed circuit board
assemblies (``PCBA''), two power supplies, an uplink module, a
protective metal housing, and ancillary devices to support
additional features. The NES is configured with Cisco's
configuration data. The configuration data programs the logic gates
of the hardware components on the PCBA, which imparts physical
changes to the patterns of interconnections in the hardware
circuitry, defining the behavior of each component. The NES operates
using Cisco's Polaris Operating System Software (``Polaris OS'').
In China, PCBAs are manufactured using: application specific
integrated circuit (``ASIC'') components, which are assembled to
final form in Korea incorporating materials from Taiwan and Japan in
a process that takes between 12 and 25 weeks; central processing
unit (``CPU'') components from Taiwan; synchronous dynamic random
access memory (``SDRAM'') components from Taiwan or Korea; and,
flash components from Korea and China. The PCBAs are tested to
ensure that the PCBA components can properly interact with one
another, and they are packaged and shipped to Mexico.
In Mexico, the following operations take place:
1. One or more PCBAs are installed into the NES chassis.
2. Two power supplies are installed in the NES chassis.
3. One uplink module is installed in the NES chassis.
4. Ancillary devices that support additional NES features are
installed into the chassis.
5. A metal housing is added to complete the NES chassis
assembly.
6. The power-on and bootloader initialization take place to
activate the power system and fan modules of the NES, followed by
the activation and preliminary testing of the CPU, ASIC, and
ancillary devices.
7. The Polaris OS and configuration data developed in the United
States are loaded onto a non-volatile flash memory, and then pushed
out to the components of the PCBA.
8. The NES is tested to ensure the product functions as
designed.
Cisco states that the Polaris OS and configuration data are
downloaded onto the NES using in-circuit programming. According to
Cisco, traditionally, each component of a PCBA (e.g., ASICs) is
completely programmed at or prior to assembly onto the PCBA;
however, with in-circuit programming the hardware components are
designed to be programmed after the PCBA is completely assembled.
Cisco states that while the Polaris OS and configuration data are
simultaneously downloaded onto the NES through the in-circuit
programming, the Polaris OS and configuration data have different
purposes and affect the NES differently and in sequence. Cisco
explains that the configuration data does not operate on the
hardware in the manner that the Polaris OS does. Rather, the
configuration data completes the hardware programming, and the
Polaris OS runs on the completed hardware.
According to Cisco, the PCBAs will have no commercial
functionality when exported from China to Mexico because without the
configuration data and the Polaris OS, the NES cannot function as
intended. Cisco states that the NES will have large quantities of
configurable elements, which require the configuration data to
provide the firmware, modes and configuration settings, timing
parameters, and physical properties for the components to function
in the NES. Cisco states that the Polaris OS will provide I/O
processor, route processor, and forwarding processor capabilities to
the hardware, allowing the components to communicate with each
other. Cisco notes that approximately 95 percent of the
configuration data and 70 to 80 percent of the software code that
will be loaded onto the NES in Mexico will be completely new and
tailored based on customer needs and specifications.
ISSUE:
What is the country of origin of the NES for purposes of U.S.
Government procurement?
LAW AND ANALYSIS:
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,
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.).
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 CFR Sec. 177.22(a). In order to determine whether a
substantial transformation occurs when the components of various
origins are assembled to form completed articles, CBP considers the
totality of the circumstances and makes decisions on a case-by-case
basis.
In Data General v. United States, 4 C.I.T. 182 (1982), the court
determined that 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 the United States, the
programming bestowed upon each integrated 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. The
essence of the article, its interconnections or stored memory, was
established by programming. See also, Texas Instruments v. United
States, 681 F.2d 778, 782 (CCPA 1982) (stating the substantial
transformation issue is a ``mixed question of technology and customs
law'').
Accordingly, the programming of a device that defines its use
generally constitutes substantial transformation. See Headquarters
Ruling (``HQ'') HQ 735027, dated September 7, 1993 (programming
blank media (EEPROM) with instructions that allow it to perform
certain functions that prevent piracy of software constitutes a
substantial transformation); but see 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 imported
it).
Cisco argues that the country of origin of the NES will be
Mexico because the final assembly of the NES and installation of the
Polaris OS and configuration data onto the NES in Mexico will
substantially transform the PCBA into the NES. While the
configuration data is specific to the NES,
[[Page 5141]]
Cisco notes that the ASIC is not, and can be used in other Cisco
products with different configuration data. Additionally, Cisco
states that the Polaris OS allows the NES to switch and route
packets, which is the critical functional element of the NES. Cisco
states that the configuration data physically changes the electrical
values of the logic gates present in the ASICs and other components,
by connecting the gates in combinations that tell the components how
to function and communicate within the system. Cisco argues that the
configuration data installed on the NES should be distinguished from
software installations because the configuration data completes the
hardware programming, physically changing the hardware itself. Cisco
states the software's incorporation onto the NES is different
because it runs on the completed hardware as opposed to being a part
of the hardware itself.
Cisco cites HQ 563012, dated May 4, 2004, in support of its
position. In HQ 563012, CBP held that the PCBA and casing that were
manufactured for a switch in China, were substantially transformed
in the United States or Hong Kong, where U.S.-origin software was
loaded, and the PCBA was further assembled with a power supply,
fans, and an A/C filter of various origins to form the final fabric
switch. CBP noted that in addition to the actual assembly, the
configuration and software download operations performed in either
Hong Kong or in the United States transformed the switch from a non-
functional device into a fabric switch that was capable of
performing various storage network functions.
Similar to the scenario in HQ 563012, where Hong Kong was found
to be the origin, in this case, the major components of the NES,
particularly the PCBA comprised of the ASIC, CPU, SDRAM, and flash
components, will be manufactured in China, and then shipped to
another country where the final assembly (adding the casing, power
supply, uplink modules, and ancillary devices to the PCBA), software
loading, configuration, and testing take place. Here, the other
country is Mexico, which is different from the country where the
U.S.-origin software is developed. While CBP has normally focused on
where the origin of the software and where the programming took
place, applying CBP's precedent in HQ 563012 to Cisco's
manufacturing operations in Mexico, we find that the PCBAs from
China will be substantially transformed by the final assembly,
software loading, configuration, and testing operations in Mexico,
and thus the country of origin for purposes of U.S. Government
procurement will be Mexico.\1\
---------------------------------------------------------------------------
\1\ See HQ H175415, dated October 4, 2011 (CBP held that
imported Ethernet switches underwent a substantial transformation
after U.S.-origin software was downloaded onto the devices' flash
memory in the United States, which allowed the devices to function);
see also HQ H052325, dated March 31, 2009 (holding that imported
network devices underwent a substantial transformation in the United
States after U.S.-origin software was downloaded onto the devices in
the United States, which gave the devices their functionality); and,
HQ H034843, dated May 5, 2009 (holding that Chinese USB flash drives
underwent a substantial transformation in Israel when Israeli-origin
software was loaded onto the devices, which made the devices
functional). CBP has also held that when software is programmed in
one country, and loaded onto a switch in different countries, the
process of loading the software is not a sufficient operation by
itself to result in a substantial transformation. See HQ H241177,
dated December 3, 2013; and, HQ H240199, dated March 10, 2015.
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HOLDING:
Based on the facts provided, the PCBAs from China will be
substantially transformed into the NES by the processes that take
place in Mexico. As such, the NES will 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 CFR 177.29. Any party-at-interest other
than the party which requested this final determination may request,
pursuant to 19 CFR 177.31, that CBP reexamine the matter anew and
issue a new final determination. Pursuant to 19 CFR 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,
Alice A. Kipel,
Executive Director
Regulations and Rulings
Office of Trade
[FR Doc. 2018-02244 Filed 2-2-18; 8:45 am]
BILLING CODE 9111-14-P
