Notice of Issuance of Final Determination Concerning Certain Ethernet Switches, Routers and Network Cards, 1775-1777 [2019-01115]
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Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Notices
the product to function as a self-adhesive
cutaneous electrode. As indicated in your
letter, the hydrogel used in this product is
dedicated for use in cutaneous electrodes, as
the chemical and mechanical properties of
the hydrogel dictate its single intended use
in medical electrode-related applications.
Furthermore, the product ceases to be a
medical product once the shelf life of the
hydrogel has been exceeded. Accordingly, we
find that the U.S.-origin hydrogel imparts the
essential character of the self-adhesive
cutaneous electrode.
Regarding the assembly and processing
that occurs in China, we note that these
constitute relatively simple and minor
operations involving highly repetitive, lowskill functions. The lamination of the
hydrogel onto the conductive plastic and
fabric backing, the mechanical die cutting of
the pad, and the gluing of the leadwire occur
in less than six seconds per electrode. In
contrast, we recognize that all of the
engineering and design of the self-adhesive
cutaneous electrode occurs in the United
States. While the conductive plastic, fabric
backing and leadwire facilitate the product’s
functionality, the hydrogel itself remains
unchanged by the Chinese assembly and
processing and continues to provide the
essential function of the FDA-regulated
‘‘cutaneous electrode’’ product.
Consequently, we find that the self-adhesive
cutaneous electrode is not substantially
transformed by the assembly and processing
that occur in China.
With regard to your marking question,
Section 304 of the Tariff Act of 1930, as
amended (19 U.S.C. § 1304), provides that,
unless excepted, every article of foreign
origin (or its container) imported into the
United States shall be marked in a
conspicuous place as legibly, indelibly, and
permanently as the nature of the article (or
container) will permit in such a manner as
to indicate to an ultimate purchaser in the
United States the English name of the
country of origin of the article. The
regulations implementing the country of
origin marking requirements and exceptions
of 19 U.S.C. § 1304, along with certain
marking provisions of the Harmonized Tariff
Schedule of the United States (19 U.S.C.
§ 1202), are set forth in 19 C.F.R. Part 134.
‘‘Country of origin’’ is defined, in relevant
part, as: the country of manufacture,
production, or growth of any article of
foreign origin entering the United States. 19
C.F.R. § 134.1(b). Further work or material
added to an article in another country must
effect a substantial transformation in order to
render such other country the ‘‘country of
origin’’ within the meaning of this part[.]’’
For purposes of marking, the same
substantial transformation analysis discussed
above applies in this case. Accordingly, the
self-adhesive cutaneous electrodes which are
processed in China are products of the
United States. Because the electrodes are
products of the United States that are
exported and returned without undergoing a
substantial transformation, they are excepted
from country of origin marking requirements
pursuant to 19 C.F.R. § 134.32(m). Please
note that if you wish to mark the selfadhesive cutaneous electrodes or the
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packaging containing these products to
indicate that they are ‘‘Made in the USA’’,
the marking must comply with the
requirements of the Federal Trade
Commission (FTC). We suggest that you
direct any questions on this issue to the FTC.
HOLDING:
Based on the information provided, the
country of origin of the self-adhesive
cutaneous electrode for U.S. government
procurement purposes is the United States.
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,
Dated: January 29, 2019.
Alice A. Kipel,
Executive Director, Regulations and Rulings,
Office of Trade.
[FR Doc. 2019–01116 Filed 2–4–19; 8:45 am]
BILLING CODE 9111–14–P
DEPARTMENT OF HOMELAND
SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final
Determination Concerning Certain
Ethernet Switches, Routers and
Network Cards
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 switches,
routers and network cards. Based upon
the facts presented, CBP has concluded
in the final determination that the
United States is the country of origin of
the Ethernet switches, routers and
network cards for purposes of U.S.
Government procurement.
DATES: The final determination was
issued on January 29, 2019. 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,
2019.
FOR FURTHER INFORMATION CONTACT:
Tebsy Paul, Entry Process and Duty
Refunds Branch, Regulations and
Rulings, Office of Trade (202) 325–0195.
SUMMARY:
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1775
Notice is
hereby given that on January 29, 2019,
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 switches, routers and
network cards, which may be offered to
the U.S. Government under an
undesignated government procurement
contract. This final determination, HQ
H290670, 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 and downloading
operations performed in the United
States, using U.S.-origin software,
substantially transform non-TAA
country Ethernet switches, routers and
network cards. Therefore, the country of
origin of the Ethernet switches, routers
and network cards 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.
SUPPLEMENTARY INFORMATION:
Dated: January 29, 2019.
Alice A. Kipel,
Executive Director, Regulations and Rulings,
Office of Trade.
HQ H290670
January 29, 2019
OT:RR:CTF:VS H290670 TP
CATEGORY: Origin
Mr. Stuart P. Seidel
Baker & McKenzie, LLP
815 Connecticut Ave., N.W.
Washington, D.C. 20006–4078
RE: U.S. Government Procurement; Country
of Origin; Ethernet Switches, Routers
and Network Cards; Substantial
Transformation
Dear Mr. Seidel:
This is in response to your letter dated
September 20, 2017, requesting a final
determination on behalf of ALE USA, Inc.
(‘‘ALE’’) pursuant to subpart B of Part 177 of
the U.S. Customs & Border Protection
(‘‘CBP’’) Regulations (19 C.F.R. Part 177).
This final determination concerns the
country of origin of ALE’s Ethernet switches,
routers and network cards. As a U.S.
importer, ALE is a party-at-interest within
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the meaning of 19 C.F.R. § 177.22(d)(1) and
is entitled to request this final determination.
Per your letter dated September 20, 2017,
we have reviewed your request for
confidentiality pursuant to 19 C.F.R.
§ 177.2(b)(7) with respect to certain
information submitted. As that information
constitutes privileged or confidential matters,
it has been bracketed and will be deleted
from any published versions.
FACTS:
ALE manufactures and imports a group of
Ethernet switches, routers and network cards.
The group of products consists of the
following: OmniSwitch® OS6900–X72,
OS6900–Q32, OS6900–C32, OS6900–CX72,
OS6860/6860E family, OS 6560 family, OS
6450 family and OS 6865–U28X. You state
that the hardware for these products was
designed in Taiwan and manufactured in
China. You state that the final programming
of the EEPROM on the device and majority
of the programming for the Alcatel Operating
System (‘‘AOS’’) are completed and compiled
in the United States and will be downloaded
in the United States. You also account for the
labor hours spent and the qualifications of
the coders and developers who worked on
developing, programming, and downloading
the software in the United States.
You state that the assembly process is the
same for all the products mentioned above.
The metal fabrication consists of simple
punching, bending and painting of sheet steel
or aluminum metals to create the protective
case. This occurs in Taiwan and takes
approximately 20 minutes to complete. The
remaining hardware assembly takes place in
China. ALE states that the individual
components of the hardware include
resistors, capacitors, diodes, transistors,
memory, application specific integrated
circuits, memory modules, CPUs, printed
circuit cards, and metal housings. ALE states
that the countries of origin for these
components are from various parts of Asia,
including Singapore, Taiwan and China.
ALE describes the hardware assembly in
China as follows:
1. The Surface Mount technology (‘‘SMT’’)
installation involves the mounting of a
preprogrammed [XXXXX] program. SMT
involves the mounting of electronic
components directly on to the printed circuit
board. The [XXXXX] program is compiled
codes that allows the CPU to have the
necessary configurations to support computer
function by using a set of commands. The
[XXXXX] program is required to boot the
device so that it can load the ALE programs.
However, the devices cannot function until
the U.S.-developed and programmed
software and EEPROM are loaded in the
United States.
2. An in circuit test (‘‘ICT’’) is performed.
This process allows for the ICT to program
a complex programmable logic device
(‘‘CPLD’’) image into the CPLD programmable
application-specific integrated circuit
(‘‘ASIC’’). The CPLDs are integrated circuits
that are configured to implement digital
hardware and by programming them into an
ASIC, the integrated circuits can be suited for
a specific purpose, rather than generalpurpose use. In this case, the CPLD image
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contains code that allows the CPU to boot the
device for testing. Additionally, the EEPROM
is programmed with critical information that
is retrieved from ALE’s servers.
3. The hardware undergoes mechanical
assembly.
4. Installation of a diagnostic file to allow
for thorough testing. The purpose of the
software that is downloaded on to the
hardware in China is to perform diagnostic
testing to assure the circuit paths on the
printed circuit board are made and function
properly.
5. The hardware undergoes functional
testing.
6. An environment stress screening
(‘‘ESS’’) test is performed. This is considered
a type of burn-in test to identify
manufacturing quality issues.
7. The hardware is packaged.
ALE contends that the programming
undertaken in China is to verify that the
product has been manufactured correctly.
Specifically, the partial tests ensure that the
surface mounting of electronic components is
complete. You state that at this point, the
hardware is missing the majority of
programming leaving it incapable of
performing the necessary functions of
Institute of Electrical and Electronics
Engineers (‘‘I.E.E.E.’’) Ethernet router
functionality; therefore the product enters the
United States in a non-functional state.
Additionally, you state that in the United
States, the systems are unpacked and
presented to ALE test executives for proper
configuration and labeling through a U.S.
secure server. The assembly process in the
United States involves the following steps:
(1) the EEPROM is re-programmed with
valid, proper information originating solely
from ALE USA’s propriety product Data
Management tool; (2) the AOS is loaded onto
an electronic storage medium; (3) final tests
are conducted; (4) the product is packaged;
(5) and quality control mechanisms are
carried out which are validated to allow for
release of the products to be shipped.
You state that the AOS software enables
the OmniSwitch products to function as a
switch/router. You assert that the AOS
contains the specialized routing algorithms
that transform merchant silicon into a
functional OmniSwitch/Router and that, as
stated above, the software was almost
completely architected, developed,
programmed and compiled in the United
States. The EEPROM is also reprogrammed to
incorporate product specific information
allowing it to operate as a Layer 2, 3 and 6
device. You state that Layers 2, 3 and 6 refer
to the layers that comprise an Open System
Interconnection (‘‘OSI’’) networking model.
You state that the layers are a controlled
hierarchy where information is passed from
one layer to the next creating a blueprint for
how information is passed from physical
electrical impulses to applications. The AOS
is downloaded onto storage within the
device. The software is compiled many times
until a final version is approved. Quality
checks occur to certify that the code is ready
and manufacturing test engineers work with
engineering personnel to test the AOS
software.
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ISSUE:
What is the country of origin of the
Ethernet switches, routers and network cards
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 C.F.R. § 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 C.F.R. § 177.22(a).
In rendering final determinations for
purposes of U.S. Government procurement,
CBP applies the provisions of subpart B of
Part 177 consistent with the Federal
Acquisition Regulations. See 19 C.F.R.
§ 177.21. In this regard, CBP recognizes that
the Federal Acquisition Regulations restrict
the U.S. Government’s purchase of products
to U.S.-made or designated country end
products for acquisitions subject to the Trade
Agreements Act. See 48 C.F.R. § 25.403(c)(1).
The Federal Acquisition Regulations define
‘‘U.S.-made end product’’ as ‘‘an article that
is mined, produced, or manufactured in the
United States or that is substantially
transformed in the United States 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
transformed.’’ See 48 C.F.R § 25.003.
In Data General v. United States, 4 C.I.T.
182 (1982), the court determined that the
programming of a foreign Programmable
Read-Only Memory chip (‘‘PROM’’) 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’’); HQ 735027,
dated September 7, 1993 (programming blank
media (EEPROM) with instructions that
allow it to perform certain functions that
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prevent piracy of software constitutes a
substantial transformation); 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 imported it).
CBP has examined the effect of
downloading U.S.-developed software in
previous decisions. For example, in HQ
H258960, dated May 19, 2016, CBP
considered the country of origin of network
transceivers in two different scenarios. In
Scenario One, the importer purchased
‘‘blank’’ transceivers from Asia. The
transceivers were then loaded with U.S.developed software in the United States,
which made the transceivers functional. In
Scenario Two, the importer purchased the
transceivers with a generic program
preinstalled, which was then removed so that
the U.S.-developed software could be
installed. CBP held that, in Scenario One,
because the transceivers could not function
as network devices without the U.S.developed software, the transceivers were
substantially transformed as a result of the
downloading of the U.S.-developed software
performed in the United States. However, in
Scenario Two, because the transceivers were
already functional when imported, the
identity of the transceivers was not changed
by the downloading performed in the United
States, and no substantial transformation
occurred.
Similarly, in 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. In China, the printed
circuit board assemblies, chassis, top cover,
power supply, and fan were assembled.
Then, in the United States, U.S.-origin
software, which gave the hardware the
capability of functioning as local area
network devices, was loaded onto the
hardware. CBP noted that the U.S.-origin
software ‘‘enables the imported switches to
interact with other network switches’’ and
that ‘‘[w]ithout this software, the imported
devices could not function as Ethernet
switches.’’ Under these circumstances, CBP
held that the country of origin of the local
area network devices was the United States.
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).
In this case, the hardware is imported from
China in a fully assembled state. However, at
the time of importation the devices are not
functional because they lack the software
needed to run. Here, unlike Scenario Two in
HQ H258960, the programming that occurs in
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China is to perform diagnostic testing to
assure the circuit paths on the printed circuit
board are made and function properly.
Furthermore, contrary to Scenario Two in HQ
H258960, the identity of the switches
changes after the U.S.-origin software is
downloaded onto the switches. Moreover, as
in HQ H175415, HQ H052325, and HQ
H258960, it is only after the installation of
U.S.-origin software that the devices obtain
their essence and functionality as switches
and routers. Without the U.S. proprietary
software, the devices cannot function as a
network device in any capacity. Here, the
AOS is developed and downloaded in the
United States. The development,
configuration, and downloading of the AOS
helps transform the essence of the products
at issue from merchant silicon into fully
functional network devices that are capable
of performing the intended switching and
routing functions. The devices at issue here
derive their core functionality as switches
and routers from the installation of the U.S.developed software. The U.S.-developed
software enables the system to interact with
other network switches or routers through
network switching and routing protocols, and
allows for the management of functions such
as network performance monitoring and
security and access control.
Under these circumstances, and consistent
with previous CBP rulings, we find that the
country of origin of the final product is the
United States, where the non-functional
devices are substantially transformed as a
result of downloading performed in the
United States, with software developed in the
United States. Furthermore, in the present
case, the essence of the articles depends on
the information technology found in the
software, which allows the devices to
communicate with other network switches or
routers for their ultimate purpose. For
country of origin determinations, it should be
noted that the final determination differs
based on each article’s specific purpose,
makeup, and applicable technology.
HOLDING:
The country of origin of the Ethernet
switches, routers and network cards for
purposes of U.S. Government procurement is
the United States.
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 partyat-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. 2019–01115 Filed 2–4–19; 8:45 am]
BILLING CODE 9111–14–P
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–6101–N–03]
Notice of Regulatory Waiver Requests
Granted for the Third Quarter of
Calendar Year 2018
AGENCY:
Office of the General Counsel,
HUD.
ACTION:
Notice.
Section 106 of the Department
of Housing and Urban Development
Reform Act of 1989 (the HUD Reform
Act) requires HUD to publish quarterly
Federal Register notices of all
regulatory waivers that HUD has
approved. Each notice covers the
quarterly period since the previous
Federal Register notice. The purpose of
this notice is to comply with the
requirements of section 106 of the HUD
Reform Act. This notice contains a list
of regulatory waivers granted by HUD
during the period beginning on July 1,
2018 and ending on September 30,
2018.
FOR FURTHER INFORMATION CONTACT: For
general information about this notice,
contact Ariel Pereira, Associate General
Counsel for Legislation and Regulations,
Department of Housing and Urban
Development, 451 Seventh Street SW,
Room 10282, Washington, DC 20410–
0500, telephone 202–708–3055 (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 800–877–8339.
For information concerning a
particular waiver that was granted and
for which public notice is provided in
this document, contact the person
whose name and address follow the
description of the waiver granted in the
accompanying list of waivers that have
been granted in the third quarter of
calendar year 2018.
SUPPLEMENTARY INFORMATION: Section
106 of the HUD Reform Act added a
new section 7(q) to the Department of
Housing and Urban Development Act
(42 U.S.C. 3535(q)), which provides
that:
1. Any waiver of a regulation must be
in writing and must specify the grounds
for approving the waiver;
2. Authority to approve a waiver of a
regulation may be delegated by the
Secretary only to an individual of
Assistant Secretary or equivalent rank,
and the person to whom authority to
waive is delegated must also have
authority to issue the particular
regulation to be waived;
3. Not less than quarterly, the
Secretary must notify the public of all
SUMMARY:
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[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Notices]
[Pages 1775-1777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01115]
-----------------------------------------------------------------------
DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection
Notice of Issuance of Final Determination Concerning Certain
Ethernet Switches, Routers and Network Cards
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, routers and network
cards. Based upon the facts presented, CBP has concluded in the final
determination that the United States is the country of origin of the
Ethernet switches, routers and network cards for purposes of U.S.
Government procurement.
DATES: The final determination was issued on January 29, 2019. A copy
of the final determination is attached. Any party-at-interest, as
defined in 19 CFR Sec. 177.22(d), may seek judicial review of this
final determination within March 7, 2019.
FOR FURTHER INFORMATION CONTACT: Tebsy Paul, Entry Process and Duty
Refunds Branch, Regulations and Rulings, Office of Trade (202) 325-
0195.
SUPPLEMENTARY INFORMATION: Notice is hereby given that on January 29,
2019, 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
switches, routers and network cards, which may be offered to the U.S.
Government under an undesignated government procurement contract. This
final determination, HQ H290670, 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 and downloading operations performed in the United States,
using U.S.-origin software, substantially transform non-TAA country
Ethernet switches, routers and network cards. Therefore, the country of
origin of the Ethernet switches, routers and network cards 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: January 29, 2019.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
HQ H290670
January 29, 2019
OT:RR:CTF:VS H290670 TP
CATEGORY: Origin
Mr. Stuart P. Seidel
Baker & McKenzie, LLP
815 Connecticut Ave., N.W.
Washington, D.C. 20006-4078
RE: U.S. Government Procurement; Country of Origin; Ethernet
Switches, Routers and Network Cards; Substantial Transformation
Dear Mr. Seidel:
This is in response to your letter dated September 20, 2017,
requesting a final determination on behalf of ALE USA, Inc.
(``ALE'') pursuant to subpart B of Part 177 of the U.S. Customs &
Border Protection (``CBP'') Regulations (19 C.F.R. Part 177). This
final determination concerns the country of origin of ALE's Ethernet
switches, routers and network cards. As a U.S. importer, ALE is a
party-at-interest within
[[Page 1776]]
the meaning of 19 C.F.R. Sec. 177.22(d)(1) and is entitled to
request this final determination.
Per your letter dated September 20, 2017, we have reviewed your
request for confidentiality pursuant to 19 C.F.R. Sec. 177.2(b)(7)
with respect to certain information submitted. As that information
constitutes privileged or confidential matters, it has been
bracketed and will be deleted from any published versions.
FACTS:
ALE manufactures and imports a group of Ethernet switches,
routers and network cards. The group of products consists of the
following: OmniSwitch[supreg] OS6900-X72, OS6900-Q32, OS6900-C32,
OS6900-CX72, OS6860/6860E family, OS 6560 family, OS 6450 family and
OS 6865-U28X. You state that the hardware for these products was
designed in Taiwan and manufactured in China. You state that the
final programming of the EEPROM on the device and majority of the
programming for the Alcatel Operating System (``AOS'') are completed
and compiled in the United States and will be downloaded in the
United States. You also account for the labor hours spent and the
qualifications of the coders and developers who worked on
developing, programming, and downloading the software in the United
States.
You state that the assembly process is the same for all the
products mentioned above. The metal fabrication consists of simple
punching, bending and painting of sheet steel or aluminum metals to
create the protective case. This occurs in Taiwan and takes
approximately 20 minutes to complete. The remaining hardware
assembly takes place in China. ALE states that the individual
components of the hardware include resistors, capacitors, diodes,
transistors, memory, application specific integrated circuits,
memory modules, CPUs, printed circuit cards, and metal housings. ALE
states that the countries of origin for these components are from
various parts of Asia, including Singapore, Taiwan and China.
ALE describes the hardware assembly in China as follows:
1. The Surface Mount technology (``SMT'') installation involves
the mounting of a preprogrammed [XXXXX] program. SMT involves the
mounting of electronic components directly on to the printed circuit
board. The [XXXXX] program is compiled codes that allows the CPU to
have the necessary configurations to support computer function by
using a set of commands. The [XXXXX] program is required to boot the
device so that it can load the ALE programs. However, the devices
cannot function until the U.S.-developed and programmed software and
EEPROM are loaded in the United States.
2. An in circuit test (``ICT'') is performed. This process
allows for the ICT to program a complex programmable logic device
(``CPLD'') image into the CPLD programmable application-specific
integrated circuit (``ASIC''). The CPLDs are integrated circuits
that are configured to implement digital hardware and by programming
them into an ASIC, the integrated circuits can be suited for a
specific purpose, rather than general-purpose use. In this case, the
CPLD image contains code that allows the CPU to boot the device for
testing. Additionally, the EEPROM is programmed with critical
information that is retrieved from ALE's servers.
3. The hardware undergoes mechanical assembly.
4. Installation of a diagnostic file to allow for thorough
testing. The purpose of the software that is downloaded on to the
hardware in China is to perform diagnostic testing to assure the
circuit paths on the printed circuit board are made and function
properly.
5. The hardware undergoes functional testing.
6. An environment stress screening (``ESS'') test is performed.
This is considered a type of burn-in test to identify manufacturing
quality issues.
7. The hardware is packaged.
ALE contends that the programming undertaken in China is to
verify that the product has been manufactured correctly.
Specifically, the partial tests ensure that the surface mounting of
electronic components is complete. You state that at this point, the
hardware is missing the majority of programming leaving it incapable
of performing the necessary functions of Institute of Electrical and
Electronics Engineers (``I.E.E.E.'') Ethernet router functionality;
therefore the product enters the United States in a non-functional
state. Additionally, you state that in the United States, the
systems are unpacked and presented to ALE test executives for proper
configuration and labeling through a U.S. secure server. The
assembly process in the United States involves the following steps:
(1) the EEPROM is re-programmed with valid, proper information
originating solely from ALE USA's propriety product Data Management
tool; (2) the AOS is loaded onto an electronic storage medium; (3)
final tests are conducted; (4) the product is packaged; (5) and
quality control mechanisms are carried out which are validated to
allow for release of the products to be shipped.
You state that the AOS software enables the OmniSwitch products
to function as a switch/router. You assert that the AOS contains the
specialized routing algorithms that transform merchant silicon into
a functional OmniSwitch/Router and that, as stated above, the
software was almost completely architected, developed, programmed
and compiled in the United States. The EEPROM is also reprogrammed
to incorporate product specific information allowing it to operate
as a Layer 2, 3 and 6 device. You state that Layers 2, 3 and 6 refer
to the layers that comprise an Open System Interconnection (``OSI'')
networking model. You state that the layers are a controlled
hierarchy where information is passed from one layer to the next
creating a blueprint for how information is passed from physical
electrical impulses to applications. The AOS is downloaded onto
storage within the device. The software is compiled many times until
a final version is approved. Quality checks occur to certify that
the code is ready and manufacturing test engineers work with
engineering personnel to test the AOS software.
ISSUE:
What is the country of origin of the Ethernet switches, routers
and network cards 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 C.F.R. 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. 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 rendering final determinations for purposes of U.S.
Government procurement, CBP applies the provisions of subpart B of
Part 177 consistent with the Federal Acquisition Regulations. See 19
C.F.R. Sec. 177.21. In this regard, CBP recognizes that the Federal
Acquisition Regulations restrict the U.S. Government's purchase of
products to U.S.-made or designated country end products for
acquisitions subject to the Trade Agreements Act. See 48 C.F.R.
Sec. 25.403(c)(1). The Federal Acquisition Regulations define
``U.S.-made end product'' as ``an article that is mined, produced,
or manufactured in the United States or that is substantially
transformed in the United States 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 transformed.'' See 48 C.F.R
Sec. 25.003.
In Data General v. United States, 4 C.I.T. 182 (1982), the court
determined that the programming of a foreign Programmable Read-Only
Memory chip (``PROM'') 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''); HQ 735027, dated September 7, 1993 (programming blank media
(EEPROM) with instructions that allow it to perform certain
functions that
[[Page 1777]]
prevent piracy of software constitutes a substantial
transformation); 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 imported it).
CBP has examined the effect of downloading U.S.-developed
software in previous decisions. For example, in HQ H258960, dated
May 19, 2016, CBP considered the country of origin of network
transceivers in two different scenarios. In Scenario One, the
importer purchased ``blank'' transceivers from Asia. The
transceivers were then loaded with U.S.-developed software in the
United States, which made the transceivers functional. In Scenario
Two, the importer purchased the transceivers with a generic program
preinstalled, which was then removed so that the U.S.-developed
software could be installed. CBP held that, in Scenario One, because
the transceivers could not function as network devices without the
U.S.-developed software, the transceivers were substantially
transformed as a result of the downloading of the U.S.-developed
software performed in the United States. However, in Scenario Two,
because the transceivers were already functional when imported, the
identity of the transceivers was not changed by the downloading
performed in the United States, and no substantial transformation
occurred.
Similarly, in 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.
In China, the printed circuit board assemblies, chassis, top cover,
power supply, and fan were assembled. Then, in the United States,
U.S.-origin software, which gave the hardware the capability of
functioning as local area network devices, was loaded onto the
hardware. CBP noted that the U.S.-origin software ``enables the
imported switches to interact with other network switches'' and that
``[w]ithout this software, the imported devices could not function
as Ethernet switches.'' Under these circumstances, CBP held that the
country of origin of the local area network devices was the United
States. 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).
In this case, the hardware is imported from China in a fully
assembled state. However, at the time of importation the devices are
not functional because they lack the software needed to run. Here,
unlike Scenario Two in HQ H258960, the programming that occurs in
China is to perform diagnostic testing to assure the circuit paths
on the printed circuit board are made and function properly.
Furthermore, contrary to Scenario Two in HQ H258960, the identity of
the switches changes after the U.S.-origin software is downloaded
onto the switches. Moreover, as in HQ H175415, HQ H052325, and HQ
H258960, it is only after the installation of U.S.-origin software
that the devices obtain their essence and functionality as switches
and routers. Without the U.S. proprietary software, the devices
cannot function as a network device in any capacity. Here, the AOS
is developed and downloaded in the United States. The development,
configuration, and downloading of the AOS helps transform the
essence of the products at issue from merchant silicon into fully
functional network devices that are capable of performing the
intended switching and routing functions. The devices at issue here
derive their core functionality as switches and routers from the
installation of the U.S.-developed software. The U.S.-developed
software enables the system to interact with other network switches
or routers through network switching and routing protocols, and
allows for the management of functions such as network performance
monitoring and security and access control.
Under these circumstances, and consistent with previous CBP
rulings, we find that the country of origin of the final product is
the United States, where the non-functional devices are
substantially transformed as a result of downloading performed in
the United States, with software developed in the United States.
Furthermore, in the present case, the essence of the articles
depends on the information technology found in the software, which
allows the devices to communicate with other network switches or
routers for their ultimate purpose. For country of origin
determinations, it should be noted that the final determination
differs based on each article's specific purpose, makeup, and
applicable technology.
HOLDING:
The country of origin of the Ethernet switches, routers and
network cards for purposes of U.S. Government procurement is the
United States.
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,
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
[FR Doc. 2019-01115 Filed 2-4-19; 8:45 am]
BILLING CODE 9111-14-P
