[Federal Register Volume 67, Number 183 (Friday, September 20, 2002)]
[Notices]
[Pages 59332-59334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-23758]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Customs Service


Notice of Issuance of Final Determination Concerning Notebook 
Computer Products

AGENCY: Customs Service, Department of the Treasury.

ACTION: Notice of final determination.

-----------------------------------------------------------------------

SUMARY: This document provides notice that Customs has issued a final 
determination concerning the country of origin of certain notebook 
computer products which were offered to the United States Government 
under an undesignated government procurement contract. The final 
determination found that based upon the facts presented, the country of 
origin of notebook computer products assembled in the United States 
with United States and foreign components is the United States.

DATE: The final determination was issued on February 3, 1998. 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 30 days of September 20, 2002.

FOR FURTHER INFORMATION CONTACT: Craig Walker, Special Classification 
and Marking Branch, Office of Regulations and Rulings (202-572-8836).

SUPPLEMENTARY INFORMATION: Notice is hereby given that on February 2, 
1998, pursuant to subpart B of part 177, Customs Regulations (19 CFR 
part 177, subpart B), Customs issued a final determination concerning 
the country of origin of certain notebook computer products which were 
offered to the United States Government under an undesignated 
government procurement contract. The U.S. Customs ruling number is HQ 
560677. This final determination was issued at the request of Dell 
Computer Corporation under procedures set forth at 19 CFR part 177, 
subpart B, which implements Title III of the Trade Agreements Act of 
1979, as amended (19 U.S.C. 2511-18). The final determination concluded 
that, based upon the facts presented, the assembly in the United States 
of foreign and United States components to create certain notebook 
computer products results in a substantial transformation of the 
foreign components. Accordingly, the country of origin of the computer 
products is the United States.
    Section 177.29, Customs Regulations (19 CFR 177.29), provides that 
notice of final determinations shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, Customs Regulations (19 CFR 177.30), states 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. Customs has recently learned 
that notice of the final determination issued as HQ 560677 was 
inadvertently not published as required by 19 CFR 177.29. Nevertheless, 
because publication of notice of the final determination is a 
prerequisite to the initiation of judicial review of the determination 
by a party-in-interest under 19 CFR 177.30, this document gives notice 
of the final determination issued on February 3, 1998. Any party-at-
interest, as defined in 19 CFR 177.22(d), may seek judicial review of 
this final determination within 30 days of September 20, 2002.


[[Page 59333]]


    Dated: September 6, 2002.
Michael T. Schmitz,
Assistant Commissioner, Office of Regulations and Rulings.

HQ 560677

February 3, 1998.

MAR-05 RR:TC:SM 560677 BLS

CATEGORY: Marking

Richard F. Busch, II,
Hall & Evans, L.L.C., 1200 Seventeenth Street, Denver, Colorado 
80202-5817.
Re: U.S. Government Procurement; Final Determination; Title III, 
Trade Agreements Act of 1979 (19 U.S.C. 2511); Subpart B, Part 177, 
Customs Regulations (19 CFR 177.21 et seq.); Country of origin of 
Notebook computer products; substantial transformation; HRL 735608; 
HRL 559336

    Dear Mr. Busch: This is in reference to your letters dated 
September 23 and September 29, 1997, on behalf of Dell Computer 
Corporation (Dell), requesting a final determination of origin under 
Subpart B of Part 177, Customs Regulations (19 CFR 177.21 et seq.) 
in connection with the offering of two portable notebook computer 
products for sale to the U.S. Government. (Scenarios 1 and 2 of your 
submission).
    In your letter of December 3, 1997, you also advised that Dell 
was withdrawing its ruling request at this time in connection with 
Scenario 3, pertaining to certain operations in the U.S., but would 
re-submit the request with additional information at a later date. 
Under the circumstances, we will address only the issues pertaining 
to the notebook computers.
    Under Subpart B of Part 177, which implements Title III of the 
Trade Agreements Act of 1979, as amended (19 U.S.C. 2511 et seq.), 
the Customs Service issues country of origin advisory rulings and 
final determinations on whether an article is or would be a product 
of a designated foreign country or instrumentality for the purpose 
of granting waivers of certain ``Buy America'' restrictions in U.S. 
law or practice for products offered for sale to the U.S. 
Government. Hall & Evans, L.L.C., as counsel to Dell, a party-at-
interest within the meaning of 19 CFR 177.22(d)(1), is entitled to 
request this final determination.

Facts

    The two notebook computer products, ``Twister'' and ``Mojave,'' 
are designed and engineered to meet a broad range of custom 
configurations. Mojave is primarily designed to meet the needs of 
government agencies/large corporations, and Twister is primarily 
designed to meet the needs of sophisticated individuals and small 
businesses.
    In general, both the Mojave and Twister notebook computers will 
be manufactured by Dell from parts and components sourced through 
multiple vendors in a variety of countries. Dell's Texas 
manufacturing operation consists of three phases. The first phase is 
the Government customer's design/order, which is the actual 
beginning of a customized notebook computer system. The second phase 
of the manufacturing operation involves the assembly of parts, 
subassemblies and components during a multi-station production 
process. Finally, Dell has developed a proprietary systems 
integration process (FISH/FIDA) that transforms the non-operational 
``chassis'' for Twister and Mojave into customized computer notebook 
systems that will operate to the precise requirements of different 
Government customers.
    You state that Dell employs software programmers and hardware 
engineers, who must not only write the appropriate software to 
configure each system on a build-to-order basis, but also ensure all 
existing software and components are fully compatible and optimized 
with the thousands of software and hardware component configurations 
which the Government may dictate. You also state that all Dell 
employees who work on the Mojave and Twister production lines must 
attend internal training to become certified to perform the delicate 
tasks required in a number of the manufacturing stations.

Assembly of Twister

    When the chassis is received from the Taiwanese OEM (original 
equipment manufacturer), the LCD and the CPU are already installed 
on the base plastics, but the BIOS and memory modules are not so 
installed. The components are sourced from various countries, which 
include: the chassis (Taiwan); hard disk drive (Thailand); BIOS chip 
(U.S.); floppy disk drive (China); AC adapter (China, but in the 
future, Thailand); CD ROM (Japan); fax modem cards (U.S.); docking 
station (Taiwan); and the memory board (Korea, Japan, or Singapore). 
The process of assembling the product is as follows:

Station 1. Dell receives chassis; it is checked for defects and 
placed on the assembly line. The chassis is matched with a specific 
order.
Station 2. System service tag numbers are input; customer-specific 
testing regime is configured and loaded; customer-specific disk 
configured.
Station 3. BIOS chip and memory modules installed.
Station 4. Hard Disk Drive prepared for installation.
Station 5. Hard Disk Drive installed into notebook chassis.
Station 6. PCMCIA modem card installed.
Station 7. AC adapter plugged in, PCMCIA insert removed and network 
interface card inserted. Notebook booted and Flash BIOS burned into 
non-volatile RAM. FISH/FIDA configures a customer-specific machine 
and begins running diagnostic tests.
Station 8. Electro-Mechanical Repair. Any notebooks with technical 
problems are sent to this station for repair.
Station 9. Quality Control.
Station 10-12. Dell customized and proprietary ``Pic to Light'' 
assembly process. (A manufacturing system that identifies specific 
peripherals, components and subassemblies for inclusion into the 
manufacturing process along the assembly line.)
Station 13. ``Out of Box'' Audit. Notebooks are taken randomly from 
the assembly line and tested.
Station 14. Automatic processing and shipping.

Assembly of Mojave

    The assembly of Mojave is similar but not identical to that of 
Twister. When Dell receives the notebook chassis from Taiwan, the 
LCD screen, floppy disc drive and the BIOS chip have been assembled 
onto the base plastics, but neither the keyboard nor the CPU and 
other primary chips are installed. The additional components which 
make up the Mohave are identical to the components assembled to make 
the Twister with the exception of the keyboard, which is not 
included as part of the Twister configuration. The components are 
sourced from various countries, which include: the chassis (Taiwan); 
hard disk drive (Thailand); floppy disk drive (China); AC adapter 
(China, but in the future, Thailand); CD ROM (Japan); fax modem 
cards (U.S.); docking station (Taiwan); and the memory board (Korea, 
Japan, or Singapore). The country of origin of the keyboard is 
Japan, but in the future will be Malaysia. The CPU is of U.S.-
origin. The process of assembling Mojave is as follows:

Station 1. Dell receives chassis; it is checked for defects and 
placed on the assembly line. The chassis is matched with a specific 
order.
Station 2. System service tag numbers are input; customer-specific 
testing regime is configured and loaded; customer-specific disk 
configured.
Station 3. CPU processor module and hybrid cooler installed.
Station 4. Keyboard installed.
Station 5. Memory modules installed.
Station 6. Hard Disk Drive prepared for installation.
Station 7. Hard Disk Drive installed into notebook chassis.
Station 8. PCMCIA modem card installed.
Station 9. Notebook booted and Flash BIOS burned into non-volatile 
RAM. FISH/FIDA configures a customer-specific machine and begins 
running diagnostic tests.
Station 10. Electro-Mechanical Repair. Any notebooks with technical 
problems are sent to this station for repair.
    The operations performed at Stations 11 through 16 of the Mojave 
assembly line are identical to the operations that occur at Stations 
9 through 14 of the Twister assembly line, including quality 
control, ``Pic to Light'' process, testing, and shipping.

Issue

    Whether the assembly in the U.S. of the various components into 
the Twister and Mojave notebook computers constitute a substantial 
transformation, such that the computers may be considered products 
of the U.S.

Law and Analysis

    As prescribed under Title III of the Trade Agreements Act, the 
origin of an article not wholly the growth, product, or manufacture 
of a single country or instrumentality is to be determined by the 
rule of substantial transformation. 19 U.S.C. Sec.  2518(4). Such an 
article is not a product of a country unless it has been 
substantially transformed there into a new and different article of 
commerce with a name, character or use different from that of the 
article or articles from which it was transformed. See also 19 CFR

[[Page 59334]]

Sec.  177.23(a). Thus, the critical issue that must be addressed in 
determining the country of origin of ``Mojave'' and ``Twister'' is 
whether the imported foreign components are substantially 
transformed as a result of the operations performed in the U.S. That 
is, does the name, character or use of the foreign components change 
as a result of the processing and assembly operations performed to 
manufacture the notebook computers. In Belcrest Linens v. United 
States, 573 F. Supp. 1149 (CIT 1983), aff'd, 741 F.2d 1368 (Fed. 
Cir. 1984), the issue framed by the court was whether as a result of 
the assembly process the parts lose their identity and become an 
integral part of the new article. Assembly operations which are 
minimal or simple, as opposed to complex or meaningful, will 
generally not result in a substantial transformation. See C.S.D. 85-
25. However, the issue of whether a substantial transformation 
occurs is determined on a case-by-case basis.
    Dell contends that the chassis and other components of both 
Mojave and Twister undergo manufacturing processes resulting in 
customized notebook computers distinct from the components from 
which they were assembled. In this regard, Dell emphasizes that as 
distinguished from other companies' manual load, fixed image 
processes, Mojave and Twister are customer specific at the time of 
the order, and involve the loading of operational characteristics 
and the specific software capability requested by the customer. Dell 
points to the degree of expertise required to implement its 
proprietary FISH/FIDA manufacturing process, represented by its 
skilled programmers and engineers. Dell states that the interactions 
between various software packages and between hardware devices are 
resolved by Dell's FISH/FIDA process, which is not the case during a 
manual installation process (involving operational software from 
diskettes or CD ROMs). Accordingly, Dell argues that the assembly 
operations coupled with the unique customer-specific manufacturing 
process transform the foreign components into products, notebook 
computer systems, with a character and use distinct from the parts 
from which they were made.
    Customs has previously considered the issue of whether the 
processing and assembly of electronic components into a finished 
article results in a substantial transformation of the individual 
components.
    In Headquarters Ruling Letter (HRL) 711967 (March 17, 1980), 
Customs held that television sets which were assembled in Mexico 
with printed circuit boards, power transformers, yokes and tuners 
from Korea and picture tubes, cabinets, and additional wiring from 
the U.S. were products of Mexico for country of origin marking 
purposes. The U.S. and Korean parts were substantially transformed 
by the processing performed in Mexico and all the components lost 
their individual identities to become integral parts of the new 
article.
    In HRL 732170 (January 5, 1990), Customs held that a backless 
television cabinet containing a tuner, speaker and circuit board 
imported in the U.S., was substantially transformed there when 
assembled with a domestic color picture tube, deflection yoke, 
electron beam bender and degaussed coil, and a remote control into a 
finished television receiver. Customs stated that the imported 
components lost their individual identities as a result of the 
assembly operation in that they became integral parts of a new 
article--a television.
    HRL 735608 (April 27, 1995) involved various scenarios 
pertaining to the assembly of a desktop computer in the U.S. and the 
Netherlands. In one of the scenarios, foreign components to be 
assembled in the U.S. included the case assembly (including the 
computer case, system power supply and floppy disc drive), partially 
completed motherboard, CPU (which controls the interpretation and 
execution of instructions and includes the arithmetic-logic unit and 
control unit), hard disc drive, slot board, keyboard BIOS and system 
BIOS ( basic input and output system). Additional components 
manufactured in the U.S. or the Netherlands to be assembled into the 
finished desktop computers depending on the model included an 
additional floppy drive, CD ROM disk, and memory boards. In that 
case, Customs found that the foreign case assemblies, partially 
completed motherboards, hard disk drives and slot boards underwent a 
change in name, character and use as a result of the operations in 
the U.S. and lost their separate identities in becoming an integral 
part of a desktop computer. Customs noted that the finished article, 
a desktop computer, was visibly different from any of the individual 
foreign components, acquiring a new use, processing and displaying 
information. Accordingly, Customs held that the individual 
components underwent a substantial transformation as a result of the 
operations performed in the U.S.\1\
---------------------------------------------------------------------------

    \1\ See also HRL 559336 dated March 13, 1996, where Customs 
found that foreign components (i.e., clamshell base, LCD video 
display, hard disk drive, floppy disk drive, kA/C power adapter) 
used in the assembly of notebook computers under four scenarios were 
substantially transformed as a result of the assembly operations 
performed int he U.S. In that case, depending on the scenario, the 
clamshell was either complete when received or consisted of a 
separate top (video display component) and base, which may or may 
not have included the keyboard. It is also noted that in the various 
scenarios presented, the CPU/daughterboard assembly, an essential 
component of the notebook computer, was produced int he U.S.
---------------------------------------------------------------------------

    Based on the totality of the circumstances of this case and 
consistent with the rulings cited above, we find that the foreign 
components that are used in the manufacture of the notebook 
computers Twister and Mojave in the manner described are 
substantially transformed as a result of the operations performed in 
the U.S. The name, character, and use of the foreign chassis in each 
case, hard disk drive, floppy disc drive, memory boards and other 
foreign components change as a result of the processing and other 
assembly operations performed in the U.S. Like the case assemblies 
in HRL 735608 and HRL 559336, the chassis', hard disk drives, floppy 
disc drives, memory boards and other components lose their separate 
identities and become an integral part of a notebook computer as a 
result of the assembly operations and other processing. The 
character and use of the foreign components are changed as a result 
of the operations performed, in that a new article, a notebook 
computer, is visibly different from any of the individual foreign 
components, acquiring a new use, processing and displaying 
information.

Holding

    Based on the facts presented, foreign chassis', hard disk 
drives, floppy disks, memory boards and other foreign components, 
which are further processed and assembled into notebook computers in 
the U.S., in the manner described above, are substantially 
transformed as a result of the operations performed in the U.S. 
Accordingly, the country of origin of the notebook computers is the 
U.S.
    Notice of this final determination will be given in the Federal 
Register as required by 19 CFR Sec.  177.29. Any party-at-interest 
other than the party which requested this final determination may 
request, pursuant to 19 CFR Sec.  177.31, that Customs reexamine the 
matter anew and issue a new final determination.
    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,
Stuart P. Seidel,
Assistant Commissioner, Office of Regulations and Rulings.

[FR Doc. 02-23758 Filed 9-19-02; 8:45 am]
BILLING CODE 4820-02-P