[Federal Register Volume 69, Number 167 (Monday, August 30, 2004)]
[Notices]
[Pages 52935-52938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19672]


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DEPARTMENT OF LABOR

Employment and Training Administration

[TA-W-50,588]


Murray Engineering, Inc. Complete Design Service, Flint, 
Michigan; Notice of Negative Determination on Remand

    The United States Court of International Trade (USCIT) remanded to 
the Department of Labor for further investigation Former Employees of 
Murray Engineering v. U.S. Secretary of Labor, USCIT 03-00219. The 
Department concludes that the subject worker group does not qualify for 
eligibility to apply for Trade Adjustment Assistance (TAA) benefits for 
two reasons. First, the subject facility does not produce an article 
because designs are not an article for TAA purposes. Second, 
irrespective of whether the subject facility's designs are articles, 
the petition would be denied because there was neither a shift of 
production nor increased imports as required under section 222(a) of 
the Trade Act of 1974, as amended (Trade Act), and the workers do not 
qualify as adversely affected secondary workers under section 222(b) of 
the Trade Act.
    On January 15, 2003, the petitioner filed a petition on behalf of 
workers of Murray Engineering, Inc., Complete Design Service, Flint, 
Michigan (``Murray Engineering'') for TAA. The petition stated that 
workers design automotive gauges, tools, fixtures, and dies.
    The Department's initial negative determination for the former 
workers of Murray Engineering was issued on February 5, 2003. The 
Notice of Determination was published in the Federal Register on 
February 24, 2003 (68 FR 8620). The Department's determination was 
based on the finding that workers provided industrial design and 
engineering services and did not produce an article within the meaning 
of Section 222 of the Trade Act.
    In a letter dated February 19, 2003, the petitioner requested 
administrative reconsideration of the Department's negative 
determination. The petitioner alleged that Murray Engineering produced 
a ``tangible drawing essential and integral to the making or building 
of a product'' and that the Department was misled by the ``Service'' in 
the company's name.
    The Department denied the petitioner's request for reconsideration 
on March 31, 2003, stating that the engineering drawings, schematics, 
and electronically generated information prepared by the subject worker 
group were not considered production within the meaning of the Trade 
Act. The Department further stated that the fact that the information 
is generated on paper is irrelevant to worker group eligibility for 
TAA. The Department's Notice of Negative Determination Regarding 
Application for Reconsideration was published in the Federal Register 
on April 15, 2003 (68 FR 18264).
    By letter of April 30, 2003, the petitioner appealed the 
Department's denial of the request for reconsideration to the USCIT 
asserting that ``machine drawings (plans) are an article.'' The 
petitioner asserts that the subject worker group should be eligible to 
apply for TAA due to imports of like or directly competitive articles 
and, alternatively, because they are adversely affected secondary 
workers.
    The Department filed a motion requesting that the USCIT remand the 
case to the Department for further investigation, and the USCIT granted 
the motion.
    The Department issued its Notice of Negative Determination on 
Remand on August 20, 2003. The Notice was published in the Federal 
Register on September 10, 2003 (68 FR 53395). The remand determination 
stated that the workers did not produce an article and were not 
eligible for certification as workers producing an article affected 
either by a shift of production or by imports, or as adversely affected 
secondary workers.
    On May 4, 2004, the USCIT remanded the matter to the Department for 
further investigation, directing the Department to investigate: (1) The 
nature of the designs provided by Murray Engineering to its 
customers;(2) how the designs are sold to Murray Engineering's 
customers; (3) what proportion of the designs are printed or embodied 
on CD-Rom/diskette; and (4) how the petitioner's eligibility to apply 
for TAA is affected by the different formats in which the designs are 
embodied. The USCIT reserved judgment whether the Murray Engineering 
workers are qualified for certification as adversely affected secondary 
workers.
    The designs created by Murray Engineering are used to make 
machines, tools, gauges, dies, molds and fixtures for hydraulic, 
pneumatic, mechanical, and electrical systems used in the manufacture 
of products. Each design is unique because each one is job specific and 
tailored to customer's specifications. Workers use computer software 
such as Unigraphics and Auto Cad to create each design.
    According to the Murray Engineering company official, Murray 
Engineering customers are charged for the labor incurred in the 
creation of the designs and can either pay by design or pay by the 
hour. Printed copies of the design are provided to customers about two-
thirds of the time and, in all instances, designs are provided on CD-
Rom.
    When a project is accepted by Murray Engineering, it is assigned to 
a designer to develop the designs. The assigned designer is responsible 
for understanding and adhering to the design specifications, 
understanding the client's product and manufacturing operations, and 
working with the client to develop the final design. The designer 
creates multiple designs for the customer, from which the customer 
would choose one, and Murray Engineering would then modify the chosen 
design as requested. The design process requires constant input and 
approval by the customer. Steps of the design process may be repeated 
before the final design is approved by the customer.
    Once the designs are completed and meet the customer's 
requirements, the designs are saved on Murray Engineering's computer 
network. The designs are then hand-delivered to the customer in the 
format that the customer has requested. As noted above, in all cases 
the designs are provided on CD-Rom, and in two-thirds of the cases 
printed copies are provided. Data charts, test results, and other 
schematics may accompany the designs when the designs are sent to the 
customer.
    The job descriptions provided by Murray Engineering for the 
Complete Design Service show that workers are engaged primarily in 
activity related to the preparation of designs of machines, tools, 
gauges, dies, molds and fixtures for hydraulic, pneumatic, mechanical, 
and electrical systems used in the manufacture of products. The 
positions are detail-oriented and require a wide range of technical 
skills (including designing, drafting, mathematical computation, and 
computer graphics). Additionally, some drafters and designers may be 
required to take additional training and acquire the skills and 
knowledge (including familiarity with the client's products and 
manufacturing operations) needed to create the design per 
specifications.

[[Page 52936]]

    The USCIT's May 4, 2004 decision suggests that any item classified 
in the Harmonized Tariff Schedule of the United States (``HTSUS'') is 
an ``article'' for all purposes of the Trade Act, including the TAA 
program. If one relies solely on HTSUS classification codes, one would 
conclude that the workers of Murray Engineering produce an article 
within the meaning of the TAA program because designs printed on paper 
and designs transmitted on diskette or CD-Rom are included under HTSUS 
classification codes. Designs recorded on paper are identified in 
heading 4911, HTSUS, and designs recorded on diskette or CD-Rom is 
identified in subheading 8524.39.40, HTSUS. Since Murray Engineering 
provides all designs to its customers on CD-Rom, the designs would be 
included under subheading 8524.39.40, HTSUS, and the two-thirds of the 
designs provided on paper would be included under heading 4911, HTSUS.
    However, the Department believes that rote application of HTSUS 
classification codes is not the sole arbiter in this matter, and the 
Department bases this determination that the workers do not produce an 
article for TAA purposes upon a careful review of many sources of 
information rather than limiting its analysis to rote application of 
HTSUS classification codes.
    The Department believes that HTSUS classification codes are not, in 
this case, determinative because the designs are subject to duty only 
to the extent that the medium upon which it is recorded is subject to 
duty. Clarifying this point, the duty would be levied without regard to 
the content or value of the designs themselves, but rather is 
determined by the medium itself. Thus, designs recorded on paper are 
subject to duty only to the extent that the medium upon which they are 
recorded (paper) is subject to duty (heading 4911, HTSUS). Likewise, 
designs recorded on diskette or CD-Rom are subject to duty only to the 
extent that the medium upon which they are recorded is subject to duty 
(subheading 8524.39.40, HTSUS). In contrast, telecommunication 
transmissions, such as electronic mail, television and radio signals, 
and Internet activity, are exempt from the HTSUS (General Note 3e(ii)) 
and, therefore, designs sent by such means are not subject to duty. 
This is an important distinction because workers of Murray Engineering, 
Complete Design Service are engaged in developing designs and not in 
the manufacture of the mediums on which the designs are conveyed to 
customers.
    The Department believes it would lead to absurd results and would 
contravene the purposes of the TAA program to condition the workers' 
eligibility for benefits on the medium through which designs are 
provided to customers. Allowing the medium of conveyance to control 
whether designs are articles for purposes of determining TAA worker 
group eligibility would result in workers performing identical work as 
Murray Engineering workers being denied TAA benefits if their firm 
solely e-mailed designs to customers, without providing them on CD-Rom, 
diskettes, or paper. The Department believes this would be an unjust 
and absurd basis for distinguishing whether a group of workers would be 
eligible to apply for TAA. Therefore, the Department believes that it 
would be erroneous to conclude that the Murray Engineering designs are 
articles solely because they would, because of their medium of 
conveyance, fall under specified HTSUS classification codes.
    Although HTSUS classification codes arguably support that designs 
are articles, other sources support the conclusion that designs are not 
articles for TAA purposes. These sources include: (1) Documents 
illustrating the company's self-identification as a service provider, 
the design creation process, and the workers' job descriptions; (2) 
information from the Department of Homeland Security, U.S. Customs and 
Border Protection (Customs); (3) the Central Product Classification 
system compiled by the United Nations; (4) the World Trade 
Organization's ``Services Sectoral Classification List'' and General 
Agreement on Trade in Services; and (5) the Department of Labor, Bureau 
of Labor Statistics, Occupational Outlook Handbook.
    Murray Engineering identifies itself as a company that provides 
industrial design and engineering solution services to manufacturing 
industries. The company official has consistently referred to Murray 
Engineering as a service provider and the Department notes that the 
company was unable to provide production figures because no such 
records are kept since it considers itself to be a service company. 
That Murray Engineering gives customers the option of paying by the 
hour rather than by the design further supports that Murray Engineering 
does not produce an article because common experience is that payment 
by hours of labor rather than by quantity of a finished product is not 
an option provided to customers purchasing articles.
    The Department sought information from Customs, because Customs is 
an authority on import classification, on the classification of designs 
and whether Murray Engineering's designs are subject to duty under the 
HTSUS. Customs suggested that the Department review the U.S. Customs 
Service, Customs Bulletin and Decisions, Volume 36, No. 6 (February 6, 
2003), Attachment A (a collection of Customs classification decisions). 
Throughout Attachment A, Customs valued carrier media bearing data or 
instructions, inclusive or exclusive of the value of the recorded data 
or instructions, only on the cost or value of the carrier medium 
itself. That Customs classifies and values imports based on physical 
characteristics supports that the Murray Engineering designs are not 
``articles'' for TAA program purposes because they would be dutiable 
based on the medium of conveyance rather than the designs contained on 
the medium. As noted above, this is important because workers of Murray 
Engineering, Complete Design Service are engaged in design work and not 
in the manufacture of the medium of conveyance.
    Pursuant to a suggestion by the U.S. International Trade 
Commission, the Department sought guidance from the United Nations' 
Central Product Classification system (CPC), which also supports that 
the Murray Engineering designs are not articles. The United Nations 
developed the CPC to provide unrestricted access to selected global 
data, including international trade statistics. The CPC classifies 
items into products and services. It is clear from a review of the CPC 
that design work is a service. The designs created by the workers of 
Murray Engineering are covered by Section Eight (``Business services; 
agricultural, mining and manufacturing services''), Group 867 
(``Architectural, engineering and other technical services''), Class 
8672 (``Engineering services''), Subclasses 86725 (``Engineering design 
services for industrial processes and production'') and 86726 
(``Engineering design services n.e.c.''). The Explanatory note for 
Subclass 86726 states that ``[i]ncluded here are acoustical and 
vibration engineering designs, traffic control system designs, 
prototype development and detailed designs for new products and any 
other specialty engineering design services.'' The identification of 
design work as a service supports that designs are not an article.
    Further, the Department referred to a World Trade Organization 
(WTO) classification system, the ``Services Sectoral Classification 
List,'' that is similar to the CPC and supports a conclusion that 
Murray Engineering does not produce articles. The ``Services

[[Page 52937]]

Sectoral Classification List'' identifies and describes types of 
services in various industries. This classification list was developed 
as a reference for the international trade community when dealing with 
services negotiations. A careful review of this list shows that it 
follows the CPC and lists ``Engineering services'' in Section 8672 and 
``Related scientific and technical consulting services'' in Section 
8675. The Department believes that the Murray Engineering design work 
logically falls within these classifications, supporting that the 
workers perform a service and do not produce articles.
    Finally among sources of information in the international trade 
community, the Department referred to the WTO's General Agreement on 
Trade in Services (GATS) for guidance. The GATS provides further 
support for concluding that Murray Engineering does not produce 
articles. The GATS is a set of rules covering international trade in 
services. The GATS identifies ``architectural and engineering 
services'' as a sector that ``includes work by engineering firms to 
provide blueprints and designs for buildings and other structures and 
by engineering firms to provide planning, design, construction and 
management services for building structures, installations, civil 
engineering work and industrial processes.'' This description 
encompasses the design work performed by Murray Engineering and 
supports that designs are not articles because the work is categorized 
in a classification system that is specific to service work and, by its 
very purpose, excludes manufacture and trade of tangible goods.
    In addition to sources of information above, the Department 
examined a source of information outside the international trade 
community but within the Department of Labor, the Occupational Outlook 
Handbook. The Occupational Outlook Handbook is published by the 
Department of Labor, Bureau of Labor Statistics (BLS), and it provides 
further support that a conclusion that designs are not articles. BLS 
published the ``Occupational Outlook Information'' handbook in 1946 to 
assist vocational counselors in finding employment for returning 
veterans. BLS published the Occupational Outlook Handbook for civilians 
in 1949. The purpose of the publication is to guide the general 
public--schools, colleges, employment service offices, vocational 
guidance counselors, and job-seeking individuals--in matters regarding 
employment, training, and career development. The Department believes 
this publication is useful for analyzing the proper classification of 
design work because it reflects the Department's broader view of how 
various jobs are classified.
    The Occupational Outlook Handbook categorizes design work under the 
job functions of ``drafters.'' The Occupational Outlook Handbook states 
that ``[d]rafters prepare technical drawings and plans used by 
production and construction workers to build everything from 
manufactured products, such as toys, toasters, industrial machinery, 
and spacecraft. . . . Their drawings provide visual guidelines, show 
the technical details of the products and structures, and specify 
dimensions, materials, and procedures. Drafters fill in technical 
details, using drawings, rough sketches, specifications, codes, and 
calculations previously made by engineers, surveyors, architects, or 
scientists. . . . Some drafters use their knowledge of engineering and 
manufacturing theory and standards to draw the parts of the machine in 
order to determine design elements, such as the numbers and kinds of 
fasteners needed to assemble the machine.'' This description applies to 
the work performed by Murray Engineering workers.
    The Occupational Outlook Handbook states, under the ``employment'' 
heading for the occupation of ``drafters,'' that ``[a]lmost half of all 
jobs for drafters were in architectural, engineering and related 
services firms that design construction projects or do other 
engineering work on a contract basis for other industries.'' (Emphasis 
added.) This description applies to Murray Engineering workers and 
supports that drafting work is a service rather than involving the 
production of an article.
    Even if one concludes that the Murray Engineering designs are 
articles for TAA purposes, the subject worker group cannot be certified 
because the certification criteria are not met under either under 
Section 222(a) of the Trade Act or, for adversely affected secondary 
workers, under Section 222(b) of the Trade Act.
    The Department also investigated, assuming for argument that 
designs are articles, whether the certification criteria under Section 
222(a) of the Trade Act have been met. This investigation inquired into 
whether Murray Engineering shifted production from the subject facility 
to another country, or whether the subject firm or its major declining 
customers increased imports of products like or directly competitive 
with those made at the subject facility. The investigation revealed 
that Murray Engineering did not shift design work abroad or import 
designs during the relevant time periods (2001 and 2002). The 
Department conducted a survey of Murray Engineering's major declining 
customers regarding their purchases of designs for periods 2001 and 
2002. The customers surveyed constituted a significant portion of the 
subject company's sales declines during the relevant time period. All 
the customers reported no import purchases of designs during the 
surveyed time periods.
    Regarding TAA eligibility as adversely affected secondary workers 
under section 222(b) of the Trade Act, the subject worker group can be 
certified as eligible to apply for TAA as adversely affected secondary 
workers only if Murray Engineering either: (1) Supplied components or 
unfinished or semi-finished goods to a firm employing workers who are 
covered by a certification of eligibility for adjustment assistance; or 
(2) assembled or finished products made by such a firm. In the case at 
hand, neither criterion is met because Murray Engineering did no 
assembly or finishing work, nor did any of Murray Engineering's 
customers' workers receive a certification of eligibility to apply for 
TAA during the relevant time period.
    In order to be eligible as suppliers of components or unfinished or 
semi-finished goods, as petitioner claims the subject worker group to 
be, the subject worker group must have produced a component part of the 
product that is the basis of the TAA certification. Because Murray 
Engineering did not produce a component part of a final product, they 
were not secondary suppliers of a TAA-certified facility, as required 
by section 222(b) of the Trade Act. Even if the design specifications 
were sometimes mounted or affixed to their customers' manufacturing 
equipment, the display of the design specifications were not necessary 
for the equipment to function properly and did not enhance the 
equipment's performance; thus, the designs were not component parts.
    Further, Murray Engineering did no business with a TAA-certified 
company during the relevant time period. The petitioning worker 
specifically claims that Murray Engineering provided designs to Lamb 
Technicon, a TAA-certified company (TA-W-40,267 & TA-W-40,267A). 
However, Murray Engineering did business with Lamb Technicon most 
recently in 1999, which is before the relevant time period for the 
Murray Engineering petition at issue in this case. Therefore, Lamb 
Technicon's certification (TA-W-40,267 & TA-W-40,267A) is not a valid 
basis for

[[Page 52938]]

certifying Murray Engineering workers as adversely affected secondary 
workers eligible to apply for TAA.

Conclusion

    After careful reconsideration on remand, I affirm the original 
notice of negative determination of eligibility to apply for TAA for 
workers and former workers of Murray Engineering, Inc., Complete Design 
Service, Flint, Michigan.

    Signed at Washington, DC this 19th day of August 2004.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. 04-19672 Filed 8-27-04; 8:45 am]
BILLING CODE 4510-30-P