[Federal Register Volume 72, Number 152 (Wednesday, August 8, 2007)]
[Notices]
[Pages 44566-44568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-15484]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection


Notice of Issuance of Final Determination Concerning Printer 
Cartridges

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determination.

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SUMMARY: This document provides notice that the Bureau of Customs and 
Border Protection (CBP) has issued a final determination concerning the 
country of origin of certain printer cartridges which may be offered to 
the United States Government under an undesignated government 
procurement contract. CBP has concluded that, based upon the facts 
presented, the operations performed at the United States facility do 
not result in a substantial transformation of the goods. Therefore, the 
goods will not be considered to be products of the United States.

DATES: The final determination was issued on August 2, 2007. 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 August 8, 2007.

FOR FURTHER INFORMATION CONTACT: Gerry O'Brien, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of International Trade 
(202-572-8792).

SUPPLEMENTARY INFORMATION: Notice is hereby given that on August 2, 
2007, pursuant to subpart B of part 177, Customs Regulations (19 CFR 
part 177, subpart B), CBP issued a final determination concerning the 
country of origin of certain printer cartridges which may be offered to 
the United States Government under an undesignated government 
procurement contract. This final determination, in HQ H009107, was 
issued at the request of Nukote International, Inc. 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 operations performed at the United States facility 
do not result in a substantial transformation of the goods. Therefore, 
the goods will not be considered to be products of 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, 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: August 2, 2007.
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.

HQ H009107

August 2, 2007.

MAR-2-05 OT:RR:CTF:VS H009107 GOB

CATEGORY: Marking.

G. Matthew Koehl, Esq., Kirkpatrick & Lockhart Preston Gates Ellis 
LLP., 1735 New York Avenue NW., Suite 500, Washington, DC 20006-
5221.

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. 2511); Subpart B, Part 177, CBP Regulations; Country of 
Origin of Printer Cartridges

Dear Mr. Koehl:

    This is in response to your letter of March 26, 2007, requesting 
a final determination on behalf of Nukote International, Inc. 
(``Nukote''), pursuant to subpart B of Part 177, Customs and Border 
Protection (``CBP'') Regulations (19 CFR 177.21 et seq.). Under 
these regulations, which implement Title III of the Trade Agreements 
Act of 1979, as amended (19 U.S.C. 2511 et seq.), CBP issues country 
of origin advisory rulings and final determinations as to whether an 
article is or would be a product of a designated country or 
instrumentality for the purpose of granting waivers of certain ``Buy 
American'' restrictions in U.S. law or practice for products offered 
for sale to the U.S. Government.
    This final determination concerns the country of origin of 
certain laser printer cartridge models. We note that Nukote is a 
party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is 
entitled to request this final determination.

FACTS

    You request a final determination with respect to three 
manufacturing process scenarios and resulting end products. The 
first scenario involves laser toner cartridges for color laser 
printers, including both color and monochrome (black) cartridges. 
The second scenario involves monochrome (black) laser toner 
cartridges for conventional laser printers with an electronic chip. 
The third scenario involves monochrome (black) laser toner 
cartridges for conventional laser printers without an electronic 
chip.
    You describe the first process as follows. Nukote collects empty 
toner cartridges from end users at collection sites in the United 
States and, to a substantially lesser extent, in Canada, Singapore, 
the United Kingdom, Hong Kong and China. Nukote also purchases used 
printer cartridges from United States-

[[Page 44567]]

based brokers. These used printer cartridges were originally 
manufactured at various locations in different countries. Nukote has 
no process for identifying the country of origin of the empty 
cartridges.
    Nukote then sends the cartridges to a foreign country, where 
they are sorted to remove units which cannot be remanufactured. This 
process identifies cartridge type and printer type, and removes 
damaged and broken parts and units that cannot be processed. The 
cartridges which can be remanufactured are then shipped to a 
different foreign facility, where Nukote has direct management and 
operational responsibility and where the operations performed are 
based on proprietary specifications developed by Nukote. At this 
facility, the used cartridges are split open, disassembled and 
separated into three sub-assemblies--the developer section, the 
toner hopper, and the waste hopper. The original doctor blade is 
cleaned and the original primary charge roller is sandblasted and 
recoated. The drum is removed from the waste hopper, which, along 
with the toner hopper, is scraped to remove plastic flash and 
residual foam seal material, and then blown out to remove residual 
toner from the original manufacturer. New foam seals are installed 
on the toner hopper and waste hopper units. New waste hopper drums, 
recovery blades and wiper blades are also installed. After being 
rebuilt with a clean blade, roller and gears, the developer section 
is temporarily assembled with a ``host'' toner section (the ``host'' 
hopper is used repeatedly for this test; it is not a part of an 
operating toner cartridge) and the rebuilt waste hopper. The 
temporarily-assembled unit is inserted in a printer which has been 
``hot-wired'' to bypass the need for an electronic chip, which has 
not been installed. The cartridge then undergoes a test print to 
check that the seals do not leak and are capable of producing 
acceptable quality print. This mechanical test does not evaluate 
whether the cartridge will operate on its own in a printer. It could 
not do so, as the cartridge has not been charged with toner and the 
electronic chip has not been installed; without the chip, the 
cartridge is not operable, as it cannot communicate with the 
printer. The ``host'' hopper is then removed and the three main sub-
assembly components (the developer section, the toner hopper, and 
the waste hopper) are prepared for shipment to Nukote's Rochester 
facility.
    Final assembly of the printer cartridges occurs at Nukote's 
Rochester, New York facility. You state that the substantial 
majority of the operations at this facility are performed by skilled 
Nukote quality control and technical operations staff, which must 
complete a minimum of three to four weeks of training in order to 
become certified to engage in this activity. These operations 
consist of the following: (1) Incoming Quality Inspection. You state 
that the goods arrive without the electronic chip and toner that are 
necessary for the printer cartridge to perform any useful function. 
(2) Filling and Sealing. The toner hopper is filled with new 
chemical toner and the hopper is sealed with a plug. The toner in 
the first manufacturing process scenario is either of U.S. or 
foreign origin. (3) Mechanical Assembly. The waste hopper, developer 
section and toner hopper are assembled with screws, springs and 
clips. (4) Testing. Nukote ``process tests'' ten percent of the 
units for print quality and leakage. All of this testing is 
performed by a Nukote quality control technician and/or quality 
engineer. Nukote also ``life tests'' one to two percent of the 
units. During this process, all seals, clips, blades, PCRs, and 
rollers are visually inspected for cleanliness and proper assembly. 
(5) Inspection. One hundred percent of the units are visually 
inspected against a defined inspection criteria. (6) External 
Cleaning. The exterior of the units is cleaned by a pneumatic air 
line, a toner dust cloth and a dust collection device. (7) 
Installation of a Computer Chip. A custom-engineered and IP-
protected chip, developed and manufactured in the United States, is 
manually installed in each unit. The chip enables the printer 
software to recognize the correct laser cartridge and permits the 
printer to tabulate the page count and toner volume level. The 
cartridge is non-functional without this chip. (8) Advance 
Preparation for Shipment. A shipping protector, lot control tag and 
shipping seals are applied. (9) Packaging for Shipment. The unit is 
placed in a shipping bag, protective endcaps are installed, an 
instruction sheet is added, a customer label is applied, and the 
unit is sealed in a customer-specific box. (10) Skidding and 
Shipment. The units are placed on a skid and sent to the shipping 
warehouse for movement to a distribution center in Tennessee. The 
cost of U.S. origin components for this scenario will vary from 
approximately 21% to 74%, depending on whether the toner is of U.S. 
or foreign origin.
    The second process scenario involves conventional monochrome 
printer cartridges with computer chips. This process is 
substantially the same as the first process, with the following 
exceptions. The disassembly process at the foreign facility is 
slightly less complex because the cartridge itself is less complex 
than a chemical toner color cartridge. The toner is always of U.S. 
origin and is much less expensive than the toner for the color 
cartridge. The cost of the drum is considerably less than in the 
first scenario. The cost of U.S. origin components will range from 
approximately 69% to 76%, depending on whether certain components 
are of U.S. or foreign origin. As in the first scenario, a custom-
engineered and IP-protected chip, developed and manufactured in the 
United States, is manually installed in each unit. The chip enables 
the printer software to recognize the correct laser cartridge and 
permits the printer to tabulate the page count and toner volume 
level.
    The third manufacturing process scenario is different from the 
second only in that there is no computer chip in the third scenario. 
The cost of U.S. origin components will range from approximately 60% 
to 68%, depending on whether certain components are of U.S. or 
foreign origin. As in the second scenario, the toner is always of 
U.S. origin.

Issue

    What is the country of origin of the subject laser printer 
cartridge models for the purpose of U.S. Government procurement?

Law and Analysis

    Pursuant to Subpart B of Part 177, 19 CFR 177.21 et seq., which 
implements Title III of the Trade Agreements Act of 1979, as amended 
(19 U.S.C. 2511 et seq.), CBP issues country of origin advisory 
rulings and final determinations as to whether an article is or 
would be a product of a designated country or instrumentality for 
the purposes of granting waivers of certain ``Buy American'' 
restrictions in U.S. law or practice for products offered for sale 
to the U.S. Government.
    Under the rule of origin set forth under 19 U.S.C. 2518(4)(B):
    An article is a product of a country or instrumentality only if 
(i) it is wholly the growth, product, or manufacture of that country 
or instrumentality, or (ii) in the case of an article which consists 
in whole or in part of materials from another country or 
instrumentality, it has been substantially transformed into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.

See also, 19 CFR 177.22(a).

    In determining whether the combining of parts or materials 
constitutes a substantial transformation, the determinative issue is 
the extent of operations performed and whether the parts lose their 
identity and become an integral part of the new article. Belcrest 
Linens v. United States, 573 F. Supp. 1149 (Ct. Int'l Trade 1983), 
aff'd, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are 
minimal or simple, as opposed to complex or meaningful, will 
generally not result in a substantial transformation. See, C.S.D. 
80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, 
and C.S.D. 90-97. In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), CBP 
held that for purposes of the Generalized System of Preferences 
(``GSP''), the assembly of a large number of fabricated components 
onto a printed circuit board in a process involving a considerable 
amount of time and skill resulted in a substantial transformation. 
In that case, in excess of 50 discrete fabricated components (such 
as resistors, capacitors, diodes, integrated circuits, sockets, and 
connectors) were assembled. Whether an operation is complex and 
meaningful depends on the nature of the operation, including the 
number of components assembled, number of different operations, 
time, skill level required, attention to detail, quality control, 
the value added to the article, and the overall employment generated 
by the manufacturing process.
    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled into 
completed products, CBP considers the totality of the circumstances 
and makes such determinations on a case-by-case basis. The country 
of origin of the item's components, extent of the processing that 
occurs within a country, and whether such processing renders a 
product with a new name, character, or use are primary 
considerations in such cases. Additionally, factors such as the 
resources expended on product design and development, extent and 
nature of post-

[[Page 44568]]

assembly inspection and testing procedures, and worker skill 
required during the actual manufacturing process will be considered 
when determining whether a substantial transformation has occurred. 
No one factor is determinative.
    Nukote collects empty toner cartridges from end users at 
collection sites in the United States and, to a substantially lesser 
extent, in Canada, Singapore, the United Kingdom, Hong Kong and 
China. Nukote also purchases used printer cartridges from United 
States-based brokers. These used printer cartridges were originally 
manufactured at various locations in different countries. The 
cartridges are sorted at one foreign location and are then processed 
at a second foreign location and subsequently in the United States.
    At the second foreign location, the cartridges are split open, 
disassembled, and separated into three sub-assemblies. Worn 
components of the sub-assemblies are replaced and made operational 
again. This work constitutes disassembly of the used cartridges, as 
well as certain preparation for the processing which will occur in 
the United States. At this point the goods are tested. It is claimed 
that the sub-assemblies are not functional without the chip which is 
later installed in the United States (at least in the two scenarios 
where the chip is involved).
    The processing which occurs at Nukote's Rochester, New York 
facility includes inspection, filling and sealing, mechanical 
assembly, testing, cleaning, installation of a computer chip, 
preparation and packaging for shipment, and shipment. We do not 
believe these operations are complex enough to result in a 
substantial transformation of the sub-assemblies. The sub-assemblies 
are essentially made functional again at the foreign facility. While 
the chip which makes the cartridge work (in two of the three 
scenarios) is inserted in the United States, we find that the 
bringing together of the sub-assemblies in the United States does 
not result in a substantial transformation of the goods. For 
example, these operations in the United States are not as 
significant as those in NY G87305, where the cartridges were 
completely disassembled; salvageable parts were sorted into bins, 
cleaned, and reconditioned; major components, including the OPC drum 
and toner were replaced; and other new components were added.
    In HQ 561232, dated April 20, 2004, CBP considered the steps 
necessary to create a fully functional FM tuner, including 
adjustments to the oscillator coil, two filter coils, and the 
demodulator coil, selecting and installing two resistors, and 
enclosing the item in a metal case. CBP held that ``while these 
additional operations are required to create a fully functional 
product, and are of a certain complexity requiring technical skill, 
they do not change the essential character of the PCBA [printed 
circuit board assembly], which at this stage of production has the 
characteristics of the imported FM tuner but has not quite achieved 
full functionality.'' Therefore, CBP held that there was not a 
second substantial transformation in the Philippines. We believe 
that HQ 561232 is relevant here as the imported sub-assemblies 
possess the characteristics of the printer cartridge but, as 
imported, have not achieved full functionality.

Holding

    The operations performed at Nukote's Rochester, New York 
facility do not result in a substantial transformation of the 
cartridges. Therefore, the cartridges will not be considered to be 
products of the United States.


     Sincerely,

Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.
 [FR Doc. E7-15484 Filed 8-7-07; 8:45 am]
BILLING CODE 9111-14-P