[Federal Register Volume 73, Number 30 (Wednesday, February 13, 2008)]
[Notices]
[Pages 8335-8339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-2636]


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DEPARTMENT OF HOMELAND SECURITY

 Customs and Border Protection


Notice of Issuance of Final Determination Concerning 
Multifunctional Machines

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 U.S. Customs and Border 
Protection (CBP) has issued a final determination concerning the 
country of origin of certain multifunctional machines which may be 
offered to the United States Government under an undesignated 
government procurement contract. CBP has concluded that, based upon the 
facts presented, certain goods imported into Japan are substantially 
transformed in Japan such that Japan is the country of origin of the 
finished multifunctional machines for government procurement purposes.

DATES: The final determination was issued on January 4, 2008. A copy of 
the final determination is attached. Any

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party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of this final determination within 30 days of February 13, 2008.

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 January 4, 
2008, 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 multifunctional machines which may be 
offered to the United States Government under an undesignated 
government procurement contract. This final determination, in HQ 
H018467, was issued at the request of Panasonic Corporation of North 
America 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, certain goods imported into Japan are substantially 
transformed in Japan such that Japan is the country of origin of the 
finished multifunctional machines for government procurement purposes.
    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: January 4, 2008.
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.

Attachment

HQ H018467

January 4, 2008,
MAR-2-05 OT:RR:CTF:VS H018467 GOB
Category: Marking

Madeline B. Kuflik, Esq.,
Assistant General Counsel,
Panasonic Corporation of North America,
One Panasonic Way, 3B-6,
Secaucus, NJ 07094.

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 Multifunctional Machines.

Dear Ms. Kuflik:

    This is in response to your letter of October 5, 2007, requesting a 
final determination on behalf of Panasonic Corporation of North America 
(``PNA''), 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. In response to our request, you provided 
additional information with your correspondence of November 7, 2007 and 
December 5, 2007.
    This final determination concerns the country of origin of certain 
color digital multifunctional machines. We note that PNA 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 describe the pertinent facts as follows. The product at issue 
is a full-color digital multifunctional machine which can scan, copy, 
and print. The machine has the following functions: up to 26 ppm color 
printing; 600 dpi x 600 dpi scanning resolution; 1200 dpi x 1200 dpi 
printing resolution; high-speed image editing; high speed image 
compression; network function; automatic duplex scanning; automatic 
duplex printing; paper ejection; and direct printing function from SD 
card and PC card. The machine is sold under model number DP-C354.
    You state that the multifunctional machine consists of the 
following units:
    1. Automatic Document Feeder Unit--takes several pages and feeds 
the paper one page at a time into the scanner.
    2. Scanner Unit--consists of CCD board, lens, lamp, mirror, drive 
motor, detection sensor, scanner controlling board, image signal 
conversion board and SD (secure digital) memory board.
    3. Operation Panel Unit--consists of tilt mechanism, 7.8 inch LCD, 
23 operation buttons, 14 LED, five printing boards, and backup battery.
    4. Feed Unit--consists of feeding roller, pick up roller, pick up 
solenoid, paper detection sensor, paper passage sensor and 
electromagnetic timing clutch.
    5. Manual Paper Feed Unit--for use with special paper; consists of 
feeding roller, pick up roller, pick up solenoid, paper detection 
sensor, paper passage sensor and electromagnetic timing clutch.
    6. Lift-Up Motor Unit--consists of driving motor, paper detection 
sensor and pick-up sensor.
    7. Automatic Document Transferring Unit--feeds the printing paper 
to the toner transferring unit; consists of driving motor, cooling fan, 
paper passage sensor, paper ejection roller, transferring roller, 
switching solenoid, electromagnetic clutch, jam-proof door and pinch 
roller.
    8. Induction Heating Fuser Unit--fuses the toner on paper by the 
induction heating method; consists of induction heating coil, fusing 
belt, heating roller, fusing roller and pressure roller.
    9. Induction Heating Power Supply Unit--supplies power to the 
induction fuser unit.
    10. Transcription Unit--transcribes the unit on the printing paper; 
consists of bias roller and OPC (organic photo conductor) drum unit.
    11. OPC Drum Unit--this unit is charged with electricity and the 
laser beam sweeps across it to make the electrostatic latent image; 
consists of cleaning blade, cleaning roller and OPC drum.
    12. Developing Unit--transfers the toner to the charged part of the 
OPC drum; consists of concentration sensor, magnet roller, developer, 
doctor blade and screw.
    13. Laser Scanning Unit--irradiates the laser beam on the OPC drum 
to make the surface potential; consists of lens, mirrors, polygon motor 
and fan.
    14. Motor Drive Board--controls the driving of the motors.
    15. Automatic Duplex Unit Board--controls the paper detection 
sensor and paper passage sensor.
    16. High-Voltage Power Supply Board--controls the high-voltage 
power supply.
    17. Low-Voltage Power Supply Board--controls the low-voltage power 
supply.
    18. Main Drive Unit--controls the transcription unit, OPC drum and 
developing units.
    19. Subassembly Units--there are five different types of simple 
units which consist of two to five parts.
    20. System Control Board--This board, which acts as the central 
control system, has a central processing unit (CPU) and 512 MB of 
memory. It performs ``image processing'' which is

[[Page 8337]]

the editing, color tuning, enlarging, reducing and manipulating of the 
image data to fit the image quality which is designated by the user for 
the copy output or the print output. Image data is the data which is 
scanned by the scanner. The user controls the multifunctional printer 
by touching the operational panel and sending the data from the PC. The 
system control board processes the data from the operation panel and PC 
and sends the processed command to the other boards that control the 
function which meets the user's intention. The three other boards which 
receive data from the system control board are the scanner unit, the 
operation panel unit and the engine control board. The system control 
board is the core part of this product. It measures approximately 244 
mm long and 330 mm wide and it contains approximately 2750 parts.
    21. Engine Control Board--This board controls the machinery parts 
that feed the recording papers. The machinery parts controlled by the 
engine control board are the feed unit, manual paper feed unit, lift up 
motor unit, automatic document feeding unit and main drive unit. The 
board also controls the units that print the image to the recording 
papers such as the induction heating fuser unit, transcription unit, 
OPC drum unit, developing unit and laser scanning unit. This board is 
approximately 244 mm long and 187 mm wide and consists of approximately 
1610 parts.
    In your submission of December 5, 2007, you state that ``[t]he 
system control board can be compared to the brain of a human being as 
it is responsible for coordinating all of the activity of the machine 
and controlling all of the following important functions of the 
machine.'' These functions include: all image processing functions 
(e.g., where the toner is to be applied and the temperature of the 
toner); enlargement and reduction functions; all functions which are 
available from the control panel (e.g., choices of multiple copies, 
double-sided copies, etc.); color image tuning (adding or subtracting 
color); user interface control (control panel and touch screen 
operations); and ``rastering'' of the printed data (the process of 
taking data sent by a computer's printer driver and converting it so 
that it can be understood by the engine control board to put the image 
on paper).
    In the same submission, you state that ``[t]he engine control board 
can be analogized to the nervous system of a human being. It carries 
out the commands of the brain, or in this case the system control 
board.'' The engine control board controls the functions relating to 
the feed of paper, including the paper feed units, the manual feed 
units, the automatic document feeder unit, the paper lift-up motors, 
and the main drive unit motor. The engine control board also controls 
the following units with respect to the printing process: the laser 
unit, which exposes the photo-receptor to create the copy; the photo-
conductor unit; the transfer belt units; the developing units, which 
contain the toners which are applied to the photo-conductors and 
transfer unit; and the fixing unit, which makes the toner permanent on 
the paper.
    PNA's request involves two manufacturing scenarios. In the first 
scenario, there are three countries in which manufacturing occurs; in 
the second scenario, there are two countries in which manufacturing 
occurs.

First Scenario--Manufacturing in China, the Philippines, and Japan

    The following seven units are manufactured in China from components 
produced in various countries: automatic document feeder unit; scanner 
unit; operation panel unit; feed unit; manual paper feed unit; lift up 
motor unit; and subassembly units. After these components are 
manufactured in China, they are sent to the factory in the Philippines.
    The following eleven units are manufactured in the Philippines from 
components produced in various countries: Automatic document 
transferring unit; induction heating fuser unit; induction heating 
power supply unit; transcription unit; developing unit; laser scanning 
unit; main drive unit; motor drive board; high voltage power supply 
board; low voltage power supply board; and automatic duplex unit board. 
The components manufactured in China and those manufactured in the 
Philippines are assembled into one main body in the Philippines. That 
body is sent to the factory in Japan.
    The following work is performed in Japan. The OPC drum unit and the 
toner reservoir are manufactured. The system control board and the 
engine control board, which are manufactured in Japan, are mounted and 
inspected. Approximately 1,600 electronic parts and 500 electronic 
parts are mounted on the back of the system control board and the 
engine control board, respectively, by three large mounting machines. 
The boards are then inspected. At that point, about 1,100 electronic 
parts and 1,000 electronic parts are mounted on the front sides of the 
system control board and the engine control board, respectively. The 
boards are then inspected again. Workers then mount 19 parts on the 
system control board and 40 parts on the engine control board by hand 
soldering. The boards are then inspected again.
    You state that the workers involved in the mounting and soldering 
of the parts should be highly skilled because the parts are mounted 
densely in view of the large number of parts and the fact that each 
electronic part is microminiaturized. After the mounting process is 
completed, the boards are inspected as to functionality by special 
measurement equipment. This inspection takes approximately 10 to 20 
minutes per board.
    At this point in the process, the OPC drum unit, the toner 
reservoir, the system control board and the engine control board are 
incorporated into the main body which was assembled in the Philippines. 
The next step is the installation of firmware into the system control 
board and the engine control board. You state that the firmware in the 
system control board controls the user interface, imaging, and 
memories; the firmware in the engine control board controls machinery. 
You state that the firmware, which is developed in Japan, is similar to 
the application software of a personal computer.
    The process concludes with the inspection of the completed product 
and adjustments to the concentration in the toner, print position, 
print color, and print quality. These adjustments are necessary for 
accurate printing.

Second Scenario--Manufacturing in the Philippines and Japan

    The following 18 units are manufactured in the Philippines from 
components produced in various countries: Automatic document feeder 
unit; scanner unit; operation panel unit; feed unit; manual paper feed 
unit; lift up motor unit; subassembly units; automatic document 
transferring unit; induction heating fuser unit; induction heating 
power supply unit; transcription unit; developing unit; laser scanning 
unit; main drive unit; motor drive board; high voltage power supply 
board; low voltage power supply board; and automatic duplex unit board. 
These components are assembled into one main body in the Philippines. 
That body is sent to the factory in Japan.
    The manufacturing process in Japan in this scenario is the same as 
the process described in the first scenario.
    The second scenario differs from the first scenario in that no 
units are manufactured in China in the second scenario. The 18 units 
manufactured in the Philippines in the second scenario include the 11 
units manufactured there in the first scenario and the seven units

[[Page 8338]]

manufactured in China in the first scenario.

Issue

    What is the country of origin of the subject color digital 
multifunction machines 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. If 
the manufacturing or combining process is a minor one which leaves the 
identity of the article intact, a substantial transformation has not 
occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 
(1982), aff'd 702 F. 2d 1022 (Fed. Cir. 1983). 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, and use are primary considerations in such cases. 
Additionally, factors such as the resources expended on product design 
and development, extent and nature of post-assembly inspection and 
testing procedures, and worker skill required during the actual 
manufacturing process may be relevant when determining whether a 
substantial transformation has occurred. No one factor is 
determinative.
    In HQ 735315, dated April 10, 1995, CBP stated:

    We agree * * * that the assembly of the various components into 
the optics module shell, mainly the PWBs which are manufactured in 
the U.S., constitutes a substantial transformation. * * * [W]e find 
that the manufacture of the PWBs and their subsequent installation 
into the shells constitutes a complex and meaningful assembly 
pursuant to C.S.D. 85-25. Although the imported shells consist of 
important components, such as the sampling device, furnace, light 
bulbs, and mirrors/optics, the PWBs give the optics module the 
ability to function and analyze * * *.

    In HQ 561734, dated March 22, 2001, CBP determined that certain 
multifunctional machines (printer, copier, and facsimile) assembled in 
Japan were a product of Japan for purposes of government procurement. 
The machines were comprised of 227 parts (108 parts obtained from 
Japan, 92 from Thailand, three from China, and 24 from other countries) 
and eight subassemblies, each of which was assembled in Japan. It was 
further noted that the scanner unit (one of the eight subassemblies 
assembled in Japan) was characterized as ``the heart of the machine.''
    In HQ 562936, dated March 17, 2004, CBP found that a 
multifunctional machine (printer, copier, scanner, facsimile) was a 
product of Japan for the purpose of U.S. government procurement. CBP 
noted that a substantial portion of the machine's components and 
assemblies were of Japanese origin. The requester had described certain 
of these components as the ``most complex,'' ``key,'' and 
``essential.'' CBP recognized that, in addition to the Japanese 
subassemblies, certain critical Japanese-origin parts were incorporated 
into the Chinese subassemblies. CBP found that the processing that 
occurred in Japan was complex and meaningful, required the assembly of 
a large number of components, and resulted in a new and distinct 
article of commerce that possessed a new name, character, and use.
    Based upon the facts which you present, we note that operations are 
performed in three countries in the first scenario and two countries in 
the second scenario. In situations like these, no one country imparts 
the dominant portion of the work conducted. Nonetheless, based upon the 
applicable legal standard, we determine that, with respect to each of 
the two scenarios, the goods imported into Japan are substantially 
transformed in Japan such that Japan is the country of origin of the 
multifunctional machines (model number DP-C354) for government 
procurement purposes. In making this determination, we give substantial 
weight to the fact that the system control board, the engine control 
board, and the firmware are manufactured in Japan. Based upon the facts 
presented, these components are of utmost importance to the 
functionality of the completed good. We also find that the operations 
performed in Japan are meaningful and relatively complex and result in 
an article of commerce which possesses a new name, character, and use. 
Therefore, as Japan is the final country of production and a 
substantial amount of work is performed there, we find that the country 
of origin in both scenarios is Japan.

Holding

    With respect to each of the two scenarios, the goods imported into 
Japan are substantially transformed in Japan such that Japan is the 
country of origin of the multifunctional machines (model number DP-
C354) for government procurement purposes.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 CFR 177.29. Any party-at-interest other 
than the party which requested this final determination may request, 
pursuant to 19 CFR 177.31, that

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CBP reexamine the matter anew and issue a new final determination. 
Pursuant to 19 CFR 177.30, any party-at-interest may, within 30 days 
after publication of the Federal Register notice referenced above, seek 
judicial review of this final determination before the Court of 
International Trade.
    Sincerely,


Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.


 [FR Doc. E8-2636 Filed 2-12-08; 8:45 am]
BILLING CODE 9111-14-P