[Federal Register Volume 73, Number 84 (Wednesday, April 30, 2008)]
[Notices]
[Pages 23479-23482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9340]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Stereoscopic 
Display Models

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 stereoscopic display models to 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 in the United States result in a 
substantial transformation of the goods. Therefore, the country of 
origin of the stereoscopic display models is the United States for 
purposes of U.S. Government procurement.

DATE: The final determination was issued on April 23, 2008. 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 April 30, 2008.

FOR FURTHER INFORMATION CONTACT: Karen Greene, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of International Trade 
(202-572-8838).

SUPPLEMENTARY INFORMATION: Notice is hereby given that on April 23, 
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 stereoscopic display models to be offered 
to the United States Government under an undesignated government 
procurement contract. The CBP ruling number is HQ H015324. This final 
determination was issued at the request of Planar Systems, 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 in the United States resulted 
in a substantial transformation of the goods. Therefore, the 
stereoscopic display models are 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: April 23, 2008.
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.

    Attachment:

    HQ H015324
    April 23, 2008.
MAR-2-05 OT:RR:CTF:VS H015324 HEF
Category: Marking
    Mr. Harold Paul Luks, Poliner & Luks LLP, 1300 19th Street, NW., 
Suite 401, Washington, DC 20036.

RE: U.S. Government Procurement; Final Determination; country of 
origin of stereoscopic displays; substantial transformation; 19 CFR 
part 177
Dear Mr. Luks:
    This is in response to your letter dated August 2, 2007, 
requesting a final determination on behalf of Planar Systems, Inc. 
(``Planar''), 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 on 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 stereoscopic displays. We note that Planar is a party-at-
interest within the meaning of 19 CFR 177.22(d)(1) and is entitled 
to request this final determination. Confidential treatment for 
certain business information identified in your request for a final 
determination will be extended in accordance with your request. 
Photographs of the manufacturing process were also submitted with 
your request. In preparing this final determination, consideration 
was given to your supplemental submissions dated August 23, 2007; 
September 25, 2007; November 9, 2007; November 13, 2007; and January 
2, 2008.
Facts
    The products subject to this final determination are 
stereoscopic display models, which, you explain, create three-
dimensional digital images of video output by a computer or other 
stereoscopic video source. The stereoscopic display models and their 
key components were designed and developed in the United States 
through the use of Planar's proprietary StereoMirror\TM\ technology. 
You advise that the stereoscopic

[[Page 23480]]

display models are used in a variety of applications where two-
dimensional images are insufficient because of the lack of depth and 
position, including: photogrammetry, intelligence, and environmental 
applications; remote vehicle operations; medical imaging; complex 
modeling/visualization applications; and three-dimensional 
simulations for gaming and situational training.
    The two models that are the subject of your request are the 
SD2020 and the SD2320W. The SD2020 model incorporates two 20-inch 
LCD monitors, and the SD2320W model incorporates two 23-inch wide-
format LCD monitors. The SD2020 model has a total of 240 parts, and 
the SD2320W model has a total of 238 parts. You describe the 
configuration of the stereoscopic display models as follows.
    The two LCD monitors are mounted in a custom-made stand in an 
up/down configuration at a 110[deg] angle. A special beamsplitter 
mirror is mounted at the bisecting angle between the two monitors. 
The stand is manufactured so that the two images are aligned as if 
looking at one monitor. A graphics card in the computer transmits/
outputs right eye and left eye video separately. The left eye image 
is sent to the lower monitor. Because the right eye image is 
reflected by the beamsplitter, the right eye image is sent through a 
custom-designed and manufactured mirror-flip PCI card (included with 
the system) that reverses the image before it is sent to the top 
monitor. The user of the SD system wears passive polarizing glasses 
provided with the system that enable each eye to see only the image 
from one of the monitors (i.e., the glasses block the right eye from 
seeing the image on the lower monitor and block the left eye from 
seeing the image on the top monitor). Thus, the two images appear to 
the user as a fused stereoscopic three-dimensional image.
    Planar procures the LCD monitors and beamsplitter mirrors from 
foreign vendors and imports the articles to the United States. The 
LCD monitors originate in either China or Taiwan, and the mirrors 
are of either Japanese or German origin. You note that the 
beamsplitter mirror is custom manufactured to Planar's 
specifications and has no other function apart from its use in the 
display.
    Planar sends one of the LCD monitors to a third-party in the 
United States for an optical transformation process. Pursuant to 
your request, we are according confidential treatment to the 
specific details of this process. However, you provide the following 
non-confidential summary of the process:
    Planar Systems requires that the polarization orientation of 
light emitted from the monitor be effectively rotated 90[deg]. This 
complex process requires the careful removal and replacement of 
optical films on both the liquid crystal display panel and the 
backlight film stack. Specialized machines operated by experienced 
and trained technicians in clean-room, ESD [electrostatic 
discharge]-protected environments are required to complete these 
changes in a non-destructive manner.
    Your submission also relates that this process requires five 
days to complete and is of such a complex nature that Planar is not 
capable of performing it in-house, despite twenty-four years of 
display manufacturing experience. Upon completion of the process, 
the LCD monitor is reassembled, tested for functionality, packaged, 
and returned to Planar.
    You explain that the stereoscopic display's mirror flip card 
acts to ``flip'' the image for the user's right eye, so that the 
image is accurate when reflected in the beamsplitter mirror. In 
order to achieve this capability, Planar designed a special 
electronic circuit board to mirror the digital visual interface 
(``DVI'') video input content, one row at a time, and output the 
reversed video to the top monitor of the stereoscopic display. The 
mirror flip card is manufactured in the United States by two 
companies, in accordance with the specifications and directions 
provided by Planar. The first company manufactures a four-layer 
printed circuit board (``PCB''). You explain that each layer of the 
PCB is built of a copper clad, which consists of an insulating 
substrate and a layer of copper of a specified thickness. Each layer 
of the copper clad is etched to remove unwanted copper to reveal the 
trace and contacts for the circuitry. The four layers are then 
aligned and laminated together to form a single substrate. Next, 
holes are milled for components and hardware. Then, the holes are 
``seeded'' and plated. The PCB is silk-screened with a solder mask 
and reference designators and routered to the specific board 
dimensions. Finally, the PCB is tested and packaged before being 
shipped to the second company. At the second company's U.S. 
facility, the PCB will be assembled with the remaining components of 
the mirror flip card. First, the PCB is silk-screened with a solder 
paste to leave a thin layer of solder on specific pads for the 
remaining components. Automated equipment places some of the parts 
on the PCB. You describe the process as iterative, as it may require 
several attempts to achieve the proper placement. Parts that the 
machine cannot place are placed by hand. Then, the populated PCB is 
soldered in an infrared reflow machine that passes the circuit under 
an infrared light source with a programmed time and temperature 
file. The PCB is manually ``stuffed'' with the remaining components 
like the DVI and power connectors. Then, the PCB is passed through a 
wave solder machine to solder these parts. Finally, the completed 
mirror flip card is tested for functionality before being packaged 
and shipped to Planar.
    As the components arrive at Planar's U.S. facility, they are 
inspected to determine compliance with their respective 
specifications. After three shipments are received, fully inspected, 
and found to be in compliance, the part number and vendor are 
approved for random lot inspections. If a problem arises, the full 
inspection process will be reinstated until another three shipments 
are found to be without faults. After inspection, technicians 
assemble the stereoscopic displays in accordance with the company's 
detailed work instructions. First, a technician creates a ``Build 
Setup'' profile in a Lotus database designed to track inventory and 
production and assigns a serial number to the unit. The lower and 
upper monitor assemblies are assembled by removing the accompanying 
stands from the LCD monitors, attaching and routing the DVI cables, 
and securing the monitors with screws to a custom-made U.S.-origin 
stand. Then, a support for the mirror is attached to the lower 
monitor assembly. In total, the upper monitor assembly consists of 
12 parts and the lower monitor assembly consists of 16 parts. Next, 
the mirror assembly is manufactured by assembling the mirror frame 
with protective gaskets and screws, inspecting the mirror panel with 
a ``glass defect guide template,'' inserting the beamsplitter mirror 
into the frame, and affixing the mirror assembly to the mirror 
support on the display stand. The assembly of the mirror involves 29 
parts. Assembly of the stereoscopic display is completed by the 
attachment of the upper monitor assembly to the lower monitor 
assembly with alignment pins and screws.
    A software test file is used to align the system and the mirror 
is adjusted until it achieves a one-pixel tolerance for a normal 
viewing angle and a three-pixel tolerance for a view from the left 
or right edges of the mirror. The technicians ensure that the 
beamsplitter is precisely positioned at a bisecting angle between 
the two monitors to prevent loss or confusion of the stereoscopic 
image. You advise that even a small misalignment may cause users to 
experience headaches, eye fatigue, nausea or other discomfort. The 
alignment process may require up to 90 minutes to ensure accurate 
and precise alignment and co-planarity of the stereoscopic images.
    After assembly and alignment, the display undergoes testing and 
quality assurance processes to ensure its proper performance. The 
displays are also examined for pixel defects, and the mirror and 
stand are inspected for cosmetic defects. Finally, the display is 
packaged with the mirror flip card, a user manual, and U.S.-origin 
polarized glasses and cables. The final product is then shipped to 
the U.S. customer. You advise that the production of each unit 
requires approximately 135 minutes of work by a skilled Planar 
technician. You also attest that the processing and assembly 
operations performed in the United States add significant value to 
the product, as Planar's customers will pay a premium of up to ten 
times the cost of a standard LCD monitor to obtain the three-
dimensional display capability of Planar's stereoscopic display 
models.
Issue
    What is the country of origin of the stereoscopic display models 
for purposes 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 on 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.

[[Page 23481]]

    Under the rule of origin set forth at 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 rendering advisory rulings and final determinations for 
purposes of U.S. Government procurement, CBP applies the provisions 
of subpart B of Part 177 consistent with the Federal Procurement 
Regulations. See 19 CFR 177.21. In this regard, CBP recognizes that 
the Federal Procurement Regulations restrict the U.S. Government's 
purchase of products to U.S.-made or designated country end products 
for acquisitions subject to the TAA. See 48 CFR 25.403(c)(1). The 
Federal Procurement 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.
48 CFR 25.003
    Therefore, the question presented in this final determination is 
whether, as a result of the operations performed in the United 
States, the stereoscopic display models are substantially 
transformed into products of the United States.
    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, 6 Ct. Int'l Trade 204, 573 F. Supp. 1149 
(1983), aff'd, 741 F.2d 1368 (Fed. Cir. 1984). If the manufacturing 
or combining process is a minor one which leaves the identity of the 
imported article intact, a substantial transformation has not 
occurred. Uniroyal Inc. v. United States, 3 Ct. Int'l Trade 220, 542 
F. Supp. 1026 (1982). 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, and C.S.D. 90-97.
    In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), Headquarters Ruling 
Letter (``HRL'') 071827, dated September 25, 1984, CBP determined 
that assembly of a large number of fabricated components onto a 
circuit board resulted in a substantial transformation of the 
constituent components for purposes of the Generalized System of 
Preferences program. In that decision, CBP stated that an assembly 
process would not constitute a substantial transformation unless the 
operation is ``complex and meaningful.'' 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.
    CBP has considered the issue of whether the processing and 
assembly of electronic components into a finished article results in 
a substantial transformation on a number of occasions. In another 
final determination, HRL 735315, dated April 10, 1995, CBP held that 
the country of origin of optical spectroscopy instrument (``OSI'') 
systems was the United States for purposes of U.S. Government 
procurement. Each system had three essential elements: A controlling 
computer, an optics module, and an output device such as a printer. 
The optics module shell and its related components were imported 
from Australia. At the U.S. customer site, U.S.-origin printed 
wiring board assemblies (``PWBs'') were integrated into the shells 
to create a finished optics module. The PWBs were necessary for the 
control and operation of the optics module. Then, the module was 
further assembled with a U.S.-origin controlling computer and 
printer to create the OSI system. CBP found that the assembly of the 
PWBs and other components into the optics module shell constituted a 
complex and meaningful assembly and was sufficient to substantially 
transform the optics module into a product of the United States. As 
the other components of the OSI system were products of the United 
States, CBP held that their incorporation with the optics module 
rendered the OSI system a product of the United States.
    In HRL 734213, dated February 20, 1992, CBP held that the 
conversion of an imported computer monitor into a touchscreen 
monitor in the United States constituted a substantial 
transformation of the imported monitor for country of origin marking 
purposes. To create the touchscreen monitor, the imported monitor 
was tested, a power plug was installed, and the cathode ray tube was 
removed. The bucket, swivel base, and front plastic bezel of the 
monitor were also removed and painted. Then, a transorb board and 
the touchscreen were installed. The touchscreen underwent testing 
and alignment by skilled technicians. Then, the monitor was 
reassembled, tested, and packed for shipment. CBP found that the 
touchscreen capability of the finished product was not just a simple 
enhancement of the monitor, but rather a significant change in its 
very nature, which resulted in the monitor having a new use as an 
interface device for a blood analyzer unit.
    By contrast, assembly operations that are minimal or simple will 
generally not result in a substantial transformation. For example, 
in HRL 734050, dated June 17, 1991, CBP determined that Japanese-
origin components were not substantially transformed in China when 
assembled in that country to form finished printers. The printers 
consisted of five main components identified as the ``head,'' 
``mechanism,'' ``circuit,'' ``power source,'' and ``outer case.'' 
The circuit, power source and outer case units were entirely 
assembled or molded in Japan. The head and mechanical units were 
made in Japan but exported to China in an unassembled state. All 
five units were exported to China, where the head and mechanical 
units were assembled with screws and screwdrivers. Thereafter, the 
head, mechanism, circuit, and power source units were mounted onto 
the outer case with screws and screwdrivers. In holding that the 
country of origin of the assembled printers was Japan, CBP 
recognized that the vast majority of the printers' parts were of 
Japanese origin and that the operations performed in China were 
relatively simple assembly operations.
    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled to form 
completed articles, CBP considers the totality of the circumstances 
and makes such decisions on a case-by-case basis. The country of 
origin of the article's components, the extent of the processing 
that occurs within a given country, and whether such processing 
renders a product with a new name, character, or use are primary 
considerations in such cases. Additionally, facts such as resources 
expended on product design and development, extent and nature of 
post-assembly inspection procedures, and worker skill required 
during the actual manufacturing process will be considered when 
analyzing whether a substantial transformation has occurred; 
however, no one such factor is determinative.
    Based on the facts provided in the instant case, we find that 
the processing and assembly operations performed in the United 
States result in a substantial transformation of the imported LCD 
monitors and the beamsplitter mirror into a product with a new name, 
character, and use. In support of this determination, we note that 
one LCD is subjected to significant further processing in the United 
States. Specifically, we find that the polarization process 
performed in the United States changes the essential character of 
the LCD, as the polarization feature of the LCD imparts the 
stereoscopic functionality to the entire system. In addition, the 
assembly, testing, and alignment of the two LCD monitors and the 
beamsplitter mirror to form the stereoscopic display require a 
significant amount of time and precision by skilled technicians. 
Consequently, we find these operations to be complex and meaningful.
    You explain that neither the LCD monitors nor the beamsplitter 
mirror can generate a three-dimensional image until they are 
integrated with the remaining components of the finished 
stereoscopic display model. Although the mirror flip card and 
goggles are necessary for the proper operation of the stereoscopic 
display model, they are not integrated into the display at Planar's 
facility. Similar to the PWBs in HRL 735315, supra, the mirror flip 
card is integrated into the display at the U.S. customer site, and 
the goggles will be worn by the customer during the operation of the 
model. As these components are of U.S. origin, we find that their 
incorporation and use with the stereoscopic display render the 
entire model a product of the United States.
Holding:
    Based upon the facts provided, we find that the processing and 
assembly operations performed in the United States constitute a

[[Page 23482]]

substantial transformation of the foreign-origin components. 
Therefore, the country of origin of the stereoscopic display models 
is the United States for purposes of U.S. Government procurement.
    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 CBP 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,

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

 [FR Doc. E8-9340 Filed 4-29-08; 8:45 am]
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