[Federal Register Volume 73, Number 228 (Tuesday, November 25, 2008)]
[Notices]
[Pages 71666-71668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28014]


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DEPARTMENT OF HOMELAND SECURITY

U.S. 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 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 a government procurement 
contract. Based upon the facts presented, in the final determination 
CBP concluded that Japan is the country of origin of the 
multifunctional machines for purposes of U.S. Government procurement.

DATES: The final determination was issued on November 7, 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 December 26, 2008.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on, 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 a government procurement contract. This final 
determination, in HQ H020516, was issued at the request of Sharp 
Electronics 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). In the final determination, CBP 
concluded that, based upon the facts presented, certain articles will 
be substantially transformed in Japan. Therefore, CBP found that Japan 
is the country of origin of the finished articles for purposes of U.S. 
Government procurement.
    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 Sec.  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: November 20, 2008.
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.

HQ H020516

    November 7, 2008.
OT: RR:CTF:VS H020516 KSG.
Mr. Edmund Baumgartner, Esq.,
Pillsbury Winthrop Shaw Pittman LLP,
1540 Broadway,
New York, NY 10036.
Re: U.S. Government Procurement; country of origin of multifunctional 
machines; substantial transformation.
Dear Mr. Baumgartner:
    This is in response to your letter, dated November 26, 2007, 
requesting a final determination on behalf of Sharp Electronics 
Corporation (``Sharp'')

[[Page 71667]]

pursuant to subpart B of 19 CFR Part 177.
    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 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.
    This final determination concerns the country of origin of certain 
multifunctional machines that Sharp may sell to the U.S. Government. We 
note that Sharp is a party-at-interest within the meaning of 19 CFR 
177.22(d)(1) and is entitled to request this final determination. A 
conference was held on this matter at Headquarters on August 25, 2008.

Facts:

    This case involves the Sharp Andromeda II J-models (Sharp model 
 AR-M257J, AR-M317J). These models have monochrome copying, 
printing, faxing and scanning functions. Model AR-M257J and 
ARM-317J are designed to print 25 and 31 pages per minute.
    Sharp Corporation, Sharp's parent company (``Sharp Japan'') 
developed the Andromeda J-models in Japan; all the engineering, 
development, design and art work processes were developed in Japan.
    There are 8 main subassemblies that compose the Andromeda II J-
models. Two subassemblies involve processing in Japan: The 
multifunctional printer (``MFP'') control unit and process unit. 
Subassemblies made in China include: The laser scanner unit (``LSU''); 
transfer unit; the MFP cabinet unit; the developer unit (``DV'') unit; 
fusing unit; and the reversible single pass feeder (``RSPF'').
    The MFP control unit is the combination of a printed circuit board 
with a number of sophisticated integrated circuits. The flash read-only 
memory (``ROM''), which you state is the primary component, is 
manufactured in Japan. The CPU, the integrated circuit for the main 
control unit (``MCU''), and the printed wiring board (``PCB'') for the 
integrated memory controller, which you state are the key parts of the 
control printer boards, are produced in Japan. Other components such as 
diodes, resistors and capacitors are installed on the control printer 
board in China.
    The process unit subassembly houses the drum used for creating 
images. The drum is produced and installed in Japan using parts made in 
China, such as the flanges and the gear. Assembly in China includes 
integration of the drum support frame and the main charger unit.
    The LSU unit creates text or images on the photoconductor drum. The 
LSU unit is assembled in China. The laser diode and the synchronous 
lenses, which you state are critical components, are produced in Japan.
    The transfer unit uses a roller to place the image created on the 
drum onto the paper. This unit is assembled in China. The transfer 
rollers are made in Japan.
    The MPF cabinet unit is the outer body of the multifunctional 
system. Several parts are made in Japan including the motor driver, 
parts of the scanner, the application-specific integrated circuits 
(``ASIC''), the CPU, the flash ROM and the program for the ASIC. You 
state that when the unit leaves China, it is not functional because 
there is no process unit, transfer unit or fusing unit. You state that 
the core parts for forming the images, such as the main board, the 
transfer unit, the DV unit and the process unit, are installed in 
Japan.
    The DV unit is used to transfer toner evenly over the latent image 
created on the drum unit. The unit is assembled in China. The developer 
(iron powder beads), the toner cartridge and the toner are produced in 
Japan.
    The fusing unit is used to fix the transferred image onto paper. It 
is assembled in China. Certain components such as the fusing gear, the 
separator pawl and thermostat, which you state are critical, are 
produced and tested in Japan.
    Lastly, the RSPF transports the original document to the part of 
the machine used for scanning the image. It is assembled in China.
    The final assembly of the machines takes place in Japan. Sharp 
Japan starts with a MFP cabinet unit subassembly and assembles the key 
subassemblies described above into the cabinet by screws. The flash ROM 
is installed into the slot on the rear of the MFP cabinet unit and 
fixed with screws. The Andromeda II J-models consist of 2914 pieces of 
parts, and over 30 percent of them are assembled in Japan.
    Extensive testing and final inspection and packaging of the units 
for shipment to the U.S. occurs in Japan.
    The imported J-models are classified in subheading 8443.31 of the 
Harmonized Tariff Schedule of the United States (``HTSUS''). The sub-
assemblies imported into Japan are classified in subheading 
8443.99.5015, HTSUS.

Issue

    What is the country of origin of the subject multifunctional 
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. 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

[[Page 71668]]

article, and the overall employment generated by the manufacturing 
process.
    The courts and CBP have also considered the essential character of 
the imported article in making these determinations. See Uniroyal, Inc. 
v. United States, 542 F. Supp. 1026, 3 CIT 220, 224-225 (1982) (where 
it was determined that imported uppers were the essence of a completed 
shoe) and National Juice Products Association, et al v. United States, 
628 F. Supp. 978, 10 CIT 48, 61 (1986) (where the court addressed each 
of the factors (name, character, and use) in finding that no 
substantial transformation occurred in the production of retail juice 
products from manufacturing concentrate).
    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 will be considered when determining whether a 
substantial transformation has occurred. No one factor is 
determinative.
    CBP has held in a number of cases involving similar merchandise 
that complex and meaningful assembly operations involving a large 
number of components result in a substantial transformation. In 
Headquarters Ruling Letter (``HRL'') 563491 (February 8, 2007), CBP 
addressed the country of origin of certain digital color 
multifunctional systems manufactured by Sharp and assembled in Japan of 
various Japanese--and Chinese--origin parts. In that ruling, CBP 
determined that color multifunctional systems were a product of Japan 
based on the fact that ``although several subassemblies are assembled 
in China, enough of the Japanese subassemblies and individual 
components serve major functions and are high in value, in particular, 
the transfer belt, control box unit, application-specific integrated 
circuits, charged couple device, and laser diodes.'' Further CBP found 
that the testing and adjustments performed in Japan were technical and 
complex and the assembly operations that occurred in Japan were 
sufficiently complex and meaningful. Thus, through the product assembly 
and testing and adjustment operations, the individual components and 
subassemblies of Japanese and foreign-origin were subsumed into a new 
and distinct article of commerce that had a new name, character, and 
use. See also HRL 562936, dated March 17, 2004.
    In HRL 561734, dated March 22, 2001, CBP held that certain 
multifunctional machines (consisting of printer, copier, and fax 
machines) assembled in Japan were a product of that country for the 
purposes of U.S. government procurement. The multifunctional machines 
were assembled from 227 parts (108 parts obtained from Japan, 92 from 
Thailand, 3 from China, and 24 from other countries) and eight 
subassemblies, each of which was assembled in Japan. See also HRL 
561568, dated March 22, 2001.
    Counsel states that the engineering, design and development of 
these machines takes place entirely in Japan. A number of components 
that are claimed to be critical such as the flash ROM, CPU, ASIC's, 
transfer roller, a charge-coupled device (``CCD''), synchronous lenses, 
laser diodes, drums, developer and toner are made in Japan. The final 
assembly and adjustment/alignment/testing procedures required for these 
J-model are also performed in Japan and claimed to be extremely 
sophisticated. Counsel states that unless the J-models are properly 
adjusted and aligned, they do not become marketable products and this 
adjustment process requires a high level of technical skills.
    We agree that the J-models discussed in this ruling are considered 
a product of Japan. As noted above, the engineering, design and 
development of the multifunctional machines occurs in Japan. Moreover, 
a substantial portion of the components and assemblies are of Japanese 
origin. Sharp describes many of these components as critical. We note 
that several of the components used in the Chinese-origin subassemblies 
are of Japanese origin. Further, the processing that occurs in Japan is 
complex and meaningful, requiring the assembly of a large number of 
components, that results in a new and distinct article of commerce with 
a new name, character and use. As Japan is the final country of 
production and a substantial amount of work is performed there, we find 
that the Andromeda II-J multifunctional machines are products of Japan 
for the purposes of U.S. Government procurement.

Holding

    Based on the facts of this case, we find that the processing in 
Japan substantially transforms the non-Japanese components. Therefore, 
the country of origin of the Sharp Andromeda II J-model multifunctional 
machines is Japan 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. 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. E8-28014 Filed 11-24-08; 8:45 am]
BILLING CODE 9111-14-P