[Federal Register Volume 75, Number 151 (Friday, August 6, 2010)]
[Notices]
[Pages 47609-47611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19363]


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DEPARTMENT OF HOMELAND SECURITY


U.S. Customs and Border Protection; Notice of Issuance of Final 
Determination Concerning a Certain Unified Communications Solution

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 a certain unified communications solution. Based 
upon the facts presented, CBP has concluded in the final determination 
that the United States is the country of origin of the unified 
communications solution for purposes of U.S. government procurement.

DATES: The final determination was issued on August 2, 2010. 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 from date of publication in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Alison Umberger, Valuation and Special 
Programs Branch: (202) 325-0267.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on August 2, 
2010, 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 the unified communications solution which may be 
offered to the U.S. Government under an undesignated government 
procurement contract. This final determination, in HQ H090115, was 
issued at the request of Avaya 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 has concluded that, based upon the facts presented, 
the unified communications solution, assembled, installed and 
programmed in the United States using subassemblies made in China and 
Israel, and software developed in the United States, is substantially 
transformed in the United States, such that the United States is the 
country of origin of the finished article 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 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, 2010.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International 
Trade.

Attachment

HQ H090115

August 2, 2010

OT:RR:CTF:VS H090115 ARU
CATEGORY: Marking

Mr. Stuart P. Seidel, Baker & McKenzie LLP, 815 Connecticut Avenue, 
NW., Washington, DC 20006-4078, USA

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. Sec.  2511); Subpart B, Part 177, CBP Regulations; 
Avaya Unified Communications Solution (``Communication Manager'')

    Dear Mr. Seidel: This is in response to your letter dated 
December 29, 2009, requesting a final determination on behalf of 
Avaya Inc. (``Avaya''), pursuant to subpart B of part 177, Customs 
and Border Protection (``CBP'') Regulations (19 CFR Sec.  177.21 et 
seq.). Pursuant to our request, you provided additional information 
during a meeting on March 5, 2010.
    Under the pertinent regulations, which implement Title III of 
the Trade Agreements Act of 1979, as amended (19 U.S.C. Sec.  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 an 
Avaya Unified Communications Solution known as ``Communication 
Manager.'' We note that Avaya is a party-at-interest within the 
meaning of 19 CFR Sec.  177.22(d)(1) and is entitled to request this 
final determination. In addition, we have reviewed and granted the 
importer's request for confidentiality pursuant to section 
177.2(b)(7) of the Customs Regulations chapter 19, with respect to 
certain information submitted.

FACTS:

    The end product at issue is a Unified Communications Solution 
which is made up of numerous electronic components that are 
assembled and integrated at an end user's premises in the United 
States using software known as ``Communication Manager.'' 
Communication Manager is the IP telephony software foundation on 
which Avaya delivers unified communications to large and small 
enterprises. It can control and expand a system from fewer than 100 
users to as many as 36,000 users on a single system to more than one 
million users on a single network. You state that the programming, 
assembly and installation of a system will typically take 
approximately one month to complete.
    It is stated that Communication Manager adds functionality to 
certain individual components and changes functionality of other 
components. Although each installation at an end user's premises is 
different, due to the end user's needs, each system will consist of 
at least the following components: server, media gateways, circuit 
packs, and internet protocol (``IP'') telephone sets. Avaya's 
Communication Manager software is developed and tested exclusively 
by Avaya in Denver, Colorado. Communication Manager is designed to 
run on a variety of Linux-based media servers. Linux is an open 
source operating system. Communication Manager provides centralized 
call control for a resilient, distributed network of media gateways 
and a wide range of analog, digital, and IP-based communication 
devices. It also has several advanced built-in applications, 
including mobility applications, call center features, advanced 
conference calling, and enhanced emergency 9-1-1 capabilities. 
Communication Manager is the foundation for building complete 
enterprise communication networks by supporting SIP, H.323, and 
other industry-standard communications protocols over a variety of 
different networks. This protocol support provides centralized voice 
mail, attendant operations, and call centers across multiple 
locations.

A. Hardware

    1. Media Servers: Each Communication Solution consists of one or 
more media servers. Some servers are in the form of blades. These 
are cards (similar to printed circuit cards with components) that 
are fit or assembled into Media Gateways, while others are 
standalone units.
    2. Media Gateways: You describe three models of Media Gateways.
    i. G250 Media Gateway: a powerful branch communication solution 
that packs an IP telephony gateway, an advanced IP WAN router, a VPN 
gateway and a high-performance LAN switch into a compact, 2U high 
19'' rack unit.
    ii. G350 Media Gateway: a powerful converged networking solution 
that packs an IP telephony gateway, an advanced IP WAN router, a VPN 
Gateway, and a high-performance LAN switch into a compact (3U) 
modular chassis.

[[Page 47610]]

    iii. G450 Media Gateway: consists of a 3U high, 19'' rack 
mountable chassis with field-removable Supervisor Main Board Module, 
Power Supplies, Fan Tray, DSP resources and memory.
    3. Circuit Packs: A circuit pack, also known as a circuit card, 
circuit board, or printed circuit, is an electronic circuit 
consisting of one or more electronic components arranged on a 
substrate board or card with one of more conductive layers laminated 
on one or more insulating layers. The electronic components on the 
circuit pack can be inserted into holes or surface mounted on 
conductive pads using various alloys of metal called solder. Such 
circuit packs usually leave one or more connectors to integrate them 
into the system of which they are a part. Avaya's circuit packs are 
not stand-alone devices. They are inserted as components to Avaya's 
Media Gateway units. Avaya offers two types of circuit packs--a 
``TN'' card and an ``MM'' card. TN circuit packs are based on older 
technology for use in legacy telephony systems, also called 
Telephone Interface Cards. MM circuit packs are based on newer 
technology, also called Media Modules.
    4. Telephone Sets: Internet Protocol (``IP'') telephones that 
before integration through Communication Manager have no 
functionality.

B. Software

    You claim that the integration of the individual components is 
achieved through the use of software called Communication Manager, 
which adds functionality to certain individual components and 
changes functionality of the other components. Avaya's Communication 
Manager software is developed and tested exclusively by Avaya in 
Denver, Colorado. Avaya began development of Communication Manager 
in 2002 and since that time has spent significant resources in the 
development and maintenance of Communication Manager. All the 
engineering, development, and design were developed in the United 
States; however, a small percentage of the ongoing software 
development takes place abroad.

C. Assembly

    1. Operations in China:
    There are 6 main subassemblies that compose the Communication 
Manager solution. Subassemblies made in China include: Gateways, 
Servers, Media Modules, Telsets, and Circuit Packs. The hardware 
listed above is manufactured in China. The raw components for the 
hardware are obtained from various countries throughout Asia and 
Europe. Certain gateways are also manufactured in Israel and other 
countries, but will eventually be manufactured in China.
    2. Operations in the United States:
    All the engineering, development, design were developed in the 
United States. Communication Manager will be installed onto a solid 
state drive or hard drive residing on the server. It will be custom 
configured at the end user's facility or another location in the 
United States to integrate the various components. Although each 
installation at an end user's premises is different, due to the end 
user's needs, each system will consist of at least the following 
components: server, media gateways, circuit packs, and IP telephone 
sets. Once actual installation begins, approximately five (5) days 
is needed to customize the Communication Manager software for the 
end user. A total of 11 days is required to assemble the necessary 
equipment, install the hardware, and integrate the hardware and 
software. The complex installation and integration requires both 
adjustments to hardware and customized software programming. You 
claim that due to the number of components assembled, number of 
different operations, time, skill level required, attention to 
detail, quality control, the value added to the Communication 
Manager, and the overall employment complexity in development of the 
software, the hardware is substantially transformed when the 
software is added and the system is integrated.

ISSUE:

    What is the country of origin of Communication Manager Units for 
purposes of U.S. Government procurement?

LAW AND ANALYSIS:

    Pursuant to subpart B of Part 177, 19 CFR Sec.  177.21 et seq., 
which implements Title III of the Trade Agreements Act of 1979, as 
amended (``TAA'' 19 U.S.C. Sec.  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.
    Under the rule of origin set forth at 19 U.S.C. Sec.  
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 C.F.R. Sec.  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 C.F.R. Sec.  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 
C.F.R. Sec.  25.403(c)(1).
    The Federal Acquisition 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 C.F.R. Sec.  25.003.

    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, and 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.
    With respect to the product under consideration in the instant 
case, we note that CBP has not previously considered whether the 
components at issue are substantially transformed when brought 
together in the manner set forth above. However, CBP has considered 
whether components of various origins have been substantially 
transformed during the assembly of related products. Though such 
rulings may not be directly on point with the facts under 
consideration in the instant case, the guidance supplied by such 
cases may nonetheless be applied to resolve the issues presently 
before us. The determination will be in this instance ``a mixed 
question of technology and customs law, mostly the latter.'' Texas 
Instruments, Inc. v. United States, 681 F.2d 778, 783 (C.C.P.A. 
1982).
    You claim that, ``[i]n * * * rulings involving hardware which 
lacked the functional `intelligence' characteristics present in the 
completed product, and where the firmware/software provided the 
merchandise's functionality, CBP determined that the products were 
substantially transformed into products of the country where the 
software which provided its functionality was installed and final 
testing occurred.'' We disagree with the scope of this statement. 
While the location of the software installation and testing is one 
factor to be considered, it is not the sole determinant. The country 
in which the software development takes place is also relevant.
    In Data General v. United States, 4 CIT 182 (1982), the court 
determined that for purposes of determining eligibility under item 
807.00, Tariff Schedules of the United States, the programming of a 
foreign PROM (Programmable Read-Only Memory chip) substantially 
transformed the PROM into a U.S. article. In programming the 
imported PROMs, the U.S. engineers systematically caused various 
distinct electronic interconnections to be formed within each 
integrated circuit. The programming bestowed upon each circuit its 
electronic function. That is, its ``memory'' which could be 
retrieved. A distinct physical change was effected in the PROM by 
the opening or closing of the fuses, depending on the method of 
programming. This physical alteration, not visible to the naked eye, 
could be discerned by electronic testing of the PROM. The court 
noted that the programs

[[Page 47611]]

were designed by a project engineer with many years of experience in 
``designing and building hardware.'' While replicating the program 
pattern from a ``master'' PROM may be a quick one-step process, the 
development of the pattern and the production of the ``master'' PROM 
required much time and expertise. The court noted that it was 
undisputed that programming alters the character of a PROM. The 
essence of the article, its interconnections or stored memory, was 
established by programming. The court concluded that altering the 
non-functioning circuitry comprising a PROM through technological 
expertise in order to produce a functioning read only memory device 
possessing a desired distinctive circuit pattern was no less a 
``substantial transformation'' than the manual interconnection of 
transistors, resistors and diodes upon a circuit board creating a 
similar pattern.
    In C.S.D. 84-86, CBP stated:
    We are of the opinion that the rationale of the court in the 
Data General case may be applied in the present case to support the 
principle that the essence of an integrated circuit memory storage 
device is established by programming * * * . [W]e are of the opinion 
that the programming (or reprogramming) of an EPROM results in a new 
and different article of commerce which would be considered to be a 
product of the country where the programming or reprogramming takes 
place.
    Accordingly, the programming of a device that changes or defines 
its use generally constitutes substantial transformation. See also 
HQ 733085, dated July 13, 1990; and HQ 558868, dated February 23, 
1995 (programming of SecureID Card substantially transforms the card 
because it gives the card its character and use as part of a 
security system and the programming is a permanent change that 
cannot be undone); HQ 735027, dated September 7, 1993 (programming 
blank media (EEPROM) with instructions on it that allows it to 
perform certain functions of preventing piracy of software 
constituted substantial transformation); but see HQ 732870, dated 
March 19, 1990 (formatting a blank diskette did not constitute 
substantial transformation because it did not add value, did not 
involve complex or highly technical operations and did not create a 
new or different product); HQ 734518, dated June 28, 1993 
(concluding that motherboards were not substantially transformed by 
the implanting of the central processing unit on the board because, 
whereas in Data General use was being assigned to the PROM, the use 
of the motherboard had already been determined when the importer 
imported it).
    In HQ 563012, dated May 4, 2004, CBP considered whether 
components of various origins were substantially transformed when 
assembled to form a fabric switch which involved a combination of 
computer hardware and software. Most of the assembly of computer 
hardware was performed in China. Then, in either Hong Kong or the 
U.S., the hardware was completed and the U.S.-origin software was 
downloaded onto the hardware. CBP noted that the U.S.-developed 
software provided the finished product with its ``distinctive 
functional characteristics.'' In making the determination that the 
product was substantially transformed in the United States, where 
the fabric switch was assembled to completion, CBP considered both 
the assembly process that occurred in the United States and the 
configuration operations that required U.S.-origin software. In the 
scenario where the fabric switch was assembled to completion in Hong 
Kong, CBP determined the origin for marking purposes was Hong Kong.
    In HQ 559255, dated August 21, 1995, a device referred to as a 
``CardDock'' was under consideration for country of origin marking 
purposes. The CardDock was a device which was installed in IBM PC 
compatible computers. After installation, the units were able to 
accept PCMCIA cards for the purpose of interfacing such PCMCIA cards 
with the computer in which the CardDock unit was installed. The 
CardDock units were partially assembled abroad but completed in the 
United States. The overseas processing included manufacturing the 
product's injection molded plastic frame and installing integrated 
circuits onto a circuit board along with various diodes, resistors 
and capacitors. After such operations, these items were shipped to 
the United States for further processing that included mating a 
U.S.-origin circuit board to the foreign-origin frame and board. The 
assembled units were thereafter subjected to various testing 
procedures. In consideration of the foregoing, CBP held that the 
foreign-origin components, i.e., the ISA boards, frame assemblies 
and connector cables, were substantially transformed when assembled 
to completion in the United States. In finding that the name, 
character, and use of the foreign-origin components had changed 
during processing in the United States, CBP noted that the 
components had lost their separate identity during assembly and had 
become an integral part of a new and distinct item which was visibly 
different from any of the individual foreign-origin components.
    In HQ 735027, dated September 7, 1993, a device that software 
companies used to protect their software from piracy was under 
consideration for country of origin marking purposes. The device, 
referred to as the ``MemoPlug,'' was assembled in Israel from parts 
that were obtained from Taiwan (such as various connectors and an 
Electronically Erasable Programmable Read Only Memory, or 
``EEPROM'') and Israel (such as an internal circuit board). After 
assembly, these components were shipped to a processing facility in 
the United States where the EEPROM was programmed with special 
software. Such processing in the United States accounted for 
approximately 50 percent of the final selling price of the 
MemoPlugs. In finding that the foreign-origin components were 
substantially transformed in the United States, CBP noted that the 
U.S. processing transformed a blank media, the EEPROM, into a device 
that performed functions necessary to the prevention of software 
piracy.
    We make our determinations based on the totality of the 
circumstances. Here, we take particular note of the fact that the 
installation of the Communication Manager software adds 
functionality to certain individual components and changes 
functionality of other components. This software is developed and 
tested exclusively by Avaya in Denver, Colorado. Avaya began 
development of Communication Manager in 2002 and since that time has 
spent significant resources in the development and maintenance of 
the software. In addition, assembly and installation of the hardware 
components that make up the Avaya Communication Solution will 
typically take approximately one month to complete and are performed 
in the United States. While the subassemblies are manufactured in 
China and Israel, all of the initial engineering, development, and 
design were developed in the United States.
    Based upon the above precedents and the totality of the 
circumstances, we find that the there is a substantial 
transformation of the component parts in the United States, the 
location where the final assembly and installation of the hardware 
as well as the application of the Communication Manager software 
occur. It follows that we find the country of origin for government 
procurement purposes is the United States.

HOLDING:

    Based on the facts provided, the assembly, installation, and 
programming operations performed in the United States impart the 
essential character to Communication Manager. As such, Communication 
Manager will be considered a product of the United States for the 
purpose of government procurement.
    Notice of this final determination will be given in the Federal 
Register as required by 19 C.F.R. Sec.  177.29. Any party-at-
interest other than the party which requested this final 
determination may request, pursuant to 19 C.F.R. Sec.  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, Regulations and Rulings, Office of International 
Trade.
[FR Doc. 2010-19363 Filed 8-5-10; 8:45 am]
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