[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]
[Notices]
[Pages 34964-34967]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14214]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Toshiba E-
Studio Multi-Function Peripherals

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 Toshiba e-Studio Multi-function 
Peripherals (MFPs), which perform imaging, scanning, faxing, and 
printing functions. Based upon the facts presented, CBP has concluded 
that the country where the last substantial transformation takes place 
is Singapore. Therefore, the country of origin of the MFPs is Singapore 
for purposes of U.S. Government procurement.

DATES: The final determination was issued on June 5, 2012. 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 on or before July 12, 2012.

FOR FURTHER INFORMATION CONTACT: Heather K. Pinnock, Valuation and 
Special Programs Branch: (202) 325-0034.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on June 5, 2012, 
pursuant to subpart B of Part 177, U.S. Customs and Border Protection 
Regulations (19 CFR part 177, subpart B), CBP issued a final 
determination concerning the country of origin of certain Toshiba e-
Studio MFPs which may be offered to the U.S. Government under an 
undesignated government procurement contract. This final determination, 
HQ H198875, was issued 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 country where the 
last substantial transformation takes place is Singapore. Therefore, 
the country of origin of the MFPs is Singapore for purposes of U.S. 
Government procurement.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination 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: June 5, 2012.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International 
Trade.

Attachment

HQ H198875

June 5, 2012

MAR OT:RR:CTF:VS H198875 HkP

CATEGORY: Origin

David T. Ralston Jr., Esq.
Foley & Lardner LLP
3000 K Street, NW
Suite 600
Washington, DC 20007-5109

RE: U.S. Government Procurement; Country of Origin of Toshiba e-Studio 
Multi-function Peripherals; Substantial Transformation

    Dear Mr. Ralston:
    This is in response to your letter, dated December 30, 2011, 
clarified on January 30, 2012, requesting a final determination on 
behalf of Toshiba America Business Solutions (``TABS''), pursuant to 
subpart B of part 177 of the U.S. Customs and Border Protection 
(``CBP'') Regulations (19 C.F.R. Part 177). Under these regulations, 
which implement Title III of the Trade Agreements Act of 1979 
(``TAA''), 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 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 eight 
models of Toshiba e-Studio multi-function peripherals (``MFPs''). As a 
U.S. importer, TABS is a party-at-interest within the meaning of 19 
C.F.R. Sec.  177.22(d)(1) and is entitled to request this final 
determination.

FACTS:

    Toshiba's MFPs perform imaging, scanning, faxing and printing 
functions. TABS imports eight models of MFPs from Singapore: (1) the e-
Studio 3040CG; (2) the e-Studio 4540CG; (3) the e-Studio 5540CG; (4) 
the e-Studio 6540CG; (5) the e-Studio 306G; (6) the e-Studio 456G; (7) 
the e-Studio 656G; and, (8) the e-Studio 856G. The model numbers ending 
in ``CG'' offer full color printing while those ending in ``G'' offer 
monochrome printing only. Apart from this, the primary distinction 
between the model types is the speed at which they print documents. The 
model name incorporates the maximum page-per-minute (``ppm'') output of 
each model. For example, the e-Studio 3040CG model prints a maximum of 
30 ppm, and the e-Studio 856G model prints a maximum of 85 ppm. Each 
MFP model is primarily composed of the same

[[Page 34965]]

major components and assemblies, and is manufactured using essentially 
the same processes performed in the same locations.
    An MFP consists of the following components:
    (1) Logic Control (``LGC'') Board: a printed circuit board 
(``PCB'') populated with hundreds of micro-miniaturized parts. It 
drives the laser and scaner, exposes the photosensitive drum to make a 
latent image, and otherwise regulates the electric photography process 
based on the print data received from the System (``SYS'') Board 
(below); controls the transfer of toner from the drum to the paper 
while regulating feeding of the paper, the fixing of toner to the paper 
to complete the print image, and the ejection of the paper from the 
MFP; and, for photocopying, directs the scanning of original documents 
and sends the image data to the SYS Board. The LGC Board is 
manufactured in Singapore.
    (2) SYS Board: a PCB populated with hundreds of micro-miniaturized 
parts. It allows the MFP to receive print data from the intranet, a 
scanner, an incoming fax, or through its copier function, convert the 
data and send it to the LGC board. It also allows the user to interface 
with the MFP by detecting key or touchscreen input and by sending image 
data to the display screen and displaying it. The SYS Board is 
manufactured in Singapore.
    (3) Control Panel: used to operate the MFPs, consists of button and 
touch-panel switches, light emitting diodes (``LEDs'') and a liquid 
crystal display (``LCD''). It is assembled in China.
    (4) Scanner: irradiates the surface of the original document. The 
reflected light is directed to a charge-coupled device (``CCD'') board 
using mirrors and lenses, where the optical image data is converted 
into an electrical signal that is transmitted to the SYS Board for 
further processing. It consists of different types of glass, an 
exposure lamp, a reflector, drive pulley, sensor, lens, CCD board, 
Scanner Logic Board (``SLG''), and other components. It is assembled in 
China.
    (5) Laser Optical Unit: radiates a laser beam onto the 
photoconductive drum in response to the digital image signals 
transmitted from the scanner, Universal Serial Bus (``USB'') port, or 
network to create a latent image. The image signal is converted into 
the light emission signal of the laser diode on the laser driving 
(``LDR'') PCB, then radiated on the drum through optical elements such 
as lenses and mirrors. It is assembled in China.
    (6) Paper Feeding System: feeds paper into the section of the MFP 
where the image is printed onto paper. It consists of several types of 
rollers, several types of sensors, and a drive system consisting of 
several motors. It is assembled in China.
    (7) Electrophotograph Processing Unit (``EPU''): allows the 
formation of a latent image on the surface of the photoconductive drum 
within the unit. The EPU consists of two subassemblies, the process 
unit (the drum cleaner and developer unit) and the drive section. There 
are four EPUs in each color printer, one for each color of toner used 
for color printing (yellow, magenta, cyan, and black). It is assembled 
in China.
    (8) Transfer and Second Transfer Unit. The Transfer Unit transfers 
the toner image from the photoconductive drum onto the transfer belt 
and the Second Transfer Unit transfers the image from the transfer belt 
to paper. The units consist of several components: a transfer belt 
unit, a transfer belt cleaning unit, a second transfer unit, several 
types of sensors, and a motor. It is assembled in China.
    (9) Fuser Unit: fuses the toner image to paper by applying heat and 
pressure. The paper is then transported to the bridge unit or the paper 
exit unit. The unit principally consists of several types of rollers, 
heating lamps, thermistors, thermostats, a heating coil, entrance 
guide, paper guider, separation plate and fingers, and a fuser belt. It 
is assembled in China.
    (10) Automatic Duplexing Unit (``ADU''): reverses paper so that 
images can be automatically printed on both sides of the paper. It 
consists of various types of sensors, rollers, a PCB, switch and motor. 
It is assembled in China.
    (11) Paper Exit Unit: transports paper from the fuser unit or the 
optional bridge unit to the exit tray or the finisher. It consists of 
various types of sensors, rollers, a switch, cooling fan and motor. It 
is assembled in China.
    (12) Hard-disk Drive (``HDD''): allows the storage, encryption and 
protection of data. It is designed and developed in Japan and 
manufactured overseas. Application software is developed in Japan.
    (13) Firmware: software that controls all the functions of an MFP. 
System firmware controls the SYS Board and engine firmware controls the 
LGC Board. The e-Bridge open software platform enables the installation 
of multiple devices, the performance of initial settings, and 
integration with core business applications to streamline workflows. 
All MFP firmware is developed in Japan.
    (14) Image Processing (``IMG'') Board: converts image data captured 
from the original document into printer image data for output to the 
printer or to be stored as a data file. The conversion process is 
controlled by the SYS Board and implemented by the LGC Board. The IMG 
Board itself is not programmed with any software. The board is only 
installed in the four MFPs that print in color--the ``CG'' models; 
image processing in the monochrome MFPs is done by the SYS Board and 
the LGC Board. It is manufactured in China.
    TABS describes the SYS Board and the LGC Board (components 1 and 2 
above) as the critical core components of an MFP because they organize 
and control the mechanical functions of an MFP, and an MFP could not 
operate without them. According to TABS' submission, the SYS Board is a 
system controller that unifies the MFP into a single system and can be 
considered the ``brains'' of the machine. On the other hand, the LGC 
Board functions as the fine mechanical controller of the MFP, precisely 
regulating the mechanical and electrical actions of the MFP to effect 
printing, scanning and other functions. TABS analogizes the LGC Board 
to the human nervous system, in that it carries out the commands of the 
brain, i.e., the SYS Board.
    Manufacture of the MFPs begins in China where all the subassemblies 
listed above, except for the LGC and SYS Boards and the HDD, are 
assembled. The subassemblies are connected to each other by a variety 
of wiring harnesses and attached to the metal frame of the MFP, which 
is then encased by a plastic cover. The unit is tested to ensure that 
it operates correctly. The tests involve the temporary installation of 
SYS and LGC Boards and a HDD, which are not shipped to Singapore with 
the MFPs. After testing is complete, the MFPs are shipped to Singapore 
for additional manufacturing, programming, and testing. The 
manufacturing processes in China account for approximately 60 percent 
of the total time it takes to manufacture an MFP.
    In Singapore, the SYS and LGC Boards are manufactured by populating 
PCBs with hundreds of circuits and components, after which each board 
is inspected and tested for functionality using specialized equipment. 
According to TABS, the manufacture of the boards requires more advanced 
production technology than typical electric boards. The boards are 
permanently installed into the MFPs and programmed with system firmware 
(SYS Board) and engine firmware (LGC Board) developed in Japan. The 
third country-origin HDD is also permanently installed into the MFPs. 
The HDD installation process

[[Page 34966]]

involves creating HDD partitions, installing Japanese-origin 
application software, and performing an aging test, and takes 
approximately two hours. The MFPs are then programmed with Japanese-
origin Toshiba e-Bridge software, after which the MFPs' images are 
tested using specialized equipment and adjusted as necessary. TABS 
states that because the post-production testing in Singapore concerns 
the intricacies of image quality and output rather than the mechanical 
workings of MFP components, it is far more complicated and requires a 
higher degree of skill and technology that the testing performed in 
China. After successfully completing the image quality and adjustment 
testing in Singapore, the MFPs are packaged for shipment.

ISSUE:

    What is the country of origin of the various models of TABS e-
Studio Multi-Function Peripherals 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 (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 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. 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 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, the 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.
    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. In HQ H098417, dated June 
15, 2010, dimmer and fan speed control switches were made from 
subcomponents made in Hong Kong and shipped to Mexico for assembly. The 
processing in Mexico included the assembly of a bare printed circuit 
board into a final PCB and the assembly of the PCB with other 
components into the finished product. CBP found that the assembly in 
Mexico was sufficiently complex and the components were substantially 
transformed into a final product that had a new name, character and 
use, such that the country of origin was Mexico. Likewise, in HQ 
H155115, dated May 24, 2011, CBP found that assembly in the United 
States of an imported glider and imported and U.S.-origin parts 
substantially transformed the components into an article with a new 
name, character, and use. The assembly process in the U.S. was complex 
and time-consuming and involved a significant U.S. contribution in both 
parts and labor. Consequently, the country of origin for procurement 
purposes was the United States.
    In Texas Instruments v. United States, 681 F.2d 778, 782 (CCPA 
1982), the court observed that the substantial transformation issue is 
a ``mixed question of technology and customs law.''
    In Data General v. United States, 4 Ct. Int'l Trade 182 (1982), the 
court determined that for purposes of determining eligibility under 
item 807.00, Tariff Schedules of the United States (predecessor to 
subheading 9802.00.80, Harmonized Tariff Schedule of the United 
States), the programming of a foreign PROM (Programmable Read-Only 
Memory chip) in the United States 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 court 
noted that the programs were designed by a U.S. project engineer with 
many years of experience in ``designing and building hardware.''
    TABS believes that the country of origin for TAA purposes is 
Singapore because the components and elements that are most important 
to the MFPs--the SYS Board (the ``brain'' of the MFP), the LGC Board 
(the ``nervous system'' implementing the commands of the brain), the 
HDD, and Toshiba proprietary software--are incorporated into the 
machines in Singapore. In addition, the SYS Board and the LGC Board are 
manufactured in Singapore. In support of its position, TABS cites HQ 
H018467 (Jan. 4, 2008).
    In HQ H018467, CBP was asked to consider two manufacturing 
scenarios for multi-function printers. In one scenario, manufacturing 
took place in two countries; in the other, it took place in three 
countries. In the two-country scenario, 18 units were 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. The units were sent to Japan where the 
system control board, engine control board, OPC drum unit, and the 
toner reservoir were manufactured and incorporated into the units. The 
control boards were programmed in Japan with Japanese firmware that 
controlled the user interface, imaging, memories, and the mechanics of 
the machines. The machines were then inspected and adjusted as 
necessary. CBP found that the manufacturing operations in Japan 
substantially transformed the Philippine units such that Japan was the 
country of origin of the multifunctional machines. In making our 
determination we took into consideration the fact that the system 
control board, the engine control board, and the firmware, which were 
very important to the functionality of the machines, were manufactured 
in Japan. We also found that the operations performed in Japan were 
meaningful and complex and resulted in an article of commerce with a 
new name, character and use.

[[Page 34967]]

    In this case, substantial manufacturing operations are performed in 
both China and Singapore. Chinese subassemblies are imported into 
Singapore where they are fitted with Singaporean-origin SYS Boards and 
LGC Boards and programmed with Japanese-origin system and engine 
firmware. The firmware controls the functions and mechanics of the 
MFPs. The HDD, which is manufactured in a third country, is also 
installed into the MFPs in Singapore and programmed with Japanese-
origin application software. The boards assembled in Singapore are 
important to the function of the MFPs, as is the Japanese software. But 
the assembly in Singapore completes the MFPs. Therefore, we find that 
the last substantial transformation occurs in Singapore. See HQ 563012, 
dated May 4, 2004 (CBP found that Hong Kong was the country of origin 
of fabric switches assembled to completion in Hong Kong, where they 
were also configured and programmed with U.S.-origin software that 
transformed the switches from non-functional devices into fabric 
switches capable of performing various Storage Area Network related 
functions); HQ H170315, scenario III, dated July 28, 2011 (application 
and transceiver boards for satellite phones were assembled in Malaysia 
and programmed with U.K.-origin software in Singapore, where the phones 
were also assembled. CBP found that no one country's operations 
dominated the manufacturing operations of the phones and that the last 
substantial transformation occurred in Singapore.) Therefore, the 
country of origin of the e-Studio MFPs is Singapore.

HOLDING:

    Based on the facts provided, the country where the last substantial 
transformation takes place is Singapore. As such, the Toshiba e-Studio 
MFPs described in this ruling are to be considered products of 
Singapore for purposes of U.S. 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. Pursuant to 19 C.F.R. 
Sec.  177.30, any party-at-interest may, within 30 days of 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. 2012-14214 Filed 6-11-12; 8:45 am]
BILLING CODE 9111-14-P