[Federal Register Volume 78, Number 104 (Thursday, May 30, 2013)]
[Notices]
[Pages 32427-32429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-12816]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning 
Multifunctional Digital Imaging Systems

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 digital imaging systems. 
Based upon the facts presented, CBP has concluded in the final 
determination that the United States is the country of origin of the 
multifunctional digital imaging systems for purposes of U.S. Government 
procurement.

DATES: The final determination was issued on May 21, 2013. 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 1, 2013.

FOR FURTHER INFORMATION CONTACT: Suzanne Kane, Valuation and Special 
Programs Branch: (202) 325-0119.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on May 21, 2013, 
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 digital imaging systems 
which may be offered to the U.S. Government under an undesignated 
procurement contract. This final determination, in HQ H240213, was 
issued at the request of Ricoh Electronics, 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 particular multifunctional digital imaging systems, 
assembled in the United States from parts made in China, Japan, and the 
Philippines, are 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, Customs 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: May 21, 2013.
Glen E. Vereb,
Acting Executive Director, Regulations and Rulings, Office of 
International Trade.

Attachment

HQ H240213

May 21, 2013
OT:RR:CTF:VS H240213 SEK
CATEGORY: Marking

Ms. Fusae Nara
Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, NY 10036-4039

RE: U.S. Government Procurement; Country of Origin of Ricoh Aficio 
SP5200SG/5210SFG/5210SRG Multifunctional Digital Imaging Systems

    Dear Ms. Nara:
    This is in response to your letter, dated March 11, 2013, 
requesting a final determination on behalf of your client, Ricoh 
Electronics, Inc. (Ricoh), pursuant to subpart B of Part 177, 
Customs and Border Protection (CBP) Regulations (19 CFR Sec.  177.21 
et seq.). 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 trade 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 digital imaging systems (MFPs) that Ricoh 
may sell to the U.S. Government. We note that Ricoh is a party-at-
interest within the meaning of 19 CFR Sec.  177.22(d)(1) and is 
entitled to request this final determination.

FACTS:

    The products at issue in this ruling are certain MFPs 
manufactured by Ricoh, consisting of the Ricoh Aficio SP 5200SG 
(base model), the SP 5210SFG (incorporating a fax machine), and the 
SP 5210SRG (incorporating a finisher unit for stacking and 
stapling). All three MFP models have monochrome copying, printing, 
and scanning functions, and one model, the SP 5210SFG, has an 
additional facsimile function. Ricoh intends to import the 
components and subassemblies of the MFPs from China and the 
Philippines for manufacture in the U.S. and subsequent sale to U.S. 
government agencies.
    Ricoh states that it developed the SP5200-series MFPs in Japan, 
and that the entire engineering, development, design and artwork 
processes for the MFPs took place in Japan. The project team 
consisted of approximately 50 engineers, who were all based in Japan 
and worked for Ricoh's parent company, Ricoh Company, Ltd. At the 
initial stage of the MFP production process, individual parts are 
assembled into various assemblages of parts called subassemblies. 
The manufacture of subassemblies takes place in multiple countries, 
including the United States, China, and the Philippines. The 
subassembly units incorporated in Ricoh's SP5200-series include the 
following:
     Automatic Reverse Document Feeder Unit (ARDF unit): the 
ARDF unit has a 50 sheet capacity, and its main task is to feed 
paper, sheet by sheet, to the next scanning process. The ARDF unit 
is assembled in China.
     Scanning Unit: performs the task of converting the 
original images into digital signals. It is assembled in China.
     Duplex Unit: enables double-sided copying and printing. 
It is assembled in China.
     Fusing Unit: contains a fusing roller and a pressure 
roller, which are both manufactured in Korea, and a heater 
manufactured in Japan. The main task of the Fusing unit is to 
permanently affix the toner on the paper by applying heat and 
pressure to the toner powder. The Fusing unit is assembled in China.
     Laser Unit: receives the image from the Scanning unit 
and copies the image onto the organic photo conductor (OPC) drum. 
The Laser unit is assembled in China. The two key components of the 
Laser unit, the laser diode unit and two lenses, are manufactured in 
Japan.
     All in One Unit (AIO): is assembled in China and 
contains the toner powder manufactured in Japan using a formula 
developed by Ricoh Company, Ltd.
     Base Engine and Image Control unit (BICU): controls the 
mechanical function of the MFP and is, in turn, controlled by the 
Controller unit. It is assembled in China.

[[Page 32428]]

     Power Supply Unit (PSU): provides the DC power to the 
system and AC power to the fusing. It is assembled in China.
     Fax Unit: is either a standard or optional item 
depending on the model type of the SP5200-series MFP. It is 
assembled in China.
     Hard Disk Drive (HDD): is either a standard or optional 
item depending on the model type of the SP5200-series MFP. Ricoh 
purchases HDDs made in the Philippines from another company.
     Operation Panel: acts as the interface between the user 
and MFP and is assembled in China.

Ricoh states that the above subassemblies are assembled in China to 
construct the incomplete and non-functional printer engine. The 
incomplete engine includes the automatic document feeder, scanning 
unit, duplex unit, fusing unit, laser unit, AIO, BICU, PSU and other 
paper tray and mechanical parts to move paper throughout the MFP. 
Ricoh asserts that the assembly of the incomplete and non-functional 
printer engine does not require sophisticated skills or expensive 
machinery.
    The next stage of the production process is the Controller unit 
subassembly. Ricoh states that in a completed MFP, the Controller 
unit functions as the electronic ``brain'' of the MFP and controls 
its functions. Ricoh states that it has invested significant amounts 
for R&D in Japan to develop the Controller unit, as well as millions 
of dollars in Ricoh's factory in Tustin, California for the 
machinery to manufacture different types of Controller units. Ricoh 
considers the manufacturing of the Controller unit, including the 
printed circuit board (PCB) and programming of the firmware (the 
fixed internal programs that control electronic devices), to be 
extremely complex, and necessitating highly skilled labor to perform 
optical inspections, soldering, functional testing and circuit 
testing.
    The Controller unit is manufactured in the United States in 
three stages. First, Ricoh manufactures the PCB in the United 
States, including the automatic board stuffing process using surface 
mount technology (SMT), automated optical inspection (AOI), and 
manual soldering. Ricoh states that approximately 1,335 components, 
including integrated circuits, diodes, capacitors, connectors, and 
other semiconductor devices are mounted on the PCB using both 
automated and manual soldering processes. Second, Ricoh programs the 
PCB with firmware that was developed in Japan. Once the installation 
of the firmware on the PCB is complete, the Controller unit becomes 
functional as the ``brain'' of the MFP. Finally, after the assembly 
of the PCB and the installation of the firmware, the PCB undergoes 
testing to ensure the functionality and quality of the PCB.
    The final assembly of the MFPs consists of incorporating the 
Controller unit and HDD into the incomplete, non-functional printer 
engines. The HDD is mounted on the Controller unit, and the HDD 
control board is inserted into the socket of the controller unit. 
The assembled unit is inserted to the rear of the incomplete printer 
engine. The operation panel is connected to the incomplete printer 
engine by several cables, and then attached to the front of the 
printer engine. An AIO is installed to the printer engine, and 
finally the fax unit is installed to the printer engine. The final 
MFPs will undergo inspection at Ricoh's Tustin, California factory.

ISSUE:

    What is the country of origin of the Ricoh Aficio SP5200SG/
5210SFG/5210SRG MFPs for purposes of U.S. Government procurement?

LAW AND ANALYSIS:

    Pursuant to Subpart B of Part 177, 19 C.F.R 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 or 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 in 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 Acquisition 
Regulations. See 19 C.F.R. Sec.  177.21. In this regard, CBP 
recognizes that the Federal Acquisition 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 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 the 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 that 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, 
generally will 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 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.''
    CBP has held in a number of cases involving similar merchandise 
that complex and meaningful operations involving a large number of 
components result in a substantial transformation. In support of its 
position, Ricoh cites HQ H018467 (Jan. 4, 2008). In HQ H018467, CBP 
considered the country of origin of multi-function printers in which 
manufacturing took place in two countries. In that case, the 
following eighteen units were manufactured in the Philippines from 
components produced in various countries: the 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 then 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

[[Page 32429]]

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.
    Ricoh also cites HQ H185775 (Dec. 21, 2011). In HQ H185775, CBP 
considered the country of origin of a multifunction office machine. 
In that case, the incomplete print engine was produced in Vietnam 
and consisted of a metal frame, plastic skins, motors, controller 
board with supplier-provided firmware, a laser scanning system, 
paper trays, cabling paper transport rollers, and miscellaneous 
sensing and imaging systems. The incomplete print engine was shipped 
to Mexico, where the following assemblies were added: the formatter 
board, scanner/automatic document feeder, control panel, fax card, 
hard disk drive/solid state drive, firmware (which was developed and 
written in the U.S.), along with other minor components and 
accessories. The finished products were also tested and prepared for 
shipping to their ultimate destinations. CBP determined that Mexico 
was the country of origin because a substantial transformation of 
the various components occurred in Mexico, and the assembly of the 
materials from various countries resulted in the final 
multifunctional office machine product.
    In this case, substantial manufacturing operations are performed 
in both China and Japan. Chinese subassemblies are imported into the 
United States, where they are combined with U.S.-origin Controller 
units containing U.S.-origin PCBs, and programmed with Japanese-
origin firmware. The Controller unit is stated to control the 
functions and mechanics of the MFPs along with the Japanese 
firmware. The HDD, which is manufactured in a third country, is also 
installed into the MFPs in the United States. As the MFPs are 
comprised of subassemblies and components from various countries, 
but are also comprised of a Controller unit assembled in the United 
States (with U.S.-origin PCBs), which is important to the function 
of the MFPs, and the assembly in the United States completes the 
MFPs, we find that the last substantial transformation occurs in the 
United States. See HQ H198875, dated June 5, 2012 (CBP found that 
Singapore was the country of origin of MFPs assembled to completion 
in Singapore, where they were also fitted with Singaporean-origin 
PCBs and programmed with Japanese-origin application software); 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 Ricoh Aficio 
SP5200SG/5210SFG/5210SRG MFPs is the United States.

HOLDING:

    The imported components that are used to manufacture the Ricoh 
Aficio SP5200SG/5210SFG/5210SRG MFPs are substantially transformed 
as a result of the assembly and firmware installation operations 
performed in the United States. Therefore, we find that the country 
of origin of the Ricoh Aficio SP5200SG/5210SFG/5210SRG MFPs for 
government procurement purposes is the United States.
    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,

Glen E. Vereb,

Acting Executive Director, Regulations and Rulings, Office of 
International Trade.

[FR Doc. 2013-12816 Filed 5-29-13; 8:45 am]
BILLING CODE 9111-14-P