[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75362-75364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29586]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Docave 
Computer Software

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 computer software known as DocAve 
Software. Based upon the facts presented, CBP has concluded that the 
software build operations performed in the United States substantially 
transform software modules developed in China. Therefore, the country 
of origin of DocAve Software is the United States for purposes of U.S. 
Government procurement.

DATES: The final determination was issued on December 4, 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 January 10, 2014.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on December 4, 
2013, 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 computer 
software known as DocAve Software, which may be offered to the U.S. 
Government under an undesignated government procurement contract. This 
final determination, HQ H243606, 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 
software build operations performed in the United States substantially 
transform non-TAA country software modules developed in China. 
Therefore, the country of origin of DocAve Software is the United 
States 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: December 4, 2013.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International 
Trade.

Attachment

HQ H243606
December 4, 2013

Larry Hampel, Esq.

Albert B. Krachman, Esq.
Blank Rome, LLP
Watergate
600 New Hampshire Avenue, NW
Washington, DC 20037

RE: Trade Agreements Act; Substantial Transformation; Country of Origin 
of Software

Dear Mr. Hampel and Mr. Krachman:

    This is in response to your letter dated June 24, 2013, requesting 
a final determination on behalf of AvePoint, Inc. (``AvePoint''), 
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 computer 
software. As the U.S. importer of the subject

[[Page 75363]]

merchandise, AvePoint 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:
    AvePoint manufactures DocAve Software (``DocAve''), a comprehensive 
suite of applications for Microsoft[supreg] SharePoint[supreg]. 
SharePoint is a multipurpose set of Web technologies backed by a common 
technical infrastructure that is used to provide intranet portals, 
document & file management, collaboration, social networks, extranets, 
Web sites, enterprise search, and business intelligence. It also has 
system integration, process integration, and workflow automation 
capabilities. DocAve products simplify the deployment, monitoring, and 
enforcement of SharePoint governance policies. DocAve products have a 
browser-based user interface and a fully distributed architecture that 
integrates backup, administration and data management technologies for 
all SharePoint products. Its applications can be executed separately, 
but they function within a unified platform and are provided as an 
integrated package.
    According to the information submitted, DocAve software is 
developed in seven steps, described as follows:

(1) Research: A list of ideas and potential features to be included in 
the software is compiled. A product roadmap is developed and test cases 
are written to govern and ensure that all the requirements of the 
application and software design are met. Twenty percent of total 
product development hours is allocated to this step (18% of which is 
performed in the U.S. and 2% in China).
(2) Development of Graphic User Interface (``GUI''): A prototype GUI 
based on designs created in Step 1 is developed and tested. Ten percent 
of total product development hours is allocated to this step, all of 
which is performed in the U.S.
(3) Development/Writing of Software Specifications and Architecture: 
The chief architects create a detailed software design in order to 
modularize the software so that its development can be easily 
distributed and managed by different development teams. Ten percent of 
total product development hours is allocated to this step, all of which 
is performed in the U.S.
(4) Programming of Source Code: Software modules are distributed to 
different development teams in the U.S. and China. Each module is self-
contained and can be developed separately, but cannot run independently 
and is not executable code. Twenty-five percent of total product 
development hours is allocated to this step (5% of which is performed 
in the U.S. and 20% in China).
(5) Software Build: Separate source code modules are transferred to the 
repository server hosted in the U.S., which is the only place where a 
development team has access to the entire source code. The team 
integrates the modules with each other by compiling the source code 
into object code (a sequence of statements or instructions in a 
computer language) and works out incompatibilities or bugs by re-
writing or correcting source code, as needed, makes the software into 
executable files, and constructs an installation package that is easily 
installed. The U.S. team creates all the lines of the object code, 
makes all the software executable files in various versions and 
languages. This step may be performed multiple times if testing 
indicates the need for correction. Fifteen percent of total product 
development hours is allocated to this step, all of which is performed 
in the U.S.
(6) Testing and Validation: The software package is tested based on 
functional specifications defined in Step 1. Once the test case pass 
rate is met, the software is ready for release. Fifteen percent of 
total product development hours is allocated to this step (5% of which 
is performed in the U.S. and 10% in China).
(7) Preparing Software/Burning Media for Distribution: The U.S. project 
management team coordinates with marketing and sales teams to make the 
software publicly available. Five percent of total product development 
hours is allocated to this step, all of which is performed in the U.S.

In sum, steps 2, 3, 5, and 7 (development of the GUI, development/
writing of specification and architecture software, software build, and 
preparation of software for distribution) are performed entirely in the 
U.S. Steps 1, 4, and 6 (research, programming of the source code, and 
testing and validation) are performed in the U.S. and China. In terms 
of total product development hours, which encompass all seven steps, 
68% is allocated to work performed in the United States, and 32% to 
work performed in China. We note that there were no documents submitted 
in support of the estimated percentages of work hours involved in the 
overall manufacturing process. For the purposes of this ruling, we 
presume that the figures provided are correct.

ISSUE:

    What is the country of origin of AvePoint's DocAve Software 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 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 Procurement Regulations define ``U.S.-made end product'' as:
    [A]n 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.

[[Page 75364]]

    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. The PROMs had no capacity to store and retrieve 
information until they were programmed in the U.S. by U.S. engineers 
who interconnected the discrete components in a defined logical 
pattern. 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 were 
designed by a U.S. 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 altered 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.
    You believe that the country of origin of DocAve Software is the 
United States because it is the country in which the software build 
occurs, a process which you liken to assembly and believe is sufficient 
in itself to effect a substantial transformation of all the software 
inputs. You note that some of the pre-build design and architecture, 
and some of the post- or re-build test design and validation decisions 
also take place in the U.S. Specifically, the design concept and user-
driven features of the software are the result of work performed in the 
U.S., and their functional implementation is achieved only through the 
compilation of source code modules and the integration of executable 
modules through numerous build and test sequences, also performed in 
the U.S. Additionally, you note that while testing is largely performed 
in China, the decisions on critical functions and features pass rates 
are taken by the U.S. project management team. As a result of the 
software development and production processes performed in the U.S., 
you believe that a new commercial product (DocAve Software) is created 
that differs from any of its components, which individually are not 
capable of achieving the purpose or function of the completed software.
    Based on the reasoning in Data General supra, we find that the 
software build performed in the U.S. substantially transforms the 
software modules developed in China and the U.S. into a new article 
with a new name, character and use, that is, DocAve Software. During 
the software build process, the source code modules developed in the 
U.S. and China are transferred to a server in the U.S, where the U.S. 
software development team creates DocAve Software by compiling the 
source code into object code, and works out incompatibilities or bugs 
by re-writing or correcting source code as needed. Moreover, the U.S. 
team creates all the lines of the object code, makes all the software 
executable files in various versions and languages, and constructs the 
installation package as an easily installable unit. In addition, 90% of 
the software development research is performed in the U.S., as are 
aspects of programming of the source code and testing and validation, 
such that 68% of the development of DocAve Software is attributed to 
work performed in the United States. Given these facts, we find that 
the country of origin of DocAve Software is the United States for 
purposed of U.S. Government procurement.
    Please be advised that whether the software may be marked ``Made in 
the U.S.A.'' or with similar words, is an issue under the authority of 
the Federal Trade Commission (``FTC''). We suggest that you contact the 
FTC, Division of Enforcement, 6th and Pennsylvania Avenue NW, 
Washington, DC 20508, on the propriety of markings indicating that 
articles are made in the United States.

HOLDING:

    Based on the facts provided, the software build operations 
performed in the United States substantially transforms the software 
modules developed in China and the U.S. into a new article with a new 
name, character and use, that is, DocAve Software. As such, DocAve 
Software is considered a product of 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 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. 2013-29586 Filed 12-10-13; 8:45 am]
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