Federal Register, Volume 79 Issue 29 (Wednesday, February 12, 2014)

[Federal Register Volume 79, Number 29 (Wednesday, February 12, 2014)]
[Notices]
[Pages 8471-8473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03029]

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DEPARTMENT OF HOMELAND SECURITY

Customs and Border Protection

Notice of Issuance of Final Determination Concerning Certain
Cordless Headsets

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 cordless headsets with included dongles.
Based upon the facts presented, CBP has concluded that the non-TAA
country where the headsets and dongles are assembled is the country
where the last substantial transformation occurs. Therefore, for
purposes of U.S. Government procurement, the country of origin of the
headsets with included dongles is the non-TAA country where they were
assembled.

DATES: The final determination was issued on February 3, 2014. 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 March 14, 2014.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on February 3,
2014, 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 cordless headsets
with included dongles that may be offered to the U.S. Government under
an undesignated government procurement contract. This final
determination, HQ H248027, 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 concludes that, based upon the facts presented, the
last substantial transformation takes place in the non-TAA country
where the headsets and dongles are assembled. Therefore, for purposes
of U.S. Government procurement, the country of origin of the headsets
with included dongles is the non-TAA country where they were assembled.
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: February 5, 2014.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International
Trade.

Attachment

HQ H248027

February 3, 2014

VAL OT:RR:CTF:VS H248027 HkP

CATEGORY: Origin

Mr. Steve Bonar
Sr. Global Customs Compliance Manager
Plantronics, Inc.
345 Encinal Street
Santa Cruz, CA 95060

RE: Trade Agreements Act; Substantial Transformation; Country of
Origin of Cordless Headsets

Dear Mr. Bonar:

This is in response to your letter dated August 21, 2013,
requesting a final determination on behalf of Plantronics, Inc.
(``Plantronics'') 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
Plantronics Voyager Legend^TM UC cordless headsets. We
note that as both the foreign manufacturer and the U.S. importer,
Plantronics 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. Your request for confidential treatment regarding
manufacturing locations contained in your request is granted and the
information contained in square brackets will not be disclosed to
the public.

FACTS:

Plantronics imports fully functional Plantronics Voyager
Legend^TM UC cordless headsets from [TAA country].
According to the information submitted, the cordless headsets are
lightweight devices worn over the ear that allow the user to control
and communicate with mobile phones and computers. The headsets
utilize Bluetooth technology, which allows for the exchange of

[[Page 8472]]

data over short distances from fixed and mobile devices using radio
frequency reception and transmission technologies. The headsets are
packaged and sold with a Bluetooth Universal Serial Bus (``USB'')
dongle/adapter (a hardware key for electronic copy and content
protection that unlocks software functionality or decodes content)
that, when plugged into a computer, allows the headset to control
Voice over Internet Protocol (``VoIP'') communication by acting as a
pass-through for data.
The headsets and dongles are manufactured in the countries
listed below as follows:

[TAA country]

Individual chips containing all the components of an electronic
system, known as a ``System on a Chip'' (``SoC''), are manufactured
and loaded with Bluetooth protocol stack firmware and 16 megabits of
programmable memory. A Bluetooth protocol stack is a series of
instructions that allow Bluetooth devices to communicate with each
other.

[Non-TAA country]

A printed circuit board containing transistors, diodes,
capacitors, the Bluetooth-loaded SoC with flash memory, and an
antenna is manufactured and assembled with plastic housing, buttons,
speakers, microphones, sensors and batteries using solder and glue
into a complete headset. The components are from [non-TAA country
and TAA countries].
An antenna and an integrated circuit from [TAA country] also
loaded with Bluetooth protocol stack firmware are assembled with the
plastic housing to create a dongle.

[TAA country]

The fully assembled headsets and dongles are shipped to [TAA
country]. In their imported condition, the headsets are capable of
sending and receiving data but cannot utilize the data to perform
tasks such as the regeneration of sound (voices).
Firmware is downloaded onto the SoC in the headset. Embedded in
the firmware are ``software hooks'', the sole purpose of which is to
link the headsets with non-headset devices that have corresponding
software (discussed below).
After the firmware is downloaded, the interior circuitry and the
exterior of the headset are coated with a water resistant nano
coating, the radio frequency reception and transmission of the
headset are tested, and the headsets are packaged for retail sale.
Firmware is a class of code that controls the user interface
(such as buttons and voice prompts that allow a user to change
languages, answer or end a call), as well as the entire data flow
into and out of the headset. In addition, firmware manages the
integration of the headset with a paired device, such as a computer
with a VoIP softphone, by calling the software loaded onto the
paired device using digital hooks embedded in the firmware code. For
example, some Voyager Bluetooth headsets have Vocalyst software
hooks embedded in their firmware and will only interact with a
corresponding Vocalyst application on a computer, while other
Bluetooth headsets that do not have Vocalyst software hooks would
not be able to connect. Firmware features digital signal processing
(DSP), which regenerates data into audio and transforms audio into
data. In addition, firmware is responsible for: Smart Call Transfer
which, during an active call, transfers audio to the appropriate
device (phone or headset); disabling the call control button to
eliminate pocket dialing; automatically pausing streaming audio;
automatically disconnecting a call; battery meter display on
smartphones; voice recognition/commands; and, Caller ID. You state
that without the firmware downloaded in [TAA country], the headset
could not function as designed, and would only be able to be turned
on and send and receive a signal but could not interface with other
devices.
Since 2008, all Bluetooth and other Voyager firmware has been
designed and coded in [TAA country] by Plantronics. Firmware design
involves the definition of application architecture, sequencing, and
the programming language, while coding involves writing code
according to specification and placing it in the predefined
sequence.
Software allows the headset to integrate with multiple VoIP
applications, and supports activities such as firmware updates,
headset diagnostics, and the sending of emails and the reading of
text messages. The software is designed in the United States,
outsourced to multiple non-TAA countries to be coded according to
U.S. specifications, and sequenced in the U.S. However, the software
is not installed onto the headset or dongle but onto the paired non-
headset device, such as a computer or mobile phone, which is not at
issue in this ruling. Accordingly, the software will not be further
discussed.
This ruling is issued on the assumption that the information
provided to this office is correct.

ISSUE:

What is the country of origin of Plantronics Voyager Legend UC
headsets 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.

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.
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 C.S.D. 84-86, CBP stated:

[[Page 8473]]

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
Headquarters Ruling Letter (``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 that allow it to perform
certain functions that prevent piracy of software constitute
substantial transformation); and, HQ 733085, dated July 13, 1990;
but see HQ 732870, dated March 19, 1990 (formatting a blank diskette
does not constitute substantial transformation because it does not
add value, does not involve complex or highly technical operations
and did not create a new or different product); HQ 734518, dated
June 28, 1993, (motherboards are 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
imports it).
You argue that the country of origin is [TAA country] because
you believe that it is the country where the final substantial
transformation takes place. You state that without the firmware with
embedded software hooks loaded onto the fully assembled headsets in
[TAA country], the headsets can only receive signals but cannot
answer or end calls, operate by voice recognition, be turned on and
off based on their positioning, direct signals to paired devices, or
otherwise interact with a VoIP softphone or other Bluetooth devices.
Accordingly, you believe that the firmware makes the headsets into
new and different articles. In support of your position you cite
Data General supra and HQ H170315, dated July 28, 2011.
HQ H170315 concerned the country of origin of satellite
telephones. CBP was asked to consider six scenarios involving the
manufacture of PCBs in one country and the programming of the PCBs
with second country software either in the first country or in a
third country where the phones were assembled. In the relevant
scenarios (I and II), CBP found that when the PCBs were manufactured
and programmed with second country software in one country and then
incorporated into the phones in a third country, that the country of
origin was the country in which the PCBs, which were the essence of
the phones, were manufactured and programmed because the assembly
operations in the third country were not sufficiently complex or
meaningful to transform the PCBs into new and different articles.
The third country operations consisted of assembling the imported,
programmed PCBs with covers, a housing, antennas and cables by means
of inserting, stacking, screwing and fitting together with clips.
In this case, the headset is fully assembled in [non-TAA
country] from [non-TAA country and TAA country] components. The
dongle is also made in [non-TAA country]. The headset and the
dongle, both loaded with [TAA country]--origin Bluetooth firmware,
are shipped to [TAA country]. Although in its imported condition the
headset can send and receive signals, it cannot interface with other
devices. The dongle is fully functional when imported and is able to
transmit and receive data signals. In [TAA country], [TAA country]--
origin firmware with embedded [TAA country]--origin software hooks
is downloaded onto the headset, enabling it to communicate with
corresponding software in a paired device such as a computer via the
dongle. The firmware loaded in [TAA country] also enables the
headset to process digital signals by filtering, measuring and
compressing analog radio signals, transfer audio between a paired
phone and headset during an active call, and to operate using voice
recognition/commands, among other functions.
In HQ 241177, dated December 3, 2013, switches were assembled to
completion in Malaysia and then shipped to Singapore, where software
developed in the United States at a significant cost and over many
years was downloaded onto them. The U.S.-origin software enabled the
imported switches to interact with other network switches through
network switching and routing, and allowed for the management of
functions such as network performance monitoring and security and
access control; without this software, the imported devices could
not function as Ethernet switches. CBP found that the software
downloading performed in Singapore did not amount to programming
because programming consisted of writing, testing and implementing
code necessary to make a computer function in a certain way.
Likewise, in this case the software downloading performed in
[TAA country] does not amount to programming because the [TAA
country] operations do not involve writing, testing or implementing
the code necessary to make the headsets function in a certain way.
See Data General supra. See also ``computer program'',
Encyclop[aelig]dia Britannica (2013), (9/19/2013) http://www.britannica.com/EBchecked/topic/130654/computer-program, which
explains, in part, that ``a program is prepared by first formulating
a task and then expressing it in an appropriate computer language,
presumably one suited to the application.''
While the programming occurs in [TAA country], the downloading
occurs in [TAA country]. Given these facts, we find that the country
where the last substantial transformation of the headsets occurs is
[non-TAA country], that is, where the major assembly processes are
performed. The country of origin for purposes of U.S. Government
procurement is [non-TAA country]. Likewise, we find that the country
of origin of the dongles is [non-TAA country], where they were
assembled.

HOLDING:

Based on the facts provided, the last substantial transformation
occurs in [non-TAA country]. As such, the headsets and dongles will
be considered products of [non-TAA country] 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. 2014-03029 Filed 2-11-14; 8:45 am]
BILLING CODE P