[Federal Register Volume 80, Number 140 (Wednesday, July 22, 2015)]
[Notices]
[Pages 43451-43456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17963]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Storage 
Infrastructure Solution System

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 the VistA imaging tier II storage infrastructure 
solution (``VistA Storage Solution'') manufactured and distributed by 
Merlin International (``Merlin''). Based upon the facts presented, CBP 
has concluded that the United States will be the country of origin of 
the VistA Storage Solution for purposes of U.S. Government procurement.

DATES: The final determination was issued on July 16, 2015. 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 August 21, 2015.

FOR FURTHER INFORMATION CONTACT: Antonio J. Rivera, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of 
International Trade (202) 325-0226.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on July 16, 2015 
pursuant to subpart B of Part 177, U.S. Customs and Border Protection 
Regulations (19 CFR part 177, subpart B), CBP has issued a final 
determination concerning the country of origin of the VistA Storage 
Solution manufactured and distributed by Merlin, which may be offered 
to the U.S. Government under an undesignated government procurement 
contract. This final determination, HQ H259758, was issued under 
procedures set forth at 19 CFR part 177, subpart B, which implements 
Title III of the Trade Agreement Act of 1979, as amended (19 U.S.C. 
2511-18). In the final determination CBP found that, based upon the 
facts presented, four U.S.-origin hardware and software components and 
two foreign-origin hardware and software components were integrated 
into one end product, the VistA Storage Solution. CBP found that 
assembling the hardware components together, loading the software 
components onto the hardware components, and configuring the software 
components to reach the desired storage infrastructure, which were 
processes that took place entirely in the United States, substantially 
transformed the individual components into the final product, the VistA 
Storage Solution. CBP noted that the majority of the components were 
from the United States; that the processing took place entirely in the 
United States; that the name, character and use of the individual 
components differed from the name, character and use of the final 
product; that the tariff classification of the foreign components 
changed when they were integrated into the final product; and, the cost 
breakdown of each component, to find that under the totality of the 
circumstances, the country of origin of the VistA Storage Solution will 
be 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: July 16, 2015.
Harold Singer,
Acting Executive Director, Regulations and Rulings, Office of 
International Trade, HQ H59758.
July 16, 2015
OT:RR:CTF:VS H259758 AJR
CATEGORY: Origin
George W. Thompson, Esq.
Thompson & Associates, PLLC
1250 Connecticut Avenue, NW, Suite 200, Washington, DC 20036

RE: U.S. Government Procurement; Country of Origin of Storage 
Infrastructure Solution Systems; Substantial Transformation

Dear Mr. Thompson:
    This is in response to your letter, dated November 21, 2014, 
requesting a final determination on behalf of Merlin International, 
Inc. (``Merlin''), 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 Merlin's 
VistA Imaging Tier II Storage Infrastructure Solution (``VistA Storage 
Solution''). We note that Merlin 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:
    You describe the pertinent facts as follows. The VistA Storage 
Solution is a record imaging, storage, and data retrieval system 
produced by Merlin in accordance with its contract with the Veterans 
Administration (``VA''). The VistA Storage Solution at issue contains a 
24 TeraByte (``TB'') storage system.\1\ Under its contract with the VA 
(``VA Contract''), Merlin will install the VistA Storage Solution at 
144 VA locations where Veterans Integrated Service Network (``VISN'') 
facilities are hosted. The VA Contract requires that each installed 
VistA Storage Solution (1) be networked into a single ``grid'' to allow 
access to, and automatic replication of, stored data throughout the 
networked system; while also (2) performing as ``virtual machines'' to 
ensure that data stored remains available in the event of any system 
failures. To meet these contract requirements, Merlin designed the 
VistA Storage Solution, assembling together three main hardware 
components and configuring them with three main software components, in 
order to provide the particular product required by the VA.
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    \1\ Merlin produces other VistA Storage Solutions with the same 
functionality as the subject VistA Storage Solution, but with 
different storage capabilities that include 18, 36, 90, 120, and 180 
TB storage systems.
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A. The Hardware Components
    Each VistA Storage Solution will consist of at least the following 
hardware components: two to four Cisco UCS C240 rack-mount servers 
(``Cisco Servers''); one or more NetApp E2600 series Fibre Channel 
storage arrays

[[Page 43452]]

(``NetApp Storage Arrays''); and, two Cisco Catalyst 2960 Gigabit 
Ethernet network switches (``Cisco Network Switches'').
    You state that the Cisco Servers are produced in the United States 
and will provide the computing platform for the system. You state that 
the NetApp Storage Arrays are produced in the United States and will 
provide the data storage capability for the system. You state that the 
Cisco Network Switches are produced in the United States or China and 
will provide network connectivity for the system, enabling management 
access to the system's components, and user and application access to 
the system's data storage.
    The Cisco Servers, NetApp Storage Arrays, and Cisco Network 
Switches will be interconnected by cables, mounted on a rack, and 
supplied electricity through power strips. You state that the cables, 
racks, and power strips (collectively, ``Miscellaneous Components'') 
originate in various countries.
B. The Software Components
    The Cisco Servers will be loaded with the following software: 
VMware vSphere 5 ESXi hypervisor software (``VMware''); Novell SuSE 
Linux Enterprise Server 11 (``Novell''); and, NetApp's StorageGRID 
software solution (``StorageGRID'').
    You state that VMware was developed in the United States and it 
will enable the Cisco Servers to host three to six ``virtual 
machines.'' You state that Novell was developed in the United States 
and it will be the operating system software for the Cisco Servers. You 
state that StorageGRID was developed in Canada and it will protect 
images against data loss or corruption by maintaining multiple 
geographically separated replicas, by proactively and continuously 
checking integrity, and by self-healing to maintain resiliency in the 
event of corruption or failure. Additionally, you state that 
StorageGRID will provide the ``virtual machines'' with: an 
administration node for administrative access and control; a control 
node for metadata management and replication management of data 
objects; a storage node for stored objects; a standard gateway node for 
access to stored data; and, a primary gateway HA \2\ pair providing a 
high availability cluster of standard gateways.
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    \2\ HA means High-Availability. See http://www.cisco.com/c/en/us/td/docs/security/nac/appliance/configuration_guide/411/cam/cam411-book/m_ha.html.
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    You state the hardware components, with their standard features, 
lack the ``grid'' and ``virtual machine'' functions required by the VA 
Contract. You state that without VMWare and StorageGRID, it would be 
impossible for the VistA Storage Solution components to act together as 
part of a multi-site system (i.e. a single ``grid''). You also state 
that without Novell, the Cisco Servers would be unable to operate at 
all, much less support the ``virtual machine'' requirements.
C. Assembly and Configuration Process
    The VistA Storage Solutions will be assembled in Virginia, United 
States by two of Merlin's subcontractors, Mission Mobility (``MM'') and 
NetApp Inc. (``NAI''). Once MM obtains the hardware from Merlin it will 
perform the first assembly process in about two days as follows:
    1. Assembling the hardware onto racks, and connecting the 
individual pieces by cables;
    2. Setting the server specifications for compatibility with VA's 
current document storage and retrieval system (VistA Imaging Tier II);
    3. Configuring CIMC \3\ and hard drives;
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    \3\ CIMC means Cisco Integrated Management Controller.See http://www.cisco.com/c/en/us/support/servers-unified-computing/ucs-c-series-integrated-management-controller/products-installation-and-configuration-guides-list.html.
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    4. Setting proper boot device and the connection to the server 
CIMC;
    5. Connecting drives and media to the servers;
    6. Entering the boot menu and configuring the server management IP 
address;
    7. Loading the VMware on the servers;
    8. Configuring the storage devices to accept StorageGRID; and,
    9. Conducting tests to ensure the equipment operates properly.
    After this first assembly, NAI will install the VistA Storage 
Solutions at individual VA sites in a final assembly process that takes 
about one to two weeks as follows:
    1. Configuring the servers to permit them to communicate on the 
VISN, use StorageGRID, adjust the Network Time Protocol, deploy VMware 
templates, set up the vCenter Server Linux Virtual Appliance, and 
deploy the Open Virtualization Formats;
    2. Mapping storage to hosts and creating raw device mapping to 
provide direct ``virtual machine'' access to storage devices;
    3. Installing Novell on each ``virtual machine'' and building the 
nodes;
    4. Installing StorageGRID; and,
    5. Conducting tests and connecting the equipment to the VA computer 
network.
    You also state that prior to the final assembly process by NAI, VA 
employees will remove preloaded firmware (incompatible with the VA 
Contract requirements) from the Cisco Network Switches and replace it 
with Cisco Systems firmware package that permits the Cisco Network 
Switches to operate in virtual mode. After the NAI installation 
activity, you state that VA technicians will update the Cisco Network 
Switches with the latest version of Cisco Systems' Internal Operating 
Software firmware, a United Stated developed firmware.
    In an email, dated May 29, 2015, Merlin submitted information 
concerning the cost of each component, photographs of each hardware 
component and the installed components together, a workflow diagram of 
the system, and the VA Contract.
ISSUE:
    What is the country of origin of the VistAs for purposes of U.S. 
Government procurement?
LAW AND ANALYSIS:
    Pursuant to Subpart B of Part 177, 19 C.F.R. 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 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 CFR 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

[[Page 43453]]

country end products for acquisitions subject to the TAA. See 48 CFR 
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 CFR Sec.  25.003.

    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 previously considered 
the substantial transformation of components into servers (see 
Headquarter Ruling (``HQ'') H215555, dated July 13, 2012), into storage 
arrays (see HQ H125975, dated January 19, 2011), and into network 
switches (see HQ H241177, dated December 3, 2013), as ``end products,'' 
individually. CBP has also considered whether components of various 
origins have been substantially transformed during the assembly of 
related products. Particularly, HQ H090115, dated August 2, 2010, 
considered whether media servers, media gateways,\4\ circuit packs, 
telephone sets, and proprietary software were substantially transformed 
into a ``Unified Communications Solution,'' the ``end product.'' Though 
such rulings may not be directly on point, to the extent the VistA 
Storage Solution is an ``end product,'' we find such guidance 
applicable to the issue presently before us.
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    \4\ The media gateways described in HQ H090115 packed together 
wide area network routers and local area network switches.
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    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. In this case, 
the determination will be ``a mixed question of technology and customs 
law, mostly the latter.'' Texas Instruments v. United States, 681 F.2d 
778, 783 (CCPA 1982).

The Country of Origin of the Article's Components

    In HQ 735315, dated April 10, 1995, CBP considered whether three 
essential components (a U.S.-origin controlling computer, an 
Australian-origin optics module with a U.S.-origin printed wiring board 
assembly (``PWB''), and a U.S.-origin output device such as a printer) 
were substantially transformed into an optical spectroscopy instrument 
for purposes of U.S. Government procurement. In determining that the 
instrument was a product of the United States, it was noted that the 
majority of the components (the computer, PWB, and printer) and the 
added software were products of the United States, and their 
incorporation with the foreign optic module, rendered the instrument a 
product of the U.S. Similarly, in HQ 561734, dated March 22, 2001, CBP 
determined that certain multifunctional (printer, copier, and 
facsimile) machines assembled in Japan from 227 parts (108 from Japan, 
92 from Thailand, and 24 from other countries) and eight Japanese 
subassemblies, were products of Japan for purposes of U.S. Government 
procurement. It was particularly noted that the Japanese-origin scanner 
subassembly was characterized as ``the heart of the machine'' in HQ 
561734, which is similarly reflected with the U.S.-origin PWB in HQ 
735315.
    In this case, you state that there are six essential components, 
four from the United States, one from China, and one from Canada. From 
the VA Contract, the VistA Storage Solution appears to serve two 
purposes: (1) giving access to and automatically replicating stored 
data in the network; and (2) backing up data virtually in the case of 
any system failure. The VA Contract also notes that the VistA Storage 
Solution must be compatible with VA's VistA Imaging Tier II, a 
sophisticated and comprehensive electronic health record (``EHR(s)'') 
database system used by the VA's medical staff to store, retrieve, and 
manage documents at various VA locations.\5\
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    \5\ EHR is an electronic version of a patient's medical history, 
comprising a collection of standard medical and clinical data 
gathered by the patient's providers. See http://www.healthit.gov/providers-professionals/electronic-medical-records-emr.
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    At their basic levels, all six components provide essential 
qualities to support the purposes of the VA Contract; that is, the 
server will provide a computer operating structural function, the 
storage array will provide a storage structural function, the network 
switch will provide a connectivity structural function, VMware will 
provide the system with ``virtual machine'' capability, Novell will 
provide the system with an operating system, and StorageGRID will 
provide the system with capabilities that enhance its virtual functions 
and ensure data protection. However, the underlying basis of this 
product is the ability to store EHRs for their later use by the VA.\6\ 
If the product could not store EHRs, it would not have any EHRs to 
retrieve. Even when considering its network connectivity and virtual 
data protection purposes, these functions would not matter if the 
product was not able to store EHRs in the first place. Similar to the 
scanner subassembly being the ``heart of the machine'' in HQ 561734, 
which allowed the multifunctional machine to take in data it would 
eventually output, the NetApp Storage Array allows the VistA Storage 
Solution to store EHRs that are later utilized by the functions of its 
other components. Therefore, only considering the country of origin of 
the VistA Storage Solution's components, and noting that four of the 
six components are from the United States, and the particular 
importance of the U.S.-origin NetApp Storage Array, we find that this 
factor weighs towards a United States country of origin determination 
for the VistA Storage Solution.\7\
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    \6\ The VistA Storage Solution's storage capabilities were 
emphasized in the VA Contract, which states that the purpose of the 
solicitation by the VA ``is to acquire Tier II archive storage for 
use within VA's VistA Imaging environment,'' noting the prior 
storage capabilities and updated storage requirements, which ``must 
be reviewed on a regular basis to determine the best solution to 
meet the system's expanding storage needs.''
    \7\ This finding is made on the assumption that the four U.S.-
origin components of the VistA Storage Solution actually originate 
in the United States as claimed in the final determination request.
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The Extent of the Processing that Occurs within a Given Country

    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

[[Page 43454]]

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. If the manufacturing or 
combining process is a minor one which leaves the identity of the 
article intact, a substantial transformation has not occurred. 
Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), 
aff'd 702 F. 2d 1022 (Fed. Cir. 1983).
    In HQ H125975, CBP held that an electronic data storage system that 
ensures data integrity and availability was a product of Mexico as a 
result of the assembly and programming operations that took place in 
Mexico. All of the systems hardware components were assembled into the 
final product in Mexico and its foreign-origin controller assembly, 
already assembled into the final product, was reprogrammed with 
software in Mexico. It was stated that the system could not function in 
its intended manner without the software.
    This case considers a very similar product that will be assembled 
from subassemblies into its final form, loaded with software, and then 
configured to customer specifications, all in the same country. This 
process from assembly to configuration will start and end in the United 
States and may take more than two weeks to complete. According to the 
information submitted, the VistA Storage Solution cannot function in 
its intended manner without the downloaded software components. We also 
note there are various configuration tasks which take place throughout 
this process that are essential to the VA Contract purposes, such as 
configuring the servers to permit them to communicate on the VISN and 
deploy VMware, and mapping storage to hosts and creating raw device 
mapping to provide direct ``virtual machines'' access to storage 
devices. The NetApp and VMware vSphere Storage Best Practices \8\ is a 
technical report published by NetApp, detailing the flexible storage 
infrastructure designs offered by combining NetApp Storage Array, 
VMware, with servers and network switches, and intended for those 
architecting, designing, managing, and supporting such a storage 
infrastructure. In explaining the best practices for device mapping, 
various storage architecture concepts and constructs, and methods of 
configuration, it is clear that such tasks are not minimal or simple, 
but require a certain level of expertise to design and reach the 
desired storage infrastructure for particular systems like the VistA 
Storage Solution. Therefore, only considering the extent of processing 
that occurs within a given country, and noting the entire process will 
take place in the United States, we find that this factor weighs 
towards a United States country of origin determination for the VistA 
Storage Solution.
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    \8\ This technical report was published by NeApp with 
contributions from Cisco (Trey Layton), but is independent from 
Merlin. See Vaughn Stewart, Larry Touchette, et al., NetApp and 
VMware vSphere Storage Best Practices, NetApp Technical Report, TR-
3749, Version 2.1 (July 2010).
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Whether such Processing Renders a Product with a New Name, Character, 
and Use

    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 
(``HTSUS'')), 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 
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. 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. 84-85, 18 Cust. B. & Dec. 1044, 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 defines its use generally 
constitutes substantial transformation. See also 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); and 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); 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); and, 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 it was imported).
    It is claimed that Merlin will take several individual components 
and combine them in the United States to make an otherwise mere 
collection of hardware into a functional storage system, specifically 
compatible with the VA technology demands. These hardware components 
will not have pairing capability until the software components are 
downloaded, and it is claimed that their integration into the final 
product will impart the essential character of the VistA Storage 
Solution, substantially transforming the individual components that 
comprise it. In support, HQ H082476, dated May 11, 2010; HQ H034843, 
dated May 5, 2009; and, HQ H175415, dated October 4, 2011, are 
cited.\9\
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    \9\ Counsel for Merlin cites to ``Notice of Issuance of Final 
Determination Concerning Certain Ethernet Switches, 76 Reg. Reg. 
62431 (Oct. 7, 2011), issued as Customs Headquarters Ruling 
561568.'' HQ 561568, dated March 22, 2001, was published as 66 FR 
17222 and concerns bowling pin sets. The cited 76 Reg. Reg. 62431 
concerning Ethernet switches corresponds to HQ H175415, and the 
correct citation is provided above.
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    HQ H082476 held that a mass storage device was a product of the 
United because assembling 12 foreign-origin hardware components (a 
central processing unit, speed processing circuit, EEPROM, hard disk 
drive, memory module, etc.) and configuring them with U.S.-developed 
proprietary software, a process that took place entirely in the United 
States, constituted a substantial transformation. It was noted that the 
tariff classification of the assembled hardware without the software 
(8471.70.40, HTSUS) shifted

[[Page 43455]]

when the product was complete with the software (8471.80.10, HTSUS). 
The decision particularly emphasized the technical effort in loading 
the software, and that the ``customization and installation of firmware 
and application software make[s] what would otherwise be a non-
functioning rack storage unit, into [a] proprietary clustered 
technology.'' HQ H034843 held that USB flash drives were products of 
Israel or the United States because, though the assembly process began 
in China and the software and firmware were developed in Israel, the 
installation and customization of the firmware and software that took 
place in Israel or the United States made the USB flash drives 
functional, permitted them to execute their security features, and 
increased their value. HQ H175415 held that Ethernet switches were 
products of the United States because, though the hardware components 
were fully assembled into Ethernet switches in China, they were 
programmed with U.S.-origin operating software enabling them to 
interact and route within the network, and to monitor, secure, and 
access control of the network.
    Similarly, the substantial transformation of components into 
servers, storage arrays, or network switches per HQ H215555, HQ 
H125975, and HQ H241177, as noted above, is well documented, relying on 
the same principles discussed in HQ H082476, HQ H034843, and HQ 
H175415. This suggests that the servers, storage arrays, and network 
switches, each and of themselves, already have a determined use and 
character prior to their assembly into a VistA Storage Solution. As HQ 
732870 and HQ 734518 point out, when programming does not actually 
create a new or different product, it may not constitute a substantial 
transformation. Moreover, HQ 241177 notes certain ``software 
downloading'' does not amount to ``programming'' which ``involves 
writing, testing and implementing code necessary to make a computer 
function a certain way.'' Given these considerations, it would appear, 
for instance, that programming an imported, already functional, network 
switch just to customize its network compatibility, would not actually 
change the identity of the imported product as a network switch. 
However, the issue before us, with an end product that has functions 
and purposes beyond network connectivity, requires consideration beyond 
the function of one single component, but rather consideration of the 
integrated whole.
    In HQ H090115, CBP held, based on a totality of the circumstances, 
that subassemblies manufactured in China (media servers, media 
gateways, circuit packs, and telephone sets) were substantially 
transformed into a ``Unified Communications Solution'' product of the 
United States. The United States processing, lasting about 16 days, 
included configuring the software to the end users requirements and 
integrating the hardware and software to work as one functional unit. 
It was particularly noted that the software was developed and 
maintained exclusively in the United States, and added functionality to 
certain individual components and changed the functionality of others.
    In this case, you state there is only one foreign hardware 
component. Similar to HQ H090115, the foreign hardware component is 
assembled with other hardware components in the United States, loaded 
with software, and then configured to the end users requirements. This 
process occurs entirely in the United States, lasts about 16 days, and 
will also result in one functional unit. By integrating the network 
switch into the VistA Storage Solution, the result is not merely a 
network switch; rather, the network switch will be configured, per the 
added and customized software components, to specifically work with two 
other hardware components in a manner that permits storing and 
retrieving EHRs for a particular and complex medical network. The 
network switch, though it would be functional as a network switch prior 
to its assembly and configuration with the other components, would not 
be functional as the subject end product with its required purposes and 
functions.
    Moreover, though HQ H090115 notes that the development of the 
software is also relevant, in this case you state that there are three 
software components, two developed in the United States and one in 
Canada, all of which will be installed and configured in the United 
States. Particularly, StorageGRID will be customized in the United 
States to be compatible with the hardware components and the networked 
system, the various nodes enabled by StorageGRID will be built during 
the assembly process in the United States, and the access to storage 
enabled by StorageGRID will be enabled in the United States by mapping 
the storage to the servers. As noted in the discussion above concerning 
NetApp and VMware vSphere Storage Best Practices, these tasks are not 
minimal or simple, but require a certain level of expertise to design 
and reach the desired storage infrastructure for particular systems 
like the VistA Storage Solution.
    Therefore, only considering whether such processing renders a 
product with a new name, character, and use, and noting the manner in 
which the foreign hardware component and foreign software component are 
integrated to form an end product that functions differently than such 
components do on their own, we find that this factor weighs towards a 
United States country of origin determination for the VistA Storage 
Solution.\10\
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    \10\ This finding is made on the assumption that the four U.S.-
origin components of the VistA Storage Solution actually originate 
in the United States as claimed in the final determination request.
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Additional Factors

    Aside from the factors above weighing towards a finding that the 
VistA Storage Solution is a product of the United States for purposes 
of U.S. Government Procurement, we note additional factors that lead to 
this conclusion. While changes in tariff classification are not 
determinative, the two foreign components, the Cisco Network Switch 
(8471.80.1000, HTSUS) and StorageGRID (8523, HTSUS), will change in 
tariff classification once configured and integrated into the final 
product (8471.70, HTSUS). See HQ H082476. Additionally, the cost 
breakdown per each hardware component places the most value on the 
NetAPP Storage Array, followed by the Cisco Server, and then the Cisco 
Network Switch; while the cost breakdown per each software component 
places the most value on Novell; followed by VMware, and then 
StorageGRID.\11\
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    \11\ Aside from the values per component provided by Merlin in 
the email, dated May 29, 2015, these values aligned with the values 
per unit costs estimated from Merlin's Product Catalog, dated 
October 1, 2013, and similarly reflected by Cisco prices, consumer 
reports, and other price databases.
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    In summary, Merlin produces the VistA Storage Solution using six 
main components (three hardware components and three software 
components), from which only two components are of foreign-origin. The 
components will be combined, loaded with software, and then configured 
using skilled technical effort to design and reach the desired storage 
infrastructure for the VistA Storage Solution. The customization of the 
components and further installation of the software and firmware make 
what would otherwise be a non-functional rack storage unit into 
Merlin's proprietary networked storage system, the VistA Storage 
Solution. This process, from combining the two U.S.-origin hardware 
components and one foreign-origin hardware component to installing the 
two U.S.-origin software

[[Page 43456]]

components and one foreign-origin software component, occurs entirely 
in Virginia, United States in a period of up to 16 days. As a result of 
the processing in the United States, based on the totality of the 
circumstances and assuming that four of the components actually 
originate in the United States as claimed, we find that the imported 
hardware and software components will be substantially transformed. 
Therefore, the country of origin of the VistA Storage Solution will be 
the United States for purposes of U.S. Government procurement.
HOLDING:
    Based on the facts provided, the hardware and software components 
will be substantially transformed through an assembly process that 
occurs entirely in the United States. As such, the VistA Storage 
Solution will be 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 CFR 177.29. Any party-at-interest other 
than the party which requested this final determination may request, 
pursuant to 19 CFR 177.31, that CBP reexamine the matter anew and issue 
a new final determination. Pursuant to 19 CFR 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,
Harold Singer, Acting Executive Director
Regulations and Rulings
Office of International Trade
[FR Doc. 2015-17963 Filed 7-21-15; 8:45 am]
BILLING CODE P