[Federal Register Volume 81, Number 3 (Wednesday, January 6, 2016)]
[Notices]
[Pages 496-498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-33245]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Certain 
Multifunction Printer Products

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 multifunction printer products known as 
bizhub C3850FS multifunction digital printers (``bizhub MFP''). Based 
upon the facts presented, CBP has concluded that the country of origin 
of the bizhub MFP is Japan for purposes of U.S. Government procurement.

DATES: The final determination was issued on December 23, 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 February 5, 2016.

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 December 23, 
2015, 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 certain multifunction 
printer products known as bizhub C3850FS multifunction digital 
printers, which may be offered to the U.S. Government under an 
undesignated government procurement contract. This final determination, 
HQ 263561, 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 the processing in Japan resulted in a substantial 
transformation. Therefore, the country of origin of the bizhub MFP is 
Japan 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 23, 2015.
Myles B. Harmon,
Acting Executive Director, Regulations and Rulings, Office of 
International Trade.
Attachment

HQ H263561

December 23, 2015

OT:RR:CTF:VS H263561 AJR

CATEGORY: Origin

Daniel E. Waltz, Esq., Squire Patton Boggs (US) LLP, 2550 M Street, 
NW., Washington, DC 20037

RE: U.S. Government Procurement; Country of Origin of Multifunction 
Printers; Substantial Transformation

    Dear Mr. Waltz: This is in response to your letter, dated March 
23, 2015, requesting a final determination on behalf of Konica 
Minolta (``K/M''), pursuant to subpart B of part 177 of the U.S. 
Customs and Border Protection (``CBP'') Regulations (19 CFR part 
177). Under these regulations, which implement Title III of the 
Trade Agreements Act of 1979 (``TAA''), as amended (19 U.S.C. 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 K/M's 
bizhub C3850FS multifunction digital printers (``bizhub MFP(s)''). 
We note that K/M is a party-at-interest within the meaning of 19 CFR 
177.22(d)(1) and is entitled to request this final determination.

FACTS:

    K/M plans to sell its bizhub MFPs to the U.S. government. The 
bizhub MFPs are multifunction color machines that perform printing, 
copying, scanning, and faxing functions. According to K/M's counsel, 
the bizhub MFP was designed and developed in Japan, and its most 
important and complex components will be manufactured in Japan. The 
assembly process for the bizhub MFPs will start in Thailand and 
finish in Japan, assembling a total of 11 subassemblies into the 
final bizhub MFP product.

Assembly Processes in Thailand:

    In Thailand, the following four subassemblies (collectively, 
``Subassemblies 1-4'') will be assembled into their final form 
within the bizhub MFP's frame:
    1. The Print Head will be produced in Thailand from five sub-
components:
     a G1 lens manufactured in Japan;
     a G2 lens manufactured in Japan;
     a polygonal motor manufactured in China;
     a housing case manufactured in China; and,
     a laser diode manufactured in Taiwan.
    According to K/M's counsel, while the quantity at which the G1 
and G2 lenses are produced lowers their relative cost, the lenses 
are more complex than the other sub-components of the Print Head as 
noted by the higher skill and technology levels needed to produce 
them. The Print Head operates by reflecting a laser beam off of the 
lenses and onto the rotating polygonal mirrors in order to produce a 
copied image in the Latent Image Unit's photoconductor (``OPC''). 
The Print Head will be assembled into, and

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permanently integrated within, each bizhub MFP in Thailand.
    2. The Optical Lens will be manufactured in China from Chinese-
origin materials. It operates by accurately collecting the light 
reflected from external documents onto its lens. It will be 
assembled into, and permanently integrated within, each bizhub MFP 
in Thailand.
    3. The Charge Coupled Device (``CCD'') Board will be 
manufactured in China. It separates the colors collected by the 
Optical Lens, and converts them into independent colors. It will be 
assembled into, and permanently integrated within, each bizhub MFP 
in Thailand.
    4. The Mechanical Control Board will be manufactured in 
Thailand. It controls the bizhub MFP's input and output process 
through an engine that feeds the paper. It will be assembled into, 
and permanently integrated within, each bizhub MFP in Thailand.
    Additionally, six subassemblies (collectively, ``tested 
subassemblies'') will be assembled into the bizhub MFP for testing 
purposes, but then removed after testing, as follows:
    5. The Latent Image Unit will be produced in Thailand from three 
sub-components:
     OPC drums manufactured in Japan;
     a developer, with toner and carrier developing 
materials, manufactured in Japan; and,
     an electrostatic charging roller manufactured in Japan.
    The OPC drums receive the laser beam. Then, the developing 
materials and electrostatic charging roller sense the image being 
transmitted by the laser, regulate its thickness and precision, and 
transfer it to the Image Transfer Belt. The Latent Image Unit will 
be installed within a bizhub MFP for testing purposes, and then 
removed, while in Thailand.
    6. The Image Transfer Belt Unit will be manufactured in China 
from three sub-components:
     an image transfer belt manufactured in China;
     a 1st image transfer roller manufactured in China; and,
     a cleaning blade manufactured in China.
    It receives the single-color image from the Latent Image Unit 
and creates a multi-color image to transfer onto paper. The Image 
Transfer Belt Unit will be shipped to Thailand, where it will be 
installed within a bizhub MFP for testing purposes, and then 
removed.
    7. The 2nd Image Transfer Roller Unit will be manufactured in 
China. It supports the Image Transfer Belt Unit. The 2nd Image 
Transfer Roller Unit will be shipped to Thailand, where it will be 
installed within a bizhub MFP for testing purposes, and then 
removed.
    8. The Fusing Unit will be produced in Thailand from three sub-
components:
     a fusing belt manufactured in Japan;
     a fusing roller manufactured in China; and,
     a pressure sub-component manufactured in China.
    According to K/M's counsel, the fusing belt accounts for a 
significant percentage of the Fusing Unit's cost and is a key sub-
component. The Fusing Unit will be installed within a bizhub MFP for 
testing purposes, and then removed, while in Thailand.
    9. The Hard Disk Drive (``HDD'') will be manufactured in China 
or Thailand. It will be installed within a bizhub MFP for testing 
purposes, and then removed, while in Thailand.
    10. The Power Supply Unit will be manufactured in China. It will 
be shipped to Thailand, where it will be installed within a bizhub 
MFP for testing purposes, and then removed.

Assembly Process in Japan:

    Once the tested subassemblies are removed, the bizhub MFPs as 
assembled with Subassemblies 1-4 will be shipped to Japan without 
the tested subassemblies. Instead of shipping the tested 
subassemblies, six separate but identical subassemblies 
(collectively, ``Subassemblies 5-10,'' as described above) will be 
shipped to Japan for final assembly. In Japan, these integrated and 
unintegrated subassemblies will be assembled to completion with the 
following subassembly:
    11. The MFP Board will be manufactured from Japanese materials, 
and installed with Japanese-developed software, in Japan. According 
to K/M''s counsel, it constitutes the machine's ``brain'', 
integrating the printer and copier functions, and converting 
electric signals to digital signals, which are sent to the Print 
Head to create the image. It will be assembled into, and permanently 
integrated within, each bizhub MFP in Japan.
    The finished bizhub MFP will be tested, adjusted, and calibrated 
in Japan before shipment to the U.S. The testing conducted in Japan 
includes electronically adjusting the laser position and intensity 
of the laser diode's beam in the Print Head, and electronically and 
physically adjusting the Latent Image Unit to calibrate the unit's 
position and imaging accuracy. According to K/M's counsel, the 
testing conducted in Japan requires skilled workmanship, involving 
more complex and precise tests than the initial testing and 
adjustments conducted in Thailand.

ISSUE:

    What is the country of origin of the bizhub MFP for purposes of 
U.S. Government procurement?

LAW AND ANALYSIS:

    Pursuant to Subpart B of Part 177, 19 CFR 177.21 et seq., which 
implements Title III of the Trade Agreements Act of 1979, as amended 
(19 U.S.C. 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. 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 CFR 177.22(a).
    To determine whether the combining of parts or materials 
constitutes a substantial transformation, the determinative issue is 
the extent of operations performed and whether the parts lose their 
identity and become an integral part of the new article. Belcrest 
Linens v. United States, 573 F. Supp. 1149 (Ct. Int'l Trade 1983), 
aff'd, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are 
minimal or simple, as opposed to complex or meaningful, will 
generally not result in a substantial transformation. 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. CBP will make these decisions on a case-by-case basis, 
considering the totality of the circumstances. 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 various cases concerning similar merchandise, CBP has held 
that complex and meaningful assembly operations involving a large 
number of components will generally result in a substantial 
transformation. In Headquarters Ruling Letter (``HQ'') 562936, dated 
March 17, 2004, CBP addressed the country of origin of certain MFPs 
assembled in Japan of various Japanese- and Chinese-origin parts. 
CBP determined that the MFP was a product of Japan based on the fact 
that a ``substantial portion of the printer's individual components 
and subassemblies [were] of Japanese origin.'' Furthermore, CBP 
noted that some of the Japanese components and subassemblies were 
essential parts of the finished article, and other Japanese parts, 
including the reader scanner unit and the control panel unit, were 
critical to the production of the printer. Finally, CBP noted that 
the Japanese processing operations were complex and meaningful, that 
required ``the assembly of a large number of components, and 
render[ed] a new and distinct article of commerce that possesse[d] a 
new name, character, and use.''
    In HQ H025106, dated June 11, 2008, CBP addressed the country of 
origin of certain photocopying machines, which had photocopying, 
printing, faxing, and scanning functions. The machines were 
comprised of a scanning unit, controller unit subassembly, laser 
scanning unit, photoconductor unit, developer unit, transfer unit, 
and fusing unit. Three of these components were assembled into the 
machine's frame in China, and the rest were assembled into the frame 
in Japan,

[[Page 498]]

where the machines were completed. CBP noted that though the 
developer unit and transfer unit were assembled in China, enough of 
the subassemblies and individual components (e.g. the transfer belt 
and photoconductor unit, among others) were from Japan, with the 
photoconductor being made of entirely Japanese parts. It also noted 
that though the developer unit would be assembled in China, two of 
the unit's key components were from Japan; and while the transfer 
unit would be partially assembled in China, the transfer belt was 
from Japan. CBP also noted that there were a large variety of 
adjustments that were made to the subassemblies in Japan, using 
advanced equipment and firmware. As a result, CBP held that the 
country of origin of the machines was Japan because the Japanese and 
foreign origin parts were substantially transformed into the 
machines through the product assembly that took place in Japan. See 
also HQ H020516, dated November 7, 2008 (holding that the country of 
origin of certain MFPs was Japan, using the same reasoning as HQ 
562936 and HQ H025106, and also noting that the MFPs were designed 
and developed in Japan).
    Based on the facts presented, we note that though the assembly 
of the bizhub MFP will take place in Japan and Thailand, there are 
also operations that contribute to this assembly which will take 
place in China. In situations like these, no one country imparts the 
dominant portion of the work conducted. Nonetheless, based upon the 
applicable legal standard, we determine that, the frame and 
subassemblies of the bizhub MFP that will be imported into Japan 
will be substantially transformed in Japan such that Japan will be 
the country of origin for purposes of U.S. Government procurement. 
In making this determination, we note that only four of the bizhub 
MFP's subassemblies (i.e. Subassemblies 1-4) will be assembled into 
the bizhub MFP's frame in Thailand, while the remaining seven 
subassemblies (i.e. Subassemblies 5-10, plus the MFP Board) will be 
assembled into, and permanently integrated within, the bizhub MFP in 
Japan. Further, we note that the MFP Board (the ``brain'' of the 
bizhub MFP) will be manufactured from all Japanese parts, will be 
integrated into the bizhub MFP in Japan, and accounts for a 
significant percentage of total subassemblies cost. Although many of 
the individual subassemblies will be assembled outside of Japan, we 
note sufficient use of Japanese sub-components in producing these 
subassemblies, such as the fusing belt that will be used to make the 
Fusing Unit, and the OPC drums, developer, and electrostatic roller 
that will be used to make the Latent Image Unit. As a result, the 
Japanese subassemblies and sub-components collectively attribute a 
significant percentage of the total subassemblies cost. Moreover, 
though we note the importance of the subassemblies and sub-
components from Thailand and China, these subassemblies and sub-
components will be integrated into a product that was designed and 
developed in Japan, and will be operated by Japanese-developed 
software that will also be installed onto the bizhub MFP in Japan. 
See HQ H198875, dated June 5, 2012 (noting that a foreign HDD that 
was integrated into an MFP in Singapore and installed with Japanese 
software in Singapore contributed to the reason that the HDD was 
substantially transformed into the MFP in Singapore). In this case, 
K/M incurred significant resources in Japan by developing and 
designing the MFP product, and its proprietary software, in Japan. 
Finally, the assembly operations that occur in Japan will be 
sufficiently complex and meaningful. Through the product assembly, 
as well as the testing and adjustment operations, the individual 
subassemblies and sub-components of Japanese and foreign-origin will 
be subsumed into a new and distinct article of commerce that has a 
new name, character, and use. Therefore, under the totality of the 
circumstances, we find that the country of origin of the bizhub MFP 
will be Japan for purposes of U.S. Government procurement.

HOLDING:

    Based on the facts provided, the country where the last 
substantial transformation will take places is Japan. As such, the 
bizhub MFPs will be considered products of Japan 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,

Myles B. Harmon,

Acting Executive Director
Regulations and Rulings
Office of International Trade

[FR Doc. 2015-33245 Filed 1-5-16; 8:45 am]
 BILLING CODE P