[Federal Register Volume 82, Number 96 (Friday, May 19, 2017)]
[Notices]
[Pages 23015-23018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-10057]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning a Certain 
Visitor Management 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 a certain visitor management system known as the 
Raptor Basic System. Based upon the facts presented for purposes of 
U.S. Government procurement, CBP has concluded that China is the 
country of origin of the identification scanner and printer components 
of the Raptor Basic System, that the United States is the country of 
origin of the label component of the Raptor Basic System, and that 
Taiwan is the country of origin of the barcode scanner that is 
compatible with the Raptor Basic System.

DATES: The final determination was issued on May 08, 2017. 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 June 19, 2017.

FOR FURTHER INFORMATION CONTACT: Robert Dinerstein, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of Trade, at 
(202) 325-0132.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on May 08, 2017, 
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 a certain visitor 
management system known as the Raptor Basic System, which may be 
offered to the U.S. Government under an undesignated government 
procurement contract. This final determination, HQ H277116, 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 
identification scanner and printer components of the Raptor Basic 
System were not substantially transformed in the United States, and 
thus remain products of China. Additionally, CBP concluded that the 
label component of the Raptor Basic System was a product of the United 
States and that the barcode scanner that is compatible with the Raptor 
Basic System was a product of Taiwan. Therefore, for purposes of U.S. 
Government procurement, China is the country of origin of the 
identification scanner and printer components of the Raptor Basic 
System, the United States is the country of origin of the label 
component of the Raptor Basic System, and Taiwan is the country of 
origin of the barcode scanner that is compatible with the Raptor Basic 
System.
    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: May 08, 2017.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H277116

May 08, 2017

OT:RR:CTF:VS H277116 AJR

Ms. Heather Mims
Centre Law and Consulting LLC
8330 Boone Boulevard, Suite 300

[[Page 23016]]

Tysons, VA 22182

RE: U.S. Government Procurement; Country of Origin of a Visitor 
Management System

Dear Ms. Mims:

    This is in response to your letter, dated June 15, 2016, requesting 
a final determination on behalf of Raptor Technologies, LLC 
(``Raptor''), 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 the 
Raptor Basic System (``RBS''). We note that Raptor 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:

    Raptor provides security and safety products to schools across the 
United States, and plans to sell its RBS product to the U.S. 
Government. The RBS is a visitor management system that is typically 
installed in elementary schools and used as a screening tool. The RBS 
is comprised of a scanner, a printer, the Raptor software, and labels. 
Installation of the RBS requires the use of a customer provided 
computer, where the software is installed. Once the RBS is installed 
and ready for use, users are able to scan the identification cards of 
individuals visiting the school in order to obtain personal/public 
information pertaining to the visitor. Based on the information 
received, the user prints out a color coded visitor tag which signifies 
the access or identity type of the visiting person.
    Specifically, the RBS consists of the Raptor software, one roll of 
Blanco labels, one Acuant Duplex ID scanner (``ID scanner''), and one 
Dymo printer. Along with the cost for these items, the software 
updates, database set-up, and shipping fee are integrated into the RBS 
price. Additional ID scanners, printers, and labels can be purchased 
for use with the RBS, along with barcode scanners that are also 
compatible with the system. According to Raptor, the RBS and its 
compatible products are produced for sale in the United States as 
follows:
    (1) Raptor Software: Raptor developed the software for the RBS in 
the United States. Additionally, Raptor's engineers write the source 
code for the software in the United States, and Raptor will install the 
software to customer specifications onto the RBS in the United States. 
The software is a critical component because it controls the entire 
system enabling it to manage, report, send, alert, and track all 
visitors entering public or private premises, along with notifying the 
Raptor technical support team about any potential issues. The software 
connects and communicates with the printers, scanners, and customer-
provided computers within the system. The software accounts for 30 
percent of the RBS price. Additionally, the software makes the RBS 
operational by automatically updating and permitting access to various 
databases, including the RBS database, which is also located in the 
United States. Raptor spends approximately two hours setting up the 
database, and training its customers how to use the system, which 
accounts for 21.86 percent of the RBS price. Together the cost of the 
software, database set-up, and training for the RBS system account for 
51.86 percent of the RBS price.
    (2) Blanco Labels: Blanco, Inc. develops and manufactures the 
labels in the United States, and the labels are printed with the Raptor 
logo in the United States. The RBS only uses these labels for the 
temporary badges and passes that it prints. The labels account for 6.25 
percent of the RBS price.
    (3) Acuant Duplex ID Scanner: The ID scanner consists of a hardware 
component made in China and a software component developed by Acuant 
(``Acuant software'') in the United States. The Acuant software is 
loaded onto the hardware component in the United States, and permits 
the ID scanner to communicate with the Raptor software. Raptor states 
that without the Raptor software, the ID scanner would not be an 
integral part of the RBS. The ID scanner accounts for 30.93 percent of 
the RBS price.
    (4) Dymo Printer: Dymo designs and engineers the printer in the 
United States and manufactures the printer in China. The printer 
communicates with the Raptor software, and Raptor states that without 
this software, the printer would not print the specific visitor badges 
or passes. The printer accounts for 8.68 percent of the RBS price.
    (5) Barcode Scanner: The barcode scanner is not required for the 
RBS, but is compatible with the system. Scan Technology Inc. 
manufactures the barcode scanner in Taiwan with parts that are also 
from Taiwan. The barcode scanners are also inspected and tested in 
Taiwan before they are shipped to the United States. While the barcode 
scanners are not part of the RBS, and will not be included within the 
RBS price, the purchase price for one barcode scanner comes to 
approximately 10 percent of the RBS price.
    The final assembly of the RBS occurs in the United States. 
According to Raptor, this process is complex and uses skilled 
technicians to complete it. This assembly takes approximately one hour 
per system and sometimes there are several systems installed in one 
school. The final testing of the RBS printers, scanners, and software 
also occurs in the United States. According to Raptor, it takes 
approximately one hour to test a system with a skilled technician, but 
some locations require testing multiple systems. Additionally, Raptor 
technicians train the users on how to use the system in the United 
States, and this training takes approximately one hour.

ISSUE:

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

LAW AND ANALYSIS:

    Pursuant to subpart B of Part 177, 19 C.F.R. Sec.  177.21 et seq., 
which implements Title III of the 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.
    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 order to determine whether a substantial transformation occurs 
when the components of various origins are assembled to form completed 
articles, CBP considers the totality of the circumstances and makes 
decisions on a

[[Page 23017]]

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. Here, the 
determination will be a ``mixed question of technology and customs law, 
mostly the latter.'' Texas Instruments v. United States, 681 F.2d 778, 
782 (CCPA 1982).
    In this case, Raptor acquires scanners and printers that were 
manufactured outside of the United States and installs onto them the 
Raptor software that was developed in the United States. The 
installation of the Raptor software takes place in the United States, 
and Raptor further customizes these devices with the software for each 
of its customers in the United States, as well as trains its customers 
on how to use the system. This package of hardware components, software 
components, and services are integrated together by Raptor as the RBS, 
which is the product being sold to the U.S. Government.
    Raptor believes that the country of origin of the RBS is the United 
States reasoning that the printers, scanners, labels, and software are 
substantially transformed into the RBS in the United States by 
installing critical software in the United States. Raptor also believes 
that the software, ID scanner, printer, and label components of the RBS 
are individually products of the United States, and that the RBS-
compatible Barcode scanner is a product of Taiwan.
    With regard to the Raptor software, Raptor argues that software is 
substantially transformed into a new article of commerce where the 
software build takes place, citing to HRL H268858, dated February 12, 
2016.\1\ However, while HRL H268858 took into account the development 
of the software as a factor in substantial transformation, it did not 
state that the intangible software itself was a product of a particular 
origin. Rather, it decided that the intangible software, partially 
developed in the United States, and tangible U.S.-origin blank discs, 
when combined by loading the software onto the discs, resulted in one 
product of the United States.
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    \1\ Raptor also cites to HRL H192146, dated June 8, 2012, which 
is a non-binding advisory ruling.
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    Unlike HRL H268858, where CBP determined the country of origin of a 
tangible product, here we have no indication that the Raptor software 
by itself is a tangible product prior to its integration with the 
scanners and printers of the RBS. In rendering final determinations for 
purposes of U.S. Government procurement, CBP recognizes that the 
Federal Acquisition Regulation (``FAR'') restricts the U.S. 
Government's purchase of products to U.S.-made or designated country 
end products for acquisitions subject to the TAA, which excludes 
automatic data processing (``ADP'') telecommunications and transmission 
services, and related services. See 19 C.F.R. Sec.  177.21; and, 
subpart 25.4, FAR (48 C.F.R. Subpart 25.4). See also General Note 3(e), 
Harmonized Tariff Schedule of the United States (``HTSUS'') (stating 
that that telecommunication transmissions are not goods subject to the 
provisions of the tariff schedule, and as such would not require a 
country of origin marking). To the extent the Raptor software is an 
intangible product developed in the United States and transmitted via 
intangible signals, the Raptor software, by itself, is not subject to 
the country of origin determinations issued by CBP for purposes of U.S. 
Government procurement.
    However, the ID scanner and printer, which are tangible products 
imported into the United States are subject to the country of origin 
determination issued by CBP. In this regard, CBP may look at the 
process of loading U.S.-developed software onto these products in the 
United States when considering the extent of processing that occurs 
within the United States under the substantial transformation test. 
While Raptor argues that this process will transform the ID scanner and 
printer into products of the United States, we disagree as explained 
below.
    Here, both the development and loading of the software take place 
in the United States. However, the ID scanners and printers in this 
case serve as scanners and printers, even before software is loaded 
onto them in the United States. While the Acuant software gives the ID 
scanner the particular features of an Acuant branded scanner, and while 
the Raptor software gives the ID scanner and printer the ability to 
function within the RBS, this does not change the fact that these 
products have a predetermined use prior to having software installed 
onto them in the United States. See HRL H215657, dated April 29, 2013 
(holding that the process of developing and installing software onto 
foreign flashlights in the United States did not change the basic 
operations of the flashlight). Likewise, the process of customizing the 
RBS to work with multiple devices and multiple databases, or the 
process of training the customer how to use the system, will not 
transform the scanner into something other than a scanner or the 
printer into something other than a printer. See generally National 
Hand Tool Corp. v. United States, 16 Ct. Int'l Trade 308, 311 (1992) 
(holding that processing in the United States did not substantially 
transform tools already shaped for a predetermined use prior to 
importation into the United States).
    Raptor also cites to HRL H039856, dated August 12, 2009, to argue 
that the RBS is a product of the United States. In HRL H039856, various 
components of foreign origin, including a printer control unit and 
laser scanning unit, were imported into Japan and assembled into 
multifunction printers (``MFP(s)''). CBP has considered similar MFP 
cases on various occasions. In these cases, various components, 
including printer unit and scanner unit subassemblies, are physically 
integrated together to create an MFP capable of printing, scanning, and 
similar operations. Prior to this assembly, these subassemblies lack 
these capabilities. See HRL H263561, dated December 23, 2015; HRL 
H025106, dated June 11, 2008; and, HRL 562936, dated March 17, 2004. 
Unlike these MPF cases, the scanner and printer in this case do not 
require integration into the RBS to function as scanners and printers. 
Moreover, integrating the scanner and printer components into the RBS 
does not result in a printer and scanner that are physically assembled 
together. That is, after integration into the system, the scanner will 
look like the same scanner, and the printer like the same printer, both 
still without permanent physical attachments to other tangible 
products. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 
1026 (1982), aff'd 702 F. 2d 1022 (Fed. Cir. 1983) (noting that if the 
manufacturing or combining process is a minor one which leaves the 
identity of the article intact, a substantial transformation has not 
occurred).
    We also disagree with Raptor's argument that the various hardware 
component parts of the RBS cannot function as a visitor management 
system without the Raptor software, citing to HRL H090115, dated August 
2, 2010, and HRL H21555, dated July 13, 2012. The software installation 
process in HRL H090115 was only part of the 16 day process that 
rendered a substantial transformation, and thus is distinguished from 
this case which only involves a one to three hour process per system, 
mainly focusing on the software installation. Similarly we distinguish 
HRL H21555 because that case involved microcomputer devices which could 
not function without the proprietary software, whereas this case 
involves printers and scanners that are functional without the Raptor 
software.

[[Page 23018]]

    Additionally, we note that the ID scanner and printer are products 
that can be individually purchased and used outside of the system 
without the Raptor software. Thus, whether these products are 
substantially transformed into the RBS is really a question of whether 
the software development and loading are sufficient to transform these 
individual products into a different article of commerce, the RBS. As 
indicated above, regardless of the software installed onto the ID 
scanner and printer, the ID scanner and printer already have their 
respective functions as scanners and printers prior to their 
incorporation into the system. They function as scanners and printers 
when they are manufactured in China, their basic functions in this 
regard do not change once imported into the United States, and their 
physical appearance will remain the same even after integrated into the 
RBS. Accordingly, the ID scanner and printer remain products of China 
for purposes of U.S. Government procurement.
    With regard to the Blanco labels, Raptor indicates that such will 
be designed and manufactured in the United States. Similarly, Raptor 
indicates that the barcode scanner will be manufactured entirely in 
Taiwan. Raptor provides affidavits signed by the label manufacturer and 
barcode scanner manufacturer stating that such are products of the 
United States and Taiwan, respectively. To the extent that the labels 
and barcode scanner are products from the United States and Taiwan, 
respectively, each may be individually compliant under the TAA.
    While the labels are products that are integrated within the RBS, 
their country of origin does not change the country of origin of the ID 
scanner and printer within the RBS. In a number of rulings CBP stated, 
``merely packaging parts of a kit together does not constitute a 
substantial transformation.'' See HRL 732498, dated October 3, 1989; 
and HRL 732897, dated June 6, 1990. As noted from these rulings, 
packaging the ID scanner and printers with the labels does not 
substantially transform these products because such are already in 
their finished forms, not modified or affixed to each other, or 
combined in a permanent matter. Accordingly, the ID scanner and 
printers remain products of the country where they will be 
manufactured, China.

HOLDING:

    Based on the facts provided, the integration of the ID scanner, 
printer, and labels via the Raptor software into the RBS does not 
substantially transform these individual products into a product of the 
United States. Rather, for purposes of U.S. Government procurement, the 
labels are products of the United States, and the ID scanner and 
printer remain products of China because they are not substantially 
transformed by the processes that take place in the United States. 
Moreover, to the extent the RBS-compatible barcode scanner is 
manufactured in Taiwan, it is a product of Taiwan 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,

Alice A. Kipel, Executive Director
Regulations and Rulings
Office of Trade

[FR Doc. 2017-10057 Filed 5-18-17; 8:45 am]
 BILLING CODE P