[Federal Register Volume 82, Number 165 (Monday, August 28, 2017)]
[Notices]
[Pages 40783-40786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18202]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs And Border Protection


Notice of Issuance of Final Determination Concerning Country of 
Origin of Tablet Computers for Health Mobile and Hub Platforms

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 tablet computers known as Vivify Health Mobile and 
Hub Platforms. Based upon the facts presented, CBP has concluded in the 
final determination that for purposes of U.S. Government procurement in 
the installation of proprietary software on tablet computer does not 
substantially transform the imported tablet computers.

DATES: The final determination was issued on August 22, 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 September 27, 2017.

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

SUPPLEMENTARY INFORMATION: Notice is hereby given that on August 22, 
2017, pursuant to subpart B of Part 177, Customs and Border Protection 
(CBP) Regulations (19 CFR part 177, subpart B), CBP issued a final 
determination concerning the country of origin of tablet computers 
which may be offered to the United States Government under an 
undesignated government procurement contract. This final determination, 
HQ H284523, was issued at the request of Vivify Health Inc. under 
procedures set forth at 19 CFR part 177, subpart B, which implements

[[Page 40784]]

Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 
2511-18). In the final determination, CBP was asked to consider whether 
the loading of the specialized software onto a tablet computer that
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that 
notice of final determinations 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: August 22, 2017.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H284523

August 22, 2017

OT:RR:CTF:VS: H2854523 RSD

CATEGORY: Origin

Stuart P. Seidel, Esq.
Baker & McKenzie LLP
815 Connecticut Avenue,
Washington, DC 20006-4078

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. Sec.  2511); Subpart B, Part 177, CBP Regulations; 
Tablet Computers, Health Mobile and Hub Platforms

Dear Mr. Seidel:

    This is in response to your letter of March 20, 2017, on behalf 
of Vivify Health, Inc. (Vivify), requesting a final determination 
concerning the country origin of a product that you refer to as a 
``home health mobile platform and hub'', pursuant to subpart B of 
Part 177, U.S. Customs and Border Protection (CBP) Regulations (19 
CFR 177.21, et seq.). Under the pertinent regulations, which 
implement 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. You state in your letter that this request 
is being made pursuant to a letter from the Department of Veterans 
Affairs (VA) to the prime contractor, Iron Bow Technologies, LLC 
(Iron Bow), requiring the filing of a request for a substantial 
transformation ruling from U.S. CBP.
    As a domestic manufacturer, Vivify is a party-at-interest within 
the meaning of 19 CFR 177.22(d)(1) and is entitled to request this 
final determination.

FACTS:

    The specific product at issue, referred to as the Vivify Mobile 
Device Platform and Hub Platform, begins as a tablet computer. The 
tablet computers are produced in Vietnam by one of the leading 
tablet manufacturers. The tablets are intended for purchase by the 
Veterans Health Administration for use by patients at home who will 
collect their health data that is measured by other peripheral 
devices such as blood pressure monitors, blood glucose monitors etc. 
These other devices are not imported with the tablet.
    Vivify's supplier purchases the tablets in the United States 
from an authorized reseller. In the United States, one of Vivify's 
Hub production partners partially disassembles the case and adds a 
Bluetooth speaker microphone array that was assembled in Hong Kong, 
an ``on-the-go'' USB hub manufactured in China, and the housing, 
custom designed in the United States and Israel and manufactured in 
California, USA and Israel. All the above Hub Platform sub-
components are shipped to facilities in Texas and in California for 
a final test fit, assembly, configuration and, then shipped for 
Quality Assurance testing in Tempe Arizona.
    In order to collect the health data from each patient/user, 
Vivify installs specialized software (Vivify Health Pathways) onto 
the tablet computers. According to the information provided, the 
software was developed entirely in the United States, at Vivify's 
corporate headquarters in Plano, Texas at a cost of several million 
dollars using a team of more than 30 persons. The software enables 
patients to provide vital sign data and their responses to clinical 
questions. This application is installed on the tablet to meet the 
VA's requirements for medical devices, including patient 
confidentiality and interoperability with VA systems and protocols. 
In addition, this software disables the generic applications that 
would be normally used on the tablets. After the patient data is 
collected, it is next forwarded to VA clinicians over the VA 
intranet.

ISSUE:

    Whether the imported tablets are substantially transformed by 
the installation of Vivify's proprietary software, so as to make 
them a product of the United States.

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. 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 CFR 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 177.21. In this regard, CBP recognizes that the Federal 
Acquisition Regulations restrict the U.S. Government's purchase of 
products to U.S.-made or designated country end products for 
acquisitions subject to the Trade Agreements Act. See 48 CFR 
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 name, character, or use distinct from that of the 
article or articles from which it was transformed.'' See 48 CFR 
25.003.
    ``The term `character' is defined as `one of the essentials of 
structure, form, materials, or function that together make up and 
usually distinguish the individual.''' Uniden America Corporation v. 
United States, 120 F. Supp. 2d. 1091, 1096 (citations omitted) (Ct. 
Int'l Trade 2000), citing National Hand Tool Corp. v. United States, 
16 Ct. Int'l Trade 308, 311 (1992). In Uniden, concerning whether 
the assembly of cordless telephones and the installation of their 
detachable A/C (alternating current) adapters constituted instances 
of substantial transformation, the Court of International Trade 
applied the ``essence test'' and found that ``[t]he essence of the 
telephone is housed in the base and the handset.''
    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. 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. 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.'' In addition, the court noted that 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

[[Page 40785]]

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.'' Accordingly, 
the programming of a device that confers its identity as well as 
defines its use generally constitutes a 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 constitutes a 
substantial transformation); and, HQ 733085, dated July 13, 1990; 
but see HQ 732870, dated March 19, 1990 (formatting a blank diskette 
does not constitute a substantial transformation because it does not 
add value, does not involve complex or highly technical operations, 
and does 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 has already been determined when the 
importer imported it).
    HQ H258960, dated May 19, 2016, reviewed the country of origin 
of hardware components of certain transceivers in two scenarios that 
are instructive to the case at issue here. The hardware components 
of the transceivers were wholly manufactured in a foreign country 
and imported into the United States. In the first scenario, the 
transceivers were ``blanks'' and were completely non-functional and 
specialized proprietary software was developed and downloaded in the 
United States, making the transceivers functional and compatible 
with the OEM technology. In the second scenario, the transceivers 
were preprogrammed with a generic program that was replaced with the 
specialized proprietary software. It was argued that in both 
scenarios, the imported hardware was substantially transformed by 
the development, configuration, and downloading operations of the 
United States origin software. As in this case, the expenses for the 
work performed in the United States were noted to far outweigh the 
work performed abroad. In the first scenario, we found that the non-
functional transceivers were substantially transformed as a result 
of downloading performed in the United States, with proprietary 
software developed in the United States. However, in the second 
scenario, it was determined that since the transceivers had generic 
network functionality, programming them merely to customize their 
network compatibility would not actually change the identity of the 
imported transceivers. See also HQ H241177 supra. Accordingly, it 
was determined that the country where the last substantial 
transformation occurred was China or another Asian country where the 
hardware components were manufactured.
    In this case, you contend that the software downloading 
operations performed in the United States transform the generic 
tablet computers into medical devices. You further explain that the 
cost of writing the software programming far outweighs the cost of 
the imported generic tablets. You emphasize that the U.S. operations 
disable the Android applications and install health monitoring 
software that cannot be undone by third parties during the normal 
course of operations. Therefore, you contend that this operation 
changes the classification of the tablet from Heading 8471 of the 
Harmonized Tariff Schedule of the United States (HTSUS) to a medical 
device of Heading 9018, HTSUS.
    In essence, what is being done by the installation of the 
software in the United States, is to limit the original capacity of 
the imported tablets for the purpose of facilitating the reception, 
collection and transmission of a patient's medical data to VA 
clinicians for their review. The original tablet has the ability to 
perform these functions, but it was determined that for ease of use 
and for other reasons it is best to disable these functions and to 
consolidate them in one function via the specialized software. It is 
stated that the general functionality of the tablet is removed and 
replaced so that it is easier for patients to use the device and 
access the system. It is also stated that the security of the 
patient's medical data will be better protected.
    It is clear that loading the specialized software onto the 
tablet computer that remains fully functional as a computer would be 
insufficient to constitute a new and different article of commerce, 
since all of the functionality of the original computer would be 
retained. In this case, however, in addition to the addition of the 
software, we are being asked to consider the effect of disabling the 
general applications that have been programmed onto the tablet. In 
our judgment, this added factor does not cause or require a 
different result. The functions of the original tablet produced in 
Vietnam that are necessary to receive and transmit data are in 
essence still present on the modified tablet, as aided by the 
software. While the tablet is no longer a freely programmable 
machine, we find the imposition of this limitation is insufficient 
to constitute a substantial transformation of the imported tablets.
    Furthermore, we note that the converted tablets loaded with the 
Vivify Pathway Software do not actually measure any health related 
functions, such as blood pressure, or oxygen saturation levels, nor 
do they provide any medical treatment to patients. Instead, the 
converted tablets function to receive medical data that is obtained 
from other peripheral devices, such as a blood pressure cuff or an 
oxygen sensor, and to transmit that medical data to a clinician for 
review. Therefore, it appears that after the proprietary software is 
downloaded onto the tablets, they function basically as a type of 
communications device.
    It is also claimed that the FDA considers the Mobile Device 
Platform and the Hub Platform to be medical devices, and thus 
counsel contends that CBP should also consider the tablets loaded 
with the Vivify software to be medical devices rather than tablets. 
We note, however, that FDA's determinations on whether any items are 
considered medical devices are based upon different criteria from 
what CBP must apply in determining the country of origin of a 
product using the substantial transformation test. In HQ H019436, 
dated March 17, 2008, CBP considered the tariff classification of a 
SONA Sleep Apnea Avoidance Pillow (pillow), imported from China. The 
ruling noted that while the subject merchandise was considered a 
Class II therapeutic cervical pillow for snoring and mild sleep 
apnea by the FDA, this determination, did not control the tariff 
classification. Similarly in this case, the FDA's determination that 
the imported tablets are medical devices is of limited relevance to 
CBP's determination as to the country of origin of the devices.
    In reviewing the processing performed in the United States on 
the imported tablets under consideration, we note that it is 
analogous to the situation of the transceivers described by the 
second scenario of HQ H258960. The imported tablets are 
preprogrammed with a generic program, which is the standard android 
operating system, prior to their importation. When they are first 
imported, the tablets can perform all of the standard functions of 
an android tablet, and could in their imported condition be used in 
conjunction with the proprietary software, but are customized for 
use. Accordingly, like the transceivers described in the second 
scenario of HQ H258960, we find that the name, character, and use of 
the imported tablet computers remain the same. Therefore, we further 
find that the imported tablets are not substantially transformed in 
the United States by the downloading of the proprietary software, 
which allows them to function with the VA Healthcare network. After 
the Vivify Health Pathways software is downloaded, the country of 
origin of the imported tablets remains the country where they were 
originally manufactured, which in this case is Vietnam.

HOLDING:

    Based on the facts of this case, the imported tablets used with 
Home Health Hub platform are not substantially transformed by the 
installation of the proprietary Vivify Health Pathways software. 
Therefore, the country of origin of the tablets will remain the 
country where they were originally manufactured.
    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

[[Page 40786]]

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. 2017-18202 Filed 8-25-17; 8:45 am]
 BILLING CODE 9111-14-P