[Federal Register Volume 83, Number 42 (Friday, March 2, 2018)]
[Notices]
[Pages 9017-9021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04273]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determinations Concerning Country of 
Origin of the Hub and Mobile Platforms, and the AMC Home Tele-Health 
System

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determinations.

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SUMMARY: This document provides notice that U.S. Customs and Border 
Protection (``CBP'') has issued two final determinations concerning the 
country of origin of tablet computers and smart phones known as the Hub 
and Mobile Platforms, and CareConsole Hub and Mobile Hub. CBP has 
concluded in the final determinations that for purposes of U.S. 
Government procurement the installation of proprietary software on 
tablet computers or smart phones does not substantially transform the 
imported tablet computers or smart phones.

DATES: The final determinations were issued on February 21, 2018. 
Copies of the final determinations are attached. Any party-at-interest, 
as defined in 19 CFR 177.22(d), may seek judicial review of these final 
determinations within April 2, 2018.

FOR FURTHER INFORMATION CONTACT: Joy Marie Virga, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of Trade (202-325-
1511).

SUPPLEMENTARY INFORMATION: Notice is hereby given that on February 21, 
2018, CBP issued two final determinations concerning the country of 
origin of tablet computers, smart phones, and systems, which may be 
offered to the United States Government under an undesignated 
government procurement contract. These final determinations, HQ H284834 
and HQ H284617, were issued at the request of 1Vision, LLC and Care 
Innovations, LLC, respectively, 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 
determinations, CBP was asked to consider whether disabling the general 
applications of a tablet computer or smart phone and loading 
specialized software onto the device, enabling a patient to provide 
medical information to the VA, constituted a substantial 
transformation. In one final determination, CBP was further asked if 
the integration of the altered tablets and smartphones into a larger 
telehealth system constituted a substantial transformation. In the 
final determinations, CBP concluded that these activities do not 
constitute a substantial transformation and the origin of the tablet 
computers, smart phones, and systems remains the original country of 
manufacturing.
    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: February 21, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H284834

February 21, 2018

OT:RR:CTF:VS: H284834 JMV

CATEGORY: Origin

George W. Thompson, Esq. Thompson & Associates, PLLC 1250 Connecticut 
Ave. NW, Suite 200 Washington, DC, 20036

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, CareConsole Hub and Mobile Hub

Dear Mr. Thompson:

    This is in response to your letter of March 20, 2017, on behalf 
of 1Vision, LLC (``1Vision''), requesting a final determination 
concerning the country origin of a product that you refer to as the 
AMC Home Tele-health System (``Tele-health System'' or ``the 
System''), pursuant to subpart B of Part 177, U.S. Customs and 
Border Protection (CBP) Regulations (19 C.F.R. Sec.  177.21, et 
seq.). You state in your letter that this request is being made 
pursuant to a contract with the Department of Veterans Affairs (VA) 
with 1Vision requiring the filing of a request for a country of 
origin determination from CBP.
    As a domestic producer, 1Vision 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:

    The products at issue are the Tele-health System in its entirety 
and the components, the CareConsole Hub and the Mobile Hub. The 
CareConsole Hub and the Mobile Hub, respectively, begin as a tablet 
computer and a smart phone. The CareConsole Hub is produced in the 
Republic of Korea and the Mobile Hub is produced in China. Both 
products are intended for purchase by the Veterans Health 
Administration for use by patients at home. The CareConsole Hub and 
the Mobile Hub are designed to collect health data that is measured 
by other peripheral devices, such as blood pressure cuffs, blood 
glucose monitors, etc. These other peripheral devices are not 
imported with the tablet and could be used ``as is'' within the 
1Vision ecosystem, without any changes.
    In the United States, the tablet and smart phone go through a 
number of software uninstallations and installations. The generic 
Android functions originally included on the devices, such as 
alarms, calculators and text messaging, are removed. In order to 
enable the devices to function within the Tele-health System, other 
functions, such as Bluetooth capability, are modified and additional 
software is added. In addition, 1Vision also further processes the 
devices to include additional security mechanisms and to enable them 
to function in Plain Old Telephone Systems (``POTS''), an analog 
telephone service that continues to be the basic form of home and 
small business service connection to telephone networks.
    Finally, the AMC CareConsole Mobile Application is installed on 
both devices. According to the information provided, this software 
was developed entirely in the United States. The software enables 
the patient to provide vital sign data by connecting to the 
peripheral devices via Bluetooth. The patient's information is then 
forwarded to VA clinicians over the VA intranet. 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. After the software installation is 
completed, the tablets cannot run any other program and cannot be 
reprogrammed to perform any other function.
    The CareConsole Hub and Mobile Hub are then integrated into the 
Tele-health System, which also includes servers, data storage, 
networking, additional software, and health monitoring devices such 
as blood pressure cuffs and glucose monitors. The integration 
process consists of the CareConsole Hub or Mobile Hub contacting the 
Tele-health System, hosted in the VA data centers, which then sends 
an activation code and

[[Page 9018]]

configuration file to the CareConsole Hub or Mobile Hub. The 
CareConsole Hub and Mobile Hub are then automatically configured to 
the peripheral health monitoring devices.
    All the components, other than the CareConsole Hub and Mobile 
Hub, come from the United States, Mexico, Japan, Taiwan, Ireland, or 
the Republic of Korea. These components are customized as necessary 
to function in conjunction with each other. The CareConsole Hub and 
Mobile Hub collect information from the patients in their homes and 
transmit that data to the Tele-health System. The information is 
then presented to the VA Care Coordinators through the web 
application. The Tele-health System's various components are 
installed at multiple locations, including in the patients' homes, 
VA data centers and VA offices.
    Like the Hub and Mobile Hub, the servers also cannot be used out 
of the box and must be customized. The servers are acquired without 
an operating system or software and are inoperable until software is 
installed. The servers are first installed at the VA Facility. The 
installation process takes five business days as it involves various 
assembling, configuring and testing processes. The final step is to 
load the AMC CareConsole software onto the servers.

ISSUE:

    1. Whether the imported tablets and smart phones are 
substantially transformed by the uninstallation and installation of 
software in the United States, so as to make them a product of the 
United States.
    2. Whether all the components of the Tele-health System are 
substantially transformed through the creation and installation of 
that system in the United States so as to make them a product of the 
United States.

LAW AND ANALYSIS:

    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, 
pursuant to subpart B of Part 177, 19 C.F.R. Sec.  177.21 et seq., 
which implements Title III of the Trade Agreements Act of 1979, as 
amended (19 U.S.C. Sec.  2511 et seq.).
    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 
C.F.R. Sec.  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 C.F.R. 
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 name, character, or use distinct from that of the 
article or articles from which it was transformed.'' See 48 C.F.R 
Sec.  25.003.
    In Data General v. United States, 4 C.I.T. 182 (1982), the court 
determined that 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 the United States, the 
programming bestowed upon each integrated 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 
essence of the article, its interconnections or stored memory, was 
established by programming. See also, Texas Instruments v. United 
States, 681 F.2d 778, 782 (CCPA 1982) (stating the substantial 
transformation issue is a ``mixed question of technology and customs 
law''); 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 734518, dated June 28, 1993 (motherboards 
are not substantially transformed by the implanting of the central 
processing unit on the board because, whereas in Data General use 
was being assigned to the PROM, the use of the motherboard had 
already been determined when the importer imported it).
    ``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.' '' National Hand Tool Corp. v. 
United States, 16 C.I.T. 308, 311 (1992) (citing Webster's Third New 
International Dictionary (1981)). In National Juice Prods. Ass'n v. 
United States, the Court of International Trade applied the 
``essence test'' and found that the fundamental character of orange 
juice concentrate was not changed by the addition of water, orange 
essences, and oils to make frozen concentrated orange juice, and 
hence, there was no substantial transformation. 10 C.I.T. 48, 628 F. 
Supp. 978 (1986).
    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 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 
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 
U.S. origin software. 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, dated December 3, 2013. 
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 deletion of software and the 
installation of new software performed in the United States 
transform the generic tablet computers and smartphones into medical 
devices. You emphasize that the U.S. operations disable the Android 
applications and install health monitoring software, which, you 
argue, creates an entirely new purpose for the devices. You further 
stress the complexity and number of steps taken to transform the 
tablets and smartphones into devices that may be used within the 
Tele-health System. Therefore, you contend that this operation 
substantially transforms the tablets and smartphones into new 
medical devices with distinct names, characters and uses.
    In essence, what is being done by the uninstallation and 
installation of software in the United States, is to limit the 
original capacity of the imported tablets and smartphones for the 
purpose of facilitating the reception, collection and transmission 
of a patient's medical data to VA clinicians for their review. The 
out-of-box tablets and smartphones have the ability to perform these 
general functions, but in order to meet the requirements outlined in 
the VA Request for Procurement, the CareConsole Hub and Mobile Hub 
are modified as discussed. In other words, when the tablets and 
smartphones are created, they have the ability to receive, collect, 
and transmit data. The installed software merely enables these 
devices to receive and collect an individual patient's medical data 
from the peripheral devices and transmit this medical data to the 
clinicians at the VA.
    It is clear that loading the specialized software onto a tablet 
computer or smartphone that remains fully functional as such would 
be insufficient to constitute a new and different article of 
commerce, since all of the functionality of the original device 
would be retained. In this case, however, in addition to adding the 
software, we are being asked to consider the effect of disabling the 
general applications that have been programmed onto the tablet and 
smartphone. In our judgment, this added factor does not

[[Page 9019]]

cause or require a different result. The functions of the original 
tablet and smartphone produced in the Republic of Korea or China, 
necessary to receive and transmit data are in essence still present 
on the modified devices, as aided by the software. While the tablet 
and smartphone are no longer freely programmable machines, we find 
the imposition of this limitation is insufficient to constitute a 
substantial transformation of the imported tablets and smartphones.
    Furthermore, we note that the converted tablets and smartphones 
loaded with the AMC CareConsole Application 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 devices 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 and smartphones, 
they function basically as a type of communications device.
    In reviewing the processing performed in the United States on 
the imported tablets and smartphones under consideration, we note 
that it is analogous to the situation of the transceivers described 
by the second scenario of HQ H258960. The imported devices are 
preprogrammed with a generic program, which is the standard Android 
operating system, prior to their importation. When they are first 
imported, the tablets and smartphones can perform all of their 
standard functions of an android tablet or smartphone, and can in 
their imported condition be used for their intended purpose, but are 
customized for use within the VA Healthcare network. Accordingly, 
like the transceivers described in the second scenario of HQ 
H258960, we find that the name, character, and use of the imported 
devices remain the same. Therefore, we further find that the 
imported devices 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 AMC 
CareConsole Application software is downloaded, the country of 
origin of the imported tablets and smartphones remains the country 
where they were originally manufactured, which in this case is the 
Republic of Korea and China, respectively.

The Tele-health System

    In this situation, you also present an additional argument that 
the ``end product'' is an entire system that includes all hardware 
and software components, because it is defined as such in the VA 
contract. The implication of this claim is that CBP should consider 
the Tele-health System as a whole in its substantial transformation 
analysis. The VA's determination on what is the ``end product'' is 
based upon different criteria from what CBP must consider in 
determining the country of origin of a product using the substantial 
transformation test. We note that the components at issue do not 
lose their individual identities and, therefore, are not 
substantially transformed into a new and different article.
    In HQ H125975, dated January 19, 2011, which 1Vision cites in 
support of its argument, the LSI Engenio 7900 Data Storage System 
(``7900 System'') was under consideration for government procurement 
purposes. The 7900 System was assembled in Mexico from components 
originating in various other nations. These parts included the 
Engenio Operating System, a controller assembly, a mounting 
assembly, a set of hard drives, a slot drive module assembly, and a 
cabinet assembly. Further, the controller assembly was reprogrammed 
with the EOS software to impart the functional intelligence to the 
7900 System to allow for storage management, access control and 
performance monitoring. CBP found that as a result of the assembly 
and programming operations that took place in Mexico, the imported 
components of various origins lost their individual identities and 
were substantially transformed into a new and different article, 
that is, the 7900 System.
    Although the CareConsole Hub, Mobile Hub and servers are 
customized to the VA contract specifications, the programming of 
each component to function in coordination with each other for a 
common purpose does not lead to a substantial transformation 
finding. As discussed above, the tablets and phones are not 
substantially transformed by the uninstallation and installation of 
software. Similarly, we cannot find a substantial transformation of 
the servers because software is installed. Moreover, the 
installation of the software onto the servers would not affect the 
other components of Tele-health System as they remain separate 
articles of commerce. Unlike the situation in H125975, all the 
devices and peripheral equipment remain identifiable as separate 
components. The peripheral medical devices, such as the blood 
pressure cuffs, blood glucose monitors etc., remain, as stated, ``as 
is'' and without any customization; the CareConsole Hub and Mobile 
Hub, as explained above, remain and continue to function as 
communication devices; the servers remain and continue to function 
as servers, etc. The fact that these devices are programmed to 
function in conjunction with each other for the purpose of 
receiving, collecting and transmitting medical data does not mean 
that a change of use or character occurs. Since the components have 
not lost their separate identities during assembly of the Tele-
health System and have not become an integral part of a new and 
distinct item, which is visibly different from any of the individual 
components, we find there is no substantial transformation.

HOLDING:

    Based on the facts of this case, the imported tablets and 
smartphones used with the CareConsole Hub and Mobile Hub platform 
are not substantially transformed by the installation of the AMC 
CareConsole Application. Therefore, the country of origin of the 
tablets and smartphones will remain the country where they were 
originally manufactured. Additionally, all components of the Tele-
health System are not substantially transformed through the creation 
and installation of that system in the United States so as to make 
them a product of the United States.
    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

HQ H284617

February 21, 2018

OT:RR:CTF:VS: H284617 JMV

CATEGORY: Origin

David E. Fletcher, Esq.
Cooley LLP
1299 Pennsylvania Avenue, NW Suite 700
Washington, DC 20004-2400

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. Fletcher,

    This is in response to your letter of March 21, 2017, on behalf 
of Care Innovations requesting a final determination concerning the 
country of origin of a product that you refer to as ``the Hub 
Platform and the Mobile Platform,'' pursuant to subpart B of Part 
177, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. 
Sec.  177.21, et seq.). You state in your letter that this request 
is being made pursuant to a letter from the Department of Veterans 
Affairs (VA) to Care Innovations requiring the filing of a request 
for a country of origin determination from CBP.
    As a domestic importer of merchandise, Care Innovations 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:

    The products at issue are referred to as the Hub Platform and 
the Mobile Platform. The Hub Platform is a home based platform that 
operates via Plain Old Telephone Systems (``POTS''), while the 
Mobile Platform is a handheld platform with wireless connectivity. 
Both platforms begin as iPad tablet computers that are produced by 
Apple in China, which are later encased with protective cases that 
are also manufactured in China. The tablet is designed for use by 
patients at home to collect health data that is measured by other 
peripheral devices such as blood pressure monitors, spirometer etc. 
These other devices are not imported with the tablet.
    After the tablets are imported into the United States, Care 
Innovations performs

[[Page 9020]]

additional production steps in its Roseville, California facility to 
create the Hub Platform and Mobile Platform. Care Innovations 
installs the Health Harmony Mobile software on the tablet computers, 
adds a Subscriber Identity Module (``SIM'') card supplied by the 
cellular service provider, and packages the tablets in the 
protective cases. For the Hub Platform, which runs on POTS, Care 
Innovations attaches a POTS modem and router, manufactured in the 
United States with imported components. For both the Hub Platform 
and the Mobile Platform, Care Innovations installs the Airwatch 
Mobile Device Manager application, which removes the functionality 
usually available on an Apple iPad Mini tablet so that the user will 
only be able to run the Health Harmony Mobile software. The end 
result is a tablet locked into ``single app mode,'' running only the 
Health Harmony application functionality and Bluetooth linked 
peripheral screens.
    Care Innovations also adds physical asset tags to each tablet 
and registers them on Care Innovation's Mobile Device Management 
server; registers component details in the customer database; and 
verifies and documents the testing of the image and registered 
software. Care Innovations then packages the Hub Platform and Mobile 
Platform with the necessary licenses, privacy notices, and quick 
start guides. Finally, Care Innovations activates the platforms' 
features and prepares the platforms to be assigned to a specific end 
user.

ISSUE:

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

LAW AND ANALYSIS:

    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, 
pursuant to subpart B of Part 177, 19 C.F.R. Sec.  177.21 et seq., 
which implements Title III of the Trade Agreements Act of 1979, as 
amended (19 U.S.C. Sec.  2511 et seq.).
    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 
C.F.R. Sec.  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 C.F.R. 
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.'' See 48 C.F.R 
Sec.  25.003.
    In Data General v. United States, 4 C.I.T. 182 (1982), the court 
determined that 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 the United States, the 
programming bestowed upon each integrated 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 
essence of the article, its interconnections or stored memory, was 
established by programming. See also, Texas Instruments v. United 
States, 681 F.2d 778, 782 (CCPA 1982) (stating the substantial 
transformation issue is a ``mixed question of technology and customs 
law''); 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 734518, dated June 28, 1993 (motherboards 
are not substantially transformed by the implanting of the central 
processing unit on the board because, whereas in Data General use 
was being assigned to the PROM, the use of the motherboard had 
already been determined when the importer imported it).
    ``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.' '' National Hand Tool Corp. v. 
United States, 16 C.I.T. 308, 311 (1992) (citing Webster's Third New 
International Dictionary (1981)). In National Juice Prods. Ass'n v. 
United States, the Court of International Trade applied the 
``essence test'' and found that the fundamental character of orange 
juice concentrate was not changed by the addition of water, orange 
essences, and oils to make frozen concentrated orange juice, and 
hence, there was no substantial transformation. 10 C.I.T. 48, 628 F. 
Supp. 978 (1986).
    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 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 
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 
U.S. origin software. 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, dated December 3, 2013. 
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 assert that the software downloading 
operations performed in the United States transform the generic 
tablet computers into medical devices. You further argue that the 
tablets undergo a complex production process performed by skilled 
production associates at Care Innovations' Roseville, California 
facility. You emphasize that the U.S. operations disable the generic 
Apple iPad 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 substantially 
transforms the Apple iPad tablet into a new medical device with a 
distinct name, character and use.
    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 in order to meet 
FDA regulations, it is best to disable the various functions of the 
tablet and to replace them with one function via the specialized 
software. In other words, when the tablets are created, they have 
the ability to receive, collect, and transmit data. The installed 
software just enables the tablets to receive and collect an 
individual patient's medical data from the peripheral devices and 
transmit this medical data to the clinicians at the VA.
    It is clear that loading 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 adding 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 China 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

[[Page 9021]]

freely programmable machine, we find the imposition of this 
limitation is insufficient to constitute a substantial 
transformation of the imported tablets in the United States.
    Furthermore, we note that the converted tablets loaded with the 
Health Harmony 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 monitor or 
pulse oximeter, and to transmit that medical data to a clinician for 
review. Therefore, it appears that after the proprietary software is 
downloaded onto the tablets, the tablets continue to basically 
function as a type of communications device.
    It is also claimed that the FDA considers the Hub Platform and 
the Mobile Platform to be medical devices and that the IRS will tax 
the Health Harmony system, including the tablet, as a medical 
device. Thus, you contend that CBP should also consider the tablets 
loaded with the Health Harmony software to be medical devices rather 
than tablets. We note, however, that the IRS and FDA's 
determinations as to 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 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 tariff classification. Similarly in 
this case, the IRS and FDA's determinations that the imported 
tablets are medical devices and will be taxed as such are 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 Apple 
iPad operating system, prior to their importation. When they are 
first imported, the tablets can perform all of the standard 
functions of an Apple iPad tablet, and can in their imported 
condition be used in conjunction with the proprietary software. 
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 within the VA Healthcare network. 
After the Health Harmony software is downloaded, the country of 
origin of the imported tablets remains the country where they were 
originally manufactured, which in this case is China.
    Finally, you argue that since CBP concluded that a predecessor 
of the Health Harmony System, Stehekin, was considered part of a 
patient monitoring system rather than a standard computer in NY 
Ruling N004877 dated January 26, 2007, it would be inconsistent to 
conclude that Health Harmony, as Stehekin's descendant, is, for 
purposes of government procurement, merely a ``standard computer'' 
manufactured outside the United States. You claim that Stehekin is 
analogous to the tablet computer that Care Innovations uses today 
because it included a purpose-built computer, produced in China, 
that was used to deliver remote patient monitoring software and 
capability. However, the issue decided in N004877 was a question of 
tariff classification, not substantial transformation, and is 
therefore, not applicable.

HOLDING:

    Based on the facts of this case, the imported tablets used with 
the Mobile Platform and the Hub platform are not substantially 
transformed by the installation of the proprietary Health Harmony 
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 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. 2018-04273 Filed 3-1-18; 8:45 am]
 BILLING CODE 9111-14-P