[Federal Register Volume 83, Number 42 (Friday, March 2, 2018)]
[Notices]
[Pages 9013-9015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04278]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Certain 
Ethernet Gateway 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 ethernet gateway products known as AirLink 
gateways. Based upon the facts presented, CBP has concluded in the 
final determination that the United States is the country of origin of 
the AirLink gateways for purposes of U.S. Government procurement.

DATES: The final determination was issued on February 23, 2018. A copy 
of the final determination is attached. Any party-at-interest, as 
defined in 19 CFR Sec.  177.22(d), may seek judicial review of this 
final determination within April 2, 2018.

FOR FURTHER INFORMATION CONTACT: Ross M. Cunningham, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of Trade (202) 
325-0034.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on February 23, 
2018, 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 certain ethernet 
gateway products known as AirLink gateways, which may be offered to the 
U.S. Government under an undesignated government procurement contract. 
This final determination, HQ H250154, 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, based upon the facts 
presented, the programming and downloading operations performed in the 
United States, using U.S.-origin software, substantially transform non-
TAA country AirLink gateways. Therefore, the country of origin of the 
AirLink gateways is the United States for purposes of U.S. Government 
procurement.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any 
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of a final determination within 30 days of publication of such 
determination in the Federal Register.

    Dated: February 23, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H250154

February 23, 2018

OT:RR:CTF:VS H250154 GaK/RMC

CATEGORY: Origin

Mark J. Segrist Sandler, Travis & Rosenberg, P.A. 225 West Washington 
Street, Suite 1640 Chicago, IL 60606

Re: U.S. Government Procurement; Country of Origin of Gateway Products; 
Substantial Transformation

Dear Mr. Segrist:

    This is in response to your letter dated October 25, 2013, and 
your supplemental submissions dated February 27, 2014 and March 21, 
2014, requesting a final determination on behalf of your client, 
Sierra Wireless (``Sierra''), pursuant to subpart B of Part 177 of 
the U.S. Customs and Border Protection (``CBP'') Regulations (19 
C.F.R. Part 177). A meeting was held at our office on October 3, 
2014, where you and your client explained the software development 
process and the product. A further submission dated April 18, 2017, 
was provided.
    This final determination concerns the country of origin of 
Sierra's secure Ethernet gateway products (``gateways''). We note 
that as a U.S. importer, Sierra 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.
    Per your letter dated September 22, 2014, we have reviewed your 
request for confidentiality pursuant to 19 C.F.R. Sec.  177.2(b)(7) 
with respect to the information submitted. As that information 
constitutes privileged or confidential matters, it has been 
bracketed and will be deleted from any published versions.

FACTS:

    Sierra produces gateways that provide secure internet 
connectivity for mobile stations allowing a variety of enterprises, 
mainly law enforcement, to monitor their infrastructure and 
instruments by transmitting and receiving data from a central 
location. The gateways are designed for entities that require 24/7 
unmanned operation of remote assets and broadband connectivity. The 
gateways are frequently installed in police cars and provide a 24/7 
internet connection and allow police officers to access information 
stored in the central location. The gateway also acts as a firewall 
server, which ensures that the connection between the mobile station 
and the main office is secure and that unauthorized persons cannot 
access information transmitted over the internet. Sierra's 
submissions include details on four different gateway products, 
branded ``AirLink,'' to be covered by this final determination: 
GX400, GX440, LS300, and ES440. The different series of gateways are 
designed differently to meet the needs of a variety of customers\1\, 
but they have the same functions and operate with the same software, 
referred to as Aleos.
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    \1\ The GX series are designed for in-vehicle field deployments, 
such as connecting police cars or fire trucks to their network at 
headquarters. The LS series is designed for hazardous environments 
and for industrial deployments, such as surveillance of pipelines or 
meters. The ES series is designed to provide connectivity when 
landline connections are unavailable and can be used to maintain 
kiosks and retail operations online.
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    The hardware components consist of a case/kit that holds the 
module, a printed circuit assembly (``PCA'') that includes a radio 
module, a decorative cover placed over the case/kit, and various 
nuts and screws to close the case/kit and hold the cover in place. 
All the hardware components are designed in the United States and 
produced and assembled in China. Sierra imports the completed 
gateways into the United States, where authorized retailers install 
the ALEOS software. Sierra states that, at the time of importation, 
the fully assembled gateway is not functional because it does not 
contain the ALEOS software. Sierra also states that the gateway in 
its condition as imported has only the basic ability to communicate 
with a software installation tool to facilitate the download of the 
ALEOS software. The radio module contains firmware to control its 
internal function of sending and receiving to/from the network, 
which cannot take place until the ALEOS software is loaded onto the 
gateway. Sierra states that the PCA design and the firmware in the 
radio module are proprietary and are designed to work only with the 
ALEOS software and that any

[[Page 9014]]

attempts to install other software will cause the system to crash.
    ALEOS was developed entirely in the United States in five steps:

1. Research: A list of ideas and potential features of the product 
is compiled, product roadmap is developed, and product requirements 
are defined.
2. Development of Software Specification: The chief architects 
create a software design, which is developed by the development team 
to meet the defined product requirements.
3. Programming of Source Code: The development team receives the 
software development tasks, which results in the source code files 
written by the software developers.
4. Software Integration and Build: The team integrates the source 
code files by compiling the source code into a binary file that runs 
on the hardware. During this phase, the developers work out the 
incompatibilities or bugs by rewriting or correcting source code as 
needed until a build is complete and ready for testing.
5. Testing and Validation: The software package is tested based on 
functional specifications defined in the product requirements. Once 
the test case pass rate is met, the software is ready for release.

    Since 1993, approximately [3] engineer hours were spent in the 
development of the ALEOS software in the United States. Some minor 
software maintenance, such as repair and validation, is conducted in 
Canada and France, which accounts for approximately [ ]% of the 
engineer hours spent. Sierra states that the gateways are 
approximately $45 at import and after the ALEOS software is 
installed, are valued at between $479 and $899. We assume for 
purposes of this decision that the figures provided are correct. You 
also submitted an affidavit from the Vice President of Marketing at 
Sierra describing the software and installation process, a user 
guide, an end-user warranty, and a PowerPoint presentation that 
included photographs and component lists.

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).
    You argue that the country of origin of the GX400, GX440, LS300, 
and ES440 gateway products is the United States because you believe 
that the last substantial transformation occurs in the United 
States. You state that the fully-assembled gateways are not 
functional when they are imported into the United States and that 
the gateways gain their ability to function as intended only after 
U.S.-origin software is installed in the United States. In support, 
you cite, among others, Data General v. United States, 4 C.I.T. 182 
(1982), Headquarters Ruling (``HQ'') H052325, dated February 14, 
2006, and HQ H175415, dated October 4, 2011.
    In Data General, 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 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. 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. See also Texas Instruments 
v. United States, 681 F.2d 778, 782 (CCPA 1982) (holding 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 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.
    CBP has also focused on where the programming took place. For 
example, in HQ H258960, dated May 19, 2016, CBP considered the 
country of origin of network transceivers in two different 
scenarios. In Scenario One, the importer purchased ``blank'' 
transceivers from Asia. The transceivers were then loaded with U.S.-
developed software in the United States, which made the transceivers 
functional. In Scenario Two, the importer purchased the transceivers 
with a generic program preinstalled, which was then removed so that 
the U.S.-developed software could be installed. We held that, in 
Scenario One, because the transceivers could not function as network 
devices without the U.S.-developed software, the transceivers were 
substantially transformed as a result of the downloading of the 
U.S.-developed software performed in the United States. However, in 
Scenario Two, because the transceivers were already functional when 
imported, the identity of the transceivers was not changed by the 
downloading performed in the United States, and no substantial 
transformation occurred.
    Similarly, in HQ H175415 dated October 4, 2011, CBP held that 
imported Ethernet switches underwent a substantial transformation 
after U.S.-origin software was downloaded onto the devices' flash 
memory in the United States, which allowed the devices to function. 
In China, the printed circuit board assemblies, chassis, top cover, 
power supply, and fan were assembled. Then, in the United States, 
U.S.-origin software, which gave the hardware the capability of 
functioning as local area network devices, was loaded onto the 
hardware. CBP noted that the U.S.-origin software ``enables the 
imported switches to interact with other network switches'' and that 
``[w]ithout this software, the imported devices could not function 
as Ethernet switches.'' Under these circumstances, CBP held that the 
country of origin of the local area network devices was the United 
States. See also HQ H052325, dated March 31, 2009 (holding that 
imported network devices underwent a substantial transformation in 
the United States after U.S.-origin software was download onto the 
devices in the United States, which gave the devices their 
functionality); and HQ H034843, dated May 5, 2009 (holding that 
Chinese USB flash drives underwent a substantial transformation in 
Israel when Israeli-origin software was loaded onto the devices, 
which made the devices functional).
    In each case, the nature of the article and the effect of the 
processing performed must be evaluated. Here, like the network 
devices and Ethernet switches at issue in HQ H175415, HQ H052325, 
and HQ H258960 (under Scenario One), the Sierra GX400, GX440, LS300, 
and ES440 gateways are imported into the United States in a non-
functional state. It is only after the installation of U.S.-origin 
software that the devices can function as intended. Moreover, as in 
HQ H175415, HQ H052325, and HQ H258960, the gateway products at 
issue here derive their core functionality as communication devices 
from the installation of the U.S.-developed software. We note that 
this case is distinguishable from Scenario 2 in HQ H258960, as 
Sierra's products do not contain pre-installed software when they 
are imported from China, and they are non-functional at the time of 
importation to the United States. Therefore, we find that the 
country of origin of the Sierra GX400, GX440, LS300, and ES440 
gateways is the United States.

HOLDING:

    Based on the facts provided, the country of origin of the 
gateways is the United States for purposes of U.S. Government 
procurement.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 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

[[Page 9015]]

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 & Rulings Office of 
Trade

[FR Doc. 2018-04278 Filed 3-1-18; 8:45 am]
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