[Federal Register Volume 83, Number 85 (Wednesday, May 2, 2018)]
[Notices]
[Pages 19293-19296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09289]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning 
Gyrocompasses

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 gyrocompasses. Based upon the facts 
presented, CBP has concluded that the country of origin of the 
gyrocompasses is the United States for purposes of U.S. Government 
procurement.

[[Page 19294]]


DATES: This final determination was issued on April 24, 2018. 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 1, 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 April 24, 
2018, pursuant to subpart B of Part 177, U.S. Customs and Border 
Protection Regulations (19 CFR part 177, subpart B), CBP issued one 
final determination concerning the country of origin of certain 
gyrocompasses, which may be offered to the U.S. Government under an 
undesignated government procurement contract. This final determination 
(HQ H287851) was issued under procedures set forth at 19 CFR part 177, 
subpart B, which implements Title III of the Trade Agreements Act of 
1979, as amended (19 U.S.C. 2511-18). In the final determination, CBP 
concluded that the processing in the United States will result in a 
substantial transformation. Therefore, the country of origin for 
purposes of U.S. Government procurement of the gyrocompasses is the 
United States.
    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: April 24, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
HQ H287851
April 24, 2018
OT:RR:CTF:VS H287851 RMC
CATEGORY: Country of Origin
Michael S. Snarr
Baker & Hostetler LLP
Washington Square, Suite 110
1050 Connecticut Ave., NW
Washington, DC 20036-5304
Re: U.S. Government Procurement; Country of Origin of Gyrocompass; 
Substantial Transformation
Dear Mr. Snarr:
    This is in response to your letter dated June 12, 2017, requesting 
a final determination on behalf of [ ] (`` the Manufacturer'') 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 in our 
office on December 18, 2018, during which you and your client explained 
how the product functions and the assembly process. A follow-up 
submission dated January 4, 2018, was also provided.
    This final determination concerns the country of origin of a 
gyrocompass that will be assembled in the United States. As a U.S. 
importer, [the Manufacturer] 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.
    You have asked that certain information submitted in connection 
with this request be treated as confidential. Inasmuch as this request 
conforms to the requirements of 19 C.F.R. Sec.  177.2(b)(7), the 
request for confidentiality is approved. The information contained 
within brackets in this ruling or in the attachments to this ruling 
request, forwarded to our office, will not be released to the public 
and will be withheld from published versions of this ruling.
FACTS:
    [The Manufacturer] is incorporated in [ ] and has its principal 
place of business in [ ]. It is a wholly-owned subsidiary of [ ] (``the 
Parent Company''] a [ ] entity. [The Parent Company] develops 
gyrocompasses and advanced inertial navigational systems for navigation 
on land, at sea, in the air, and in space.
    The subject merchandise is a ``surface gyrocompass and attitude 
reference system'' sold under the name [ ]. The technical offer 
documentation provided describes the merchandise as a ``small size, low 
weight, low power consumption, IMO-certified, solid-state Fiber-Optic 
gyrocompass providing all necessary data for demanding navigation and 
control applications: True-North heading, roll, pitch and rates of 
return.'' The merchandise transmits these data to onboard navigational 
and control systems to control a ship's movement at sea.
    Five main components comprise the merchandise:
    1. Inertial Sensor Assembly (``ISA'')--Manufactured in France from 
French (or possibly U.S.) parts, the ISA contains interferometric 
fiber-optic gyroscopes (``FOGs'') and accelerometers. The FOGs 
incorporate fiber-optic coils connected to integrated optical circuits 
to create the interferometers that provide the actual place of 
gyroscopic measurement. Three FOGs are combined into a single component 
structure along with three accelerometers to form the ISA. The 
capability of the ISA is limited to measuring raw accelerations and 
rotation rates. After testing in France, the ISA will be shipped to the 
United States.
    2. Digital Signal Processing (``DSP'') Board--Manufactured in the 
United States from U.S. parts, the DSP Board acquires the measurements 
from the ISA, compensates for various kinds of potential measurement 
errors, computes an angular position using algorithms, and sends the 
computed parameters to a dual-access memory unit. It is comprised of 46 
different components including capacitors, resistors, connectors, 
inductors, an oscillator, a flash memory unit, and others.
    3. Interface Board--Manufactured in the United States from U.S. 
parts (other than the connectors on the interface board, which are 
sourced in Germany ``as per the standard for connectors of this 
purpose''), the Interface Board contains the connections for the 
components necessary for communication between the product and the 
ship's other hardware (e.g., panel mounted receptacle connectors, 
serial link drivers, and Ethernet LAN transformer). Thus, the Interface 
Board allows the gyroscope to communicate with the ship's other 
navigational equipment, and vice versa. It is comprised of 56 different 
components including connectors, capacitors, inductors, diodes, digital 
isolators, a filter, and Ethernet transformer, and others.
    4. Processor Board--Manufactured in the United States from U.S. 
parts, the Processor Board contains a microcontroller that serves as 
the intelligence of the merchandise. It also contains micro and flash 
memory that are necessary for the functioning of the merchandise. It is 
comprised of 61 different components including resistors, oscillators, 
connectors, diodes, LEDs, a DC power converter, a flash memory unit, 
and others.
    5. Customized Housing--Machined in the United States from U.S. 
parts, the customized housing consists of a metal baseplate and top 
cover that enclose and protect the other components.
    The U.S. assembly processes described in [the Manufacturer's] 
submission begin when a subcontractor

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assembles the DSP board, Interface Board, Processor Board, and housing 
in the United States. You state that the combined manufacturing time 
for the boards is 4.2 hours, while the customized metal housing takes 
about ten hours. For the boards, the assembly process generally 
involves the placement and soldering into place of the electronic 
components necessary for the boards' functioning. The housing is made 
by bending sheets of metal, brazing them together, and powder coating 
the component.
    Once the boards and housing have been completed, they are ready to 
be integrated with the French-origin ISAs to produce the final product. 
Although the ISAs generate raw data such as angular rates and linear 
acceleration, these measurements ``lack the accuracy and proper frame 
of reference needed to compute the relevant parameters for navigation 
or to transmit these data into a functional format for the ship's 
navigation and control'' (i.e., heading, roll, pitch, and heave). You 
state that that the DSP board, interface board, and processor board are 
essential in processing and converting the ``raw'' signal that the ISA 
generates into a signal that can be used by the ship's navigational and 
control systems. For example, according to the information provided, 
the processor board serves as the ``intelligence'' of the product and 
contains firmware and the user interface that allows a ship's crew to 
control the product. The interface board serves as the electrical link 
between the ship's electrical equipment and the product, and the DSP 
board processes the raw data generated by the ISA into a format that is 
compatible with navigational equipment. Thus, you state that the U.S. 
processor board, interface board, and DSP board are essential to the 
capabilities and functioning of the product.
    The final assembly of the [ ] product in the United States will 
take approximately seven and a half hours and will begin when the ISA 
is mounted to the baseplate of the housing, which involves placing a 
gasket, affixing heat-sink compound, and fastening screws. Technicians 
will then combine the interface board, processor board, and DSP Board 
to form ``electronic clusters.'' This process will involve soldering 
connectors, attaching flexible cables, and screwing components 
together. The processor board and the DSP board will then each be 
loaded with software developed in France.
    After this process is complete, the electronic clusters will be 
connected to the ISA through the mounting of cables that permit 
electronic exchange between the ISA and the electronic cluster. You 
state that this integration in the United States will produce an 
Inertial Measurement Unit (``IMU'') that has the capacity of recording 
and collecting raw navigational data, as well as generating and 
transmitting those data in a format that related nautical systems can 
use.
    In order to make the IMUs ready for installation, however, 
calibration testing must be conducted. In this stage of the production 
process, a motion tester and software tester will be used to ensure 
smooth integration with a ship's navigation systems. [The Manufacturer] 
states that the calibration testing will take up to 24 hours. Once this 
testing is completed, the finished gyrocompass will be ready for use in 
the field.
ISSUE:
    What is the country of origin of the gyrocompasses for purposes of 
U.S. Government procurement?
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 advisory rulings and final determinations for purposes 
of U.S. Government procurement, CBP applies the provisions of subpart B 
of Part 177 consistent with Federal Acquisition 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 TAA. 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.
    48 C.F.R. Sec.  25.003.
    In order to determine whether a substantial transformation occurs 
when components of various origins are assembled into completed 
products, the extent of operations performed and whether the parts lose 
their identity and become an integral part of the new article are 
considered. See Belcrest Linens v. United States, 6 CIT 204 (1983), 
aff'd, 741 F.2d 1368 (Fed. Cir. 1984). The country of origin of the 
item's components, extent of the processing that occurs within a 
country, and whether such processing renders a product with a new name, 
character, and use are primary considerations in such cases.
    In HQ 558919, dated March 20, 1995, U.S. Customs (now U.S. Customs 
and Border Protection) held that an extruder assembly manufactured in 
England was substantially transformed in the United States when it was 
combined with U.S. components (a drive unit, an electric control panel, 
and an extruder screw) to create a vertical extruder. Assembly 
operations in the United States included ``the complete wiring of the 
motor and control panel to the subassembly, followed by a complete set 
up and testing program to insure that the vertical extruder is 
operating within its design parameters.'' In reaching the decision that 
a substantial transformation had occurred, Customs emphasized the 
importance of the U.S. components to the functioning of the final 
product. Based on the extent of the assembly operations and the 
importance of the U.S. components, Customs held that the country of 
origin of the vertical extruder was the United States.
    By contrast, assembly operations that are minimal or simple will 
generally not result in a substantial transformation. For example, in 
HQ 734050, dated June 17, 1991, CBP held that Japanese-origin printer 
components were not substantially transformed in China when assembled 
to form finished printers. Three components, the circuit, power source, 
and outer case units, were entirely assembled or molded in Japan. Two 
components, the head and mechanical units, were made in Japan, but 
exported to China in an unassembled state. In China, the head and 
mechanical units were assembled with screws and screwdrivers. 
Thereafter, the head, mechanism,

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circuit, and power source units were mounted onto the outer case with 
screws and screwdrivers. In holding that the country of origin of the 
assembled printers was Japan, CBP recognized that the vast majority of 
the printer's parts were of Japanese origin and that the operations 
performed in China were relatively simple assembly operations.
    Here, as in HQ 558919, the merchandise contains many U.S. materials 
that are important components of the final product. With the exception 
of the French-origin ISA, which may in some cases contain U.S. parts, 
and some German-origin connectors on one subassembly, all the materials 
used in the gyroscope are of U.S.-origin. These U.S.-origin parts are 
essential to the functionality of the finished gyrocompass. As noted 
above, the processor board serves as the ``intelligence'' of the 
product and contains firmware and the user interface that allows a 
ship's crew to control the product. The interface board serves as the 
electrical link between the ship's electrical equipment and the 
product, and the DSP board processes the raw data generated by the ISA 
into a format that is compatible with navigational equipment. Without 
the U.S.-origin components, the ISA's functionality would be limited to 
measuring raw accelerations and rotation rates and would not be capable 
of producing the output expected from a navigational gyrocompass 
including heading, roll, pitch, and heave.
    In addition, the assembly processes that will occur in the United 
States are complex and time-consuming. Each of the electronic boards 
contains dozens of electrical components that must be properly mounted 
to the surface of the board and soldered into place. This process takes 
4.2 hours, while the customized metal housing takes about ten hours to 
manufacture. Next, these components will be combined with the ISA in a 
process that includes placing a gasket, affixing a heat-sink compound, 
soldering connectors, attaching cables, fastening screws, and loading 
software. This process will take an additional seven and a half hours. 
Finally, significant post-assembly testing procedures, which will 
calibrate the merchandise and ensure smooth communication with the 
ship's navigational equipment, will be carried out in the United 
States. [The Manufacturer] states that the calibration testing will 
take up to 24 hours. Consistent with previous CBP decisions, the large 
number of individual components, the 4.2 hours that will be spent 
assembling the boards, the ten hours that will be spent manufacturing 
the metal housing, the seven and a half hours that will be spent on 
final assembly, and the time spent on final calibration testing (up to 
24 hours) are evidence of complex and meaningful assembly operations in 
the United States.
    In addition, we find that the French-origin ISAs will undergo a 
change in name, character, and use when they are assembled into 
finished gyrocompasses in the United States. Although a change in a 
product's name is the weakest evidence of a substantial transformation, 
Uniroyal, Inc. v. United States, 3 CIT 220, aff'd 703 F.2d 1022 (Fed. 
Cir. 1983), we note that the name of the imported material will change 
from ISA to gyrocompass after assembly in the United States. 
Furthermore, the ISA's character--or its ``mark, sign [or] distinctive 
quality,'' Energizer Battery Inc. v. United States, No. 16-116, slip 
op. at 18 (CIT 2016) (quoting Webster's Third New Int'l Dictionary of 
the English Language Unabridged (2002) at 376)--will change from a 
component capable of taking raw measurements to a calibrated system 
able to record, collect, and transmit data to a ship's navigational 
systems. Finally, the integration of the French-origin ISA into the 
finished product changes its use from a measurement component to a 
complete gyrocompass and ``attitude reference system that is capable of 
delivering actionable data integrated into the ship's navigation and 
control systems.'' Because of the change in name, character, and use 
that occurs in the United States, and considering the totality of the 
U.S. assembly operations, amount and importance of U.S. materials, and 
testing that will occur in the United States, the country of origin of 
the gyrocompasses will be the United States for purposes of U.S. 
Government procurement.
HOLDING:
    The country of origin of the gyrocompasses for purposes of U.S. 
Government procurement will be 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 & Rulings
Office of Trade

[FR Doc. 2018-09289 Filed 5-1-18; 8:45 am]
 BILLING CODE P