[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Notices]
[Pages 1772-1775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01116]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Self-
Adhesive Cutaneous Electrodes

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

[[Page 1773]]

Protection (``CBP'') has issued a final determination concerning the 
country of origin of Rhythmlink International, LLC's self-adhesive 
cutaneous electrode. Based upon the facts presented, CBP has concluded 
that the country of origin of the self-adhesive cutaneous electrode is 
the United States for purposes of U.S. Government procurement.

DATES: The final determination was issued on January 29, 2019. 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 no later than March 7, 2019.

FOR FURTHER INFORMATION CONTACT: James Kim, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of Trade (202) 325-
0158.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on January 29, 
2019, 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 Rhythmlink 
International, LLC's self-adhesive cutaneous electrode, which may be 
offered to the U.S. Government under an undesignated government 
procurement contract. This final determination, HQ H300743, 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 
assembly and processing in China do not result in a substantial 
transformation. Therefore, the country of origin of Rhythmlink 
International, LLC's self-adhesive cutaneous electrode 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: January 29, 2019.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H300743

January 29, 2019

OT:RR:CTF:VS H300743 JK

CATEGORY: Origin

David S. Robinson Nexsen Pruet, PLLC 4141 Parklake Avenue Suite 200 
Raleigh, NC 27612

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. Sec.  2511); Subpart B, Part 177, CBP Regulations; 
Self-Adhesive Cutaneous Electrode; Substantial Transformation

Dear Mr. Robinson:

    This is in response to your letter, dated September 10, 2018, 
requesting a final determination on behalf of Rhythmlink 
International, LLC (Rhythmlink) pursuant to subpart B of Part 177 of 
the U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. 
Part 177).
    This final determination concerns the country of origin of 
various self-adhesive cutaneous electrodes. As a U.S. importer, 
Rhythmlink 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. In addition, you have requested a country of origin 
determination for marking purposes. Samples were submitted with your 
request.

FACTS:

    Rhythmlink is headquartered in Columbia, North Carolina and 
manufactures and distributes medical devices. It seeks a country of 
origin determination for purposes of government procurement for two 
types of self-adhesive cutaneous electrodes, marketed as 
``Disposable Stimulating Sticky Pad Surface Electrodes'' and 
``Disposable Recording Sticky Pad Surface Electrodes.'' You indicate 
that these products are designed and manufactured specifically for 
electrocardiogram (ECG) and electromyogram (EMG) monitoring 
applications. The catalog that you submitted indicates that the 
electrodes are pre-gelled and especially formulated to perform 
specific functions. You also state that these products are regulated 
by the U.S. Food & Drug Administration (FDA) under the category of 
``cutaneous electrode,'' which is defined as ``an electrode that is 
applied directly to a patient's skin either to record physiological 
signals (e.g., the electroencephalogram) or to apply electrical 
stimulation.'' See 21 C.F.R. Sec.  882.1320.
    Each self-adhesive cutaneous electrode consists of a ``sticky 
pad,'' composed of electrically conductive hydrogel laminated onto 
conductive plastic and fabric backing, which is attached to a 
leadwire with a miniscule amount of glue. Rhythmlink sells its self-
adhesive cutaneous electrodes in single (one pad) and paired (two 
pads connected) models with varying lengths and styles, and end 
users can customize the color of the connecting leadwire. You 
indicate that the functionality of the Sticky Pad Surface Electrode 
is common to all lengths and is unchanged by the color of the pre-
connected leadwire. The Sticky Pad Surface Electrode also comes in 
varying pad sizes; the larger the pad size, the greater the 
conductivity (but lower the specificity) of the electrical signals. 
The leadwire acts as an electrical conductor that transfers low 
voltage electrical signals from the electrode to medical diagnostic 
equipment. However, you also state that other varieties of cutaneous 
electrodes are available that are not pre-connected to a leadwire. 
Such cutaneous electrodes may connect to a leadwire by using 
alligator clips and other removable connectors.
    You state that Rhythmlink conducts all of the engineering and 
design of its self-adhesive cutaneous electrode in the United 
States. Rhythmlink purchases the hydrogel used in its self-adhesive 
cutaneous electrodes from a manufacturer in bulk roll form. The 
hydrogel, including all of its components, is manufactured entirely 
in the United States and specifically developed as a sensing or 
stimulating gel for use in medical electrode-related applications in 
cutaneous electrodes. You state that the hydrogel is manufactured in 
such a way as to serve as a metal-electrolyte interface, through 
which current flow within a patient becomes electron flow in the 
electrode and leadwire. You also state that the quality of the 
signals generated depends, in part, on the electrical 
characteristics of the electrode assembly, which is largely 
determined by the formula of the hydrogel used.
    The components used to formulate the hydrogel include deionized 
water, salts, and a gelling agent. These components are mixed 
together until homogenous, forming a conductive ``soup.'' The pH of 
the mixture is adjusted to a very specific level. The mixture is 
then cast to a specific thickness in sheet form directly onto a 
clear plastic backing material on a conveyor system, slowly moving 
along under specific environmental conditions (e.g., temperature and 
humidity) to allow the gel to set. At the end of the line, thin 
plastic film is pressed onto the gel as a protective layer prior to 
rolling the hydrogel product around heavy cardboard tubes in 300 
feet lengths. You indicate that the hydrogel has a limited shelf 
life, after which it ceases to be a medical product. The bulk roll 
hydrogels are then shipped to China for further processing.
    Korean-origin leadwire is also shipped to China. The leadwire is 
a commercially available 26-gauge twisted copper wire comprising 19 
strands of 38-gauge copper wire with medical grade PVC covering. The 
leadwire is available in a total of 26 color options. The Korean 
supplier of this wire cuts the wire, crimps a socket pin, attaches a 
connector to one end of the wire, and ships the wire to China.
    In China, the bulk roll hydrogel is first laminated to U.S.-
origin conductive plastic and Chinese-origin fabric backing, in a 
process that occurs in one second for the surface area required to 
punch out a single self-adhesive cutaneous electrode. Then the 
laminated bulk roll hydrogel is mechanically die cut one pad at a 
time, taking less than a second per pad. Subsequently, the Korean-
origin leadwire is attached to the pad using U.S.-origin glue, 
``sandwiching'' it between the conductive plastic and fabric backing 
in

[[Page 1774]]

a process that takes less than four seconds per electrode. Finally, 
the finished self-adhesive cutaneous electrodes are inserted into 
plastic pouches and cardboard packaging for shipment to the United 
States.
    In the United States, the finished products are subject to 
sterilization and a randomized sampling and testing protocol prior 
to sale.

ISSUE:

    What is the country of origin of the self-adhesive cutaneous 
electrode 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.) (TAA).
    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.

    The regulations define a ``designated country end product'' as:
    WTO GPA [World Trade Organization Government Procurement 
Agreement] country end product, an FTA [Free Trade Agreement] 
country end product, a least developed country end product, or a 
Caribbean Basin country end product.

    A ``WTO GPA country end product'' is defined as an article that:

    (1) Is wholly the growth, product, or manufacture of a WTO GPA 
country; or
    (2) In the case of an article that consists in whole or in part 
of materials from another country, has been substantially 
transformed in a WTO GPA country 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. The term refers 
to a product offered for purchase under a supply contract, but for 
purposes of calculating the value of the end product includes 
services (except transportation services) incidental to the article, 
provided that the value of those incidental services does not exceed 
that of the article itself.

48 C.F.R. Sec.  25.003. We note that Korea is a WTO GPA country, but 
China is not.
    A substantial transformation occurs when an article emerges from 
a process with a new name, character or use different from that 
possessed by the article prior to processing. A substantial 
transformation will not result from a minor manufacturing or 
combining process that leaves the identity of the article intact. 
See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); 
National Juice Products Association v. United States, 628 F. Supp. 
978 (CIT 1986).
    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled into 
completed products, CBP considers the totality of the circumstances 
and makes such determinations on a case-by-case basis. 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. No one factor is decisive; the key 
issue is the extent of operations performed and whether the parts 
lose their identity and become an integral part of the new article. 
Belcrest Linens v. United States, 573 F. Supp. 1149 (CIT 1983), 
aff'd, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are 
minimal or simple, as opposed to complex or meaningful, will 
generally not result in a substantial transformation. See C.S.D. 80-
111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and 
C.S.D. 90-97. Additionally, factors such as the resources expended 
on product design and development, extent and nature of post-
assembly inspection and testing procedures, and the degree of skill 
required during the actual manufacturing process may be relevant 
when determining whether a substantial transformation has occurred.
    The Court of International Trade has also looked at the 
essential character of an article to determine whether its identity 
has been substantially transformed through assembly or processing. 
For example, in Uniroyal, Inc. v. United States, 3 CIT 220, 225, 542 
F. Supp. 1026, 1030 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983), 
the court held that imported shoe uppers added to an outer sole in 
the United States were the ``very essence of the finished shoe'' and 
thus the character of the product remained unchanged and did not 
undergo substantial transformation in the United States. Similarly, 
in National Juice Products Association v. United States, 10 CIT 48, 
61, 628 F. Supp. 978, 991 (1986), the court held that imported 
orange juice concentrate ``imparts the essential character'' to the 
completed orange juice and thus was not substantially transformed 
into a product of the United States.
    For products used in medical-related applications, we have held 
that no substantial transformation occurs when the critical 
components which impart the essential character of the product 
subsequently undergo simple assembly and processing. In HQ H248851, 
dated July 8, 2014, CBP held that an Israeli-origin CO2 tube was not 
substantially transformed in China when cut to length and attached 
to four other components from Israel and China. CBP found that the 
CO2 tube performed the essential function of the finished product, 
which was the delivery of breath for monitoring the CO2 level in a 
patient's breath. By way of the assembly process in China, the CO2 
tube was attached to other components that facilitated its function 
and did not lose its individual identity in the process.
    Similarly, in HQ 560613, dated October 28, 1997, Customs, a 
predecessor of CBP, held that U.S.-origin components were not 
substantially transformed in Ireland when made into a pregnancy test 
kit. The test kit was made from the following U.S. components: top 
and bottom housing, paper, antibody, wick, laminate, and 
nitrocellulose. In addition, a splash guard from Ireland and rayon 
from Germany were used. The critical components of the pregnancy 
test kit were found to be the three U.S.-origin antibodies. Customs 
recognized that the U.S.-origin components imparted the essential 
character of the pregnancy test kit and that the simple assembly of 
placing the antibodies onto the rayon membrane, and subsequent 
assembly of the strips into a plastic housing, did not result in a 
substantial transformation.
    In H259473, dated June 30, 2015, CBP found that a single use 
negative pressure wound therapy system, comprised of a pump from 
China and two dressings from the United Kingdom, was of U.K.-origin 
due to the U.K.-origin of the dressings and the programming and 
final assembly of the pump occurring in the U.K. CBP found that the 
unique dressing was the ``enabling technology'' that provided the 
essential therapeutic elements for wound healing to the medical 
instrument. In addition, CBP noted that the medical instrument could 
only be used with the dressings included with the system.
    Based on the information provided in your letter and consistent 
with CBP rulings cited above, we note that the majority of the 
components of the self-adhesive cutaneous electrode are of U.S. or 
WTO GPA country origin, including the U.S.-origin hydrogel, 
conductive plastic, and glue, and the Korean-origin leadwire. Only 
the fabric backing, which merely adds strength to the leadwire 
connection, is of Chinese-origin. More importantly, we find that the 
electrically conductive hydrogel, manufactured entirely in the 
United States, performs the essential function of the finished 
product, which is to provide the means whereby electrical activity 
in the body is recorded by the input circuits of an EEG/EMG machine, 
or electrical impulses are generated when used with stimulating 
equipment. The hydrogel's adhesive properties are essential to 
allowing

[[Page 1775]]

the product to function as a self-adhesive cutaneous electrode. As 
indicated in your letter, the hydrogel used in this product is 
dedicated for use in cutaneous electrodes, as the chemical and 
mechanical properties of the hydrogel dictate its single intended 
use in medical electrode-related applications. Furthermore, the 
product ceases to be a medical product once the shelf life of the 
hydrogel has been exceeded. Accordingly, we find that the U.S.-
origin hydrogel imparts the essential character of the self-adhesive 
cutaneous electrode.
    Regarding the assembly and processing that occurs in China, we 
note that these constitute relatively simple and minor operations 
involving highly repetitive, low-skill functions. The lamination of 
the hydrogel onto the conductive plastic and fabric backing, the 
mechanical die cutting of the pad, and the gluing of the leadwire 
occur in less than six seconds per electrode. In contrast, we 
recognize that all of the engineering and design of the self-
adhesive cutaneous electrode occurs in the United States. While the 
conductive plastic, fabric backing and leadwire facilitate the 
product's functionality, the hydrogel itself remains unchanged by 
the Chinese assembly and processing and continues to provide the 
essential function of the FDA-regulated ``cutaneous electrode'' 
product. Consequently, we find that the self-adhesive cutaneous 
electrode is not substantially transformed by the assembly and 
processing that occur in China.
    With regard to your marking question, Section 304 of the Tariff 
Act of 1930, as amended (19 U.S.C. Sec.  1304), provides that, 
unless excepted, every article of foreign origin (or its container) 
imported into the United States shall be marked in a conspicuous 
place as legibly, indelibly, and permanently as the nature of the 
article (or container) will permit in such a manner as to indicate 
to an ultimate purchaser in the United States the English name of 
the country of origin of the article. The regulations implementing 
the country of origin marking requirements and exceptions of 19 
U.S.C. Sec.  1304, along with certain marking provisions of the 
Harmonized Tariff Schedule of the United States (19 U.S.C. Sec.  
1202), are set forth in 19 C.F.R. Part 134. ``Country of origin'' is 
defined, in relevant part, as: the country of manufacture, 
production, or growth of any article of foreign origin entering the 
United States. 19 C.F.R. Sec.  134.1(b). Further work or material 
added to an article in another country must effect a substantial 
transformation in order to render such other country the ``country 
of origin'' within the meaning of this part[.]''
    For purposes of marking, the same substantial transformation 
analysis discussed above applies in this case. Accordingly, the 
self-adhesive cutaneous electrodes which are processed in China are 
products of the United States. Because the electrodes are products 
of the United States that are exported and returned without 
undergoing a substantial transformation, they are excepted from 
country of origin marking requirements pursuant to 19 C.F.R. Sec.  
134.32(m). Please note that if you wish to mark the self-adhesive 
cutaneous electrodes or the packaging containing these products to 
indicate that they are ``Made in the USA'', the marking must comply 
with the requirements of the Federal Trade Commission (FTC). We 
suggest that you direct any questions on this issue to the FTC.

HOLDING:

    Based on the information provided, the country of origin of the 
self-adhesive cutaneous electrode for U.S. government procurement 
purposes is 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 after publication of the Federal Register notice 
referenced above, seek judicial review of this final determination 
before the Court of International Trade.
    Sincerely,

    Dated: January 29, 2019.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.
[FR Doc. 2019-01116 Filed 2-4-19; 8:45 am]
BILLING CODE 9111-14-P