[Federal Register Volume 88, Number 80 (Wednesday, April 26, 2023)]
[Notices]
[Pages 25415-25417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08768]



[[Page 25415]]

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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Video 
Surveillance and Data Management System

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 a video surveillance and data management system. 
Based upon the facts presented, CBP has concluded in the final 
determination that the imported components of the subject video 
surveillance and data management system undergo substantial 
transformation in the United States when made into the final VMS 
assembly.

DATES: The final determination was issued on April 10, 2023. 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 May 26, 2023.

FOR FURTHER INFORMATION CONTACT: Austen Walsh, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of Trade, at (202) 
325-0114.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on April 10, 
2023, U.S. Customs and Border Protection (CBP) issued a final 
determination concerning the country of origin of a video management 
and surveillance system for purposes of title III of the Trade 
Agreements Act of 1979. This final determination, HQ H327997, was 
issued at the request of Security Lab Inc. (``Security Lab''), 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 has concluded that, based 
upon the facts presented, the imported components are substantially 
transformed in the United States when made into the subject video 
surveillance and data management system.
    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: April 21, 2023.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H327997

April 10, 2023

OT:RR:CTF:VS H327997 AMW

Category

    Origin
Gene W. Rosen, Esq., Gene Rosen Law Group, 200 Garden City Plaza, Suite 
405, Garden City, NY 11530

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. 2511); Subpart B, Part 177, CBP Regulations; Security 
Lab Inc.; Country of Origin of Video Surveillance and Data Management 
System; Substantial Transformation

Dear Mr. Rosen:

    This is in response to your request of September 21, 2022, on 
behalf of your client, Security Lab Inc. (``Security Lab''), for a 
final determination concerning the country of origin of a video 
management and surveillance system pursuant to Title III of the Trade 
Agreements Act of 1979 (``TAA''), as amended (19 U.S.C. 2511 et seq.), 
and subpart B of Part 177, U.S. Customs and Border Protection (``CBP'') 
Regulations (19 CFR 177.21, et seq.). Security Lab is a party-at-
interest within the meaning of 19 CFR 177.22(d)(1) and 177.23(a) and is 
therefore entitled to request this final determination.

Facts

    Security Lab produces a product described as the ``video management 
and surveillance system'' (``VMS''). As outlined in your request, the 
VMS is a hardware system consisting of a camera array and central 
computer system designed to conduct and manage video surveillance 
operations that ``is capable of handling up to 64 cameras per server 
simultaneously and can be used to power hundreds of servers within a 
single, centrally administered system. . . .''
    The VMS comprises foreign-origin components that are assembled in 
the United States to create hardware that is then combined with U.S.-
origin software, including the Security Lab Application Software and 
Microsoft Windows. The hardware components consist of the following 
items:

 Chassis (product of Taiwan)
 Partially completed motherboard (product of China)
 Central processing unit (``CPU'') (product of Costa Rica, 
Vietnam, or Malaysia)
 Hard disk drive (``HDD'') (product of Singapore or Thailand)
 Optical drive (product of China)
 Memory modules (product of China)
 Graphics cards (product of China)
 Alarm boards (product of China)
 Serial attached technology attachment (``SATA Controller'') 
(product of Taiwan)
 Redundant array independent disk controller (``RAID 
controller'') (product of Singapore)
 Power supply unit (``PSU'') (product of China)
 Computer fans (product of China)
 Network interface card (``NIC'') (product of Taiwan)
 Network camera (product of Taiwan, the Republic of Korea, or 
China)
 Computer keyboard (product of China), and
 Computer mouse (product of China)

    In addition, you state that the remaining ``minor'' components 
(e.g., cables, brackets, bezels, screws, and straps) will be sourced 
from a variety of countries. Your request indicates that, as explained 
in further detail below, the items will be assembled into a 
``computer'' unit (i.e., the ``system assembly''), which is housed in 
the chassis, and contains the motherboard, CPU, HDD, memory modules, 
graphics cards, alarm boards, SATA controller, RAID controller, PSU, 
fans, and NIC. The computer unit will control the operation of the 
network cameras, and will be operated by a user utilizing the keyboard 
and mouse. Of the countries of origin provided for each component, 
Taiwan, Singapore, Costa Rica, and the Republic of Korea are each TAA-
designated countries while Vietnam, Malaysia, and China are not.
    The VMS manufacturing process consists of the following five 
phases: (1) order management; (2) hardware manufacturing; (3) 
application software, operating system and systems installation, 
configuration and management; (4) quality control and assurance; and 
(5) order and system closeout and final checks. In greater detail, 
these steps occur as follows:
     Order Management: After receiving a customer order, 
Security Lab employees issue a work order for the quantity of VMSs to 
be assembled, identifying the model number and requirements for the 
items to be manufactured. Security Lab employees then identify the bill 
of materials necessary.

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     Hardware Manufacturing: This phase involves the assembly 
of the VMS hardware, subassemblies, and components. The process 
involves the use of an electric screwdriver, hot glue, harness 
connections, and tie strips. The assembly process involves up to 30 
steps and occurs over the course of 60-90 minutes.
     Application Software, Operating System and Systems 
Installation, Configuration and Management: During this phase, Security 
Lab programmers, developers, testers, and hardware engineers design, 
develop and code the relevant version of the Security Lab Application 
Software to configure each system on a build-to-order basis. The 
software is integrated, installed, and configured into the completed 
hardware via an 18-step process occurring over the course of 60-90 
minutes.
     Quality Control and Assurance: This phase involves a 
Security Lab employee conducting a 14-step quality control check and 
testing process of each VMS, including testing video and audio 
performance and network functionality. This phase occurs over the 
course of approximately 60 minutes.
     Order and System Closeout/Final Checks: This phase 
involves a six-step, 15-minute closeout process in which photographs of 
the complete VMS are taken and a tamper seal is placed along the VMS 
chassis.
    According to your submission, the Security Lab Application Software 
is designed and coded in the United States by Security Lab programmers 
on a C, C++ framework. The software includes the following 
capabilities: real-time audio, video, and data recording, viewing, 
listening, playback, storage, information management, situational 
awareness, and security device control. The Security Lab Application 
Software functions by receiving ``communication'' and 
``interoperability'' instructions from the hardware's firmware and 
application program interfaces (``APIs''). You state that, in this 
case, the firmware is programming that is written to the hardware 
device's memory and that an API is a ``software intermediary that 
allows two applications to `talk' to each other.''

Issue

    Whether the imported components are substantially transformed when 
made into the subject VMS in 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 purpose 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 CFR 177.21 et seq., which implements Title 
III, Trade Agreements Act of 1979, as amended (19 U.S.C. 2511-2518).
    CBP's authority to issue advisory rulings and final determinations 
is set forth in 19 U.S.C. 2515(b)(1), which states:

    For the purposes of this subchapter, the Secretary of the 
Treasury shall provide for the prompt issuance of advisory rulings 
and final determinations on whether, under section 2518(4)(B) of 
this title, an article is or would be a product of a foreign country 
or instrumentality designated pursuant to section 2511(b) of this 
title.

    Emphasis added.
    The Secretary of the Treasury's authority mentioned above, along 
with other customs revenue functions, are delegated to CBP in the 
Appendix to 19 CFR part 0--Treasury Department Order No. 100-16, 68 FR 
28, 322 (May 23, 2003).
    The rule of origin set forth in 19 U.S.C. 2518(4)(B) states:

    An article is a product of a country or instrumentality only if 
(i) it is wholly the growth, product, or manufacture of that country 
or instrumentality, or (ii) in the case of an article which consists 
in whole or in part of materials from another country or 
instrumentality, it has been substantially transformed into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.

    See also 19 CFR 177.22(a).
    In rendering advisory rulings and final determinations for purposes 
of U.S. Government procurement, CBP applies the provisions of subpart B 
of Part 177 consistent with the Federal Acquisition Regulation 
(``FAR''). See 19 CFR 177.21. In this regard, CBP recognizes that the 
FAR restricts 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 CFR 25.403(c)(1).
    The FAR, 48 CFR 25.003, defines ``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.

    Section 25.003 defines ``designated country end product'' as:

a 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.

    Section 25.003 defines ``WTO GPA country end product'' 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.

    Once again, we note that the VMS is assembled in the United States 
with components sourced from a variety of TAA-designated countries 
(i.e., Taiwan, Singapore, Costa Rica, and the Republic of Korea) as 
well as several non-TAA countries (i.e., China, Vietnam, and Malaysia).
    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. 
Additionally, factors such as the resources expended on product design 
and development, the extent and nature of post-assembly inspection and 
testing procedures, and worker skill required during the actual 
manufacturing process will be considered when determining whether a 
substantial transformation has occurred. No one factor is 
determinative.
    A new and different article of commerce is an article that has 
undergone a change in commercial designation or identity, fundamental 
character, or commercial use. A determinative issue is the extent of 
the operations performed and whether the materials lose their identity 
and become an integral part of the new article. See Nat'l Hand Tool 
Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed. 
Cir. 1993). ``For courts to find a change in character, there often 
needs to be a substantial alteration in the characteristics of the 
article or components.'' Energizer Battery, Inc. v.

[[Page 25417]]

United States, 190 F. Supp. 3d 1308, 1318 (Ct. Int'l Trade 2016) 
(citations omitted).
    In instances in which component production or assembly occurs in 
multiple countries and no single country's operations dominate the 
manufacturing operations, CBP has looked to the location at which final 
assembly occurs. In CBP Headquarters Ruling (``HQ'') H170315, dated 
July 28, 2011, CBP was asked to determine the country of origin for an 
imported satellite telephone that contained Malaysian-origin circuit 
boards and U.K.-origin software and that underwent final assembly and 
programming in Singapore. In that matter, CBP noted, there existed 
``three countries under consideration where programming and/or assembly 
operations take place, the last of which is Singapore.'' Although the 
Malaysian-origin boards and U.K.-origin software were important to the 
function of the device, CBP determined Singapore to be the proper 
country of origin because it had been the site of the last substantial 
transformation. Similarly, in HQ H203555, dated April 23, 2012, CBP 
considered the country of origin of oscilloscopes containing Malaysian-
origin circuit boards assembled in Singapore and programmed with U.S.-
origin software. Once again, CBP observed that no one country's 
operations dominated the manufacturing process, but that the final 
assembly in Singapore completed the oscilloscopes and, therefore, the 
last substantial transformation occurred in that country.
    In the present matter, you argue that the country of origin of the 
VMS is the United States because you believe that the last substantial 
transformation occurs in the United States. You state that hardware 
assembly and the installation of the U.S.-origin software into the 
U.S.-assembled system assembly results in a new article with a name, 
character, and use different from the original hardware components.
    Here, a plurality of components is sourced from China, although a 
combined majority is sourced from Taiwan, Singapore, Costa Rica, 
Vietnam, Malaysia, and Thailand, and elsewhere. Importantly, the major 
components do not originate from one country, but are instead sourced 
from a variety of countries: the CPU will originate from either Costa 
Rica, Vietnam or Malaysia, the partial motherboard from China, and the 
cameras from either Taiwan, Korea, or China. The assembly in the United 
States, meanwhile, fully integrates the subassemblies and various 
component parts into the complete VMS, at which point the U.S.-origin 
software is installed. No single country's operations dominate the 
manufacturing operations of the VMS. The CPU manufactured in Costa 
Rica, Vietnam or Malaysia is important to the function of the VMS, as 
is the Chinese-origin motherboard and U.S.-origin firmware and 
software. The assembly in the United States completes the VMS. This 
matter is therefore analogous to our determination in HQ H203555, dated 
April 23, 2012, in which we determined Singapore to be the country of 
origin for oscilloscope where ``there are three countries under 
consideration where programming and/or assembly operations take place, 
the last of which is Singapore'' but ``[n]o one country's operations 
dominate[d] the manufacturing operations.'' See also, HQ H170315, dated 
July 28, 2011, scenario III.
    Based on the foregoing, we find that the last substantial 
transformation occurs in the United States, and therefore, the VMS is 
not a product of a foreign country or instrumentality which is not 
designated pursuant to section 2511(b) of this title (i.e., China, 
Vietnam, and Malaysia). As to whether the VMS assembled in the United 
States qualifies as a ``U.S.-made end product,'' you may wish to 
consult with the relevant government procuring agency and review 
Acetris Health, LLC v. United States, 949 F.3d 719 (Fed. Cir. 2020).

Holding

    Based on the information outlined above, we determine that the 
components imported into the United States undergo a substantial 
transformation when made into the subject video management system by 
Security Lab.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 CFR 177.29. Any party-at-interest other 
than the party which requested this final determination may request, 
pursuant to 19 CFR 177.31, that CBP reexamine the matter anew and issue 
a new final determination. Pursuant to 19 CFR 177.30, any party-at-
interest may, within 30 days of publication of the Federal Register 
Notice referenced above, seek judicial review of this final 
determination before the U.S. Court of International Trade.

    Sincerely,

Alice A. Kipel,
Executive Director, Regulations and Rulings Office of Trade.
[FR Doc. 2023-08768 Filed 4-25-23; 8:45 am]
BILLING CODE 9111-14-P