[Federal Register Volume 75, Number 151 (Friday, August 6, 2010)]
[Notices]
[Pages 47609-47611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19363]
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DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection; Notice of Issuance of Final
Determination Concerning a Certain Unified Communications Solution
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 certain unified communications solution. Based
upon the facts presented, CBP has concluded in the final determination
that the United States is the country of origin of the unified
communications solution for purposes of U.S. government procurement.
DATES: The final determination was issued on August 2, 2010. 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 30 days from date of publication in the Federal
Register.
FOR FURTHER INFORMATION CONTACT: Alison Umberger, Valuation and Special
Programs Branch: (202) 325-0267.
SUPPLEMENTARY INFORMATION: Notice is hereby given that on August 2,
2010, pursuant to subpart B of part 177, Customs Regulations (19 CFR
part 177, subpart B), CBP issued a final determination concerning the
country of origin of the unified communications solution which may be
offered to the U.S. Government under an undesignated government
procurement contract. This final determination, in HQ H090115, was
issued at the request of Avaya Inc. 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 unified communications solution, assembled, installed and
programmed in the United States using subassemblies made in China and
Israel, and software developed in the United States, is substantially
transformed in the United States, such that the United States is the
country of origin of the finished article for purposes of U.S.
government procurement.
Section 177.29, Customs 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: August 2, 2010.
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International
Trade.
Attachment
HQ H090115
August 2, 2010
OT:RR:CTF:VS H090115 ARU
CATEGORY: Marking
Mr. Stuart P. Seidel, Baker & McKenzie LLP, 815 Connecticut Avenue,
NW., Washington, DC 20006-4078, USA
RE: U.S. Government Procurement; Title III, Trade Agreements Act of
1979 (19 U.S.C. Sec. 2511); Subpart B, Part 177, CBP Regulations;
Avaya Unified Communications Solution (``Communication Manager'')
Dear Mr. Seidel: This is in response to your letter dated
December 29, 2009, requesting a final determination on behalf of
Avaya Inc. (``Avaya''), pursuant to subpart B of part 177, Customs
and Border Protection (``CBP'') Regulations (19 CFR Sec. 177.21 et
seq.). Pursuant to our request, you provided additional information
during a meeting on March 5, 2010.
Under the pertinent regulations, which implement Title III of
the Trade Agreements Act of 1979, as amended (19 U.S.C. Sec. 2511
et seq.), 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.
This final determination concerns the country of origin of an
Avaya Unified Communications Solution known as ``Communication
Manager.'' We note that Avaya is a party-at-interest within the
meaning of 19 CFR Sec. 177.22(d)(1) and is entitled to request this
final determination. In addition, we have reviewed and granted the
importer's request for confidentiality pursuant to section
177.2(b)(7) of the Customs Regulations chapter 19, with respect to
certain information submitted.
FACTS:
The end product at issue is a Unified Communications Solution
which is made up of numerous electronic components that are
assembled and integrated at an end user's premises in the United
States using software known as ``Communication Manager.''
Communication Manager is the IP telephony software foundation on
which Avaya delivers unified communications to large and small
enterprises. It can control and expand a system from fewer than 100
users to as many as 36,000 users on a single system to more than one
million users on a single network. You state that the programming,
assembly and installation of a system will typically take
approximately one month to complete.
It is stated that Communication Manager adds functionality to
certain individual components and changes functionality of other
components. Although each installation at an end user's premises is
different, due to the end user's needs, each system will consist of
at least the following components: server, media gateways, circuit
packs, and internet protocol (``IP'') telephone sets. Avaya's
Communication Manager software is developed and tested exclusively
by Avaya in Denver, Colorado. Communication Manager is designed to
run on a variety of Linux-based media servers. Linux is an open
source operating system. Communication Manager provides centralized
call control for a resilient, distributed network of media gateways
and a wide range of analog, digital, and IP-based communication
devices. It also has several advanced built-in applications,
including mobility applications, call center features, advanced
conference calling, and enhanced emergency 9-1-1 capabilities.
Communication Manager is the foundation for building complete
enterprise communication networks by supporting SIP, H.323, and
other industry-standard communications protocols over a variety of
different networks. This protocol support provides centralized voice
mail, attendant operations, and call centers across multiple
locations.
A. Hardware
1. Media Servers: Each Communication Solution consists of one or
more media servers. Some servers are in the form of blades. These
are cards (similar to printed circuit cards with components) that
are fit or assembled into Media Gateways, while others are
standalone units.
2. Media Gateways: You describe three models of Media Gateways.
i. G250 Media Gateway: a powerful branch communication solution
that packs an IP telephony gateway, an advanced IP WAN router, a VPN
gateway and a high-performance LAN switch into a compact, 2U high
19'' rack unit.
ii. G350 Media Gateway: a powerful converged networking solution
that packs an IP telephony gateway, an advanced IP WAN router, a VPN
Gateway, and a high-performance LAN switch into a compact (3U)
modular chassis.
[[Page 47610]]
iii. G450 Media Gateway: consists of a 3U high, 19'' rack
mountable chassis with field-removable Supervisor Main Board Module,
Power Supplies, Fan Tray, DSP resources and memory.
3. Circuit Packs: A circuit pack, also known as a circuit card,
circuit board, or printed circuit, is an electronic circuit
consisting of one or more electronic components arranged on a
substrate board or card with one of more conductive layers laminated
on one or more insulating layers. The electronic components on the
circuit pack can be inserted into holes or surface mounted on
conductive pads using various alloys of metal called solder. Such
circuit packs usually leave one or more connectors to integrate them
into the system of which they are a part. Avaya's circuit packs are
not stand-alone devices. They are inserted as components to Avaya's
Media Gateway units. Avaya offers two types of circuit packs--a
``TN'' card and an ``MM'' card. TN circuit packs are based on older
technology for use in legacy telephony systems, also called
Telephone Interface Cards. MM circuit packs are based on newer
technology, also called Media Modules.
4. Telephone Sets: Internet Protocol (``IP'') telephones that
before integration through Communication Manager have no
functionality.
B. Software
You claim that the integration of the individual components is
achieved through the use of software called Communication Manager,
which adds functionality to certain individual components and
changes functionality of the other components. Avaya's Communication
Manager software is developed and tested exclusively by Avaya in
Denver, Colorado. Avaya began development of Communication Manager
in 2002 and since that time has spent significant resources in the
development and maintenance of Communication Manager. All the
engineering, development, and design were developed in the United
States; however, a small percentage of the ongoing software
development takes place abroad.
C. Assembly
1. Operations in China:
There are 6 main subassemblies that compose the Communication
Manager solution. Subassemblies made in China include: Gateways,
Servers, Media Modules, Telsets, and Circuit Packs. The hardware
listed above is manufactured in China. The raw components for the
hardware are obtained from various countries throughout Asia and
Europe. Certain gateways are also manufactured in Israel and other
countries, but will eventually be manufactured in China.
2. Operations in the United States:
All the engineering, development, design were developed in the
United States. Communication Manager will be installed onto a solid
state drive or hard drive residing on the server. It will be custom
configured at the end user's facility or another location in the
United States to integrate the various components. Although each
installation at an end user's premises is different, due to the end
user's needs, each system will consist of at least the following
components: server, media gateways, circuit packs, and IP telephone
sets. Once actual installation begins, approximately five (5) days
is needed to customize the Communication Manager software for the
end user. A total of 11 days is required to assemble the necessary
equipment, install the hardware, and integrate the hardware and
software. The complex installation and integration requires both
adjustments to hardware and customized software programming. You
claim that due to the number of components assembled, number of
different operations, time, skill level required, attention to
detail, quality control, the value added to the Communication
Manager, and the overall employment complexity in development of the
software, the hardware is substantially transformed when the
software is added and the system is integrated.
ISSUE:
What is the country of origin of Communication Manager Units for
purposes of U.S. Government procurement?
LAW AND ANALYSIS:
Pursuant to subpart B of Part 177, 19 CFR Sec. 177.21 et seq.,
which implements Title III of the Trade Agreements Act of 1979, as
amended (``TAA'' 19 U.S.C. Sec. 2511 et seq.), CBP issues country
of origin advisory rulings and final determinations on 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.
Under the rule of origin set forth at 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 the Federal Procurement
Regulations. See 19 C.F.R. Sec. 177.21. In this regard, CBP
recognizes that the Federal Procurement 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 to form
completed articles, CBP considers the totality of the circumstances
and makes such decisions on a case-by-case basis. The country of
origin of the article's components, the extent of the processing
that occurs within a given country, and whether such processing
renders a product with a new name, character, and use are primary
considerations in such cases. Additionally, facts such as resources
expended on product design and development, extent and nature of
post-assembly inspection procedures, and worker skill required
during the actual manufacturing process will be considered when
analyzing whether a substantial transformation has occurred;
however, no one such factor is determinative.
With respect to the product under consideration in the instant
case, we note that CBP has not previously considered whether the
components at issue are substantially transformed when brought
together in the manner set forth above. However, CBP has considered
whether components of various origins have been substantially
transformed during the assembly of related products. Though such
rulings may not be directly on point with the facts under
consideration in the instant case, the guidance supplied by such
cases may nonetheless be applied to resolve the issues presently
before us. The determination will be in this instance ``a mixed
question of technology and customs law, mostly the latter.'' Texas
Instruments, Inc. v. United States, 681 F.2d 778, 783 (C.C.P.A.
1982).
You claim that, ``[i]n * * * rulings involving hardware which
lacked the functional `intelligence' characteristics present in the
completed product, and where the firmware/software provided the
merchandise's functionality, CBP determined that the products were
substantially transformed into products of the country where the
software which provided its functionality was installed and final
testing occurred.'' We disagree with the scope of this statement.
While the location of the software installation and testing is one
factor to be considered, it is not the sole determinant. The country
in which the software development takes place is also relevant.
In Data General v. United States, 4 CIT 182 (1982), the court
determined that for purposes of determining eligibility under item
807.00, Tariff Schedules of the United States, the programming of a
foreign PROM (Programmable Read-Only Memory chip) substantially
transformed the PROM into a U.S. article. In programming the
imported PROMs, the U.S. engineers systematically caused various
distinct electronic interconnections to be formed within each
integrated circuit. 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. This physical alteration, not visible to the naked eye,
could be discerned by electronic testing of the PROM. The court
noted that the programs
[[Page 47611]]
were designed by a project engineer with many years of experience in
``designing and building hardware.'' While replicating the program
pattern from a ``master'' PROM may be a quick one-step process, the
development of the pattern and the production of the ``master'' PROM
required much time and expertise. The court noted that it was
undisputed that programming alters the character of a PROM. 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.
In C.S.D. 84-86, CBP stated:
We are of the opinion that the rationale of the court in the
Data General case may be applied in the present case to support the
principle that the essence of an integrated circuit memory storage
device is established by programming * * * . [W]e are of the opinion
that the programming (or reprogramming) of an EPROM results in a new
and different article of commerce which would be considered to be a
product of the country where the programming or reprogramming takes
place.
Accordingly, the programming of a device that changes or defines
its use generally constitutes substantial transformation. See also
HQ 733085, dated July 13, 1990; and HQ 558868, dated February 23,
1995 (programming of SecureID Card substantially transforms the card
because it gives the card its character and use as part of a
security system and the programming is a permanent change that
cannot be undone); HQ 735027, dated September 7, 1993 (programming
blank media (EEPROM) with instructions on it that allows it to
perform certain functions of preventing piracy of software
constituted substantial transformation); but see HQ 732870, dated
March 19, 1990 (formatting a blank diskette did not constitute
substantial transformation because it did not add value, did not
involve complex or highly technical operations and did not create a
new or different product); HQ 734518, dated June 28, 1993
(concluding that motherboards were 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).
In HQ 563012, dated May 4, 2004, CBP considered whether
components of various origins were substantially transformed when
assembled to form a fabric switch which involved a combination of
computer hardware and software. Most of the assembly of computer
hardware was performed in China. Then, in either Hong Kong or the
U.S., the hardware was completed and the U.S.-origin software was
downloaded onto the hardware. CBP noted that the U.S.-developed
software provided the finished product with its ``distinctive
functional characteristics.'' In making the determination that the
product was substantially transformed in the United States, where
the fabric switch was assembled to completion, CBP considered both
the assembly process that occurred in the United States and the
configuration operations that required U.S.-origin software. In the
scenario where the fabric switch was assembled to completion in Hong
Kong, CBP determined the origin for marking purposes was Hong Kong.
In HQ 559255, dated August 21, 1995, a device referred to as a
``CardDock'' was under consideration for country of origin marking
purposes. The CardDock was a device which was installed in IBM PC
compatible computers. After installation, the units were able to
accept PCMCIA cards for the purpose of interfacing such PCMCIA cards
with the computer in which the CardDock unit was installed. The
CardDock units were partially assembled abroad but completed in the
United States. The overseas processing included manufacturing the
product's injection molded plastic frame and installing integrated
circuits onto a circuit board along with various diodes, resistors
and capacitors. After such operations, these items were shipped to
the United States for further processing that included mating a
U.S.-origin circuit board to the foreign-origin frame and board. The
assembled units were thereafter subjected to various testing
procedures. In consideration of the foregoing, CBP held that the
foreign-origin components, i.e., the ISA boards, frame assemblies
and connector cables, were substantially transformed when assembled
to completion in the United States. In finding that the name,
character, and use of the foreign-origin components had changed
during processing in the United States, CBP noted that the
components had lost their separate identity during assembly and had
become an integral part of a new and distinct item which was visibly
different from any of the individual foreign-origin components.
In HQ 735027, dated September 7, 1993, a device that software
companies used to protect their software from piracy was under
consideration for country of origin marking purposes. The device,
referred to as the ``MemoPlug,'' was assembled in Israel from parts
that were obtained from Taiwan (such as various connectors and an
Electronically Erasable Programmable Read Only Memory, or
``EEPROM'') and Israel (such as an internal circuit board). After
assembly, these components were shipped to a processing facility in
the United States where the EEPROM was programmed with special
software. Such processing in the United States accounted for
approximately 50 percent of the final selling price of the
MemoPlugs. In finding that the foreign-origin components were
substantially transformed in the United States, CBP noted that the
U.S. processing transformed a blank media, the EEPROM, into a device
that performed functions necessary to the prevention of software
piracy.
We make our determinations based on the totality of the
circumstances. Here, we take particular note of the fact that the
installation of the Communication Manager software adds
functionality to certain individual components and changes
functionality of other components. This software is developed and
tested exclusively by Avaya in Denver, Colorado. Avaya began
development of Communication Manager in 2002 and since that time has
spent significant resources in the development and maintenance of
the software. In addition, assembly and installation of the hardware
components that make up the Avaya Communication Solution will
typically take approximately one month to complete and are performed
in the United States. While the subassemblies are manufactured in
China and Israel, all of the initial engineering, development, and
design were developed in the United States.
Based upon the above precedents and the totality of the
circumstances, we find that the there is a substantial
transformation of the component parts in the United States, the
location where the final assembly and installation of the hardware
as well as the application of the Communication Manager software
occur. It follows that we find the country of origin for government
procurement purposes is the United States.
HOLDING:
Based on the facts provided, the assembly, installation, and
programming operations performed in the United States impart the
essential character to Communication Manager. As such, Communication
Manager will be considered a product of the United States for the
purpose of 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 determination.
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,
Sandra L. Bell,
Executive Director, Regulations and Rulings, Office of International
Trade.
[FR Doc. 2010-19363 Filed 8-5-10; 8:45 am]
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