On April 14, 2005, the U.S. Court of International Trade (USCIT) issued a second remand order directing the Department of Labor (Labor) to further investigate workers' eligibility to apply for Trade Adjustment Assistance (TAA) in the matter of Former Employees of Computer Sciences Corporation v. United States Secretary of Labor (Court No. 04-00149).
The Department's initial negative determination for the workers of Computer Sciences Corporation, Financial Services Group, East Hartford, Connecticut (hereafter “CSC”) was issued on October 24, 2003 and published in the Federal Register on November 28, 2003 (68 FR 66878). The Department's determination was based on the finding that workers did not produce an article within the meaning of Section 222 of the Trade Act of 1974. It was determined that the subject worker group provided business and information consulting, specialized application software, and technology Start Printed Page 52130outsourcing support to customers in the financial services industry.
By letter of November 24, 2003, the petitioner requested administrative reconsideration of the Department's negative determination. The Department issued a Notice of Affirmative Determination Regarding Application for Reconsideration on January 5, 2004. The determination Notice was published in the Federal Register on January 23, 2004 (69 FR 3391).
The Department issued a Notice of Negative Determination on Reconsideration was issued on February 3, 2004 and published in the Federal Register on February 24, 2004 (69 FR 8488). On reconsideration, the Department determined that the subject company produced widely marketed software on CD Rom and tapes but the workers were not eligible to apply for TAA because the subject company did not shift production, nor import completed software on physical media that is like or directly competitive with that which was produced at the subject facility.
On March 15, 2004, the petitioner sought judicial review of the negative determination, alleging that packaging functions (storing completed software on physical media and making a tape copy of the completed software on physical media) had shifted to India. On June 2, 2004, the USCIT granted the Department's request for voluntary remand and directed the Department to further investigate the subject workers' eligibility to apply for TAA.
On July 29, 2004, the Department issued a Negative Determination on Reconsideration on Remand for the workers of the subject firm on the basis that packing functions did not shift to India and that all storing and copying functions remained in the United States. The determination also stated that CSC did not import any software which is like or directly competitive with the software produced at the subject facility. The Department's Notice of determination was published in the Federal Register on August 10, 2004 (69 FR 48526).
In response to the petitioner's appeal of the negative determination on remand, the USCIT, in its April 14, 2005 order, directed the Department to: (1) Explain why code is not a software component; (2) examine whether the workers were engaged in the production of code; (3) investigate whether there was a shift of code production to India; (4) investigate whether code imported from India is like or directly competitive with the completed software of any component of software formerly produced by the workers; and (5) investigate whether there has been or is likely to be an increase in imports of like or directly competitive article by entities in the United States.
During the second remand investigation, the Department contacted the subject firm to determine what code and software is developed at the subject facility, how code is written and handled, and what services are provide to CSC clients.
The Department considered all information provided by the petitioners as well as solicited comments from the petitioners through their counsel.
In order to meet the criteria for TAA certification, the following criteria must be met:
(1) A significant number or proportion of the workers in such workers' firm, or an appropriate subdivision of the firm, have become, or are threatened to become, totally or partially separated; and
(2) The sales or production, or both, of such firm or subdivision have decreased absolutely; and
(3) Imports of articles like or directly competitive with articles produced by such firm or subdivision have increased; and the increase in imports contributed importantly to such workers' separation or threat of separation and to the decline in the sales or production of such firm or subdivision; or
(4) There has been a shift in production by such workers' firm or subdivision to a foreign country of articles like or directly competitive with articles which are produced by such firm or subdivision; and the country to which the workers' firm has shifted production of the articles is a party to a free trade agreement with the United States, is a beneficiary country under the Andean Trade Preference Act, African Growth and Opportunity Act, or the Caribbean Basin Economic Recovery Act or there has been or is likely to be an increase in imports of articles that are like or directly competitive with articles which are or were produced by such firm or subdivision.
Because 19 U.S.C. 2272(a)(2) requires that an article must be produced by the firm employing the workers covered by the petition, the first issue is whether CSC produces an article and whether the workers are engaged in production.
After completing its investigation, DOL still concludes that the plaintiffs should not be certified for TAA benefits. The first requirement that an applicant for TAA benefits must meet in a shift of production case such as this one, is that the production of an article was actually shifted. In the present case, what was shifted was the act of code writing. Code, not embodied on a physical medium, is not considered an article for TAA purposes. It is not found on the Harmonized Tariff Schedule (“HTS”). The USCIT has concluded in past cases that an item must be on the HTS to be an “article” for the purposes of the Trade Act. See Former Employees of Murray Engineering v. Chao, 358 F. Supp.2d 1269, 1272 n.7 (“the language of the Act clearly indicates that the HTSUS governs the definition of articles, as it repeatedly refers to “articles” as items subject to a duty”). Software code, not on a physical medium, is exempt from the HTSUS, and is, therefore, not an article under the HTSUS test. See HTSUS, General Note 3(I) (exempting “telecommunications transmissions” from “goods subject to the provisions of the [HTSUS]”). Therefore, there was no shift of production of an article, and there can be no Trade Act coverage.
Although the preceding discussion resolves this case, DOL undertook the investigation required by the USCIT. First, DOL does not consider software code, not embodied on any physical medium, to be a component of completed software. To be a component, DOL requires that the item in question also be an article in and of itself. It is not enough that the item be indispensable to the function of the completed article. The code is like an idea that will eventually lead to the existence of an “article”—it is, in fact, necessary—but it is not something that can be measured or “imported.” Therefore, software code, like an idea, is not a component of an “article.”
With respect to the second and third directions of the USCIT, DOL has concluded that the plaintiffs did write software code, and that the code writing function was transferred to India. The software code written in India is similar to the software code plaintiffs wrote in the United States. It is impossible to answer whether it is “like or directly competitive” because that assumes the existence of articles to compare. Because software code, not embodied on a physical medium, is not an “article” for the purposes of the Trade Act, it is clearly not “like or directly competitive” with an actual article such as completed software on a physical medium.
Finally, in order to determine whether the universe of entities who are producing software like or directly competitive with the software produced by the subject company are importing or likely to increase its imports of those products, the Department conducted a survey of the subject company's major competitors. The survey was sent to Start Printed Page 52131those seven companies who produce software which might be considered like or directly competitive with the four CSC software programs at issue: Performance Plus, JETS, Repetitive Payment System, and Vantage-One. Of the companies surveyed, none had imported software in a physical medium, and while some stated that new business opportunities were always possible, none had expressed that they were likely to import any software. Specifically, one competitor stated that it has “never used offshore resources for anything,” another competitor stated that their software was written “100% Stateside” and that there was “no intention to import anything—no software, no code” and a third competitor stated “no way, no how” that the company imports software. Because all the competitors are domestic, and none of them have increased or are likely to increase imports, it is impossible for consumers of the software code or software on a physical medium to buy an imported product “like or directly competitive” to CSC's. Obviously, CSC has increased its “delivery” of software code to the United States, but because software code is not an article for the purposes of the Trade Act, such an increase does not qualify to make plaintiffs eligible for TAA benefits.
After reconsideration on remand, I affirm the original notice of negative determination of eligibility to apply for adjustment assistance for workers and former workers of Computer Sciences Corporation, Financial Services Group, East Hartford, Connecticut.Start Signature
Signed at Washington, DC, this 24th day of August, 2005.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. E5-4774 Filed 8-31-05; 8:45 am]
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