U.S. Customs and Border Protection, Department of Homeland Security.
Notice of final determination.
This document provides notice that the Bureau of Customs and Border Protection (CBP) has issued a final determination concerning the country of origin of certain printer cartridges which may be offered to the United States Government under an undesignated government procurement contract. CBP has concluded that, based upon the facts presented, the operations performed at the United States facility do not result in a substantial transformation of the goods. Therefore, the goods will not be considered to be products of the United States.
The final determination was issued on August 2, 2007. 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 of August 8, 2007.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Gerry O'Brien, Valuation and Special Programs Branch, Regulations and Rulings, Office of International Trade (202-572-8792).End Further Info End Preamble Start Supplemental Information
Notice is hereby given that on August 2, 2007, 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 certain printer cartridges which may be offered to the United States Government under an undesignated government procurement contract. This final determination, in HQ H009107, was issued at the request of Nukote International, 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 concluded that, based upon the facts presented, the operations performed at the United States facility do not result in a substantial transformation of the goods. Therefore, the goods will not be considered to be products of the United States.
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.Start Signature
Dated: August 2, 2007.
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of International Trade.
August 2, 2007.
MAR-2-05 OT:RR:CTF:VS H009107 GOB
G. Matthew Koehl, Esq., Kirkpatrick & Lockhart Preston Gates Ellis LLP., 1735 New York Avenue NW., Suite 500, Washington, DC 20006-5221.
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. 2511); Subpart B, Part 177, CBP Regulations; Country of Origin of Printer Cartridges
Dear Mr. Koehl:
This is in response to your letter of March 26, 2007, requesting a final determination on behalf of Nukote International, Inc. (“Nukote”), pursuant to subpart B of Part 177, Customs and Border Protection (“CBP”) Regulations (19 CFR 177.21 et seq.). Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 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 certain laser printer cartridge models. We note that Nukote is a party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is entitled to request this final determination.
You request a final determination with respect to three manufacturing process scenarios and resulting end products. The first scenario involves laser toner cartridges for color laser printers, including both color and monochrome (black) cartridges. The second scenario involves monochrome (black) laser toner cartridges for conventional laser printers with an electronic chip. The third scenario involves monochrome (black) laser toner cartridges for conventional laser printers without an electronic chip.
You describe the first process as follows. Nukote collects empty toner cartridges from end users at collection sites in the United States and, to a substantially lesser extent, in Canada, Singapore, the United Kingdom, Hong Kong and China. Nukote also purchases used printer cartridges from United States-Start Printed Page 44567based brokers. These used printer cartridges were originally manufactured at various locations in different countries. Nukote has no process for identifying the country of origin of the empty cartridges.
Nukote then sends the cartridges to a foreign country, where they are sorted to remove units which cannot be remanufactured. This process identifies cartridge type and printer type, and removes damaged and broken parts and units that cannot be processed. The cartridges which can be remanufactured are then shipped to a different foreign facility, where Nukote has direct management and operational responsibility and where the operations performed are based on proprietary specifications developed by Nukote. At this facility, the used cartridges are split open, disassembled and separated into three sub-assemblies—the developer section, the toner hopper, and the waste hopper. The original doctor blade is cleaned and the original primary charge roller is sandblasted and recoated. The drum is removed from the waste hopper, which, along with the toner hopper, is scraped to remove plastic flash and residual foam seal material, and then blown out to remove residual toner from the original manufacturer. New foam seals are installed on the toner hopper and waste hopper units. New waste hopper drums, recovery blades and wiper blades are also installed. After being rebuilt with a clean blade, roller and gears, the developer section is temporarily assembled with a “host” toner section (the “host” hopper is used repeatedly for this test; it is not a part of an operating toner cartridge) and the rebuilt waste hopper. The temporarily-assembled unit is inserted in a printer which has been “hot-wired” to bypass the need for an electronic chip, which has not been installed. The cartridge then undergoes a test print to check that the seals do not leak and are capable of producing acceptable quality print. This mechanical test does not evaluate whether the cartridge will operate on its own in a printer. It could not do so, as the cartridge has not been charged with toner and the electronic chip has not been installed; without the chip, the cartridge is not operable, as it cannot communicate with the printer. The “host” hopper is then removed and the three main sub-assembly components (the developer section, the toner hopper, and the waste hopper) are prepared for shipment to Nukote's Rochester facility.
Final assembly of the printer cartridges occurs at Nukote's Rochester, New York facility. You state that the substantial majority of the operations at this facility are performed by skilled Nukote quality control and technical operations staff, which must complete a minimum of three to four weeks of training in order to become certified to engage in this activity. These operations consist of the following: (1) Incoming Quality Inspection. You state that the goods arrive without the electronic chip and toner that are necessary for the printer cartridge to perform any useful function. (2) Filling and Sealing. The toner hopper is filled with new chemical toner and the hopper is sealed with a plug. The toner in the first manufacturing process scenario is either of U.S. or foreign origin. (3) Mechanical Assembly. The waste hopper, developer section and toner hopper are assembled with screws, springs and clips. (4) Testing. Nukote “process tests” ten percent of the units for print quality and leakage. All of this testing is performed by a Nukote quality control technician and/or quality engineer. Nukote also “life tests” one to two percent of the units. During this process, all seals, clips, blades, PCRs, and rollers are visually inspected for cleanliness and proper assembly. (5) Inspection. One hundred percent of the units are visually inspected against a defined inspection criteria. (6) External Cleaning. The exterior of the units is cleaned by a pneumatic air line, a toner dust cloth and a dust collection device. (7) Installation of a Computer Chip. A custom-engineered and IP-protected chip, developed and manufactured in the United States, is manually installed in each unit. The chip enables the printer software to recognize the correct laser cartridge and permits the printer to tabulate the page count and toner volume level. The cartridge is non-functional without this chip. (8) Advance Preparation for Shipment. A shipping protector, lot control tag and shipping seals are applied. (9) Packaging for Shipment. The unit is placed in a shipping bag, protective endcaps are installed, an instruction sheet is added, a customer label is applied, and the unit is sealed in a customer-specific box. (10) Skidding and Shipment. The units are placed on a skid and sent to the shipping warehouse for movement to a distribution center in Tennessee. The cost of U.S. origin components for this scenario will vary from approximately 21% to 74%, depending on whether the toner is of U.S. or foreign origin.
The second process scenario involves conventional monochrome printer cartridges with computer chips. This process is substantially the same as the first process, with the following exceptions. The disassembly process at the foreign facility is slightly less complex because the cartridge itself is less complex than a chemical toner color cartridge. The toner is always of U.S. origin and is much less expensive than the toner for the color cartridge. The cost of the drum is considerably less than in the first scenario. The cost of U.S. origin components will range from approximately 69% to 76%, depending on whether certain components are of U.S. or foreign origin. As in the first scenario, a custom-engineered and IP-protected chip, developed and manufactured in the United States, is manually installed in each unit. The chip enables the printer software to recognize the correct laser cartridge and permits the printer to tabulate the page count and toner volume level.
The third manufacturing process scenario is different from the second only in that there is no computer chip in the third scenario. The cost of U.S. origin components will range from approximately 60% to 68%, depending on whether certain components are of U.S. or foreign origin. As in the second scenario, the toner is always of U.S. origin.
What is the country of origin of the subject laser printer cartridge models for the purpose of U.S. Government procurement?
Law and Analysis
Pursuant to Subpart B of Part 177, 19 CFR 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 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 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 under 19 U.S.C. 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 CFR 177.22(a).
In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative 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 (Ct. Int'l Trade 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. In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), CBP held that for purposes of the Generalized System of Preferences (“GSP”), the assembly of a large number of fabricated components onto a printed circuit board in a process involving a considerable amount of time and skill resulted in a substantial transformation. In that case, in excess of 50 discrete fabricated components (such as resistors, capacitors, diodes, integrated circuits, sockets, and connectors) were assembled. Whether an operation is complex and meaningful depends on the nature of the operation, including the number of components assembled, number of different operations, time, skill level required, attention to detail, quality control, the value added to the article, and the overall employment generated by the manufacturing process.
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, or use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, extent and nature of post-Start Printed Page 44568assembly 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.
Nukote collects empty toner cartridges from end users at collection sites in the United States and, to a substantially lesser extent, in Canada, Singapore, the United Kingdom, Hong Kong and China. Nukote also purchases used printer cartridges from United States-based brokers. These used printer cartridges were originally manufactured at various locations in different countries. The cartridges are sorted at one foreign location and are then processed at a second foreign location and subsequently in the United States.
At the second foreign location, the cartridges are split open, disassembled, and separated into three sub-assemblies. Worn components of the sub-assemblies are replaced and made operational again. This work constitutes disassembly of the used cartridges, as well as certain preparation for the processing which will occur in the United States. At this point the goods are tested. It is claimed that the sub-assemblies are not functional without the chip which is later installed in the United States (at least in the two scenarios where the chip is involved).
The processing which occurs at Nukote's Rochester, New York facility includes inspection, filling and sealing, mechanical assembly, testing, cleaning, installation of a computer chip, preparation and packaging for shipment, and shipment. We do not believe these operations are complex enough to result in a substantial transformation of the sub-assemblies. The sub-assemblies are essentially made functional again at the foreign facility. While the chip which makes the cartridge work (in two of the three scenarios) is inserted in the United States, we find that the bringing together of the sub-assemblies in the United States does not result in a substantial transformation of the goods. For example, these operations in the United States are not as significant as those in NY G87305, where the cartridges were completely disassembled; salvageable parts were sorted into bins, cleaned, and reconditioned; major components, including the OPC drum and toner were replaced; and other new components were added.
In HQ 561232, dated April 20, 2004, CBP considered the steps necessary to create a fully functional FM tuner, including adjustments to the oscillator coil, two filter coils, and the demodulator coil, selecting and installing two resistors, and enclosing the item in a metal case. CBP held that “while these additional operations are required to create a fully functional product, and are of a certain complexity requiring technical skill, they do not change the essential character of the PCBA [printed circuit board assembly], which at this stage of production has the characteristics of the imported FM tuner but has not quite achieved full functionality.” Therefore, CBP held that there was not a second substantial transformation in the Philippines. We believe that HQ 561232 is relevant here as the imported sub-assemblies possess the characteristics of the printer cartridge but, as imported, have not achieved full functionality.
The operations performed at Nukote's Rochester, New York facility do not result in a substantial transformation of the cartridges. Therefore, the cartridges will not be considered to be products of the United States.Start Signature
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of International Trade.
[FR Doc. E7-15484 Filed 8-7-07; 8:45 am]
BILLING CODE 9111-14-P