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Notice of Issuance of Final Determination Concerning Multifunctional Machines

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AGENCY:

U.S. Customs and Border Protection, Department of Homeland Security.

ACTION:

Notice of final determination.

SUMMARY:

This document provides notice that U.S. Customs and Border Protection (“CBP”) has issued a final determination concerning the country of origin of certain multifunctional machines which may be offered to the United States Government under a government procurement contract. Based upon the facts presented, in the final determination CBP concluded that Japan is the country of origin of the multifunctional machines for purposes of U.S. Government procurement.

DATES:

The final determination was issued on November 30, 2009. 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 January 6, 2010.

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FOR FURTHER INFORMATION CONTACT:

Karen S. Greene, Valuation and Special Programs Branch, Regulations and Rulings, Office of International Trade (202-325-0041).

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SUPPLEMENTARY INFORMATION:

Notice is hereby given that on, 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 multifunctional machines which may be offered to the United States Government under a government procurement contract. This final determination, in HQ H039955, was issued at the request of Sharp Electronics Corporation 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, certain articles will be substantially transformed in Japan. Therefore, CBP found that Japan is the country of origin of the finished articles 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.

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Dated: December 2, 2009.

Sandra L. Bell,

Executive Director, Office of Regulations and Rulings, Office of International Trade.

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Attachment

HQ H039955

November 30, 2009

OT:RR:CTF:VS H039955 KSG

Mr. Edmund Baumgartner, Esq.

Pillsbury Winthrop Shaw Pittman LLP

1540 Broadway

New York, NY 10036

Re: U.S. Government Procurement; Title III, Trade Agreements Act of 1979; Country of Origin of Multifunctional Printer Machines; substantial transformation

Dear Mr. Baumgartner:

This is in response to your letter, dated November 26, 2007, requesting a final determination on behalf of Sharp Electronics Corporation (“Sharp”) pursuant to subpart B of 19 CFR Part 177. We apologize for the delay in our response.

Under these regulations, which implement Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 2511 et seq.)(“TAA”), 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.

This final determination concerns the country of origin of certain multifunctional printer machines that Sharp may sell to the U.S. Government. We note that Sharp is a party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is entitled to request this final determination. A conference was held on this matter at Headquarters on August 25, 2008.

FACTS:

This case involves the Sharp Dragon II J-models (Sharp model # MX-M550N/UJ, MX-M620N/UJ, and MX-M700N/UJ). These models have monochrome copying, printing, faxing and duplex scanning functions.

Sharp Corporation, Sharp's parent company (“Sharp Japan”) developed the Dragon II J-models in Japan, including the engineering, development, design and art work processes. The production of the Dragon II J-Models begins with the preparation of the key subassemblies and units. According to your submission, there are 11 main subassemblies that compose the Dragon II J-models. Of the eleven subassemblies that compose the Dragon II J-Models, only the drum unit subassembly is assembled in Japan. The remaining 10 subassemblies are assembled in China with parts from Japan and China. The final assembly of the merchandise is performed in Japan.

The Subassemblies Assembled in China

According to your submission, the subassemblies which are themselves assembled in China are essentially as follows:

The laser scanning unit (“LSU”) creates text or images on the photoconductor drum. It consists of a housing, synchronous lens, two cylindrical lenses, and asynchronous lower lens.

The transfer belt unit transfers the image created on the drum onto the surface of the paper for printing.

The multifunctional printer cabinet subassembly is comprised of the mechanical frame for the printer engine along with exterior panels, paper transport and exit components, paper driver motors, cooling fans and filters, sensors and switches for detecting paper and whether doors are open or closed, the paper manual feed unit, the toner supply motors and sensors, paper transport motors and sensors, the duplex section, the toner image transfer section, the image scanner section and the operation panel.

The main charger unit subassembly charges the surface of the drum evenly by application of high voltage so that it can form electrostatic images when irradiated by laser beams.

The process unit subassembly houses the drum used for creating images. The drum is produced and installed in China.

The developer unit is used to transfer toner evenly over the latent image created on the Start Printed Page 64095drum unit. It is composed of a developing roller, a developer doctor, a mixing roller, humidity sensor, developer and toner.

The multifunctional printer control unit is the combination of a printed circuit board with a number of sophisticated integrated circuits. It controls the electrical and mechanical units. The control printed wiring board (“PWB”) and mother PWB are stuffed in China.

The Duplex Single Pass Feeder unit transports original documents fed into the multifunctional printer to the scanner. It contains a contact image sensor (“CIS”).

The fusing unit is used to fix the transferred image onto paper.

The toner hopper unit subassembly transports toner from the hopper to the developing unit and transports waste toner to the waste toner section.

Japanese Parts and Subassembly

The drum unit, which is assembled in Japan, contains the drum, a core component for creating images.

The parts that are made in Japan that are claimed to be critical components include: the LSU housing, the LSU fixing base, the LSU synchronous lower lens, LSU two cylinder lenses, the transfer belt, cleaning brushes, drum separator pawls, the cleaning brush roller, the toner waste pipe, the drum, the mixing roller, the humidity sensor, the diodes and resistors, condensors, the flash ROM, the boot ROM, the firmware, the SDRAM, the application-specific integrated circuit (“ASIC”), the multifunctional printer input/output ASIC, the system control ASIC, the LCD panel control ASIC, the USB controller, the CIS, the fusing gear, the separator pawl, the web roller, the cleaning sub roller, the cleaning roller bearing, the lower cleaning roller and the thermostats.

The firmware and ASICS are developed and produced in Japan. Further, the developer (iron powder beads) and toner are produced in Japan.

Final Assembly and Testing In Japan

The final assembly of the machines takes place in Japan. Sharp Japan starts with a MFP cabinet unit subassembly and attaches the various subassemblies by screws.

The printer control unit (MFP control unit) together with the flash ROM (which includes the firmware) is installed in a slot on the back side of the MFP cabinet. The flash ROM is installed into the slot on the rear of the MFP cabinet unit. A network interface card is installed. An additional flash ROM and a network interface card are installed.

Testing, final inspection and packaging of the units for shipment to the U.S. occurs in Japan.

ISSUE:

What is the country of origin of the subject multifunctional printer machines 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, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, 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.

CBP has held in a number of cases involving similar merchandise that complex and meaningful assembly operations involving a large number of components result in a substantial transformation. In Headquarters Ruling Letter (“HRL”) 563491 (February 8, 2007), CBP addressed the country of origin of certain digital color multifunctional systems manufactured by Sharp and assembled in Japan of various Japanese—and Chinese—origin parts. In that ruling, CBP determined that color multifunctional systems were a product of Japan based on the fact that “although several subassemblies are assembled in China, enough of the Japanese subassemblies and individual components serve major functions and are high in value, in particular, the transfer belt, control box unit, application-specific integrated circuits, charged couple device, and laser diodes.” Further CBP found that the testing and adjustments performed in Japan were technical and complex and the assembly operations that occurred in Japan were sufficiently complex and meaningful. See also HRL 562936, dated March 17, 2004.

The processing operations presented in this case are most similar to that presented in HRL 563491. The composition and assembly process of a number of key subassemblies such as the laser scanning unit, the transfer belt unit and the controller unit are not meaningfully different from the assembly operations performed on the merchandise in our previous ruling. Taking all of the facts and circumstances into account, and in light of our previous decision, we find that the operations performed in Japan including the final assembly, testing and related operations to be sufficiently complex and meaningful to result in a new and distinct article of commerce in Japan. Therefore, we find that the Dragon II-J multifunctional printer machines are products of Japan for the purposes of U.S. Government procurement. We note however, that with so many of the subassemblies performed in China, the transfer of additional parts or processing from Japan to China might well require a different result.

HOLDING:

Based on the facts of this case, the country of origin of the Dragon II J-model multifunctional printer machines is Japan for purposes of U.S. Government procurement.

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 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, Office of Regulations and Rulings Office of International Trade.

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[FR Doc. E9-29056 Filed 12-4-09; 8:45 am]

BILLING CODE 9111-14-P