[Federal Register Volume 72, Number 39 (Wednesday, February 28, 2007)]
[Notices]
[Pages 9014-9017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3482]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection


Notice of Issuance of Final Determination Concerning Digital 
Color Multifunctional Systems

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 the Bureau of Customs and 
Border Protection (CBP) has issued a final determination concerning the 
country of origin of certain digital color multifunctional systems to 
be offered to the United States Government under an undesignated 
government procurement contract. Based on the facts presented, the 
final determination found that Japan is the country of origin of the 
subject digital color multifunctional systems for purposes of U.S. 
government procurement.

DATES: The final determination was issued on February 8, 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 February 28, 2007.

FOR FURTHER INFORMATION CONTACT: Daniel Cornette, Valuation and Special 
Programs Branch, Office of International Trade; telephone (202) 572-
8731.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on February 8, 
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 digital color multifunctional systems to 
be offered to the United States Government under an undesignated 
government procurement contract. The CBP ruling number is HQ 563491. 
This final determination 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).
    The final determination concluded that, based upon the facts 
presented, the assembly in Japan of Japanese and foreign components to 
create the subject digital color multifunctional systems substantially 
transformed the foreign components into a product of Japan.
    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

[[Page 9015]]

issued. Section 177.30, CBP Regulations (19 CFR 177.30), states 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: February 21, 2007.
Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.

HQ 563491

February 8, 2007.
MAR-2-05 RR:CTF:VS 563491 DCC
Category: Marking.
Ms. Fusae Nara, Pillsbury Winthrop Shaw Pittman, 1540 Broadway, New 
York, NY 10036-4039.
Reference: U.S. Government Procurement; Final Determination; country of 
origin of digital color multifunctional systems; substantial 
transformation; 19 CFR Part 177.

    Dear Ms. Nara: This is in response to your letter dated April 24, 
2006, requesting a final determination on behalf of Sharp Electronics 
Corporation (``Sharp'') 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 (codified at 19 U.S.C. 2411 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 foreign 
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 
digital color multifunctional systems 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.
    Facts:
    The products subject to this ruling are digital color 
multifunctional systems manufactured by Sharp, Model Nos. MX-2300NJ and 
MX-2700NJ (hereinafter the ``J-Models''), imported from Japan for the 
purpose of sales to U.S. government agencies. The J-Models have 
photocopying, printing, faxing, and scanning functions. The primary 
difference between the two models is the speed at which they are able 
to process images. The MX-2300NJ prints 23 pages per minute compared to 
27 pages per minute for the MX-2700NJ.
    Sharp's parent company (``Sharp Japan'') developed the J-Model in 
Japan, and performs the entire engineering, development, design, and 
art work processes for both models in Japan. According to your 
submission, the production process may be broken down into four stages. 
In the first stage, the following key subassemblies are assembled: 
laser scanner unit (``LSU'') (assembled in China); first transfer unit 
subassembly (assembly begins in China and is finished in Japan); 
process unit subassembly (assembled in China); and controller unit 
subassembly (assembled in Japan). In addition, four minor subassemblies 
are assembled in China: first transfer cleaner unit; cabinet 
subassembly; auto document feeder subassembly, and fuser unit. The 
finished systems have one unit each of five different kinds of 
application-specific integrated circuits (``ASIC''), all of which are 
made in Japan.
    The second stage is the final physical assembly of the J-Models. In 
the third stage, Sharp Japan makes adjustments and conducts testing of 
the J-Models. In the fourth stage, the J-Models undergo final 
inspection and packaging for shipment to the United States.

1. Subassembly Preparation

(a) Laser Scanner Unit Subassembly

    The LSU writes the image data of the documents or graphics onto the 
drum unit. While the components comprising the LSU are assembled in 
China, the charge coupled device (``CCD'') and the ASIC, which are 
mounted on the cabinet as well as the laser diodes (``LDs''), are made 
in Japan. Color images are created by exposing the laser lights of the 
LDs to four color-specific drums (black, cyan, magenta, and yellow). 
The ASIC is designed to control the exposure of the laser lights 
following the scanned data with speed and precision.

(b) First Transfer Unit Subassembly

    The first transfer unit is where the four color images, which are 
created by the four color drums, are transformed into an integrated 
color image that is then transferred onto paper. The image is 
transferred to the paper by a wide belt known as a transfer belt. The 
transfer belt rotates around the first transfer unit generating print 
images, while a cleaner cartridge continuously cleans the surface of 
the belt. The unfinished first transfer unit is manufactured in China 
and completed in Japan where the transfer belt is manufactured and 
installed.

(c) Process Unit Subassembly

    The process unit is a combination of the drum, developer, and toner 
cartridges. Because the J-Models are color multifunctional systems, 
they require four sets of the process units, which includes a drum, 
developer and toner for each of the four colors, i.e., black, yellow, 
cyan, and magenta. The developer and toner materials, as well as the 
drums, are produced in Japan. The process unit subassembly is assembled 
by attaching each of the four drums to the four drum cartridges. The 
toner and developer cartridges are filled with toner and developer and 
installed on the subassembly for testing purposes.

(d) Control Box Unit Subassembly

    The control box unit is the ``brain'' of the J-Model machines. The 
control printed wiring board (``PWB'') and the mother PWB are populated 
in China with diodes, resisters, and condensers. In Japan, Sharp forms 
a harness for the hard disk (either from Malaysia or China) that is 
then fastened to the harness board of the control box unit with screws. 
The hard disk is affixed to the harness and then to the PWB. Cushioning 
is installed around the hard disk and flash memory chips (i.e., the 
boot flash ROM, and the program flash ROM) are inserted into designated 
slots on the control box.

2. Final Assembly

    The final Japanese assembly process begins with the cabinet that 
houses the middle section of the finished product. The cabinet is 
fabricated in China and contains certain components, such as Japanese 
ASICs, that are installed in China. The major subassemblies described 
above are assembled into the cabinet as follows:
    a. The side panel of the cabinet is opened and the LSU subassembly 
is inserted and fastened to the cabinet with screws.
    b. The front panel of the cabinet is opened and the first transfer 
unit assembly is inserted into a slot and fastened to the cabinet with 
screws.
    c. Four drum cartridges, four developer cartridges, and four toner 
cartridges--one for each of the four colors (i.e., black, yellow, cyan, 
and magenta)--are installed.
    d. A small panel on the back of the cabinet is removed and the 
control box unit is inserted into a slot in the cabinet assembly and 
secured with screws.
    e. The automatic document feeder is fastened to the hinge on top of 
the cabinet assembly with screws.

[[Page 9016]]

3. Testing

    In Japan, extensive tests are conducted and adjustments are made to 
all functions, including scanning, image placement, color and darkness.
    a. Adjustments. The following adjustments are made to each unit:
    <bullet> Confirm data input circuitry by connecting the printer/
scanner unit to a computer based on the destination of the finished 
unit.
    <bullet> Inspect the card reader by running a test card with a 
simulation program.
    <bullet> Apply high voltage to the printer unit and adjust it to be 
within the permitted range for each color.
    <bullet> Measure the bias voltage to confirm that the voltage used 
to remove excess toner is proper.
    <bullet> Confirm the rotation of the toner motor.
    <bullet> Confirm the functioning of the hard disk and the hard disk 
output on the LCD display panel of the operation unit.
    <bullet> Measure the distance between the drum ``sleep'' position 
and the toner cartridge magnet roller to ensure even print quality.
    <bullet> Adjust the amount of developer by connecting the developer 
unit for each color.
    <bullet> Attach the toner cartridge and adjust the darkness sensor.
    b. Test Copying. After the assembly adjustments are complete, the 
unit undergoes alignments by running test copies to confirm the 
following functions: Paper placement; print darkness; optical images; 
print placement; color balance for printer engine and print output; 
color pattern chart; manual copy; print and image output; two-sided 
copying; feeder functions; intermediate tone process control for 
various printing modes (i.e., letter, photograph, and combination); 
print output from an attached computer; USB cable connection; and 
memory. After testing is complete, each unit is reset to the default 
position to prepare for final inspection and packaging for shipment.

4. Final Inspection and Packaging

    The finished assembly is prepared for shipment by removing the drum 
cartridges, toner cartridges, and developer cartridges used for testing 
purposes and by cleaning the color toner pipes, printing mechanism, 
scanner surface, and exterior. New drum and developer cartridges are 
inserted and secured to the unit. An operator conducts a final 
inspection that includes testing the power supply, the LCD display 
panel, sensors, and proper operation of the unit. After final 
inspection, the finished unit is packaged for shipping.
    Issue:
    Whether the multifunctional systems manufactured by Sharp (Model 
Nos. MX-2300NJ and MX-2700NJ) are products of Japan for purposes 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 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 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). A substantial transformation ``results 
in an article having a name, character, or use differing from that of 
the imported article.'' Uniroyal, Inc. v. United States, 542 F. Supp. 
1026, 1029 (Ct. Int'l Trade 1982), aff'd, 702 F.2d 1022 (Fed. Cir. 
1983).
    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. See 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.
    CBP has held in a number of cases involving similar merchandise 
that complex and meaningful assembly operations involving a large 
number of components will generally result in a substantial 
transformation. In Headquarters Ruling Letter (``HRL'') 562936, 69 FR 
13577 (March 23, 2004), we addressed the country of origin of certain 
multifunction printers assembled in Japan of various Japanese- and 
Chinese-origin parts. In that ruling, we determined that the 
multifunction printer was a product of Japan based on the fact that a 
``substantial portion of the printer's individual components and 
subassemblies [were] of Japanese origin.'' Furthermore, we noted that 
some of the Japanese components and subassemblies were essential parts 
of the finished article, and other Japanese parts, including the reader 
scanner unit and the control panel unit, were critical to the 
production of the printer. Finally, HRL 562936 noted that the Japanese 
processing operations were complex and meaningful, that required ``the 
assembly of a large number of components, and render[ed] a new and 
distinct article of commerce that possesse[d] a new name, character, 
and use.''
    In HRL 562495, dated November 13, 2002, color ink jet printers were 
assembled in Singapore of components imported from a number of other 
countries. In that ruling, we determined that the imported components 
were substantially transformed during assembly such that the country of 
origin of the assembled ink jet printers was Singapore. In support of 
this determination, we considered the processing occurring within 
Singapore to be complex and extensive, requiring the integration of 13 
major subassemblies to the chassis, and that the resulting product was 
a new and distinct article of commerce that possessed a new name, 
character, and use.
    In HRL 561734, dated March 22, 2001, published in the Federal 
Register on March 29, 2001 (66 FR 17222), we held that certain 
multifunctional machines (consisting of printer, copier, and fax 
machines) assembled in Japan were a product of that country for 
purposes of U.S. Government procurement. The multifunctional machines 
were assembled from 227 parts (108 parts obtained from Japan, 92 from 
Thailand, 3 from China, and 24 from other countries) and eight 
subassemblies, each of which was assembled in Japan. One of the 
subassemblies produced in Japan, referred to as the scanner unit, was

[[Page 9017]]

described as the ``heart of the machine.'' In finding that the imported 
parts were substantially transformed in Japan, we stated that the 
individual parts and components lost their separate identities when 
they became part of the multifunctional machine. See also HRL 561568, 
dated March 22, 2001, published in the Federal Register on March 29, 
2001 (66 FR 17222).
    By contrast, assembly operations that are minimal or simple will 
generally not result in a substantial transformation. For example, in 
HRL 734050, dated June 17, 1991, we determined that Japanese-origin 
components were not substantially transformed in China when assembled 
in that country to form finished printers. The printers consisted of 
five main components identified as the ``head,'' ``mechanism,'' 
``circuit,'' ``power source,'' and ``outer case.'' The circuit, power 
source and outer case units were entirely assembled or molded in Japan. 
The head and mechanical units were made in Japan but exported to China 
in an unassembled state. All five units were exported to China where 
the head and mechanical units were assembled with screws and 
screwdrivers. Thereafter, the head, mechanism, circuit, and power 
source units were mounted onto the outer case with screws. In holding 
that the country of origin for marking purposes was Japan, CBP 
recognized that the vast majority of the printer's parts were of 
Japanese origin and that the operations performed in China were 
relatively simple assembly operations.
    In order to determine whether a substantial transformation occurs 
when components of various origins are assembled to form 
multifunctional machines, CBP considers the totality of the 
circumstances and makes such decisions on a case-by-case basis. The 
primary considerations in such cases are the country of origin of the 
machine's components and subassemblies, extent of processing that 
occurs within a given country, and whether such processing renders a 
product with a new name, character, and use. In addition, facts such as 
resources expended on product design and development, extent and nature 
of post-assembly inspection procedures, and worker skills required 
during the actual manufacturing process will be considered when 
analyzing whether a substantial transformation has occurred; however, 
no single factor is determinative.
    Based on the facts and law of this case, we find that the assembled 
J-Model multifunctional systems are products of Japan for purposes of 
U.S. Government procurement. Although several of the subassemblies are 
assembled in China, we find that 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. 
The process unit subassembly is also crucial in the performance of the 
multifunctional systems. While it is assembled in China, its key 
components, the developer and toner materials, and drums are produced 
in Japan.
    Furthermore, it is significant that although the PWB is of Chinese 
origin, the firmware for the control box unit subassembly is developed 
in Japan. This firmware programming controls the print engine, readout 
mechanism, processes images for the copier, printer, fax, and scanner, 
and controls the operation panel display. We further note that the 
testing and adjustments performed in Japan are technical and complex. 
Finally, the assembly operations that occur in Japan are sufficiently 
complex and meaningful. Through the product assembly and testing and 
adjustment operations, the individual components and subassemblies of 
Japanese and foreign-origin are subsumed into a new and distinct 
article of commerce that has a new name, character, and use. Therefore, 
we find that the country of origin of the J-Models digital color 
multifunctional systems for purposes of U.S. Government procurement is 
Japan.
    Holding:
    Based on the facts of this case, we find that the processing in 
Japan substantially transforms the non-Japanese components. Therefore, 
the country of origin of the Sharp digital color multifunctional 
systems (Model Nos. MX-2300NJ and MX-2700NJ) 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 that requested this final determination may request, pursuant 
to 19 CFR 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 reference above, seek 
judicial review of this final determination before the U.S. Court of 
International Trade.

 Sincerely,

Sandra L. Bell,
Executive Director, Office of Regulations and Rulings, Office of 
International Trade.

[FR Doc. E7-3482 Filed 2-27-07; 8:45 am]
BILLING CODE 9111-14-P