[Federal Register Volume 83, Number 147 (Tuesday, July 31, 2018)]
[Notices]
[Pages 36947-36950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16281]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Subdermal 
Needle Electrodes

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 Rhythmlink International, LLC's Subdermal Needle 
Electrode. Based upon the facts presented, CBP has concluded that the 
country of origin of the Subdermal Needle Electrode is the United 
States or Japan, depending on the country of origin of the needle 
electrode used in the assembly of the Subdermal Needle Electrode, for 
purposes of U.S. Government procurement.

DATES: The final determination was issued on July 13, 2018. 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 no later than August 30, 2018.

FOR FURTHER INFORMATION CONTACT: James Kim, Valuation and Special 
Programs Branch, Regulations and Rulings, Office of Trade (202) 325-
0158.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on July 13, 
2018, pursuant to subpart B of Part 177, U.S. Customs and Border 
Protection Regulations (19 CFR part 177, subpart B), CBP issued a final 
determination concerning the country of origin of Rhythmlink 
International, LLC's Subdermal Needle Electrode, which may be offered 
to the U.S. Government under an undesignated government procurement 
contract. This final determination, HQ H296072, was issued 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 the assembly 
and processing in China does not result in a substantial 
transformation. Therefore,

[[Page 36948]]

the country of origin of Rhythmlink International, LLC's Subdermal 
Needle Electrode is the United States or Japan, depending on the 
country of origin of the needle electrode used in the assembly of the 
Subdermal Needle Electrode, for purposes of U.S. Government 
procurement.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination 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: July 13, 2018.
Alice A. Kipel,
Executive Director, Regulations and Rulings, Office of Trade.

HQ H296072

July 13, 2018

OT:RR:CTF:VS H296072 JK

CATEGORY: Origin

David S. Robinson
Nexsen Pruet, PLLC
4141 Parklake Avenue
Suite 200
Raleigh, NC 27612

RE: U.S. Government Procurement; Title III, Trade Agreements Act of 
1979 (19 U.S.C. Sec.  2511); Subpart B, Part 177, CBP Regulations; 
Subdermal Needle Electrode; Substantial Transformation

Dear Mr. Robinson:
    This is in response to your correspondence of March 29, 2018, 
requesting a final determination on behalf of Rhythmlink International, 
LLC (``Rhythmlink''), pursuant to subpart B of Part 177, U.S. Customs 
and Border Protection (``CBP'') Regulations (19 C.F.R. Sec.  177.21 et 
seq.).
    This final determination concerns the country of origin of the 
Subdermal Needle Electrode. We note that Rhythmlink is a party-at-
interest within the meaning of 19 C.F.R. Sec.  177.22(d)(1) and is 
entitled to request this final determination.

FACTS:

    Rhythmlink is headquartered in Columbia, North Carolina and 
manufactures and distributes medical devices and provides custom 
packaging, private labeling, custom products, and contract 
manufacturing to its customers.
    The subject merchandise is a Subdermal Needle Electrode 
(``Product''), a high-tensile strength stainless steel wire cleared by 
the U.S. Food & Drug Administration (``FDA'') for performing both 
stimulating and recording electrical conductor functions. The Product 
serves as a physical connection between a patient and medical 
diagnostic equipment that records and/or elicits neurophysical 
biopotentials. The FDA classifies and designates the Product as a 
``needle electrode,'' defined in FDA regulations as ``a device which is 
placed subcutaneously to stimulate or to record electrical signals.'' 
See 21 C.F.R. Sec.  882.1350.
    Rhythmlink's fully assembled, packaged Product consists of the 
following six component parts: the needle electrode, the leadwire, a 
miniscule amount of solder, a heat shrink tube, a protective cover for 
the needle, and packaging. Rhythmlink sells the Product in varying 
lengths and styles, and end users can customize the color of the 
connecting leadwire. The leadwire acts as an electrical conductor that 
transfers low voltage electrical signals from the needle electrode to 
medical diagnostic equipment. You state that the functionality of the 
Product is common to all lengths and is unchanged by the color of the 
pre-connected leadwire. You also state that other varieties of needle 
electrodes are available in the market that are not pre-connected to a 
leadwire. Such needle electrodes may connect to a leadwire without 
soldering by using alligator clips and other removable connectors. 
Other varieties of needle electrodes may utilize wireless transmission, 
eliminating the need for a leadwire altogether.
    You state that Rhythmlink conducts all of the engineering and 
design of the Product in the United States. The engineering and design 
of the Subdermal Needle Electrode include the following steps: research 
and development; design control; IP generation; regulatory clearances; 
specifications; engineering drawings; work instructions; tooling, 
fixtures, and equipment designs; functional verification testing; 
sterilization validation; packaging, sterile barrier and shelf life 
validation; and process validations.
    Rhythmlink outsources the actual manufacturing and production of 
the FDA-compliant needle electrodes (prior to being attached to other 
components) to a contract manufacturer of medical devices. The contract 
manufacturer manufactures the needle electrode entirely in either the 
United States or Japan using either U.S. or Japanese stainless steel 
material. You state that its production processes are largely 
proprietary and that the manufacturing costs are unknown. Under the 
manufacturing process of the needle electrode, a stainless steel wire 
is cut to precise lengths, and the cut wire undergoes precise facet 
grinding, passivation, and electropolishing. The needle electrode is 
manufactured to Rhythmlink's precise specifications, with three facets 
ground onto the front end to meet sharpness and insertion force 
requirements. Finally, it is packaged and shipped. The country of 
origin of the needle electrode is marked as either the United States or 
Japan, depending on the country in which it was manufactured.
    The Korean-origin leadwire is a commercially available 26-gauge 
twisted copper wire comprising 19 strands of 38-gauge copper wire with 
medical grade PVC covering. The leadwire is available in a total of 35 
color options. The Korean supplier of this wire cuts the wire, crimps a 
socket pin, attaches a connector to one end of the wire, and ships the 
wire to China.
    The needle electrodes from the United States or Japan are exported 
to China for additional assembly and processing. The `naked' end of the 
Korean leadwire is soldered to the needle electrode using Chinese-
origin solder, which is a mix of tin and copper and represents a 
quarter of a percent of the Product's cost. You state that the 
soldering process takes roughly a second, substantiated by a video you 
provided of the process, and that six operators can professionally 
solder 30,000 Products in a day. The soldered Product undergoes 
ultrasonic cleaning and drying (spin and convention drying) in bulk. A 
Japanese-origin heat shrink tube, available in almost 40 different 
diameters, is added to protect the solder joint. A U.S.-origin 
protective needle cover is placed over the needle electrode to prevent 
accidents. Finally, the product is packaged in a Tyvek pouch and 
cardboard packaging of Chinese-origin and re-exported to the United 
States.
    In the United States, the Product is subject to sterilization and a 
randomized sampling and testing protocol prior to sale.
    You provided a catalog of Rhythmlink's products, which includes the 
Subdermal Needle Electrode. You also provided a detailed process map 
depicting the various processing steps involved in the engineering, 
manufacture, and sale of the Product, along with information on the 
country in which each step occurs and the skill and technology level 
required for each step. In addition, you provided component 
specifications for the Product.

[[Page 36949]]

ISSUE:

    What is the country of origin of the Subdermal Needle Electrode for 
purposes of U.S. Government procurement?

LAW AND ANALYSIS:

    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, pursuant 
to subpart B of Part 177, 19 C.F.R. Sec.  177.21 et seq., which 
implements Title III of the Trade Agreements Act of 1979, as amended 
(19 U.S.C. Sec.  2511 et seq.) (``TAA'').
    Under the rule of origin set forth under 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 Federal Acquisition Regulations. See 19 
C.F.R. Sec.  177.21. In this regard, CBP recognizes that the Federal 
Acquisition 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.
    A substantial transformation occurs when an article emerges from a 
process with a new name, character or use different from that possessed 
by the article prior to processing. A substantial transformation will 
not result from a minor manufacturing or combining process that leaves 
the identity of the article intact. See United States v. Gibson-Thomsen 
Co., 27 C.C.P.A. 267 (1940); National Juice Products Association v. 
United States, 628 F. Supp. 978 (Ct. Int'l Trade 1986).
    Courts have held that when the properties and uses of a product are 
predetermined by the material from which it was made, no substantial 
transformation occurs. For example, in Superior Wire v. United States, 
669 F. Supp. 472 (Ct. Int'l Trade 1987), aff'd, 867 F.2d 1409 (Fed. 
Cir. 1989), wire rod in coils was shipped to Canada where it was drawn 
into wire. The tensile strength of the final product was increased by 
approximately 30 to 40 percent as the rod was reduced in cross-
sectional area by about 30 percent and was elongated. The court 
determined that the drawing operation did not result in a substantial 
transformation, pointing out that the properties of the wire rod and 
its uses were determined by the chemical content of the rod and the 
cooling processes used in its manufacture, and that the wire rod 
dictated the final form of the finished wire.
    For purposes of this ruling, we assume that the country of origin 
of the stainless steel wire used to manufacture the needle electrode is 
the United States or Japan. You assert that the assembly and processing 
that occurs in China, a non-designated country, does not substantially 
transform the U.S. or Japanese-origin needle electrode, claimed to be 
the essential character of the Product, into a new and different 
article of commerce.
    In HQ 555774, dated December 10, 1990, Customs, a predecessor of 
CBP, ruled that Japanese-origin wire cut to varying length and 
electrical connectors crimped onto the ends of the wire in the United 
States did not constitute substantial transformation. Customs found 
that the essential character and use of the wire before and after the 
processing was the same, i.e., to conduct electrical current.
    In HQ H248851, dated July 8, 2014, CBP held that an Israeli-origin 
CO2 tube was not substantially transformed in China when cut to length 
and attached to four other components from Israel and China. CBP found 
that the CO2 tube performed the essential function of the finished 
product, which was the delivery of breath for monitoring the CO2 level 
in a patient's breath. By way of the assembly process in China, the CO2 
tube was attached to other components that facilitated its function and 
did not lose its individual identity in the process.
    Like the operations described in HQ 555774 and HQ H248851, the 
assembly and processing that occur in China are simple and minor 
processes that leave the identity of the needle electrode intact. The 
soldering of the leadwire to the needle electrode occurs in roughly one 
second. The remaining processing of the Product, consisting of cleaning 
and drying, adding a heat shrink and protective cover, and packaging, 
are likewise simple and minor operations involving highly repetitive, 
low-skill functions.
    As in Superior Wire, the properties and uses of the Product are 
predetermined by the qualities of the needle electrode itself, which do 
not change as a result of the Chinese assembly and processing 
operations. The Product's main function is to penetrate the skin or 
other membrane to allow medical diagnostic equipment to record or 
stimulate neurophysical biopotentials. While the presence of a pre-
connected leadwire does provide convenience for the end user, by 
eliminating the need to use removable connectors for attaching a 
leadwire, the needle electrode is nonetheless capable of performing its 
main function without a pre-connected leadwire. Prior to any Chinese 
assembly or processing, the needle electrode already meets the 
definition of the FDA regulated ``needle electrode.'' As in HQ H248851, 
the attachment of the leadwire and other components to the needle 
electrode may facilitate its function, but the needle electrode does 
not lose its individual identity in the process. As a result, we find 
that the U.S. or Japanese-origin needle electrode, rather than the 
Korean-origin leadwire, determines the essential character of the 
Product.
    We find that the name, character, and use of the needle electrode 
remain unchanged after the attachment of the leadwire and other 
components. Accordingly, we find that the needle electrode is not 
substantially transformed as a result of the Chinese assembly and 
processing operations.

HOLDING:

    The country of origin of the Subdermal Needle Electrode for U.S. 
Government procurement purposes is the United States or Japan, 
depending on the country of origin of the needle electrode.
    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. Pursuant to 19 C.F.R. 
Sec.  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

[[Page 36950]]

determination before the Court of International Trade.

Sincerely,

Alice A. Kipel

Executive Director
Regulations and Rulings
Office of Trade

[FR Doc. 2018-16281 Filed 7-30-18; 8:45 am]
 BILLING CODE P