[Federal Register Volume 70, Number 178 (Thursday, September 15, 2005)]
[Notices]
[Pages 54563-54566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18359]


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DEPARTMENT OF HOMELAND SECURITY

Bureau of U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Desktop 
Scanners

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 desktop scanners to be offered to the 
United States Government under an undesignated government procurement 
contract. The final determination found that, based upon the facts 
presented, the United States is the country of origin of the Kodak i600 
line of desktop scanners for purposes of U.S. Government procurement. 
The Kodak i600 series includes the i620, i640, and i660 models.

DATES: The final determination was issued on September 9, 2005. 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 September 15, 2005.

[[Page 54564]]


FOR FURTHER INFORMATION CONTACT: Ed Caldwell, Valuation and Special 
Programs Branch, Office of Regulations and Rulings (202-572-8872).

SUPPLEMENTARY INFORMATION: Notice is hereby given that on September 9, 
2005, 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 desktop scanners to be offered to the 
United States Government under an undesignated government procurement 
contract. The CBP ruling number is HQ 563294. This final determination 
was issued at the request of Eastman Kodak Company 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 the United States of parts of various 
origins to create the Kodak i600 scanners substantially transformed the 
imported parts used in production.
    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, Customs 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: September 9, 2005.
Michael T. Schmitz,
Assistant Commissioner, Office of Regulations and Rulings.

Attachment

HQ 563294

September 9, 2005.

MAR-2-05 RR:CR:SM 563294 EAC

    Category: Marking.

Mr. Alan W.H. Gourley, Crowell & Moring LLP, 1001 Pennsylvania 
Avenue, NW., Washington, DC 20004-2595

RE: U.S. Government Procurement; Final Determination; country of 
origin of desktop scanners; substantial transformation; 19 CFR part 
177

Dear Mr. Gourley:

    This is in response to your letter dated June 3, 2005, 
requesting a final determination on behalf of Eastman Kodak Company 
(``Kodak''), pursuant to subpart B of part 177, Customs 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. 
2411 et seq.), U.S. Customs and Border Protection (``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 desktop scanners that Kodak is considering selling to the 
U.S. Government. We note that Kodak is a party-at-interest within 
the meaning of 19 CFR 177.22(d)(2) and is entitled to request this 
final determination.
    Facts:

I. Background

    We are advised that the scanners under consideration consist of 
the three models within Kodak's i600 line of scanners, the i620, 
i640, and i660. The Kodak i600 Series Scanners are desktop scanners 
that have the primary function of creating electronic images from 
paper documents. Paper documents of various sizes, dimensions, and 
types may be fed into the scanners, viewed through cameras, and 
converted into electronic images. The scanners can process these 
images at a rate of up to 480 per minute. In addition, the scanners 
have a number of features to enhance their performance and improve 
the quality of the images they produce, such as skew angle 
determination, which detects and corrects images fed at an angle, 
and electronic color dropout, which removes irrelevant background 
color from images.
    The primary difference between these models is the speed at 
which they are able to process images, with the i660 able to process 
images most quickly. The mechanical components and manufacturing 
processes used to build the different models are nearly identical. 
The differences in processing speed are attributable to differences 
between the programming solutions that are installed on the 
scanners. Kodak developed the programming for the i600 line of 
scanners in the United States.

II. Component Parts and Subassemblies

    Kodak has manufactured its i600 series scanners both in its 
Rochester, New York facility and in a facility located in Shanghai, 
China. Many, but not all, of the parts used in the manufacture of 
the scanners are obtained from Chinese sources. The i600 scanners 
are comprised of 13 major subassemblies. Regardless of whether the 
scanners are manufactured to completion in the United States or 
China, the Shanghai facility also assembles three of the thirteen 
major subassemblies for the scanners from parts of U.S., Chinese, 
and other origins.
    The present ruling request pertains only to Kodak i600 scanners 
to be manufactured in the United States from parts shipped from 
China, but sourced from various countries abroad.
    Each subassembly performs a specific function and together, with 
miscellaneous other components and hardware, constitute a finished 
product capable of electronically scanning a variety of paper 
images. The finished scanners consist of approximately 600 
individual parts. The major subassemblies are identified and 
described as follows.
    Operator Control Panel (``OCP'') Assembly: This assembly 
provides the interface between the user and scanner, including 
wiring and the power switch used to turn the machine on and off.
    Elevator Assembly: This assembly lifts the paper to the proper 
height to be fed into the machine for scanning without jamming the 
feed.
    Carriage Assembly: This assembly is located at the front of the 
machine where paper is fed, and includes a metal tray upon which 
paper rests as it is fed into the scanner. The carriage assembly 
also includes the lead edge of the paper transport system which has 
a separation roller that ensures the top sheet of paper is separated 
from those below.
    Feed Module Assembly: This assembly is set above the carriage 
assembly where it grabs the top sheet of paper and feeds it into the 
scanner.
    Image Baffle Assembly: Each scanner includes two image baffle 
assemblies. Each assembly has a glass plate through which a camera 
module views paper for scanning. There are two such assemblies 
because separate cameras view the front and back of each document as 
it moves through the scanner.
    Backup Baffle Assembly: Each scanner includes two backup baffle 
assemblies. Each assembly is adjacent to the paper path where it 
guides the paper through the scanner and helps assure the paper 
feeds cleanly through the machine and does not jam. Each assembly 
also includes a backup strip, which provides a background for 
documents as they are viewed by a camera. There is one backup baffle 
assembly for each of the image baffle assemblies.
    Camera Modules (Upper and Lower): Each scanner includes two 
camera modules. The camera modules include mirrors and lenses used 
to view documents as they are fed through the scanner. Each camera 
module views and electronically captures a different side of the 
document. The upper camera module is part of the pod assembly. The 
lower camera module is located below the paper path. As the camera 
modules view a document, the light images they detect are converted 
into raw electronic data using a charge couple device. That raw data 
is amplified and forwarded to the ``E-box'', where the data is 
converted into an electronic image.
    Pod Assembly: The pod assembly is the top portion of the 
machine, which can be opened to provide access to the paper path. 
The components in this assembly operate together to feed a document 
through the machine and to view one side of the document during 
scanning. This assembly includes numerous parts, as well as the 
following major subassemblies: (a) The upper camera module; (b) an 
image baffle assembly; and (c) a backup baffle assembly.
    E-Box Assembly: This assembly contains the central ``brain'' of 
the machine, and it converts raw electronic data from the camera 
assembly into high quality electronic images. The E-box Assembly 
incorporates two circuit boards, the machine control board (``MCB'') 
and the image processing board (``IPB'').
    Shroud Assembly and Cabinetry: These pieces are the cosmetic 
cabinetry that

[[Page 54565]]

encompass and form the outside of the machine.
    Under the proposed production scenario, Kodak will purchase the 
two ``camera modules'' and the ``feed module'' as assembled units 
from its Shanghai facility. The Shanghai facility will assemble 
these modules using various parts, including a charge couple device 
for each camera module, which is purchased from the United States. 
The other major subassemblies will be manufactured in Rochester, New 
York, using component parts purchased from inventory at the Shanghai 
facility. It is envisioned that the Rochester facility will purchase 
the necessary number of parts, but that they would not be packaged 
or inventoried as kits. The parts inventoried at the Shanghai 
facility are sourced primarily from China, but include components 
from such designated countries as the United States, Canada, Japan, 
and Korea.

III. The Assembly Process

    We are informed that assembly of the scanners at the Rochester 
facility requires approximately four to six hours of work 
encompassing essentially five stages: (a) Manufacturing most of the 
major subassemblies; (b) building the pod assembly; (c) performing 
the ``main build'; (d) performing ``end of line'' procedures; and 
(e) packaging. During these stages, the machine is built, the 
firmware that allows the machine to work as a scanner is loaded, the 
major subassemblies and the integrated circuit are tested, and the 
scanner's parameters are set to enable proper operation.

1. Manufacture of Major Subassemblies

    The first step of production involves assemblage of most of the 
scanner's major subassemblies. In order to demonstrate the 
complexity of these operations, a description of the operations 
undertaken to assemble the E-box assembly has been provided. As 
noted above, the E-box Assembly contains the central brain of the 
machine and is a key component for ensuring the proper function and 
quality of the scanning operation. It contains approximately 50 
individual parts that technicians in the United States must 
assemble. The building process includes, among other things, 
mounting a CPU board to a base and adding to that CPU board a 
programmed chip that enables and controls processing speed. Other 
operations performed include mounting gaskets and a card cage, 
installing electromagnetic interference (``EMI'') gaskets, 
installing the machine control board (``MCB'') and image processing 
board (``IPB'') circuit boards, attaching a power supply to the CPU 
board, mounting a fan and installing an air duct, and attaching a 
cover to the base.
    During this stage of production, technicians also build the OCP, 
elevator, carriage, image baffle, backup baffle, and shroud 
assemblies. At the end of this production stage, these subassemblies 
are complete and ready to undergo further processing.

2. Building the Pod Assembly

    After completing the major subassemblies set forth above, the 
technicians begin assembling the pod assembly, which is the top of 
the scanner. The technicians use the upper camera module, image 
baffle assembly, backup baffle assembly, and approximately 180 
additional parts to build the pod assembly. Additional parts that 
must be integrated during this manufacturing stage include lamp 
inverters, air ducts, dust seals, video cables, blowers, air 
filters, rollers, support baffles, lamps, clutches, gears, and 
shafts. Special fixtures and tooling are used to build the pod 
assembly.

3. Main Build

    After building the pod assembly, the technicians manufacture the 
bottom of the scanner, integrate the pod assembly, make fine 
adjustments to the unit, and perform certain testing operations. 
This stage of production is referred to as the ``main build.''
    During the main build, technicians integrate the elevator, 
carriage, image baffle, backup baffle, E-box, shroud, OCP, and lower 
camera subassemblies, along with literally hundreds of additional 
parts. The additional parts include components such as camera 
mounts, lamp invertors, latch handles, bumpers, stops, slide blocks, 
bushings, brackets, gaskets, wires, air ducts, UDDS emitter boards 
(a circuit board for the ultrasonic double document sensor, which is 
used to detect misfeeds), electronic grounding jacks, elevator 
position sensors, carriage plates, motors, lamps, shafts, belts, 
blowers, air filters, foam seals, bearings, cables, switch 
actuators, and exterior cabinetry. The technicians also attach the 
pod assembly with a special fixture during this stage.
    Technicians perform quality assurance checks throughout the main 
build and also use special fixtures designed to test electrical 
grounding.

4. End of Line Procedures

    During this phase of production, additional quality control 
checks are conducted to ensure, for example, that the OCP cover is 
correctly installed, that all wires are dressed correctly, that the 
pod latches operate properly, and that glass and roller components 
are clean and ready for operation. The feeder module is then 
installed along with a separation roller and a separation pad. It is 
stated that the core elements of this stage of production, however, 
are operations such as programming, testing, and calibration of the 
machine.
    The technicians program the equipment by inputting Kodak's 
proprietary firmware designed for the i600 line of scanners. This 
firmware was developed by Kodak's Software Engineering Group within 
the United States and is considered the ``intelligence'' of the 
scanner. The firmware provides the programming that will control 
machine function and the algorithms to process images.
    The technicians load the firmware using Kodak's Scanner 
Validation Tool (``SVT''), which is a software package also 
developed and provided by Kodak's Software Engineering Group. In 
order to perform this task, technicians connect the scanner to a 
computer with the SVT and firmware already loaded. They then use the 
SVT to transfer the firmware onto the scanner. This process installs 
the firmware onto the IPB circuit board and CPU circuit board, which 
the technicians previously installed during manufacture of the E-box 
subassembly.
    Once the firmware is loaded onto the scanner, the technicians 
use the SVT and the firmware to calibrate and test the responses of 
the machine for specific inputs. These testing and calibration 
operations include procedures such as calibration of the UDDS 
system, calibration of the scanner for brightness, calibration of 
the scanner's speed, and measurement of image quality.

5. Packaging

    Once the end of line procedures are completed, the assembled 
scanners are visually inspected and packaged for shipment.
    Issue: Whether the assembled Kodak i600 line of scanners are 
considered to be products of the United States 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).
    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 (CIT 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 type 
equipment that

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complex and meaningful assembly operations involving a large number 
of components will generally result in a substantial transformation. 
For example, in Headquarters Ruling Letter (``HRL'') 562495 dated 
November 13, 2002, color ink jet printers were assembled in 
Singapore of components imported from a number of other countries. 
CBP 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 
position, CBP recognized that the processing operations that 
occurred within Singapore were complex and extensive, required 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), CBP held that certain 
multi-functional 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 multi-functional 
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 described as the ``heart of the machine.'' In finding that 
the imported parts were substantially transformed in Japan, CBP 
stated that the individual parts and components lost their separate 
identities when they became part of the multi-functional 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, CBP held 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 and screwdrivers. In holding that the 
country of origin of the assembled printers 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.
    The programming operations performed in the instant case must 
also be considered. In Data General Corporation v. United States, 4 
CIT 182 (1982), the Court of International Trade held that a PROM 
(programmable read-only memory) fabricated in a foreign country but 
programmed in the United States for use in a computer circuit board 
assembled abroad was substantially transformed. In Data General, the 
court stated that the electronic pattern introduced into the circuit 
by programming gave the PROM the function as a read only memory and 
that the essence of the article, its pattern of interconnection or 
stored memory, was established by programming.
    As applied, we find that the various foreign-origin parts are 
substantially transformed within the United States when assembled to 
form the Kodak i600 line of scanners in the manner set forth above. 
In making this determination we note that the scanners are comprised 
of approximately 600 parts and thirteen subassemblies. Ten of the 
subassemblies are assembled to completion within the United States 
during a complex and meaningful process. Illustrative examples of 
two major subassemblies built to completion in the United States are 
the E-Box assembly (comprised of approximately 50 parts) and the pod 
assembly (comprised of more than 180 parts). During the main build 
phase of production, the various subassemblies and literally 
hundreds of additional parts are assembled together to form the 
scanners. Specialized fixtures, tooling, and other equipment are 
used throughout assembly to align, test, and calibrate the scanners 
as they are built. After assembly, the scanners are programmed with 
firmware developed in the United States, which constitutes the 
intelligence of the scanners. During such assembly and programming 
operations, the individual components and subassemblies of 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 Kodak i600 scanners for purposes of U.S. 
Government procurement is the United States.
    Holding: Based upon the specific facts of this case, we find 
that the individual components and subassemblies imported into the 
United States are substantially transformed when assembled in the 
manner set forth above to form Kodak i600 desktop scanners. 
Therefore, the country of origin of the Kodak i600 line of desktop 
scanners for purposes of U.S. Government procurement is the United 
States.
    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. 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,

Michael T. Schmitz,
Assistant Commissioner, Office of Regulations and Rulings.
[FR Doc. 05-18359 Filed 9-14-05; 8:45 am]
BILLING CODE 9110-06-P