MAR-2-05 CO:R:C:V 733085 RSD

Harold Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, New York 10017

RE: Country of origin marking of programmed SecurID Cards for computer systems

Dear Mr. Loring:

This is in response to your letter of January 17, 1990, requesting a ruling on the country of origin marking requirements for security identification cards for computer systems programmed in the United States.


Your client, Security Dynamics, Inc., produces and sells various security systems for computers in the United States. The security system furnished by Security Dynamics consists of SecurID Card(s) and an access control module (ACM). The ACM is either hardware placed in front of a protected host computer or software operating in the computer. The SecurID Card is a user identification and authentication card which, in conjunction with the ACM, provides security access to mainframe computers.

The SecurID Card consists of a credit card-size package with a steel backing, and vinyl cover. The major components inside the card are a liquid crystal display (LCD), battery, chip and a printed circuit board. The components in the SecurID Card are essentially the same as any credit card-size calculator. You indicate that the device, as imported by Security Dynamics, could be programmed to operate as a calculator.

Following importation, the card and ACM are programmed with a unique seed number and a sophisticated time synchronization algorithm. Each authorized user of the secured computer system is assigned a SecurID Card whose seed, when combined with the algorithm generates a 4-8 digit code number which randomly changes every 30 or 60 seconds and is displayed on the card's LCD display panel. Each authorized user is also assigned a secret personal identification number (PIN). The PIN number and the seed associated with that PIN are programmed both into the card and ACM in such a way that the number on the computer is always synchronized with the number as it changes on the card. When a user logs onto his computer, the ACM software prompts the user to enter the PIN and the random number then showing the card's LCD display panel. If the ACM software makes a valid match between the card's number and the PIN number, the user is then authorized access into the computer.

The programming process is accomplished in the U.S. by permanently entering into the card certain substantial proprietary and U.S.-patented machine language binary information. The programming is performed by Security Dynamics at a computer workstation with the aforementioned proprietary software and a mechanized robot for imputing the binary code into the card. The binary machine language information entered into the card cannot be modified or reentered once programmed. This information converts the calculator like components into a permanently dedicated part of the security system.

The programming process is possible as the result of millions of dollars of proprietary research, proprietary clock, synchronization technology and patented security identification and authentication technology. In an exhibit contained in your submission, you indicate that the imported cost of SecurID Card is about $6.88. However, the programming results in the average retail price for the SecurID Card of between $46 and $110.

Security Dynamics also intends to put a return mailing address on the SecurID Card, in order that a finder of a lost card would be able to know where to return it.

The importer submitted a statement indicating that it purchases the SecurID Cards directly from the manufacturer in Hong Kong. It further states that it is always aware of the country of origin and that there are no middlemen involved in the transaction.


Does the programming of the SecurID Card in the U. S. constitute a substantial transformation?

Does placing a return mailing address trigger the requirements of 19 CFR 134.36(b) and 19 CFR 134.46?


Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co. 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940).

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as the country of manufacture, production or growth of any article of foreign origin entering the U.S. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of the marking laws and regulations. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed. In such circumstances the U.S. manufacturer is the ultimate purchaser. The imported article is excepted from individual marking and only the outermost container is required to be marked. (see 19 CFR 134.35).

In determining whether there is a substantial transformation, it is necessary to analyze whether programming the SecurId Cards changes their name, character, or use. In HQ 732087 ( February 7, 1990) we ruled that a blank computer diskette is substantially transformed by having a program "written" onto it and the party performing the programming is considered the ultimate purchaser of the blank diskette for country of origin marking purposes. We noted that the character of the diskette had changed from one of a blank storage medium to one with a predetermined electronic pattern encoded onto it. The use of the diskette had changed from that of an unreadable, therefore meaningless, article of software, to that of an encoded instruction guide to enable a computer to perform various commands.

In Data General v. United States, 4 C.I.T. 182 (1982), the Court found that for purposes of determining eligibility under item 807.00, Tariff Schedules of the United States, the programming of a foreign PROM substantially transforms the PROM into a U.S. article. The court noted that it is undisputed that programming alters the character of a PROM. Programming changes the pattern of interconnections within the PROM. A distinct physical change is effected in the PROM by the opening or closing of the fuses, depending on the method of programming. This physical alteration, not visible to the naked eye, may be discerned by electronic testing of the PROM. The essence of the article, its interconnections or stored memory, is established by programming. The court concluded that altering the non- functioning circuitry of an integrated circuit comprising a PROM through technological expertise in order to produce a functioning read only memory device possessing a desired distinctive circuit pattern, is no less a "substantial transformation" than the manual interconnection of transistors, resistors and diodes upon a circuit board creating a similar pattern.

In this case, we find that programming done in the U.S. by Security Dynamics changes the name, character and use of the SecurID Cards. It can only really be called a SecurID Card after it is programmed. Before programming, the card has a LCD, battery, chip, and printed circuit board; but it is essentially useless. The function of the SecurID Cards is to generate a random code that is compatible with a code on the computer security system. This allows the user to enter the code so that he can gain access to the computer system. SecurID Cards will not function with the computer security system unless they are properly programmed. The programming of the card gives it is character so that it can function as part of a computer security system. The programming also makes a permanent change in the card that cannot be undone. We also note that programming greatly increases the value of the SecurID Cards from an imported cost of about $6.88 to a retail price between $46 and $110. Accordingly, we find that since the programming is so integral to proper functioning of the SecurID Cards, it creates a new and different article of commerce and it results in a substantial transformation. Therefore, under 19 CFR 134.35, Security Dynamics is considered the ultimate purchaser and the articles are excepted from country of origin marking.

Security Dynamics also seeks to put a return mailing address on each SecurID Card so in case it is lost, a finder can return the lost card to Security Dynamics. The proposed marking is:


The question to be addressed is whether the exception from marking is precluded because of the U.S. address appearing on the imported cards. Section 134.36(b), Customs Regulations (19 CFR 134.36(b)), provides that an exception from marking shall not apply to any article or retail container bearing any words, letters, names, or symbols described in 19 CFR 134.46 or 134.47 which imply that an article was made or produced in a country other than the actual country of origin. In HQ 732329 (July 12, 1989), we indicated that a U.S. address printed on a warranty card would not trigger the requirements of 19 CFR 134.46, so long as the U.S. address appeared for the purpose of giving the warranty holder a place to direct questions and problems related to the warranty. This was because the ultimate purchaser would understand that the address related to a warranty and would not confuse the ultimate purchaser as to the country of origin. In this case, the U.S. address is only on the article for purpose of allowing a finder of a lost SecurID Card to know where to return it. The U.S. address should not confuse the ultimate purchaser as to the country of origin. Therefore, we find that neither the requirements of 19 CFR 134.36(b) nor 19 CFR 134.46 are triggered.

Finally, the importer has indicated that it knows that the country of origin of the cards is Hong Kong because it deals directly with the Hong Kong manufacturer and that there are no middlemen. The importer also indicates that this is the only overseas source of cards for the company. Section 304(a)3)(H) of the Tariff Act of 1930, as amended (19 U.S.C. 1304 (a)(3)(H)) as implemented by section 134.32(h), Customs Regulations, (19 CFR 134.32(h)), excepts from marking articles for which the ultimate purchaser must necessarily know the country of origin by reason of the circumstances of their importation or by reason of the character of the articles even though they are not marked to indicate their origin. The containers of such articles are also excepted from country of origin marking under 19 CFR 134.22(d). Because the importer deals directly with the Hong Kong manufacturer, we find that the importer necessarily knows by the circumstances of the importation that the country of origin of the SecurID Cards is Hong Kong and therefore the articles and their containers are excepted from marking under 19 CFR 134.32(h) and 19 CFR 134.22(d).


The programming of the SecurID Card results in a substantial transformation. Therefore,the U.S. importer/manufacturer is the ultimate purchaser of the imported cards.

A return mailing address for lost SecurID Cards on the cards does not trigger the requirements of 19 CFR 134.46.

If the district director at the port of entry is satisfied that the imported cards will used only in the manner set forth above, the cards and their containers do not have to be marked because the ultimate purchaser necessarily knows the country of origin of the SecurID Cards by the circumstances of the importation.


Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch