MAR-2-05 R:C:S 735315 MLR
Ms. Rosemarie Smallcombe
Manager, Corporate Customs
Varian Associates, Inc.
P.O. Box 10800
Palo Alto, California 94303-0883
RE: U.S. Government Procurement; Final Determination; Country of origin of spectrometer subassemblies; printed circuit boards; computer; printer; assembly; substantial transformation; Title III, Trade Agreements Act of 1979 (19 U.S.C. 2511); Subpart B, Part 177, Customs Regulations (19 CFR 177.21 et seq.)
Dear Ms. Smallcombe:
This is in reference to letters dated August 17, 1993, and January 3, 1994, requesting a final determination under 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. 2511 et seq.), the Customs Service issues country of origin advisory rulings and final determinations 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 America" 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 Optical Spectroscopy Instrument ("OSI") systems which Varian Associates, Inc. ("Varian") assembles in the U.S. from domestic and imported components, and which are being offered to the General Services Administration in a procurement designated under GSA Solicitation No. FCGS-Z7-89-0018-2-N. Accordingly, Varian is a party-at-interest within the meaning of 19 CFR 177.22(d)(1), and is entitled to request this final determination.
The merchandise consists of certain OSI systems. Three product lines are at issue: Atomic Absorption (AA) spectrometers, Ultraviolet-Visible-Near Infrared (UV-Vis-NIR) spectrometers, and Inductively Coupled Plasma-Atomic Emission Spectroscopy (ICP-AES) spectrometers. The AA and ICP-AES spectrometers share similar applications such as in pollution control and the clinical testing of blood, urine, and other biological materials. The UV-Vis-NIR spectrometer has a wider range of applications such as DNA analysis, reaction monitoring, and other optical testing.
All of the products have three essential elements: a controlling computer, an optics module, and an output device such as a printer. The shells and related components for the optics module will be imported from Australia. The shells typically include four major components: a sampling device, a furnace, light tubes, and mirror/optics. The shell, however, will not contain any of the printed wiring board assemblies ("PWBs") (Varian states that PWBs are essentially the same as printed circuit boards) necessary for operation and control of the module. The PWBs which include power supply boards, boards to control the instrument system, and boards to interface with the dedicated personal computer, are manufactured in the U.S., and will be shipped to the customer site where they will be integrated into the shells to create a finished optics module. This module will then be further assembled with a controlling computer and printer, also stated to be of U.S. origin, to create the OSI spectroscopy system.
Varian states that the process of assembling the PWBs into the optic module shells to create finished optics modules, and the testing of the finished product is complex and extensive, involving numerous steps and a large number of components. One example provided is the assembly of the ICP-ES Optics Modules which requires the incorporation of the following U.S. PWBs: [ ].
Another example provided is the installation of U.S. PWBs into Australian shells to create the Cary 4 and Cary 5 models. The principal steps are as follows: [ ].
To assemble an ICP module 200 OSI system, it is necessary to install the base software; install the applications software; interconnect the water cooling system, the vacuum pump system, and the computer; install the GPIB interface card; set up the printer; set up the module, including the argon gas connection and the power connections; perform a resolution test on the system; and perform an analytical performance test, including tests for signal intensity, signal background ratios, analytical calibration accuracy, and in-run (short term) precision.
Consequently, it is claimed that since over [ ] components are involved in the assembly of the U.S. PWBs (which are the "brains" of the finished product) into the Australian shells, and the finished optics module unit undergoes extensive calibration and performance testing (which requires [ ] hours to complete), and precision, attention to detail, skill, and specialized equipment are required, the imported shell is substantially transformed in the U.S. In addition, it is claimed that the U.S. PWBs give the optics module the ability to analyze. Furthermore, since the imported shells lack their source of radiation, detectors, PWBs, and personal computers, which amount to over half the cost of the completed spectrometers, and the computer, the optics module, and the printer are intrinsically co-dependent and mutually crucial to the operation of the OSI system, it is claimed that the final OSI spectroscopy system should be considered a product of the U.S.
A classification ruling, Headquarters Ruling Letter (HRL) 957284 dated December 7, 1994, was issued which held that the optics module imparts the essential character of finished spectrometers because the monochromator, present in the optics module at the time of importation, contains the precision optics essential for analyzing samples and performs the actual function of the spectrometer, which is physical analysis. Furthermore, it was stated that the modules are dedicated for use as spectrometers, and the optics are precisely set in the subassemblies prior to importation. Although it was claimed that the subassemblies lack any of the control components necessary for use as spectrometers, and that the capabilities lie in the components added in the U.S. (i.e., the personal computers and PWBs), it was held that the test is not whether the modules perform as if they were finished spectrometers, but whether they impart the essential character of finished spectrometers; accordingly, they are classifiable in subheading 9027.30.40, Harmonized Tariff Schedule of the United States (HTSUS).
Whether the assembly of the various components into the imported unfinished optic module constitutes a substantial transformation, such that the OSI spectroscopy system may be considered a product of the U.S.
LAW AND ANALYSIS:
As prescribed under Title III of the Trade Agreements Act, the origin of an article not wholly the growth, product, or manufacture of a single country is to be determined by the rule of substantial transformation. 19 U.S.C. 2518(4). Such an article is not a product of a country unless it has been substantially transformed there into a new and different article of commerce with a name, character or use different from that of the article or articles from which it was transformed.
Varian claims that the U.S. manufacture and assembly of PWBs into Australian-imported shells for optics modules substantially transform the imported components into finished optics modules of U.S. origin. In the U.S., a new and different article with a separate identity emerges when the imports are integrated with the Varian power boards. The optical module shells become finished optical modules with a new name, character, and use.
It is claimed that the Australian-sourced shell and related components for the optics module have no use unless several components are assembled together, and the character of the optical spectroscopy system is imparted by a totality of several elements, not by a single component.
Varian claims that the PWBs physically alter the imported shells to provide the finished optics module with the very essence and particular characteristics of the finished product. Varian also claims that the imported shells, consisting of a sampling device, a furnace, light tubes, and mirrors/optics cannot analyze and are non-operational, and that as a result of the U.S. operations, the imported articles receive the ability to analyze. Moreover, Varian alleges that the module itself, even when assembled with the PWBs, is not completed until it is integrated into a complete OSI system with a domestic computer and printer. Lastly, the imported module loses its separate identity when software is loaded. As support, Varian cites Data General Corp. v. United States, 4 CIT 182 (1982), where it was held that the U.S. programming of imported programmable read only memories (PROMs) substantially transformed these articles into U.S. goods. Varian also states that the manufacture of the module involves the fabrication of metal parts, finishing processes, and assembly of subassemblies, which are performed by skilled assembly personnel. Furthermore, the task of assembling the PWBs, connecting the computer and the printer into the optics module, also requires a substantial amount of time.
In determining whether the combining of parts or materials constitutes a substantial transformation, the 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 which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. See C.S.D. 85-25. However, the issue of whether a substantial transformation occurs is determined on a case-by-case basis.
In C.S.D. 85-25 (HRL 071827 dated September 25, 1984), Customs considered the issue of whether the assembly of components onto a circuit board resulted in a substantially transformed constituent material. In that decision, Customs held that an assembly process will not constitute a substantial transformation unless the operation is "complex and meaningful." 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.
Although Customs has not issued many rulings in the government procurement context, Varian cites numerous country of origin marking and preferential duty rulings as support that the OSI spectroscopy system should be considered a product of the U.S. In HRL 556981 dated March 31, 1993, Customs found that the assembly of wiring harnesses, to be incorporated in an automobile electrical system, effected a substantial transformation because 300 circuits, 300 types of insulated wires, 850 connectors, terminals and other parts were involved. In HRL 734213 dated February 20, 1992, the conversion of an imported computer monitor into a touchscreen monitor with U.S. components constituted a substantial transformation when logic boards were inserted. Additionally, in HRL 734097 dated November 25, 1991, Customs found that the installation of U.S.-manufactured terminal logic boards, keyswitches, T-connector cables, and custom keyboards into imported terminal video shells to create a functional computer terminal was a substantial transformation. Customs compared this to HRL 723170 dated January 5, 1990, where the domestic assembly of imported backless television cabinets (containing a tuner, speaker and circuit board) with major U.S. components (color picture tube, deflection yoke, etc.) constituted a substantial transformation. Varian also cites HRL 734979 dated September 3, 1993, where telephone shells, consisting of housing, plastic and electric subassemblies, and parts of a telephone, were assembled together and a substantial transformation occurred once a U.S.-origin control board was installed. In this case, Customs characterized the control board as a highly sophisticated PWB, which required considerable labor to build.
We agree with Varian that the assembly of the various components into the optics module shell, mainly the PWBs which are manufactured in the U.S., constitutes a substantial transformation. It is stated that the components involved in the U.S. assembly of the ICP-ES 110 and ICP-ES 220 modules exceeds [ ] components. The majority of the components are involved in the manufacture of the PWBs, which is not conducted at the customer site; however, we find that the manufacture of the PWBs and their subsequent installation into the shells constitutes a complex and meaningful assembly pursuant to C.S.D. 85-25. Although the imported shells consist of important components, such as the sampling device, furnace, light bulbs and mirrors/optics, the PWBs give the optics module the ability to function and analyze, similar to the circumstances in HRL 734213, HRL 734097, and HRL 734979. Consequently, it is our opinion that the imported optics module shells are substantially transformed in the U.S. Furthermore, since the other components of the OSI spectroscopy system (the computer, printer, and software) are products of the U.S., we find that their incorporation with the optics module renders the OSI spectroscopy system a product of the U.S.
On the basis of the information submitted, we find that the imported optics module shells are substantially transformed by the incorporation of the U.S.-origin PWBs in the U.S. Furthermore, since the other components of the OSI spectroscopy system (the computer, printer, and software) are products of the U.S., we find that their incorporation with the optics module renders the OSI spectroscopy system a product of the U.S.
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 Customs 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.
Harvey B. Fox, Director
Office of Regulations and Rulings