OT:RR:CTF:VS H039856 KSG
Mr. Edmund Baumgartner, Esq.
Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, NY 10036
Re: U.S. Government Procurement; country of origin of multifunctional printer machines; substantial transformation
Dear Mr. Baumgartner:
This is in response to your letters, dated November 26, 2007, July 2, 2008, and November 10, 2008, requesting a final determination on behalf of Sharp Electronics Corporation (“Sharp”) pursuant to subpart B of 19 CFR Part 177.
Under these regulations, which implement 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 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.
This final determination concerns the country of origin of certain multifunctional machines 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. A conference was held on this matter at Headquarters on August 25, 2008.
FACTS:
This case involves the Sharp Jupiter II J-models that are sent to the U.S. for final assembly (Sharp model # MX-M350NJ, MX-M350UJ, MX-M450NJ, and MX-450OUJ) (“J-models”). These models have digital multifunctional systems (monochrome copying, printing, faxing and duplex scanning functions). The Jupiter II J-models designated with an “N” feature a hard disc drive and network interface card which allows them to function as networked printers and send scanned documents in the form of e-mail attachments in various formats. The Jupiter II J-models designated with a “U” are not equipped with a hard disk or network interface card and function with stand–alone capacity.
Sharp Corporation, Sharp’s parent company (“Sharp Japan”) developed the Jupiter II J-models in Japan; all the engineering, development, design and artwork processes were developed in Japan. Each J-model is produced from a scanner unit and printer engine unit, which are assembled in Japan.
The scanner units and printer engine units are imported into the U.S. where each is combined with a scanner rack and stand which can contain optional paper feed drawers.
There are 16 main subassemblies that compose the Jupiter II J-models.
Assembly in China
Assembly in China includes assembly of the duplex single pass feeder (“DSPF”) subassembly; the laser scanning unit (“LSU”) subassembly; the transfer unit subassembly; the developer (“DV”) unit subassembly; the printer control unit (“PCU”); the fusing unit subassembly; the multifunctional printer (“MFP”) control unit and various other subassemblies.
The DSPF subassembly transports original documents to the scanning bed.
The LSU subassembly takes the image data of the documents or graphics and converts the data into laser beams which are exposed to the drum surface and create the electrostatic images necessary for printing.
3) The transfer belt unit transfers the image created on the drum onto the surface of the paper for printing. This unit is assembled in China.
The developer unit (“DV”) is used to transfer toner evenly over the latent image created on the drum unit.
The PCU controls the printing function of the J-models. It is comprised of a control printed wire board (“PWB”) and mother PWB that are stuffed in China.
6) The fusing unit is used to fix the transferred image onto paper.
Processing and Assembly in Japan of the scanner unit and the printer engine unit
The following parts which are stated to be critical components are produced in Japan: the charge-coupled device (“CCD”), the contact image sensor (“CIS”), the laser scanning unit (“LSU”) housing, the LSU fixing base, the LSU synchronous lens, the LSU two cylinder lenses, the transfer roller, the drum, the DSD flange, the DSD flange spacer, the rollers, the lamps, the thermistors, the thermostat, the cleaning roller, two sets of pawls, and the flash memory chips.
Eight of the 16 subassemblies involve processing in Japan; the upper cabinet rear unit; scanner base plate unit; the scanner control mounting unit; the process unit subassembly; the drum unit subassembly; the two rear frame units; the control box; and the high voltage holder unit.
The upper cabinet rear unit contains the detector luminescence arm and ORS emission printer wire board, which detect the size and placement of original documents on the scanning bed.
The scanner base plate unit contains a charge-coupled device (“CCD”) made in Japan, which is stated to be a critical component for scanning and copying documents. The scanning base plate unit contains lamps and mirror motors which illuminate and reflect the image for scanning by the CCD.
The scanner control mounting unit contains PWBs for operating the original document detector and guides and harnesses to hold the scanner’s optical components in place.
The process unit subassembly stores the drum used for creating images.
The drum unit contains the drum. The drum unit is assembled in Japan with parts made in China and Japan.
Rear frame 2 unit is assembled from the rear fixing plate unit, solenoid fixing plate unit, dust support plate unit and other frames, mounts, holder and plates. Rear frame 1 unit is assembled from the main duct, fusing drawer, fixing plate, paper powder remover case unit, box cooling duct unit and other parts.
The control box unit is assembled with the control box upper unit and other parts.
The high voltage holder unit is assembled from a Chinese holder and other parts.
Additional units are installed in the printer engine in Japan including the developer guide unit, left door unit, cassette unit, PS roller( resist roller) unit, main drive unit, paper feed unit, lift-up unit, paper exit reverse unit, power supply unit, PCU PWB fixing sub unit and inlet fixing unit.
Final assembly of the scanner unit and printer engine unit are then performed in Japan. All functions of the printer engine and scanner unit undergo adjustment and testing prior to being exported to the U.S. You state that the testing and adjustment process takes as much or more time than the physical assembly of the product and require skilled personnel.
Final Assembly in the U.S.
The scanner unit and the printer engine unit are imported into the U.S. where they are assembled onto a scanner rack and a scanner stand to create the finished multi-functional machine. Final testing of the machine is then performed.
The basic scanner stand is made in the U.S.
The scanner rack and stand with paper feed drawers (either 1,500 sheet or 2,500 sheet) are made in China.
ISSUE:
What is the country of origin of the subject multifunctional printer machines for the purpose 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 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.
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 (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. 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.
The courts and CBP have also considered the essential character of the imported article in making these determinations. See Uniroyal, Inc. v. United States, 542 F. Supp. 1026, 3 CIT 220, 224-225 (1982) (where it was determined that imported uppers were the essence of a completed shoe) and National Juice Products Association, et al v. United States, 628 F. Supp. 978, 10 CIT 48, 61 (1986) (where the court addressed each of the factors (name, character, and use) in finding that no substantial transformation occurred in the production of retail juice products from manufacturing concentrate).
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative.
In a number of cases, CBP has considered similar merchandise. In Headquarters Ruling Letter (“HRL”) 563491 (February 8, 2007), CBP addressed the country of origin of certain digital color multifunctional systems manufactured by Sharp and assembled in Japan of various Japanese – and Chinese – origin parts. In that ruling, CBP determined that color multifunctional systems were a product of Japan based on the fact that “although several subassemblies are assembled in China, 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.” Further CBP found that the testing and adjustments performed in Japan were technical and complex, and the assembly operations that occurred in Japan were sufficiently complex and meaningful. Thus, through the product assembly and testing and adjustment operations, the individual components and subassemblies of Japanese and foreign-origin were subsumed into a new and distinct article of commerce that had a new name, character, and use. See also HRL 562936, dated March 17, 2004.
In HRL 561734, dated March 22, 2001, CBP held that certain multifunctional machines (consisting of printer, copier, and fax machines) assembled in Japan were a product of that country for the 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. See also HRL 561568, dated March 22, 2001.
Finally, in HRL H020516, dated November 7, 2008, CBP considered Sharp Andromeda II J models composed of eight main subassemblies, two of which involved processing in Japan. Similar to this case, all the engineering, development, design, and artwork were developed in Japan. The multifunctional printer control unit was described as the brain of the model. While some of the components were installed on the control printer board in China, the flash read-only memory which included firmware developed in Japan, was manufactured in Japan. The other unit that involved production in Japan was the process unit, that housed a drum produced in Japan. The process unit was assembled in China. The other subassemblies were assembled in China but certain key components of the subassemblies originated in Japan. The final assembly was performed in Japan.
Based on the totality of the circumstances discussed in this ruling, we agree that the Jupiter II J-models described in this ruling are considered a product of Japan. As was determined in HRL 563491 and HRL H020516, substantial portions of the components that are of key importance are of Japanese origin and all the engineering, design and development of the multifunctional machines occurs in Japan. As in H020516, we find the final assembly of the subassemblies into a finished product in Japan to be sufficiently complex and meaningful to result in a new and distinct article of commerce that possesses a new name, character and use. In this case, we also note that 8 of the 16 subassemblies involve processing in Japan. In addition, the testing and adjustment of the multifunctional machines in Japan is significant.
The processing that occurs in the U.S., which involves the assembly of the finished printer engines and scanners to the stand and rack, is a simple assembly operation that is not demonstrated to be complex or meaningful and does not involve a large number of components. Based on these factors, we find that there is no substantial transformation in the U.S.
Accordingly, the country of origin of the Jupiter II J-model multifunctional printer machines is Japan for purposes of U.S. Government procurement.
HOLDING: Based on the facts of this case, the country of origin of the Jupiter II J-model multifunctional printer machines 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 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. Pursuant to 19 CFR § 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 determination before the Court of International Trade.
Sincerely,
Sandra L. Bell
Executive Director
Office of Regulations and Rulings
Office of International Trade