OT:RR:CTF:VS: H284834 JMV
George W. Thompson, Esq.
Thompson & Associates, PLLC
1250 Connecticut Ave. NW, Suite 200
Washington, DC, 20036
RE: U.S. Government Procurement; Title III, Trade Agreements Act of 1979 (19 U.S.C. § 2511); Subpart B, Part 177, CBP Regulations; Tablet Computers, CareConsole Hub and Mobile Hub
Dear Mr. Thompson:
This is in response to your letter of March 20, 2017, on behalf of 1Vision, LLC (“1Vision”), requesting a final determination concerning the country origin of a product that you refer to as the AMC Home Tele-health System (“Tele-health System” or “the System”), pursuant to subpart B of Part 177, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. § 177.21, et seq.). You state in your letter that this request is being made pursuant to a contract with the Department of Veterans Affairs (VA) with 1Vision requiring the filing of a request for a country of origin determination from CBP.
As a domestic producer, 1Vision is a party-at-interest within the meaning of 19 C.F.R. § 177.22(d)(1) and is entitled to request this final determination.
FACTS:
The products at issue are the Tele-health System in its entirety and the components, the CareConsole Hub and the Mobile Hub. The CareConsole Hub and the Mobile Hub, respectively, begin as a tablet computer and a smart phone. The CareConsole Hub is produced in the Republic of Korea and the Mobile Hub is produced in China. Both products are intended for purchase by the Veterans Health Administration for use by patients at home. The CareConsole Hub and the Mobile Hub are designed to collect health data that is measured by other peripheral devices, such as blood pressure cuffs, blood glucose monitors, etc. These other peripheral devices are not imported with the tablet and could be used “as is” within the 1Vision ecosystem, without any changes.
In the United States, the tablet and smart phone go through a number of software uninstallations and installations. The generic Android functions originally included on the devices, such as alarms, calculators and text messaging, are removed. In order to enable the devices to function within the Tele-health System, other functions, such as Bluetooth capability, are modified and additional software is added. In addition, 1Vision also further processes the devices to include additional security mechanisms and to enable them to function in Plain Old Telephone Systems (“POTS”), an analog telephone service that continues to be the basic form of home and small business service connection to telephone networks.
Finally, the AMC CareConsole Mobile Application is installed on both devices. According to the information provided, this software was developed entirely in the United States. The software enables the patient to provide vital sign data by connecting to the peripheral devices via Bluetooth. The patient’s information is then forwarded to VA clinicians over the VA intranet. This application is installed on the tablet to meet the VA’s requirements for medical devices, including patient confidentiality and interoperability with VA systems and protocols. After the software installation is completed, the tablets cannot run any other program and cannot be reprogrammed to perform any other function.
The CareConsole Hub and Mobile Hub are then integrated into the Tele-health System, which also includes servers, data storage, networking, additional software, and health monitoring devices such as blood pressure cuffs and glucose monitors. The integration process consists of the CareConsole Hub or Mobile Hub contacting the Tele-health System, hosted in the VA data centers, which then sends an activation code and configuration file to the CareConsole Hub or Mobile Hub. The CareConsole Hub and Mobile Hub are then automatically configured to the peripheral health monitoring devices.
All the components, other than the CareConsole Hub and Mobile Hub, come from the United States, Mexico, Japan, Taiwan, Ireland, or the Republic of Korea. These components are customized as necessary to function in conjunction with each other. The CareConsole Hub and Mobile Hub collect information from the patients in their homes and transmit that data to the Tele-health System. The information is then presented to the VA Care Coordinators through the web application. The Tele-health System’s various components are installed at multiple locations, including in the patients’ homes, VA data centers and VA offices.
Like the Hub and Mobile Hub, the servers also cannot be used out of the box and must be customized. The servers are acquired without an operating system or software and are inoperable until software is installed. The servers are first installed at the VA Facility. The installation process takes five business days as it involves various assembling, configuring and testing processes. The final step is to load the AMC CareConsole software onto the servers.
ISSUE:
Whether the imported tablets and smart phones are substantially transformed by the uninstallation and installation of software in the United States, so as to make them a product of the United States.
Whether all the components of the Tele-health System are substantially transformed through the creation and installation of that system in the United States so as to make them a product of the United States.
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. § 177.21 et seq., which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. § 2511 et seq.).
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 C.F.R. § 177.22(a).
In rendering final determinations for purposes of U.S. Government procurement, CBP applies the provisions of subpart B of Part 177 consistent with the Federal Procurement Regulations. See 19 C.F.R. § 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 Trade Agreements Act. See 48 C.F.R. § 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 name, character, or use distinct from that of the article or articles from which it was transformed.” See 48 C.F.R § 25.003.
In Data General v. United States, 4 C.I.T. 182 (1982), the court determined that the programming of a foreign PROM (Programmable Read-Only Memory chip) in the United States substantially transformed the PROM into a U.S. article. In the United States, the programming bestowed upon each integrated circuit its electronic function, that is, its “memory” which could be retrieved. A distinct physical change was effected in the PROM by the opening or closing of the fuses, depending on the method of programming. The essence of the article, its interconnections or stored memory, was established by programming. See also, Texas Instruments v. United States, 681 F.2d 778, 782 (CCPA 1982) (stating the substantial transformation issue is a “mixed question of technology and customs law”); HQ 735027, dated September 7, 1993 (programming blank media (EEPROM) with instructions that allow it to perform certain functions that prevent piracy of software constitutes a substantial transformation); and, HQ 734518, dated June 28, 1993 (motherboards are not substantially transformed by the implanting of the central processing unit on the board because, whereas in Data General use was being assigned to the PROM, the use of the motherboard had already been determined when the importer imported it).
“The term ‘character’ is defined as ‘one of the essentials of structure, form, materials, or function that together make up and usually distinguish the individual.’” National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (citing Webster's Third New International Dictionary (1981)). In National Juice Prods. Ass'n v. United States, the Court of International Trade applied the “essence test” and found that the fundamental character of orange juice concentrate was not changed by the addition of water, orange essences, and oils to make frozen concentrated orange juice, and hence, there was no substantial transformation. 10 C.I.T. 48, 628 F. Supp. 978 (1986).
HQ H258960, dated May 19, 2016, reviewed the country of origin of hardware components of certain transceivers in two scenarios that are instructive to the case at issue here. The hardware components of the transceivers were wholly manufactured in a foreign country and imported into the United States. In the first scenario, the transceivers were “blanks” and completely non-functional and specialized proprietary software was developed and downloaded in the United States, making the transceivers functional and compatible with the OEM technology. In the second scenario, the transceivers were preprogrammed with a generic program that was replaced with specialized proprietary software. It was argued that in both scenarios, the imported hardware was substantially transformed by the development, configuration, and downloading operations of the U.S. origin software. In the first scenario, we found that the non-functional transceivers were substantially transformed as a result of downloading performed in the United States, with proprietary software developed in the United States. However, in the second scenario, it was determined that since the transceivers had generic network functionality, programming them merely to customize their network compatibility would not actually change the identity of the imported transceivers. See also HQ H241177, dated December 3, 2013. Accordingly, it was determined that the country where the last substantial transformation occurred was China or another Asian country where the hardware components were manufactured.
In this case, you contend that the deletion of software and the installation of new software performed in the United States transform the generic tablet computers and smartphones into medical devices. You emphasize that the U.S. operations disable the Android applications and install health monitoring software, which, you argue, creates an entirely new purpose for the devices. You further stress the complexity and number of steps taken to transform the tablets and smartphones into devices that may be used within the Tele-health System. Therefore, you contend that this operation substantially transforms the tablets and smartphones into new medical devices with distinct names, characters and uses.
In essence, what is being done by the uninstallation and installation of software in the United States, is to limit the original capacity of the imported tablets and smartphones for the purpose of facilitating the reception, collection and transmission of a patient’s medical data to VA clinicians for their review. The out-of-box tablets and smartphones have the ability to perform these general functions, but in order to meet the requirements outlined in the VA Request for Procurement, the CareConsole Hub and Mobile Hub are modified as discussed. In other words, when the tablets and smartphones are created, they have the ability to receive, collect, and transmit data. The installed software merely enables these devices to receive and collect an individual patient’s medical data from the peripheral devices and transmit this medical data to the clinicians at the VA.
It is clear that loading the specialized software onto a tablet computer or smartphone that remains fully functional as such would be insufficient to constitute a new and different article of commerce, since all of the functionality of the original device would be retained. In this case, however, in addition to adding the software, we are being asked to consider the effect of disabling the general applications that have been programmed onto the tablet and smartphone. In our judgment, this added factor does not cause or require a different result. The functions of the original tablet and smartphone produced in the Republic of Korea or China, necessary to receive and transmit data are in essence still present on the modified devices, as aided by the software. While the tablet and smartphone are no longer freely programmable machines, we find the imposition of this limitation is insufficient to constitute a substantial transformation of the imported tablets and smartphones.
Furthermore, we note that the converted tablets and smartphones loaded with the AMC CareConsole Application Software do not actually measure any health related functions, such as blood pressure, or oxygen saturation levels, nor do they provide any medical treatment to patients. Instead, the devices function to receive medical data that is obtained from other peripheral devices, such as a blood pressure cuff or an oxygen sensor, and to transmit that medical data to a clinician for review. Therefore, it appears that after the proprietary software is downloaded onto the tablets and smartphones, they function basically as a type of communications device.
In reviewing the processing performed in the United States on the imported tablets and smartphones under consideration, we note that it is analogous to the situation of the transceivers described by the second scenario of HQ H258960. The imported devices are preprogrammed with a generic program, which is the standard Android operating system, prior to their importation. When they are first imported, the tablets and smartphones can perform all of their standard functions of an android tablet or smartphone, and can in their imported condition be used for their intended purpose, but are customized for use within the VA Healthcare network. Accordingly, like the transceivers described in the second scenario of HQ H258960, we find that the name, character, and use of the imported devices remain the same. Therefore, we further find that the imported devices are not substantially transformed in the United States by the downloading of the proprietary software, which allows them to function with the VA Healthcare network. After the AMC CareConsole Application software is downloaded, the country of origin of the imported tablets and smartphones remains the country where they were originally manufactured, which in this case is the Republic of Korea and China, respectively.
The Tele-health System
In this situation, you also present an additional argument that the “end product” is an entire system that includes all hardware and software components, because it is defined as such in the VA contract. The implication of this claim is that CBP should consider the Tele-health System as a whole in its substantial transformation analysis. The VA’s determination on what is the “end product” is based upon different criteria from what CBP must consider in determining the country of origin of a product using the substantial transformation test. We note that the components at issue do not lose their individual identities and, therefore, are not substantially transformed into a new and different article.
In HQ H125975, dated January 19, 2011, which 1Vision cites in support of its argument, the LSI Engenio 7900 Data Storage System (“7900 System”) was under consideration for government procurement purposes. The 7900 System was assembled in Mexico from components originating in various other nations. These parts included the Engenio Operating System, a controller assembly, a mounting assembly, a set of hard drives, a slot drive module assembly, and a cabinet assembly. Further, the controller assembly was reprogrammed with the EOS software to impart the functional intelligence to the 7900 System to allow for storage management, access control and performance monitoring. CBP found that as a result of the assembly and programming operations that took place in Mexico, the imported components of various origins lost their individual identities and were substantially transformed into a new and different article, that is, the 7900 System.
Although the CareConsole Hub, Mobile Hub and servers are customized to the VA contract specifications, the programming of each component to function in coordination with each other for a common purpose does not lead to a substantial transformation finding. As discussed above, the tablets and phones are not substantially transformed by the uninstallation and installation of software. Similarly, we cannot find a substantial transformation of the servers because software is installed. Moreover, the installation of the software onto the servers would not affect the other components of Tele-health System as they remain separate articles of commerce. Unlike the situation in H125975, all the devices and peripheral equipment remain identifiable as separate components. The peripheral medical devices, such as the blood pressure cuffs, blood glucose monitors etc., remain, as stated, “as is” and without any customization; the CareConsole Hub and Mobile Hub, as explained above, remain and continue to function as communication devices; the servers remain and continue to function as servers, etc. The fact that these devices are programmed to function in conjunction with each other for the purpose of receiving, collecting and transmitting medical data does not mean that a change of use or character occurs. Since the components have not lost their separate identities during assembly of the Tele-health System and have not become an integral part of a new and distinct item, which is visibly different from any of the individual components, we find there is no substantial transformation.
HOLDING:
Based on the facts of this case, the imported tablets and smartphones used with the CareConsole Hub and Mobile Hub platform are not substantially transformed by the installation of the AMC CareConsole Application. Therefore, the country of origin of the tablets and smartphones will remain the country where they were originally manufactured. Additionally, all components of the Tele-health System are not substantially transformed through the creation and installation of that system in the United States so as to make them a product of the United States.
Notice of this final determination will be given in the Federal Register, as required by 19 C.F.R. § 177.29. Any party-at-interest other than the party which requested this final determination may request, pursuant to 19 C.F.R. § 177.31, that CBP reexamine the matter anew and issue a new final determination. Pursuant to 19 C.F.R. § 177.30, any party-at-interest may, within 30 days of publication of the Federal Register Notice referenced above, seek judicial review of this final determination before the Court of International Trade.
Sincerely,
Alice A. Kipel, Executive Director
Regulations and Rulings
Office of Trade