Notice of Issuance of Final Determination Concerning Certain Digital Projectors

AGENCY:

U.S. Customs and Border Protection, Department of Homeland Security.

ACTION:

Notice of final determination.

SUMMARY:

This document provides notice that U.S. Customs and Border Protection (“CBP”) has issued a final determination concerning the country of origin of certain digital projectors. Based upon the facts presented, CBP has concluded that the assembly and programming operations performed in Taiwan substantially transform the non-TAA country components of the projectors. Therefore, the country of origin of the projectors is Taiwan for purposes of U.S. government procurement.

DATES:

The final determination was issued on July 29, 2011. 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 on or before September 12, 2011.

FOR FURTHER INFORMATION CONTACT:

Heather K. Pinnock, Valuation and Special Programs Branch: (202) 325-0034.

SUPPLEMENTARY INFORMATION:

Notice is hereby given that on July 29, 2011, pursuant to subpart B of part 177, U.S. Customs and Border Protection Regulations (19 CFR part 177, subpart B), CBP issued a final determination concerning the country of origin of digital projectors which may be offered to the U.S. Government under an undesignated government procurement contract. This final determination, HQ H146735, was issued 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). In the final determination, CBP concluded that, based upon the facts presented, the assembly and programming operations performed in Taiwan substantially transform the non-TAA country components of the projectors. Therefore, the country of origin of the projectors is Taiwan for purposes of U.S. government procurement.

Section 177.29, CBP Regulations (19 CFR 177.29), provides that a notice of final determination shall be published in the Federal Register within 60 days of the date the final determination is issued. Section 177.30, CBP Regulations (19 CFR 177.30), provides 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.

Attachment

HQ H146735

July 29, 2011

MAR-2 OT:RR:CTF:VS H146735 HkP

Category: Marking

Munford Page Hall, Esq.

William C. Sjoberg, Esq.

Adduci, Mastriani & Schaumberg LLP

1200 Seventeenth Street, NW

Washington, DC 20036.

RE: Final Determination; Substantial Transformation; Country of Origin of Certain Digital Projectors

Dear Mr. Hall and Mr. Sjoberg:

This is in response to your letter dated January 21, 2011, requesting a final determination on behalf of a foreign manufacturer, pursuant to subpart B of part 177 of the U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. Part 177). Under these regulations, which implement Title III of the Trade Agreements Act of 1979 (TAA), 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 two models of digital projectors. We note that as the manufacturer of the digital projectors, the foreign manufacturer is a party-at-interest within the meaning of 19 CFR 177.22(d)(1) and is entitled to request this final determination.

Facts:

According to the submitted information, the subject merchandise is two models of digital projectors, Model A and Model B (collectively, the digital projector). The projector is a 9cm x 30cm x 20cm, 2.5kg, digital light processing (DLP) projector, designed to use a high-intensity discharge (HID) arc lamp as the light source to project images from computers and other video sources. It can produce an image size of up to 307 inches diagonally. The main differences between Model A and Model B are the resolution of the projected image and the throw ratio (basically the viewing distance from the screen).

The projector is composed of the following components:

Components of Taiwanese origin include:

(1) System firmware, which controls the functions of the keypad, remote controller, USB port, lamp brightness, volume, and on-screen display main menu, as well as image processing. The fully assembled projector is programmed in Taiwan with this firmware.

(2) Power control firmware, used to control the on/off function of the projector and to retrieve the input/output (I/O) setting of the projector in the latest turn-off from an electronically erasable programmable read only memory (EEPROM). The firmware detects the power signal and transmits the command to the low voltage power supply (LVPS) to output the required voltage for the system and the lamp. The firmware also controls the operation of the fans and detects their operating status. The fully assembled projector is programmed in Taiwan with this firmware.

(3) Extended Display Identification Data (EDID) firmware, a Video Electronics Standard Association (VESA) data format that contains basic information about the projector and its capabilities, including vendor information, maximum image size, color characteristics, factory pre-set timings, frequency range limits, and character strings for the model name and serial number. The information is stored in the display and uses the Display Data Channel (DDC) to communicate between the projector and a personal computer graphics adapter. The system uses this information for configuration purposes. The fully assembled projector is programmed in Taiwan with this firmware.

(4) Network firmware, which contains the network protocol, is used to receive instructions to control the projector from a remote user using a computer. The firmware may be updated in Taiwan during the assembly and testing processes.

Components of Chinese origin include:

(1) Bottom cover module, comprised of parts from Korea, China, and Taiwan.

(2) Elevator module, used to adjust the height of the projector, comprised of parts from China and Japan.

(3) Right cover module, comprised of parts from China.

(4) Input/Output (I/O) cover module, comprised of parts from China.

(5) Top cover module, comprised of parts from Japan, Taiwan, China, the U.S., and Korea.

(6) Cosmetic module, comprised of parts from China.

(7) Fan modules, comprised of the system (axial) fan module and the lamp blower module attached to the lamp housing, comprised of parts from China.

(8) Lamp driver (ballast) module, comprised of parts from China.

(9) Lamp driver firmware, used to control lamp ignition and to obtain the ballast waveform that controls the output current with respect to the angle of the color wheel. White light, generated by a high intensity discharge arc lamp, passes through the filter to generate different colors. The firmware is programmed into an IC on the lamp driver module (Chinese component no. 8) in China.

(10) Color wheel module, which includes the color wheel, photo sensor board with photo sensor, and bracket. It acts as a time-varying wavelength filter to allow certain wavelengths of light to pass through at the appropriate times so that the filtered light may be modulated by the light valve, DMD (digital micromirror device, i.e., an optical semiconductor), to produce the projected image with full color. Module parts are from Japan, China, and Taiwan.

(11) Zoom ring module, comprised of parts from China.

(12) Lamp module, comprised of parts from China.

(13) Lamp cover module, comprised of parts from China.

(14) Semi-finished optical engine module, which includes a Taiwanese-origin DMD, a DMD board, an optical lens, a projection lens, and rod integrator. Module parts are from Taiwan and China.

(15) Main board module, which stores the system firmware (Taiwanese component no. 1) on a Taiwanese-origin DDP2431 processor, comprised of parts from China, the Czech Republic, Taiwan, Japan, Korea, and the U.S.

(16) Low voltage power supply (LVPS) module, comprised of parts from Taiwan, Japan, Korea, China, and the U.S.

(17) Local area network (LAN) module board, comprised of parts from the U.S. and unnamed countries. It is programmed with Taiwanese-origin network firmware (Taiwanese component no. 4) in China.

(18) Miscellaneous items: screws, EMI gaskets, tape (Mylar and 3M), 16-pin wiring, brackets, main board spacers, insulating rubber, Mylar film, and elevator feet.

Modules 1-8 and 10-17 are assembled in China and shipped to Taiwan. The miscellaneous Chinese components described at no. 18 above are also shipped to Taiwan to be assembled with the 16 Chinese modules.

In Taiwan, the imported modules and components are inspected and then assembled into a complete digital projector using the Chinese screws, EMI gaskets, tape (Mylar and 3M), 16-pin wiring, brackets, main board spacers, insulating rubber, Mylar film, and an elevator foot. The projector is then programmed with the power control firmware and system firmware developed in Taiwan, and then subjected to various tests. During the testing stage, the projector is also loaded with Taiwanese-origin EDID firmware, which programs the identification of the projector into the EEPROM on the main board.

ISSUE:

What is the country of origin of the projector for purposes of U.S. government procurement?

LAW AND ANALYSIS:

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.), 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 C.F.R. § 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.

In Data General v. United States, 4 Ct. Int'l Trade 182 (1982), the court determined that for purposes of determining eligibility under item 807.00, Tariff Schedules of the United States (predecessor to subheading 9802.00.80, Harmonized Tariff Schedule of the United States), 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 programming the imported PROMs, the U.S. engineers systematically caused various distinct electronic interconnections to be formed within each integrated circuit. The programming bestowed upon each 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. This physical alteration, not visible to the naked eye, could be discerned by electronic testing of the PROM. The court noted that the programs were designed by a U.S. project engineer with many years of experience in “designing and building hardware.” While replicating the program pattern from a “master” PROM may be a quick one-step process, the development of the pattern and the production of the “master” PROM required much time and expertise. The court noted that it was undisputed that programming altered the character of a PROM. The essence of the article, its interconnections or stored memory, was established by programming. The court concluded that altering the non-functioning circuitry comprising a PROM through technological expertise in order to produce a functioning read only memory device, possessing a desired distinctive circuit pattern, was no less a “substantial transformation” than the manual interconnection of transistors, resistors and diodes upon a circuit board creating a similar pattern.

You argue that Taiwan is the country of origin of the projector because it is the country in which the following actions occur: design and development of the projector, including the main board; addition of the majority of the value (materials and labor); fabrication of many parts, including the data processors (the DMD and DDP2431) that are claimed to be the major functional parts of the projector; development of four of the five firmware files used to operate the projector; programming of the main board with system firmware and programming of the control panel with power control firmware; assembly of the Chinese modules with disparate parts to make a functional projector; and, testing and adjustment of the projector. You point out that 60 percent of the total cost of materials (including accessories and packing material) comes from the United States and TAA designated countries, and that the processing in Taiwan will require 180 steps, including assembly, programming, testing, and packing.

Further, you claim that the Chinese modules are substantially transformed in Taiwan when they are assembled into a projector. As a result of the color wheel module being assembled with the semi-finished optical engine module in Taiwan, the HID arc lamp can be used as a light source and the DMD can be used as a light valve to produce color images. When the lamp ballast is connected to the LVPS, the ballast gains a power source, and when connected to the main board, the lamp can be controlled. Connecting the Chinese main board module to the semi-finished optical engine module, the DMD board, fan modules, and color wheel module allows all the boards attached to the main module to be controlled. The LVPS powers the main board so that the modules attached to it can operate. Finally, assembling the top cover module with the main board module allows the projector to be controlled through the keypad.

You state that factors such as the resources expended on design and development, extent and nature of post-assembly inspection and testing procedure, and worker skill required during the manufacturing process have been considered in determining whether a substantial transformation occurred. In support of your position you cite Headquarters Ruling Letters (HQ) H100055 (May 8, 2010), H034843 (May 5, 2009), and H015324 (April 23, 2008), 559534 (June 4, 1996), among others.

HQ H100055 concerned a motorized lift unit, designed, developed and engineered in Sweden, for an overhead patient lift system. The PCBA was assembled and programmed prior to its importation in Sweden but it was designed in Sweden and its software program was written in Sweden. The unit was then assembled in Sweden, which included the manufacture of the electrical motor. CBP found that the manufacturing and testing operations in Sweden were sufficiently complex and meaningful to transform the individual components into the lift unit, thereby making Sweden the country of origin of the unit. HQ H034843 concerned a USB flash drive partially manufactured in China and in Israel or the United States. CBP concluded that there was a substantial transformation either in Israel or in the United States, depending on the location where the final three manufacturing operations took place. HQ H015324 involved stereoscopic displays assembled in the U.S. from non-U.S. parts. U.S. assembly resulted in a substantial transformation of imported LCD monitors and a beamsplitter mirror.

In this case, the bottom cover module, elevator module, right cover module, I/O cover module, cosmetic module, two fan modules, lamp driver module programmed in China with Chinese firmware, zoom ring module, lamp module, lamp cover module, semi-finished optical engine module, color wheel module, main board module, top cover module, LAN module programmed in China with Taiwanese-origin firmware, and the LVPS module, from China are assembled together in Taiwan with other Chinese components to form a complete projector. After assembly, the projector is programmed in Taiwan with three types of firmware developed in Taiwan. The first, power control firmware, is used to control on/off functions and to retrieve the input/output setting from the last time the projector was turned off. The second, system firmware, controls the functions of the keypad, remote control, USB port, lamp brightness, volume, on-screen display menu, and image processing. The third, EDID firmware, contains basic information about the projector, such as maximum image size, color characteristics, factory pre-set timings, and frequency range limits. We find that the assembly and programming operations performed in Taiwan are sufficiently complex and meaningful so as to create a new article with a new character, name and use. See, for e.g., HQ H034843 and H100055. Moreover, we note that some of the Chinese modules were made using Taiwanese parts. Through the operations undertaken in Taiwan, the individual parts lose their identities and become integral to the new and different article, i.e., the projector. See Belcrest Linens. Accordingly, we find that the country of origin of the projector is Taiwan.

HOLDING:

Based on the facts in this case, we find that the assembly and programming operations performed in Taiwan substantially transform the non-TAA country components of the projector. Therefore, the country of origin of the Model A and Model B projectors is Taiwan for purposes of U.S. government procurement.

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,

Sandra L. Bell, Executive Director,

Regulations and Rulings

Office of International Trade.