04-6290. Notice of Issuance of Final Determination Concerning Multi-Function Printers

AGENCY:

Customs and Border Protection, Department of Homeland Security.

ACTION:

Notice of final determination.

SUMMARY:

This document provides notice that the Bureau of Customs and Border Protection (CBP) has issued a final determination concerning the country of origin of certain multi-function printers to be offered to the United States Government under an undesignated government procurement contract. The final determination found that based upon the facts presented, the country of origin of the Canon iRC3200 multi-function printer is Japan.

DATES:

The final determination was issued on March 17, 2004. 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 within 30 days of March 23, 2004.

FOR FURTHER INFORMATION CONTACT:

Edward Caldwell, Special Classification and Marking Branch, Office of Regulations and Rulings (202-572-8836).

SUPPLEMENTARY INFORMATION:

Notice is hereby given that on March 17, 2004, pursuant to subpart B of part 177, Customs Regulations (19 CFR part 177, subpart B), CBP issued a final determination concerning the country of origin of certain multi-function printers to be offered to the United States Government under an undesignated government procurement contract. The CBP ruling number is HQ 562936. This final determination was issued at the request of Canon, Inc., 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).

The final determination concluded that, based upon the facts presented, the assembly in Japan of various Japanese- and Chinese-origin parts to create Canon iRC3200 multi-function printers substantially transformed the Chinese-origin components into a product of Japan.

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

Dated: March 17, 2004.

Sandra L. Bell,

Acting Assistant Commissioner, Office of Regulations and Rulings.

Attachment

MAR-2-05 RR:CR:SM 562936 EAC

Category: Marking

Mr. Harvey M. Applebaum, Esq.

Mr. David R. Grace, Esq.

Mr. Mark E. Feldman, Esq.,

Covington & Burling, 1201 Pennsylvania Avenue, NW., Washington, DC 20004-2401.

Re: U.S. Government Procurement; Final Determination; country of origin of multi-function printers; substantial transformation; 19 CFR part 177

Dear Messrs. Applebaum, Grace, and Feldman: This is in response to your letter dated December 22, 2003, 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. 2411 et seq.), U.S. Customs and Border Protection (“CBP”) issues country of origin advisory rulings and final determinations on 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 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 the Canon “iRC3200” multi-function printer that is assembled in Japan and which Canon intends to sell to the U.S. Government through its Canon U.S.A. affiliate. We note that Canon is a party-at-interest within the meaning of 19 CFR 177.22(d)(2), and is entitled to request this final determination.

Facts

Canon has requested this final determination in order to determine the country of origin of the Canon iRC3200 multi-function printer that is capable of performing printing, copying, scanning, and facsimile functions. The printer is comprised of four main subassemblies that have been identified as the printer unit, reader scanner unit, color infrared (“iR”) controller unit, and control panel unit. The printer unit itself consists of four smaller subassemblies identified as the laser scanner unit, printer unit without laser scanner (“PWS”), drum unit, and toner cartridge. You state that the printer unit, assembled in Japan, performs the electrophotographic process which is described as the most essential task undertaken by the printer. You further state that the laser scanner unit is perhaps the most complex component of the printer and that its production requires the application of advanced manufacturing technologies.

It is our understanding that during the aforementioned electrophotographic process, a permanent photocopied image is placed onto a sheet of paper through the steps of exposure, development, transfer, and fixing. In describing the electrophotographic process, you state that during the first and most significant step, exposure, a computer image signal is converted into a laser drive signal which must be calibrated to cast a laser beam precisely onto a photosensitive drum. Following exposure, toner is electrostatically attracted to a latent image located on the surface of the photosensitive drum. The toner develops the latent image into a visible image that is thereafter permanently affixed to printing paper by a fixing unit which is comprised of a heater, fixing film unit, and roller.

The laser scanner unit performs the exposure function that is, in your opinion, the most important and precise element of the electrophotographic process. The laser scanner unit is manufactured within Japan from parts that are predominantly of Japanese origin. With respect to the origin of the other components that form the printer unit, you state that the toner cartridge (which supplies toner to the printer unit) and drum unit (which performs the development processes) are manufactured within Japan from parts of Japanese origin. The PWS unit, on the other hand, is assembled in China. However, the intermediate transfer belt, which is described as the key component of the PWS unit, is manufactured in Japan. The intermediate transfer belt transforms four color images, which are created by four drum units, into a fully integrated color image that is transferred onto print paper.

The second major subassembly of the printer, the reader scanner unit, functions as the “reader” unit of the printer by storing information onto a hard disk that is controlled by the color iR controller unit. The reader scanner unit is assembled within China. However, components that you describe as the key parts of the unit, such as the Charge Coupled Devide (“CCD”), lens unit, and xenon lamp, are manufactured in Japan. In regards to the purpose of each of these components, the xenon lamp radiates light onto a document, the lens unit focuses the light reflected from the document onto the sensor portion of the CCD, and the CCD converts the light signal into an electrical signal.

The third major component of the printer, the color iR controller unit, including the software embedded in the unit, is manufactured within Japan. The color iR controller unit integrates the local area network and executes multiple tasks (such as copying, printing, and scanning) efficiently on the network. You state that the cost incurred by Canon in researching and developing the color iR controller unit is substantial. The color iR controller unit consists of three main subassemblies: the MEDOC, which enables the simultaneous performance of multiple tasks; the GRAVES, which performs image processing functions; and the SURF, which allocates the burden of processing printing data between the computer and the printer.

The fourth major component of the printer is the control panel unit. The control panel unit is assembled in China. However, the color Liquid Crystal Display (“LCD”), which is described as the key component of the control panel unit, is manufactured in Japan. The LCD is part of the printer's “touch panel” that indicates the operational status of the printer.

As stated above, the printer's major subassemblies are assembled within Japan to form a completed Canon iRC3200 printer. A description of the processes undertaken to assemble a printer to completion, as set forth in a facsimile transmitted to our office on January 27, 2004, follows.

A. The Printer Unit

1. Laser Scanner Unit Assembly

An operator assembles a laser chip terminal onto a laser unit printed circuit board (“PCB”) and adjusts the power of the laser beam. Then an operator attaches a collimator lens to the laser unit PCB after which the operator measures the focus of the laser spot and checks the exterior of the laser unit. A series of component parts are then attached to the optical case. Such component parts have been identified as the lens supporting board unit, auto registration motor, anamorphosis lens, motor unit, Beam Detect (“BM”) sensor unit, laser unit, reflection unit, cylindrical lens, long deflective element mirror, and BD mirror. After attaching the components to the optical case, the operator adjusts the focus of the cylindrical lens, position of sub scanning, position of BD mirror, power of laser beam, and jitter. A cover is thereafter attached and the image patterns and laser scanner unit exterior are inspected.

2. Printer Unit Without Laser Scanner (“PWS”) Assembly

Various plates, mounts, rails, guides, stays, shafts, and covers are assembled in order to complete the mechanical frames of the printer unit and constitute the first assembly steps of the PWS. Thereafter, the following components are assembled to the frames: toner cartridge drive assembly, drum drive assembly, developing drive assembly, intermediate transfer belt drive assembly, fixing drive assembly, four laser scanner units, pick-up motor drive unit, paper pick-up unit, duplex driver PCB, color iR controller unit, intermediate transfer belt unit, duplex units, and fixing feeder unit. After attaching these various items, an operator uses cables to connect the components. The alignment of the rollers, intermediate transfer belt unit, laser beam angle, magnification, and starting point of laser scanning is adjusted. An operator then makes adjustments to the laser power, facsimile power, heaters, fans, and toner cartridge motor. Toner cartridges and drum units are subsequently inserted into the frame. An operator temporarily connects the reader scanner unit to the printer unit to check the image. Components used only for testing purposes, such as the four laser scanner units, color iR controller unit, drum units, and toner cartridges, are then removed from the printer and the PWS is packed for shipment.

3. Drum Unit Assembly

In order to complete the drum unit, an operator assembles numerous components, such as a photosensitive drum, primary changing roller, developing assembly, and developing cylinder. An operator uniformly coats the drum unit with photosensitive materials during assembly. Thereafter, the mechanical precision of the drum unit is inspected and the unit is packaged.

4. Toner Cartridge

Items such as toner cartridge units, toner cartridge holders, insert labels, logo labels, color labels, and side pads are assembled to complete the toner cartridge. An operator thereafter inspects the item and packs the toner cartridge.

B. Color iR Controller Unit

In order to assemble the color iR controller unit, an operator first combines the controller main PCB with the controller sub-PCB. Multiple components are then attached to the combined PCBs, including items such as a static random access memory PCB, boot read only memory, synchronous random access memory, fan, dust filter, and hard disk. The various components are subsequently connected with cables. An operator then inserts a power supply cable into the hard disk and distribution units. The assembled color iR controller unit is thereafter inspected.

C. Reader Scanner Unit

In order to build the reader scanner unit, an operator begins by assembling a number of components such as a CCD, lens unit, xenon lamp, interface PCB, lamp regulator PCB, reader controller PCB, and sensor assembly. After connecting the components with cables, an operator adjusts the mechanical alignment of certain items that form the unit. Examples of such adjustments include modifying the position of the mirror assembly and the tension of belts and wires that move optical components, such as the CCD and mirror assembly. An operator then tests the functionality of the item's communication and paper size detection capabilities, the accuracy of input data, the starting point of scanning, and image signals. Upon successful completion of these tests, the reader scanner unit is packaged for shipment.

D. Control Panel Unit

An operator assembles items such as a control panel key PCB, key tops, and LCD in order to produce a control panel unit. The various items are connected with cables. Thereafter, the operator inspects and packages the unit for shipment.

E. Final Assembly

Using screws, an operator attaches four laser scanner units (yellow, magenta, cyan, and black) as well as a color iR controller unit to the PWS. An operator subsequently initializes the random access memory of the color iR controller unit and calibrates the angle of the laser beam, magnification performance, and the starting point of laser scanning. An operator then tests the laser's power and application communication within the printer unit. Drum units and toner cartridges are attached for testing. Thereafter, the starting point of sub-scanning, the blank spaces of right and left in the test print image, and the roller pressure of the fixing rollers are adjusted. The motors and sensors are tested and paper size data is registered. Next, the reader scanner and document feeder units are attached to the printer unit. Screws are utilized to attach covers to the printer and the exterior of the unit is inspected.

Upon completion of the aforementioned assembly procedures, an operator inspects the functionality of the assembled Canon iRC3200 printer. The level of precision of the assembled unit is further tested by printing test patterns and evaluating the images thereby produced. Upon successful completion of the final inspections, the completed iRC3200 is packaged and prepared for shipment.

Issue

Whether the assembled Canon iRC3200 printers are considered to be products of Japan for purposes of U.S. Government procurement.

Law and Analysis

Under 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 on 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 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. Unites States, 573 F. Supp. 1149 (CIT 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. 85-118, C.S.D. 90-51, and C.S.D. 90-97. In C.S.D. 85-25, 19 Cust. Bull. 844 (1985), we held that for purposes of the Generalized System of Preferences, 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 results 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.

CBP has also previously considered, in a number of cases, whether components imported into a country for assembly into printers and other related items have been substantially transformed as a result of such processing. For example, in Headquarters Ruling Letter (“HRL”) 562495 dated November 13, 2002, color ink jet printers were assembled within Singapore from components obtained from Malaysia and a number of other countries. The assembly procedures undertaken in Singapore were described as follows:

1. Circuit board assembly for the input/output unit, left side, assembled to the chassis;

2. Power controller printed circuit board assembly assembled to the chassis;

3. Preheating thermal drum inserted into the chassis;

4. Paper path motor assembled to the chassis;

5. Stepper assembly motor assembly, with gear, assembled to the chassis;

6. Control panel cover assembly (user interface) assembled to the chassis;

7. High voltage power supply assembled to the chassis;

8. Input/output circuit assembly board, right, assembled to the chassis;

9. “Barracuda” print head assembly assembled to the chassis;

10. Purge control module assembled to the chassis;

11. Ink load assembly assembled to the chassis;

12. Electronic subsystem (ESS) controller board assembled to the chassis; and,

13. Front cover assembly assembled to the chassis.

Upon completion of the foregoing procedures, the assembled printers were subjected to high voltage electrical testing, inspected, packaged, and prepared for export to the United States.

After considering the totality of the circumstances in HRL 562495, we held that the various imported components were substantially transformed within Singapore and that the assembled printers were required to be marked as products of that country upon entry into the United States. In support of this determination, we noted that the processing operations that occurred within Singapore were complex and extensive, required the integration of 13 major subassemblies to the chassis, and that the resulting product was a new and distinct article of commerce that possessed a new name, character, and use.

Prior to the case cited above, CBP ruled in HRL 561734 dated March 22, 2001, 66 Fed. Reg. 17222, that Sharp multifunctional machines (printer, copier and fax machines) assembled in Japan were a product of Japan for purposes of government procurement. The machines in that case were comprised of 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. It was further noted that the scanner unit (one of the eight subassemblies assembled in Japan) was characterized as “the heart of the machine.” See also, HRL 561568 dated March 22, 2001, 66 FR 17222.

In HRL 734050 dated June 17, 1991, on the other hand, we determined that the operations performed in China to assemble printers did not substantially transform the Japanese components utilized in those printers. The printers in that case were assembled within China from five main components identified as the “head”, “mechanism”, “circuit”, “power source”, and “outer case.” The circuit, power source and outer case units were entirely assembled or molded in Japan. The head and mechanical units were manufactured in Japan but exported to China in an unassembled state. All five units were exported to China where the head and mechanical units were assembled with screws and screwdrivers. Thereafter, the head, mechanism, circuit, and power source units were mounted onto the outer case, also with screws and screwdrivers. It was stated that the value of the Japanese-origin components utilized in the printers far exceeded that of the Chinese-origin components. Based upon the foregoing facts, we held that, even though the printers were assembled to completion in China, the country of origin of the completed printers for marking purposes was Japan. In making this determination, we noted that the vast majority of the printer's parts were of Japanese origin and that the operations performed in China were only simple assembly operations.

As the cases set forth above demonstrate, in order to determine whether a substantial transformation occurs when components of various origins are assembled to form completed printers, CBP considers the totality of the circumstances and makes such decisions on a case-by-case basis. The country of origin of the printer's components, extent of the processing that occurs within a given country, and whether such processing renders a product with a new name, character, or use are primary considerations in such cases. Additionally, facts such as resources expended on product design and development, extent and nature of post-assembly inspection procedures, and worker skill required during the actual manufacturing process will be considered when analyzing whether a substantial transformation has occurred; however, no one such factor is determinative.

As applied to the facts of this case, we find that the assembled Canon iRC3200 multi-function printer is a product of Japan for purposes of U.S. Government procurement. In making this determination, we note that a substantial portion of the printer's individual components and subassemblies are of Japanese origin. You have described a number of these individual components and subassemblies as the “most complex”, “key”, and “essential” of the printer. In this regard, we recognize that, in addition to the Japanese subassemblies, certain critical Japanese-origin parts are incorporated into the Chinese subassemblies, namely the reader scanner unit and the control panel unit. Furthermore, we find that the processing that occurs in Japan is complex and meaningful, requires the assembly of a large number of components, and renders a new and distinct article of commerce that possesses a new name, character, and use.

Holding

Based upon the facts of this case, we find that the processing in Japan substantially transforms the components of Chinese origin. Therefore, the country of origin of the Canon iRC3200 printer 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. 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,

Acting Assistant Commissioner, Office of Regulations and Rulings.