03-17823. IBM Corporation, Global Services Division, Piscataway, NJ, and IBM Corporation, Global Services Division, Middletown, NJ; Notice of Negative Determination Regarding Application for Reconsideration

By application of April 29, 2003, a petitioner requested administrative reconsideration of the Department's negative determination regarding eligibility for workers and former workers of the subject firm to apply for Trade Adjustment Assistance (TAA). The denial notice applicable to workers of IBM Corporation, Global Services Division, Piscataway and Middletown, New Jersey was signed on March 26, 2003, and published in the Federal Register on April 7, 2003 (68 FR 16834).

Pursuant to 29 CFR 90.18(c) reconsideration may be granted under the following circumstances:

(1) If it appears on the basis of facts not previously considered that the determination complained of was erroneous;

(2) if it appears that the determination complained of was based on a mistake in the determination of facts not previously considered; or

(3) if in the opinion of the Certifying Officer, a misinterpretation of facts or of the law justified reconsideration of the decision.

The TAA petition was filed on behalf of workers at IBM Corporation, Global Services Division, Piscataway and Middletown, New Jersey engaged in analysis and maintenance of computer software and information systems. The petition was denied because the petitioning workers did not produce an article within the meaning of section 222 of the Act.

The petitioner asserts that the negative decision for the petitioning worker group came as a result of an overly narrow and antiquated interpretation of production as stipulated in the Trade Act. The petitioner also asserts that software is different from services in that one does not need a software “worker” to operate software.

Software and information systems are not listed on the Harmonized Tariff Schedule of the United States (HTSUS), published by the United States International Trade Commission (USITC), Office of Tariff Affairs and Trade Agreements, which describes all “articles” imported to or exported from the United States. This codification represents an international standard maintained by most industrialized countries as established by the International Convention on the Harmonized Commodity Description and Coding (also known as the HS Convention).

The Trade Adjustment Assistance (TAA) program was established to help workers who produce articles and who lose their jobs as a result of increases in imports of articles like or directly competitive with those produced at the workers' firm.

Throughout the Trade Act an article is often referenced as something that can be subject to a duty. To be subject to a duty on a tariff schedule, an article will have a value that makes it marketable, fungible and interchangeable for commercial purposes. But, although a wide variety of tangible products are described as articles and characterized as dutiable in the HTSUS, software and associated information technology services are not listed in the HTSUS. Such products are not the type of employment work products that Customs officials inspect and that the TAA program was generally designed to address.

A National Import Specialist was contacted at the U.S. Customs Service to address whether software could be described as an import commodity. The Import Specialist confirmed that electronically transferred material is not a tangible commodity for U.S. Customs purposes. In cases where software is encoded on a medium (such as a CD Rom or floppy diskette), the software is given no import value, but rather evaluated exclusively on the value of the carrier medium. This standard is based on Treasury Decision 85-124 as issued on July 8, 1985 by the U.S. Customs Service. In conclusion, this decision states that “in determining the customs value of imported carrier media bearing data or instructions, only the cost or value of the carrier medium itself shall be taken into account. The customs value shall not, therefore, include the cost or value of the data or instructions, provided that this is distinguished from the cost or the value of the carrier medium.”

Finally, the North American Industry Classification System (NAICS), published by the U.S. Department of Commerce, designates all manner of custom software applications and software systems, including analysis, development, programming, and integration as “Services” (see NAICS #541511 and #541512.)

Only in very limited instances are service workers certified for TAA, namely the worker separations must be caused by a reduced demand for their services from a parent or controlling firm or subdivision whose workers produce an article and who are currently under certification for TAA.

Conclusion

After review of the application and investigative findings, I conclude that there has been no error or misinterpretation of the law or of the facts which would justify reconsideration of the Department of Labor's prior decision. Accordingly, the application is denied.

Signed at Washington, DC, this 26th day of June, 2003.

Elliott S. Kushner,

Certifying Officer, Division of Trade Adjustment Assistance.