OT: RR: CTF: TCM H243924 ALS
Mr. George Rowe
Supply Director
Ascom TEMS
1943 Isaac Newton Square
Reston, Virginia 20190
RE: Country of Origin Marking; Mobile Telephone with Specialized Software; TEMS™ Pocket network testing device; 19 U.S.C. §1304; 19 CFR 134; Modification of HQ H014068
Dear Mr. Rowe:
This letter is a reconsideration of our October 9, 2007 ruling letter, CBP Ruling HQ H014068, to Ericsson, Inc., the previous owner and importer of the TEMS™ Pocket network testing device. Your company is receiving this letter because you and Ericsson have informed us that Ascom now owns the TEMS™ Pocket network testing device, it having been sold to Ascom in 2009. The reconsideration concerns the country of origin marking of the TEMS™ Pocket network testing device.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625 (c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), a notice was published in the CUSTOMS BULLETIN, Vol. 53, No. 12, on April 24, 2019, proposing to revoke CBP Ruling HQ H014068 (October 9, 2007), and revoke any treatment accorded to substantially identical transactions. One comment was received in response to the notice, to which we respond below. Our decision is set forth below.
FACTS:
The facts as stated in H014068 are as follows:
The TEMS Pocket is a commercially available fully functional cellular phone onto which TEMS network testing software has been loaded. According to the information submitted, TEMS software allows a cellular phone to function as a testing tool for telecommunication networks. The TEMS Pocket is used by network engineers to verify, maintain and troubleshoot mobile networks as well as for basic cell planning tasks. Collected data can be stored in the handset for later transfer to a computer. The product literature lists some of the key features of the TEMS Pocket as:
Includes a Sony Ericsson K790i, K790a, K800i or Nokia N80 mobile phone. Measures WCDMA 2100 MHz and GSM/GPRS/EDGE 850/900/1800/19000 MHz. Records logfiles for later post-processing analysis. Generates network event notifications. Clearly presents essential network information on the mobile standby display. Also displays channel information and performance measurements during WAP browsing. Measures EGPRS and WCDMA data performance. Provides cell control options including locking on RAT, locking on cell, channel and band, and modifying cell barred behavior. Supports FTP for networking troubleshooting and logfile transfer. Automates call handling, logfile recording, and transfer to server via FTP. Allows data collection in places that are hard to reach with traditional drive-test tools and methods.
The cellular phone handset is designed in Sweden and is typically assembled in China or Malaysia. The phone incorporates a camera, music and video player, and an FM radio, and can connect to the Internet. After assembly, the handset is shipped to Sweden where the TEMS software is loaded on to it and tested. According to Ericsson, the TEMS software adds approximately $2500 worth of value to the phone. A sample of the TEMS Pocket has been provided for our review.
During our teleconference, Ericsson informed CBP that the TEMS Pocket connects to a cellular network as an ordinary phone and that this is the only way in which it can connect to the network to be tested. When the phone is turned on, technical information concerning the network is immediately displayed. CBP was also informed that some of the displayed information is calculated aggregated data. For example, information concerning signal strength for a particular channel is shown as a ratio of signal strength to interference. In order to use the TEMS Pocket as a cellular phone, the TEMS software has to be manually disabled.
According to the product literature, the TEMS Pocket has several data presentation views. Combined views display information valid for all radio access technology. For example, the PDP context view displays PDP addresses and PDP context settings for each address, including the NSAPI and APN. The WCDMA views display cell and network identity along with Universal Terrestrial Radio Access (UTRA) carrier RSSI (Received Signal Strength Indication). For example, the WDCMA Cells view displays UARFCN, cell status, scrambling code, RSCP, Ec/No and path loss for each cell in active set and serving/monitored cells. The GSM/GPRS views contain serving cell ARFCN, BSIC and RxLev, and cell and network identity in addition to other information listed in the literature. In addition, the TEMS Pocket has several functions that allow the user to control the operation of the phone. According to the literature, these functions are essential for troubleshooting and verification in the field. From the Cell Control menu the user can select multiple actions such as: - Lock to RAT (Off/WCDMA/GSM)
- Lock Cell WCDMA (Off/Set UARFCN/SC)
- Lock ARFCN GSM (Off/Set ARFCN)
- Lock to Band GSM (Off/850/900/1800/1900)
- Ignore cell barred (Off/On)
- Reset control settings to default off state
The TEMS Pocket is imported packaged together with a memory stick, battery and charger, USB cable, lanyard, hands free headset and software user guides.
In addition to the facts noted above, you have confirmed that the TEMS Pocket software was developed in Sweden.
ISSUE:
What is the country of origin of the TEMS™ Pocket network testing device for the purpose of marking in accordance with 19 U.S.C. §1304 and 19 CFR 134?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting section 1304 was that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of origin of the goods. "The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, Customs and Border Protection (CBP) Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304. Section 134.1(b), CBP Regulations (19 CFR 134.1(b)), defines "country of origin" as "the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the ‘country of origin’ within the meaning of [the marking laws and regulations]."
For country of origin marking purposes, a substantial transformation of an article occurs when it is used in manufacture, which results in an article having a name, character, or use differing from that of the article before the processing. However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
In Texas Instruments v. United States, 681 F.2d 778, 782 (CCPA 1982), the court observed that the substantial transformation issue is a “mixed question of technology and customs law.” In C.S.D. 84-85, 18 Cust. B. & Dec. 1044, CBP stated:
We are of the opinion that the rationale of the court in the Data General case may be applied in the present case to support the principle that the essence of an integrated circuit memory storage device is established by programming;… [W]e are of the opinion that the programming (or reprogramming) of an EPROM results in a new and different article of commerce which would be considered to be a product of the country where the programming or reprogramming takes place.
In Data General v. United States, 4 CIT 182 (1982), the court determined for purposes of determining eligibility under item 807.00, Tariff Schedules of the United States, the predecessor to subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), 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. Accordingly, the programming of a device that defines its use generally constitutes substantial transformation.
As we stated in H014068, citing CBP Ruling HQ 968000 (February, 14, 2006),
...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, or 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; however, no one factor is determinative.
Upon further review in consideration of all the circumstances of manufacture, we find that the installation of Swedish-developed TEMS software in Sweden into the pre-existing mobile telephones that were assembled in China or Malaysia did not substantially transform the use and function of the mobile telephones. Despite the fact that the TEMS software was developed in Sweden and subsequently installed into the mobile telephones in Sweden, the mobile telephones were manufactured in China or Malaysia and became identifiable as such in China or Malaysia. In fact, the mobile telephones were identifiable by their commercial names, Nokia N80 and Ericsson K790i, K790a, and K800i, upon assembly in China or Malaysia and before the TEMS software was installed. Furthermore, the development of the TEMS software in Sweden had no bearing on the manufacturing of the subject articles as mobile telephones.
The initial function of the subject mobile devices remains intact and is only enhanced, not changed, to produce additional functions. The article in Data General, however, was substantially transformed from a non-programmed individual integrated circuit to a programmed integrated circuit with discrete and immutable functionality. In essence, the article in Data General did not become a programmed integrated circuit until it was transformed into such in the United States. It is only at that point when the article’s use became defined, unlike the TEMS Pocket, whose use became defined upon its manufacture into a mobile telephone before the TEMS software was installed.
The above-noted comment argues that the loading of the TEMS software onto to the mobile telephones is a substantial transformation. The commenter specifically argues that the TEMS software changed the mobile telephones from cellular phones to network testing devices, which the change in tariff classification represents. The commenter also argues that the necessity to manually disable the TEMS software before making a telephone call with a TEMS Pocket suggests that the TEMS Pocket is no longer a mobile telephone. We disagree for the reasons put forth above. The TEMS software indeed provides the subject merchandise with its principal function per Note 3 to Section XVI, HTSUS. That the software is permanently added to the device and that is must be manually disabled before any other application can be used (i.e. before the product can be used as a mobile phone) is why the functionality was considered in determining its classification. This differs from other mobile phones, which by their nature feature applications that run simultaneously and be uploaded or deleted by the user, and thus are classified without consideration being given to their principal function. However, the change in classification in this case does not result in a new article from the perspective of assessing whether the programming effects a substantial transportation.
In CBP Ruling HQ H284523 (August 22, 2017), CBP ruled that specialized software downloaded to a tablet computer to allow the computer to collect health data did not substantially transform the tablet computer. The downloaded software disabled other applications that would typically be used on the tablet computer. In the ruling, CBP made the following conclusion:
It is clear that loading the specialized software onto the tablet computer that remains fully functional as a computer would be insufficient to constitute a new and different article of commerce, since all of the functionality of the original computer would be retained. In this case, however, in addition to the addition of the software, we are being asked to consider the effect of disabling the general applications that have been programmed onto the tablet. In our judgment, this added factor does not cause or require a different result. The functions of the original tablet produced in Vietnam that are necessary to receive and transmit data are in essence still present on the modified tablet, as aided by the software. While the tablet is no longer a freely programmable machine, we find the imposition of this limitation is insufficient to constitute a substantial transformation of the imported tablets.
Thus, because the TEMS software application constitutes an additional, albeit principal, function and not the device’s singular function, its programming does not substantially transform the mobile phone imported into Sweden. Incidentally, in a case similar to HQ H284523, also involving health care data software downloaded to a tablet computer, CBP noted that “the issue decided in [another case cited by the ruling requester] was a question of tariff classification, not substantial transformation, and is therefore, not applicable [with regard to the country of origin determination].” See CBP Ruling HQ H284617 (February 21, 2018).
Given the foregoing, we find that the installation of the Swedish-developed TEMS software onto existing functioning mobile telephones represents an enhancement of the mobile telephones’ functionality that does not substantially transform the mobile telephones into an article having a name, character, or use differing from that of the article before the software installation. Simply put, the subject articles are manufactured into mobile telephones before the software was installed in Sweden and irrespective of the software’s development in Sweden, and they remained mobile telephones after the TEMS software was installed, albeit with more functionality. Therefore, the country of origin of the TEMS Pocket™ is China or Malaysia or any other country of manufacture where an article recognizable as a mobile telephone is created.
HOLDING:
The country of origin of the TEMS Pocket™ is, in accordance with 19 U.S.C. §1304 and 19 CFR 134, China or Malaysia or any other country of manufacture where an article recognizable as a mobile telephone is created.
EFFECT ON OTHER RULINGS:
CBP Ruling HQ H014068 (October 7, 2007) is hereby MODIFIED only with respect to the country of origin issue.
In accordance with 19 U.S.C. §1625(c), this ruling will become effective 60 days after publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division