MAR-2-05 CO:R:C:V 733085 RSD
Harold Loring, Esq.
Grunfeld, Desiderio, Lebowitz & Silverman
12 East 49th Street
New York, New York 10017
RE: Country of origin marking of programmed SecurID Cards for
computer systems
Dear Mr. Loring:
This is in response to your letter of January 17, 1990,
requesting a ruling on the country of origin marking requirements
for security identification cards for computer systems programmed
in the United States.
FACTS:
Your client, Security Dynamics, Inc., produces and sells
various security systems for computers in the United States.
The security system furnished by Security Dynamics consists of
SecurID Card(s) and an access control module (ACM). The ACM is
either hardware placed in front of a protected host computer or
software operating in the computer. The SecurID Card is a user
identification and authentication card which, in conjunction with
the ACM, provides security access to mainframe computers.
The SecurID Card consists of a credit card-size package with
a steel backing, and vinyl cover. The major components inside
the card are a liquid crystal display (LCD), battery, chip and a
printed circuit board. The components in the SecurID Card are
essentially the same as any credit card-size calculator. You
indicate that the device, as imported by Security Dynamics, could
be programmed to operate as a calculator.
Following importation, the card and ACM are programmed with
a unique seed number and a sophisticated time synchronization
algorithm. Each authorized user of the secured computer system
is assigned a SecurID Card whose seed, when combined with the
algorithm generates a 4-8 digit code number which randomly
changes every 30 or 60 seconds and is displayed on the card's LCD
display panel. Each authorized user is also assigned a secret
personal identification number (PIN). The PIN number and the
seed associated with that PIN are programmed both into the card
and ACM in such a way that the number on the computer is always
synchronized with the number as it changes on the card. When a
user logs onto his computer, the ACM software prompts the user to
enter the PIN and the random number then showing the card's LCD
display panel. If the ACM software makes a valid match between
the card's number and the PIN number, the user is then authorized
access into the computer.
The programming process is accomplished in the U.S. by
permanently entering into the card certain substantial
proprietary and U.S.-patented machine language binary
information. The programming is performed by Security Dynamics
at a computer workstation with the aforementioned proprietary
software and a mechanized robot for imputing the binary code
into the card. The binary machine language information entered
into the card cannot be modified or reentered once programmed.
This information converts the calculator like components into a
permanently dedicated part of the security system.
The programming process is possible as the result of
millions of dollars of proprietary research, proprietary clock,
synchronization technology and patented security identification
and authentication technology. In an exhibit contained in your
submission, you indicate that the imported cost of SecurID Card
is about $6.88. However, the programming results in the average
retail price for the SecurID Card of between $46 and $110.
Security Dynamics also intends to put a return mailing
address on the SecurID Card, in order that a finder of a lost
card would be able to know where to return it.
The importer submitted a statement indicating that it
purchases the SecurID Cards directly from the manufacturer in
Hong Kong. It further states that it is always aware of the
country of origin and that there are no middlemen involved in the
transaction.
ISSUES:
Does the programming of the SecurID Card in the U. S.
constitute a substantial transformation?
Does placing a return mailing address trigger the
requirements of 19 CFR 134.36(b) and 19 CFR 134.46?
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 U.S. shall be marked in a
conspicuous place as legibly, indelibly, and permanently as the
nature of the article (or its container) will permit, in such a
manner as to indicate to the ultimate purchaser in the U.S. the
English name of the country of origin of the article.
Congressional intent in enacting 19 U.S.C. 1304 was "that the
ultimate purchaser should be able to know by an inspection of the
marking on the imported goods the country of which the goods is
the product. 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; C.A.D. 104 (1940).
Part 134, Customs Regulations (19 CFR Part 134), implements
the country of origin marking requirements and the exceptions of
19 U.S.C. 1304. Section 134.1(b), Customs 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 U.S. 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. The case of U.S. v. Gibson-Thomsen Co., Inc., 27
C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in
manufacture which results in an article having a name, character
or use differing from that of the constituent article will be
considered substantially transformed. In such circumstances the
U.S. manufacturer is the ultimate purchaser. The imported article
is excepted from individual marking and only the outermost
container is required to be marked. (see 19 CFR 134.35).
In determining whether there is a substantial
transformation, it is necessary to analyze whether programming
the SecurId Cards changes their name, character, or use.
In HQ 732087 ( February 7, 1990) we ruled that a blank computer
diskette is substantially transformed by having a program
"written" onto it and the party performing the programming is
considered the ultimate purchaser of the blank diskette for
country of origin marking purposes. We noted that the character
of the diskette had changed from one of a blank storage medium to
one with a predetermined electronic pattern encoded onto it. The
use of the diskette had changed from that of an unreadable,
therefore meaningless, article of software, to that of an encoded
instruction guide to enable a computer to perform various
commands.
In Data General v. United States, 4 C.I.T. 182 (1982), the
Court found that for purposes of determining eligibility under
item 807.00, Tariff Schedules of the United States, the
programming of a foreign PROM substantially transforms the PROM
into a U.S. article. The court noted that it is undisputed that
programming alters the character of a PROM. Programming changes
the pattern of interconnections within the PROM. A distinct
physical change is 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, may be
discerned by electronic testing of the PROM. The essence of the
article, its interconnections or stored memory, is established by
programming. The court concluded that altering the non-
functioning circuitry of an integrated circuit comprising a PROM
through technological expertise in order to produce a functioning
read only memory device possessing a desired distinctive circuit
pattern, is no less a "substantial transformation" than the
manual interconnection of transistors, resistors and diodes upon
a circuit board creating a similar pattern.
In this case, we find that programming done in the U.S. by
Security Dynamics changes the name, character and use of the
SecurID Cards. It can only really be called a SecurID Card
after it is programmed. Before programming, the card has a LCD,
battery, chip, and printed circuit board; but it is essentially
useless. The function of the SecurID Cards is to generate a
random code that is compatible with a code on the computer
security system. This allows the user to enter the code so that
he can gain access to the computer system. SecurID Cards will
not function with the computer security system unless they are
properly programmed. The programming of the card gives it is
character so that it can function as part of a computer security
system. The programming also makes a permanent change in the
card that cannot be undone. We also note that programming
greatly increases the value of the SecurID Cards from an imported
cost of about $6.88 to a retail price between $46 and $110.
Accordingly, we find that since the programming is so integral to
proper functioning of the SecurID Cards, it creates a new and
different article of commerce and it results in a substantial
transformation. Therefore, under 19 CFR 134.35, Security
Dynamics is considered the ultimate purchaser and the articles
are excepted from country of origin marking.
Security Dynamics also seeks to put a return mailing address
on each SecurID Card so in case it is lost, a finder can return
the lost card to Security Dynamics. The proposed marking is:
IF FOUND RETURN TO:
SECURITY DYNAMICS:
ONE ALEWIFE CENTER, CAMBRIDGE MA 02140 USA
The question to be addressed is whether the exception from
marking is precluded because of the U.S. address appearing on the
imported cards. Section 134.36(b), Customs Regulations (19
CFR 134.36(b)), provides that an exception from marking shall not
apply to any article or retail container bearing any words,
letters, names, or symbols described in 19 CFR 134.46 or 134.47
which imply that an article was made or produced in a country
other than the actual country of origin. In HQ 732329 (July 12,
1989), we indicated that a U.S. address printed on a warranty
card would not trigger the requirements of 19 CFR 134.46, so long
as the U.S. address appeared for the purpose of giving the
warranty holder a place to direct questions and problems related
to the warranty. This was because the ultimate purchaser would
understand that the address related to a warranty and would not
confuse the ultimate purchaser as to the country of origin. In
this case, the U.S. address is only on the article for purpose of
allowing a finder of a lost SecurID Card to know where to return
it. The U.S. address should not confuse the ultimate purchaser
as to the country of origin. Therefore, we find that neither the
requirements of 19 CFR 134.36(b) nor 19 CFR 134.46 are triggered.
Finally, the importer has indicated that it knows that the
country of origin of the cards is Hong Kong because it deals
directly with the Hong Kong manufacturer and that there are no
middlemen. The importer also indicates that this is the only
overseas source of cards for the company. Section 304(a)3)(H) of
the Tariff Act of 1930, as amended (19 U.S.C. 1304 (a)(3)(H)) as
implemented by section 134.32(h), Customs Regulations, (19 CFR
134.32(h)), excepts from marking articles for which the ultimate
purchaser must necessarily know the country of origin by reason
of the circumstances of their importation or by reason of the
character of the articles even though they are not marked to
indicate their origin. The containers of such articles are also
excepted from country of origin marking under 19 CFR 134.22(d).
Because the importer deals directly with the Hong Kong
manufacturer, we find that the importer necessarily knows by the
circumstances of the importation that the country of origin of
the SecurID Cards is Hong Kong and therefore the articles and
their containers are excepted from marking under 19 CFR 134.32(h)
and 19 CFR 134.22(d).
HOLDING:
The programming of the SecurID Card results in a substantial
transformation. Therefore,the U.S. importer/manufacturer is the
ultimate purchaser of the imported cards.
A return mailing address for lost SecurID Cards on the cards
does not trigger the requirements of 19 CFR 134.46.
If the district director at the port of entry is satisfied
that the imported cards will used only in the manner set forth
above, the cards and their containers do not have to be marked
because the ultimate purchaser necessarily knows the country of
origin of the SecurID Cards by the circumstances of the
importation.
Sincerely,
Marvin M. Amernick
Chief, Value, Special Programs
and Admissibility Branch