OT:RR:CTF:VS RSD H311606
Damon V. Pike, Esq.
BDO 1601 Forum Place, 9th Floor Centurion Plaza West Palm Beach, FL 33401
RE: Country of Origin of the Wacom Cintiq Pro 16 Drawing Tablet; Section 301 Measures
Dear Mr. Pike:
This is in response to your correspondence, dated June 11, 2020, on behalf of your client, Wacom Technology Corporation, (“WTC”). In your letter, you have requested a ruling pursuant to 19 C.F.R. Part 177 regarding the country of origin of the Wacom Cintiq Pro 16 drawing tablet.
FACTS:
The merchandise under consideration is identified as the Wacom Cintiq 16 with Pro Pen 2 (Cintiq 16). The Cintiq 16 is a device known as a drawing tablet, and it is described as a multifunctional device that has a liquid crystal display (LCD) with a touch screen that operates in conjunction with automatic data processing (ADP) machines. Therefore, the Cintiq 16 does not operate as a stand-alone unit. The user of the Cintiq 16 can make professional drawings and images, such as animations and industrial designs, and is able to draw directly onto the LCD screen by using a specialized stylus, a pen-like drawing apparatus stylus. The Cintiq 16 only functions as a drawing tablet and does not perform any other operations. The product is comprised of an LCD display module, front and back cover assemblies, and various printed circuit board assemblies (PCBAs). When it is sold to the consumer, the Cintiq16 is retail packaged with a power adapter, specialized cables, and the stylus pen.
The Cintiq 16 contains technology that allows the tablet to capture each pen stroke pressure, and permits the tablet to tilt digitally to replicate the use of a pencil, paintbrush, etc. The stylus pen imported with the Cintiq 16 interacts with the tablet’s pressure-sensitive features to let the user determine how thick or thin a line should be by instantly capturing handwritten notations. The tablet wirelessly interacts with the stylus pen by plotting its location in microseconds as it makes the user’s edits onto the screen.
Once the Cintiq 16 is connected, the display image from the ADP machine’s monitor is duplicated on the Cintiq 16 LCD. Thus, the LCD screen on the Cintiq 16 tablet functions as a secondary display while users create and/or edit content via the touch surface. Likewise, users have the capability to interact with their project and can visualize the results via an ADP machine’s display output.
To perform its functions, the Cintiq 16 uses four PCBAs which are the electro-magnetic resonance (EMR) board, the keypad board, the scaler board, and the sensor control board (SCB). In New York Ruling Letter (NY) N308714, dated January 23, 2020, we considered the country of origin of a previous version of the Cintiq 16 that was produced with a different production process. The manufacturing process for making the new Cintiq16, SKU DTK-1660/KO-AB and KO-AC has now been changed. In NY N308714, three of the four PCBA boards contained in the device, the EMR board, the keypad board, and the scaler board were made in China, and only the SCB PCBA was manufactured in Taiwan. Now, WTC will populate two additional PCBA’s, the scaler board and the keypad board with components using Surface Mount Technology (“SMT”) in Taiwan instead of China. This means that under the new proposed production scenario, the keypad board, scaler board, and SCB will be produced in Taiwan instead of China.
The first two stages of production of the Cintiq 16 involves manufacturing two subassemblies in China, which are identified as the back-cover module and the front-cover module. The back cover module contains air vents inside the plastic cover, a pen tag and two small rubber anti-rolling strips on the external body of the plastic cover. The assembly of the front-cover module consists of (1) placing glass on the plastic cover; (2) attaching the LCD panel behind the cover; (3) attaching the EMR board behind the LCD panel; and (4) placing the open cells and the backlight behind the cover.
The Chinese-origin back-cover and front-cover modules will then be shipped to Taiwan together with the stylus pen, pen holder, AC adaptor, and a power cable. In addition, the following three bare Printed Circuit Boards (“PCBs”) (bare SCB PCB, bare scaler board PCB, and bare keypad board PCB) will be shipped to Taiwan for further manufacturing into the finished PCBAs through SMT. In Taiwan, the SMT processes will be used to populate each of the bare PCB’s boards with the various electronic components so that they will become fully built PCBAs. Upon completion of the SMT processes, Japanese-origin WTC tablet firmware will be installed on the SCB and Taiwanese-origin scaler board firmware will be installed on the scaler board.
The scaler board is attached to the front-cover module. The SCB is attached to the LCD panel in the front-cover module so that it can sense and capture each pen stroke’s pressure on the bare EMR board. Without the SCB underlying it, it is claimed that the EMR board will not function as a sensor. The keypad board is also assembled to the front-cover module, and it is interconnected to the scaler board with cables to allow the transmission of signals and to function as a complete unit. The back-cover module is then combined with the front-cover module with screws.
Counsel contends that the EMR board is a simple PCB board with tiny magnetic sensor coils, and it has no electronic components on it. It is attached behind the LCD screen to allow the sensor coils to magnetically capture each pen stroke. Counsel also claims that the SCB monitors the movement of the sensor coils attached on the EMR board, and that it recognizes each pen stroke, the pen’s location, pressure, and speed, and that it transmits these interpreted, digitized input signals to the output unit, i.e., the scaler board.
In addition, counsel states that the role of the scaler board is as an output unit that generates images on the LCD screen. The scaler board has the highest number of components among the four different PCBAs. While the scaler board is responsible for producing the images on the LCD screen, as an alternative the consumer/artist can still use the Cintiq 16 tablet without the LCD screen, since the user can always view drawings produced on a connected external monitor.
The fourth and final PCBA in the Cintiq 16 is the keypad board (called the “power switch”). It is responsible for directing power currents in the Cintiq 16 tablet. It functions basically as an on and off switch.
ISSUE:
What is the country of origin of the subject Cintiq 16 drawing tablet?
LAW AND ANALYSIS:
The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). See Section XXII, Chapter 99, Subchapter III, U.S. Note 20(r), HTSUS. The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(s)(i), HTSUS.
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 681 F.2d 778 (CCPA 1982). In deciding 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. See Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (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. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97.
Additionally, factors such as the resources expended on product design and development, the 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. No one factor is determinative
Counsel points out that there are four major components that make up the Cintiq 16 tablet. They are the SCB, scaler board, keypad board, and front-cover module. Consistent with CBP’s previous decisions on PCBAs, populating PCBs with various microelectronic components by using SMT constitutes a substantial transformation of the blank PCB boards and individual microelectronic components contained on the boards. See C.S.D 19 Cust. Bull. 844 (1985). Therefore, we find that the country of origin of the three individual PCBAs that are populated with components in Taiwan using SMT, (the SCB, the Scaler Board, and the Keypad Board) is Taiwan. However, in determining the country of origin of the finished Cintiq 16, we must analyze whether these Taiwanese origin PCBAs and the other manufacturing operations performed in Taiwan determine its country of origin when combined with the Chinese-origin components.
NY N308714 explained that the finished Cintiq 16 consisted of several discrete subassemblies that were previously manufactured in China. Furthermore, it was pointed out that each of the Chinese subassemblies was dedicated for use in the Cintiq 16, such that they had no other purpose other than as components of the subject input/output device. The ruling further noted that the assembly operations performed in Taiwan, which consisted of attaching, fastening, and taping and/or gluing, were not very complex. The Cintiq 16 was produced by joining these subassemblies together to form a touch screen input/output device, but the Chinese subassemblies did not undergo a physical change in Taiwan by the assembly operations performed in that country. Therefore, it was determined in NY N308714 that the assembly process performed in Taiwan did not result in a substantial transformation of the Chinese origin components and subassemblies. The components themselves were not transformed in Taiwan into a new and different article of commerce with a name, character, and use distinct from
the articles which were exported from China. Consequently, NY N308714 held that the Wacom Cintiq 16 with Pro Pen 2, PN DTK1660, was a product of China for origin and marking purposes.
As has already been noted, since the issuance of NY N308714, WTC has changed the way the Cintiq 16 will be manufactured by having two additional PCBA’s, the scaler board and the keypad board, populated with electronic components using SMT in Taiwan, instead of China. This means that under this new proposed production process, three out of the four PCBAs contained in the Cintiq 16, the keypad board, scaler board, and SCB, are now produced in Taiwan instead of China.
Counsel contends that the Taiwanese-made PCBAs impart the essence to the Cintiq 16 drawing tablet and that three of the four PCBAs used in the Cintiq 16 will now be made in Taiwan. Counsel emphasizes the importance of the SCB PCBA because it is the component in the drawing tablet that provides the specialized pressure sensitive technology used in the drawing process and what separates the Cintiq 16 drawing tablets from similar devices like other tablets which also permit basic drawing onto an LCD screen with a stylus, such as an “Apple iPad” or a “Microsoft Surface.” It is this technology why consumers would choose to buy the Cintiq 16 drawing tablet. In addition, counsel points out that the Taiwanese-made PCBAs are more sophisticated than the Chinese-made subassemblies and parts, such as the EMR board, and they contain far more individual components. Counsel maintains that the accessories, such as the stylus pen, the power adapter, and specialized cables that are sold together with the Cintiq 16 tablet should not be given a lot of weight in determining the country of origin of the finished product.
In cases concerning the country of origin of origin of a device containing multiple PCBAs, CBP has examined the function of the PCBAs contained in the device to determine the origin of the device. For instance, in NY N308544, dated January 15, 2020, CBP considered the country of origin of a satellite television receiver and an entertainment system which consisted of two primary PCBAs from Taiwan and two auxiliary PCBAs from China (among others). The final assembly was performed in China. CBP determined that the country of origin of the receiver was Taiwan because (1) the two primary PCBAs from Taiwan imparted the essence of the finished product; and (2) the assembly process performed in China did not substantially transform these primary PCBAs.
Accordingly, in analyzing what is the country of origin of the Cintiq 16, we consider the various functions of the components of the Cintiq 16 to see if they determine the essence of the finished product. We recognize that the Cintiq 16 is a combined input/output device that has two distinct functions. The first function is that of an input device by manipulating images that are drawn using a specialized uniquely suited stylus ono the LCD screen. The second function of the Cintiq 16 is to perform as an output device by showing the images drawn on the LCD screen of the Cintiq 16 and, at the same time, onto a monitor of a linked ADP machine, such as a computer if that computer has a monitor connected to it. However, it is noted that if an attached desktop PC does not have a monitor and the Cintiq 16 is plugged into the desktop, the LCD of the Cintiq 16 will function as the primary monitor with a touch surface. Consequently, an attached monitor from the ADP machine is not required for the Cintiq 16 to function as a drawing tablet.
It is also noted that for the drawing tablet to create an image, an electromagnetic signal between the stylus and the PCBAs located in the drawing tablet must be generated. The magnetic field emanating from the stylus pen is recognized by sensor boards (EMR Board and the SCB PCBA). The electromagnetic resonance technology allows for the stylus pen's location, pressure, and speed to be tracked and registered. The Chinese origin stylus pen generates a data signal which is detected by the tablet. When a user draws a line using the stylus, the coil circuit transfers the signals to the main circuit inside the stylus. By using electromagnetic signals, the tablet can sense the position of the stylus. The tablet generates an electromagnetic signal, which is received by a circuit in the stylus. The stylus works as an antenna that receives the signal and generates another electromagnetic field that "talks" back to the tablet. The SCB board receives a signal from the stylus and, through its pressure sensitive technology, contributes to making the image drawn on the Cintiq 16. The SCB monitors the movement of the sensor coils attached on the EMR board, and recognizes each pen stroke, the pen’s location, pressure, and speed, and transmits these interpreted, digitized input signals to the output unit, i.e., the scaler board. Without the SCB underlying it, it is claimed that the EMR board does not function as a sensor. In other words, it is the interaction between the Chinese origin stylus and the Chinese origin EMR board with the Taiwanese origin SCB board that allows the Cintiq 16 to generate a visible image.
The fact that the image shown on the LCD screen is duplicated on a monitor and on a connected ADP machine does not negate the fact that the Cintiq tablet 16 also functions as an output device by displaying an image on its LCD screen. With respect to which components of the Cintiq 16 impart its output function, we note that the Chinese-made LCD panel subassembly displays the image of what is being drawn as well as duplicating the primary display. However, the Taiwanese-made scaler board also greatly contributes to allowing an image to be displayed. Thus, again, it is the combination of Taiwanese and Chinese components in the Cintiq 16, that allows the Cintiq 16 to function as an output device that can display images.
Counsel contends that the greater number of components on the three Taiwanese PCBA boards indicates that they are more complex, and that they are the most important of the PCBAs contained in the Cintiq 16. We do not necessarily agree that the sheer number of electronic individual components contained on the PCBA boards means that these PCBA boards play a more vital role in the function of the device, which is to generate and display images and designs. Rather, we believe that the role of the components and the subassemblies must be considered and how they function in the finished device to determine if there are dominant components which
impart the essence of the device. In this instance, it is the interplay between the stylus, EMR SCB, scaler boards, and LCD that allow the Cintiq 16 to generate the images and to display those images onto a screen.
Counsel also points out that the Cintiq 16 is equipped with a pressure-sensitive mechanism that lets an artist put a certain amount of nuance into the computer-aided drawings. With this capability, a user of the Cintiq 16 can mimic traditional artistic techniques, such as airbrushing. When it senses the pressure that a user applies to the stylus, the Cintiq 16 can make better images that are more precise as well as more creative or artistic. It is our understanding that the Taiwanese origin SCB PCBA, with the accompanying software, is the component of the Cintiq 16 that is chiefly responsible for this pressure-sensitive mechanism. Still, the SCB and the accompanying software are not the only items in the Cintiq 16 that are responsible for the creation of the images. Rather, while the pressure-sensitive technology helps to make the images or designs generated on the Cintiq 16 to be more creative, artistic, and precise, we nonetheless do not believe that the pressure sensitive technology of the Cintiq 16 drawing tablet should be the sole basis of determining its country of origin because this specialized technology merely represents only an enhancement of the tablet’s basic functionality.
In this case, as noted, both the Chinese and Taiwanese components of the Cintiq 16 tablet play a vital role in the functions that allow the user to create images that can be electronically displayed on a screen. Accordingly, since we cannot ascertain dominant components, including the PCBAs, which are more important in providing the essence to the finished Cintiq 16 drawing tablet, we look to the nature of the processing operations to see where the most significant work involved in making the Cintiq 16 is being performed.
In HQ H015324, CBP was asked to determine the country of origin of stereoscopic displays assembled in the U.S. from non-U.S. parts. The displays consisted of two LCD monitors from China or Taiwan, mounted in a custom-made stand with a special beamsplitter mirror mounted at a bisecting angle between the two monitors. A graphics card in the computer separately transmitted right eye and left eye video. The importer would send one of the monitors to a third-party in the U.S. for an optical transformation process, after which the displays would be assembled, aligned, and tested. CBP found that the processing and assembly operations in the U.S. resulted in a substantial transformation of the imported LCD monitors and the beamsplitter mirror. We found that the polarization process performed in the U.S. changed the essential character of the LCD and imparted the stereoscopic functionality to the entire system. In addition, the assembly, testing and alignment of the display required a significant amount of time and precision by skilled technicians. In other words, it was the extensive processing performed in Taiwan that determined the country of origin of the stereoscopic displays.
.
In this case, under the new proposed production scenario, we find that the most significant work in manufacturing of the Cintiq 16 is now being performed in Taiwan. This processing work now includes the production of the three PCBA boards, the SCB PCBA, the scaler board, and the keypad board, with the addition of the Taiwanese firmware. We note that building the three PCBA boards is technically intricate and a complex operation. It involves using SMT to populate a myriad of electronic components, including the attachment of the active and passive elements as well as other components onto a bare printed circuit board by soldering, gluing and other means. In addition to the intricate work of populating the components onto the blank PCB boards, they will be programmed with specially written firmware and software, which lets the Cintiq 16 tablet perform its function as a drawing tablet. Consequently, in this new production scenario, the production operations performed in the Taiwan are more extensive and complex than the work that was being performed in Taiwan in NY N308714. In addition to producing the three PCBAs in Taiwan, other processing operations will also be performed in Taiwan to manufacture the Cintiq 16m, including installing the PCBAs into the housing, connecting cables, installing firmware, and final assembly of all the various components to produce the finished tablets. We note that the total processing operation that will be performed in Taiwan to make the Cintiq 16 requires a significant amount of time and skill to complete.
Based on the information provided in this case, we find that the proposed processing and assembly operations performed in Taiwan will result in a substantial transformation of the Chinese components of the Cintiq 16, which are shipped to Taiwan. Therefore, under the new production scenario that Counsel has set forth in his most submission, we find that the country of origin of the Cintiq 16 drawing tablet is Taiwan. As a product of Taiwan, in accordance 19 U.S.C. 1304, the Cintiq 16 drawing tablet must be marked to indicate that its country of origin is Taiwan. In addition, because the Cintiq 16 drawing tablet is a product of Taiwan and not China, it will not be subject to Section 301 duties.
HOLDING:
The country of origin of the Cintiq 16 drawing tablets is Taiwan, and in accordance with the requirements of 19 U.S.C. 1304, it must be marked to indicate that its country of origin is Taiwan. As the merchandise is not a product of China, for the purposes of the application of subheading 9903.88.03, HTSUS, Section 301 measures do not apply.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction. Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch