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CBP Identifies Country of Origin of Ultrasound Systems, Printer/Fax Machines

Wednesday, April 10, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued final determinations concerning the country of origin of certain ultrasound systems and printer/fax machines that may be offered to the U.S. government under an undesignated government procurement contract. These determinations were issued April 3 and any party-at-interest may seek judicial review of either one by May 10.

CBP issues country of origin advisory rulings and final determinations as to 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.

Ultrasound Systems. At issue are two ultrasound systems, which are diagnostic imaging systems that transmit sound waves and then receive and process the echoes of those waves to create a visual representation of a patient’s tissues and organs. The electronics modules of these systems are partially assembled in China and then imported into the U.S. for assembly with other components, including Korean-origin transducers that send and receive acoustic signals, Italian-origin monitors that permit the display of images and U.S.-origin control panels that serve as the user interface. The completely assembled systems are then loaded with U.S. designed, developed and written operating system software and application software. In addition, all of the research and development, product engineering and designed investment occur in the U.S.

Based on the totality of the circumstances, CBP finds that the last substantial transformation occurs in the U.S., the location where the final assembly and installation of the operating system software and application software occur. These operations create a new product that is capable of providing diagnostic information. Consequently, the country of origin of the ultrasound systems is the U.S.

Printer/Fax Machines. At issue are laser-based office machines for printing and faxing, suitable for use in homes and small to medium-sized businesses. All the machines’ parts are produced in China except for the hard disk drive, which is produced in Malaysia. The firmware that allows access to the hardware and software is developed and written in the U.S. and is tested and debugged in either Brazil or India. Assembly, downloading of firmware and testing are completed in Mexico.

CBP states that the assembly performed in Mexico is not significant enough to result in a substantial transformation of the Chinese components and subassemblies. Further, while the firmware provides the essential characteristic of performing as a printer/fax machine, the firmware downloaded in Mexico does not include all the firmware necessary for the finished good. CBP concludes that all the significant parts that are the essence of the finished product are produced in China, particularly the high-cost components, and that the country of origin of the machines is thus China.

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