Print PDF

Practice Areas

CBP Says Downloading of Software Needed for Operation Doesn’t Convey Origin

Wednesday, February 12, 2014
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued a final determination concerning the country of origin of certain cordless headsets that may be offered to the U.S. government under an undesignated government procurement contract. 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. This determination was issued Feb. 3 and any party-at-interest may seek judicial review of it by March 14.

The headsets at issue are lightweight devices worn over the ear that allow the user to control and communicate with mobile phones and computers. They are packaged and sold with a Bluetooth universal serial bus dongle/adapter (a hardware key for electronic copy and content protection that unlocks software functionality or decodes content) that, when plugged into a computer, allows the headset to control Voice over Internet Protocol communication by acting as a pass-through for data.

The headsets and dongles are manufactured as follows. In a non-Trade Agreements Act country, individual chips containing all the components of an electronic system (“system on a chip,” or SoC) are manufactured and loaded with Bluetooth protocol stack firmware and 16 megabits of programmable memory. In a non-TAA country, a printed circuit board containing transistors, diodes, capacitors, the SoC with flash memory, and an antenna is manufactured and assembled with plastic housing, buttons, speakers, microphones, sensors and batteries using solder and glue into a complete headset. These components are from both the non-TAA country and TAA countries. An antenna and an integrated circuit from a TAA country (also loaded with Bluetooth protocol stack firmware) are assembled with the plastic housing to create a dongle. Finally, the fully assembled headsets and dongles are shipped to a TAA country, where firmware (designed and coded in a TAA country) linking the headsets with other devices that have corresponding software is downloaded onto the SoC, a water-resistant coating is applied and the headsets are packaged for retail sale.

The petitioner argued that the addition of the firmware makes the headsets into new and different articles because without it they could only receive signals and could not answer or end calls, operate by voice recognition, be turned on and off based on their positioning, direct signals to paired devices, or otherwise interact with a VoIP softphone or other Bluetooth devices. CBP, however, said that the downloading of the firmware in the TAA country does not amount to programming (which, when it changes or defines the use of an article, generally constitutes substantial transformation) because it does not involve writing, testing or implementing the code necessary to make the headsets function in a certain way. Given these facts, CBP states that the country where the last substantial transformation of the headsets occurs (and thus the country of origin for U.S. government procurement purposes) is where the major assembly processes are performed. Likewise, the country of origin of the dongles is where they were assembled.

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines