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CBP Rules on Substantial Transformation of Ethernet Switches, Medical Electrodes

Thursday, February 07, 2019
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued final determinations concerning the country of origin of certain Ethernet switches and medical electrodes that may be offered to the U.S. government under undesignated government procurement contracts. Any party-at-interest may seek judicial review of these determinations by March 7. 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.

Ethernet switches. The hardware for the subject Ethernet switches, routers, and network cards is manufactured in China from components sourced from various parts of Asia, including China, Singapore, and Taiwan. This hardware is imported in a fully assembled state but is not functional because it lacks the software needed to run. The final programming of the EEPROM on the device and a majority of the programming for the operating system, along with the downloading of the software, are completed in the U.S.

In ruling HQ H290670, consistent with several previous rulings, CBP concludes that it is only after the installation of U.S.-origin software that the devices obtain their essence and functionality as switches and routers. As a result, CBP determines that the U.S. is the country of origin of these products for purposes of government procurement.

Electrodes. The products at issue are self-adhesive cutaneous electrodes designed and manufactured specifically for electrocardiogram and electromyogram monitoring applications. Each electrode consists of a sticky pad composed of electrically conductive hydrogel laminated onto conductive plastic and fabric backing, which is attached to a lead wire with a miniscule amount of glue. All of the engineering and design of the electrodes is conducted in the U.S. and the hydrogel, including all of its components, is manufactured entirely in the U.S. before being shipped to China for further processing.

In ruling HQ H300743, consistent with several previous rulings, CBP concludes that the country of origin of the electrodes for purposes of government procurement is the U.S. CBP explains that (a) the majority of the components of the electrodes are of U.S. or WTO GPA country origin, (b) the hydrogel performs the essential function of the finished product, and (c) the assembly and processing that occurs in China constitute relatively simple and minor operations that do not substantially transform the product.

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