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Substantial Transformation of Software Affirmed in CBP Determination

Monday, August 19, 2019
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection has issued a final determination concerning the country of origin of software products for use on mobile devices and on servers and other similar network devices that may be offered to the U.S. government under undesignated government procurement contracts. Any party-at-interest may seek judicial review of this determination by Sept. 13. 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.

Both software products are produced in a four-step process that involves (1) writing original source code or modifying open source software code in the U.S., (2) writing or modifying source code in Canada, (3) compiling the source code into executable object code in the U.S., and (4) delivering the finished software to the purchaser. The source code will be written by the company’s employees at its offices in the U.S. and Canada.

In ruling HQ H301776 CBP affirms its holding in previous rulings that compiling source code into object code results in substantial transformation. CBP explains that the name of the product changes from source code to object code, the character changes from computer code to finished software, and the use changes from instructions to an executable program. Accordingly, CBP determines that the software at issue is substantially transformed in the U.S. for purposes of U.S. government procurement.

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