H348824

H348824 August 27, 2025 OT:RR:CTF:VS H348824 AP CATEGORY: Classification; Origin Elvira Feng Wistron Corp. No.1, Zhihui Rd., Zhubei City, Hsinchu County Taiwan, Republic of China RE: Network Security Device; Country of Origin; Marking; 9802.00.50; 9802.00.80 Dear Ms. Feng: This is in response to your April 30, 2025 ruling request, regarding the country of origin of a network security device for purposes of marking and additional trade remedy measures, and the eligibility for a partial duty exemption under subheadings 9802.00.50 and 9802.00.80, of the Harmonized Tariff Schedule of the United States (“HTSUS”). FACTS: The subject network security device of subheading 8543.70.98, HTSUS, functions as an add-on device that integrates various security protocols such as firewalls and Artificial Intelligence protocols for network monitoring. The device consists of a motherboard, a light emitting diode (“LED”) board, a top cover, a fan duct, a power supply unit (“PSU”), and a rear fan. The motherboard and the LED board are manufactured in the United States in a U.S. free trade zone or in a U.S. non-bonded factory from components from multiple countries. The printed circuit board (“PCB”) is from China, the central processing unit (“CPU”) is from Malaysia, and the power supply is from China. In the United States, all the components for the motherboard and LED board are mounted onto separate PCBs via surface mount technology (“SMT”) and dual in-line package (“DIP”). SMT is a method of manufacturing whereby components are placed and soldered to the surface of the PCB rather than placed into holes on the PCB. DIP involves inserting components into pre-drilled holes on the PCB. The fully populated PCB will be the motherboard. The U.S. production costs represent 87 percent of the total cost of the network security device according to the bill of materials. The motherboard is 99.9 percent of the total U.S. production and the LED board only 0.1 percent. The completed motherboard and LED board will be exported to Taiwan where they will be inspected and assembled together with the top cover, fan duct, power supply unit (“PSU”), and rear fan to create the final network security device. You state that the motherboard and LED board will not undergo any fabrication, restoration, addition, or renovation in Taiwan. After software developed and written in the United States or Taiwan is loaded and testing is performed, the completed security device will be imported from Taiwan into the United States. The software downloaded in Taiwan will include basic input-output system (“BIOS”), operating system (“OS”), and testing program (“TP”), which will enable the device to function as intended. You explain that BIOS and OS are for system functioning, and TP is for manufacturing testing. ISSUES: 1. What is the country of origin of the network security device for purposes of marking and additional trade remedy measures? Does the device need to be marked when imported into the United States? 2. Whether the device is eligible for a partial duty exemption under subheading 9802.00.50, HTSUS. 3. Whether the device is eligible for a partial duty exemption under subheading 9802.00.80, HTSUS. LAW AND ANALYSIS: 1. Country of Origin for Purposes of Marking and Additional Trade Remedies When determining the country of origin for purposes of marking and trade remedies, 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, 69 CCPA 151 (1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). The U.S. Court of International Trade (“CIT’) has indicated that “[f]or courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the article or components.” See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (citing Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121 (1996) and Nat’l Hand Tool Corp., 16 CIT at 311). Courts have also considered “the ‘essence’ of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing.” Id. (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-98 (CIT 2000) and Uniroyal, Inc. v. United States, 3 CIT 220, 225 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983)). In Uniroyal, 3 CIT at 224, the court determined that the shoe upper was “the very essence of the completed shoe” and that the attachment of the imported shoe uppers to an outer sole in the United States was a “minor manufacturing or combining process which leaves the identity of the upper intact,” therefore, the shoe upper was not substantially transformed in the United States. The court also noted that the minor assembly operation in the United States “require[d] only a small fraction of the time and cost involved in producing the uppers.” Id. 2 In Data General v. United States, 4 CIT 182 (1982), the CIT held that for purposes of determining eligibility under item 807.00, Tariff Schedules of the United States (predecessor to subheading 9802.00.80, HTSUS), the programming of a foreign Programmable Read-Only Memory chip (“PROM”) in the United States substantially transformed the PROM into a U.S. article. The court noted that the programs were designed by a U.S. project engineer with many years of experience in “designing and building hardware.” In addition, the court noted that while replicating the program pattern from a “master” PROM may be a quick one-step process, the development of the pattern and the production of the “master” PROM required much time and expertise. The court noted that it was undisputed that programming altered the character of a PROM. While software is often essential to the function of a product, U.S. Customs and Border Protection (“CBP”) generally does not find downloading software to be a substantial transformation. See Headquarters Ruling Letter (“HQ”) H240199, dated Mar. 10, 2015 (a notebook computer was not substantially transformed when it was imported into Country F and Country D-origin BIOS was downloaded onto it). CBP may find a substantial transformation when the software is downloaded in the country where it was written and developed. See HQ H034843, dated May 5, 2009 (USB flash drives were products of Israel because the software and firmware were developed in Israel, and the installation and customization of the firmware and software that took place in Israel made the USB flash drives functional). If programming and assembly operations occur in different countries, CBP considers where the last substantial transformation occurred. For instance, in HQ H241177, dated Dec. 3, 2013, switches were assembled to completion in Malaysia and then shipped to Singapore, where software developed in the United States was downloaded. CBP found that the country where the last substantial transformation occurred was Malaysia, where the major assembly processes also were performed. In HQ H203555, dated Apr. 23, 2012, under scenario 1, the motherboard of the oscilloscopes and the power controller were assembled in Malaysia. A large number of parts were assembled in Malaysia to form the Malaysian-origin boards. The motherboards were shipped to Singapore. Upon importation into Singapore, the boards were assembled with rear, front deck, and bezel subassemblies made in Singapore from components imported from China, Malaysia, and Taiwan. In addition, the completed oscilloscopes were programmed with U.S.- origin application software and firmware in Singapore. There were three countries under consideration where programming and/or assembly operations took p

1. Country of Origin for Purposes of Marking and Additional Trade Remedies When determining the country of origin for purposes of marking and trade remedies, 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, 69 CCPA 151 (1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). The U.S. Court of International Trade (“CIT’) has indicated that “[f]or courts to find a change in character, there often needs to be a substantial alteration in the characteristics of the article or components.” See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1318 (2016) (citing Ran-Paige Co., Inc. v. United States, 35 Fed. Cl. 117, 121 (1996) and Nat’l Hand Tool Corp., 16 CIT at 311). Courts have also considered “the ‘essence’ of a completed article to determine whether an imported article has undergone a change in character as a result of post importation processing.” Id. (citing Uniden America Corp. v. United States, 120 F. Supp. 2d 1091, 1095-98 (CIT 2000) and Uniroyal, Inc. v. United States, 3 CIT 220, 225 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983)). In Uniroyal, 3 CIT at 224, the court determined that the shoe upper was “the very essence of the completed shoe” and that the attachment of the imported shoe uppers to an outer sole in the United States was a “minor manufacturing or combining process which leaves the identity of the upper intact,” therefore, the shoe upper was not substantially transformed in the United States. The court also noted that the minor assembly operation in the United States “require[d] only a small fraction of the time and cost involved in producing the uppers.” Id