NY R04401 - Country of Origin marking requirements applicable to the Brocade Silkworm 200E (SW200E) Fibre Channel fabric switch for Storage Area Networks; substantial transformation - United States International Trade Commision Rulings

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NY R04401

August 17, 2006

MAR-2 RR:E:NC:1:120 R04401

CATEGORY: MARKING

Mr. Stuart P. Seidel, Esq.
Baker and McKenzie LLP
815 Connecticut Avenue NW
Washington DC 20006

RE: Country of Origin marking requirements applicable to the Brocade Silkworm 200E (SW200E) Fibre Channel fabric switch for Storage Area Networks; substantial transformation

Dear Mr. Seidel:

This is in response to your letter dated July 12, 2006 requesting a ruling on behalf of your client, Brocade Communications Systems, Inc. You inquire whether Brocade’s Silkworm SW200E Fibre Channel fabric switch for Storage Area Networks is required to be individually marked with the country of origin China if it is later to be processed in the U.S. by a U.S. manufacturer. A marked sample was not submitted with your letter for review.

The SW200E is designed for rapidly growing storage area network (SAN) requirements in a mission critical environment. Its non-blocking architecture provides up to 4 gigabytes per second auto-sensing technology with up to 8 ports in a 1U package.

This SW200E model comprises a main logic printed circuit board assembly (PCBA), fabricated chassis and top cover, purchased power supply, fans, and AC line filter, as well as the Brocade Fabric Operating System (FOS) software and Brocade developed advanced customer specified software options. The SW200E integrates with Windows, NT, UNIX, LINUX, Solaris, and AIX software applications. It also provides FICON support on a flexible port-by-port basis in IBM xSeries server environments.

The SW200E will be partially manufactured in China, with final assembly, integration, test, software and firmware option uploads performed in the United States. The operations performed in China versus the United States are outlined below:

Operations performed in China:

A bare metal chassis bottom mechanical assembly is fabricated. A metal top cover is fabricated.
A bare printed circuit board is populated with various electronic components to form the main logic printed circuit board assembly (PCA). Diagnostic and In Circuit Test basic software is downloaded on the PCA board to enable testing of the hardware. The diagnostic software also allows limited functional test information to travel to and from the various ports on the board. The main logic PCA undergoes what is described as the standard battery of tests to ensure the functionality of its components, connections and circuitry. Examples of such tests are In Circuit Test (ICT) and the Environmental Stress Screen (ESS). The power supply (made in either China or Thailand) is assembled into the chassis. Five fans (made in China) are assembled into the chassis. AC line filter (made in either Canada or Mexico) is assembled into the chassis. The main logic PCA is installed into the chassis base. A dummy cover is installed only for ICT and ESS testing. The DBP connectors are assembled and installed. The power supply connector is assembled and installed. The fan cables are installed and connected. The permanent cable is assembled to the chassis bottom. Serial numbers from the PCA, fan tray, and power supply are collected and appended to the unit serial number in a data tracking system.

Upon completion of the foregoing procedures, the following testing operations occur:

A “system test” is performed using automated scripts and diagnostics software. A “run-in test” is performed, including an automated system test at elevated temperatures, and an ongoing reliability test.

Operations performed in the United States:

Upon completion U.S.-origin Brocade Fabric Operating System (FOS) software and customer specified firmware options, which were developed in the United States at a significant cost to Brocade, are downloaded into 512 MB compact flash memory integrated chips on the PCA. The following testing operations occur:

A “hi-pot” test is performed per safety agency standards and requirements. Software configuration and final tests are performed. First, the FOS is downloaded. Then, customer-selected software options are downloaded. A dust cap is put on the DB9 connector and an ethernet plug is installed on the RJ45 connector. Final quality assurance tests and final configuration and integration tests are performed. After software download and final system testing, the completed product is packaged and prepared for distribution and shipment.

The SW200E is substantially transformed from hardware to a Fibre Channel fabric switch; it becomes a product with a new name, character and use during the United States (U.S.) assembly process. The operating system and options software loaded in the U.S. provide the “intelligence” characteristics to the PCBA. Furthermore, the tests for the software and how it works in conjunction with the hardware are performed in the United States. Only the basic hardware subassemblies are manufactured and tested in China.

The marking statute, Section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.

Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.41(b), Customs Regulations (19 C.F.R. 134.41(b)), mandates that the ultimate purchaser in the U.S. must be able to find the marking easily and read it without strain. Section 134.1(d) defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported. 19 C.F.R. 134.1(d)(1) states that if an imported article will be used in manufacture, the manufacturer may be the ultimate purchaser if he subjects the imported article to a process which results in a substantial transformation of the article. The case of U.S. v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940), provides that an article used in manufacture which results in an article having a name, character or use differing from that of the constituent article will be considered substantially transformed, and that the manufacturer or processor will be considered the ultimate purchaser of the constituent materials. In such circumstances, the imported article is excepted from marking and only the outermost container is required to be marked. See 19 C.F.R. 134.35.

In this case, the imported SW200E Fibre Channel fabric switch for Storage Area Networks is substantially transformed as a result of the U.S. processing, and therefore the country of origin of this new product is the U.S. Pursuant to 19 C.F.R. 134.35 (a), the imported article would be exempt from marking. Only the outermost container in which the hardware is imported must be marked to indicate China as the country of origin.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. Part 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Denise Faingar at 646-733-3010.

Sincerely,

Robert B. Swierupski
Director,

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