80 FR 38718 - Notice of Issuance of Final Determination Concerning Wound Therapy System

DEPARTMENT OF HOMELAND SECURITY
U.S. Customs and Border Protection

Federal Register Volume 80, Issue 129 (July 7, 2015)

This document provides notice that U.S. Customs and Border Protection (``CBP'') has issued a final determination concerning the country of origin of the PICO single use negative pressure wound therapy system manufactured and distributed by Smith & Nephew. Based upon the facts presented, CBP has concluded that the United Kingdom will be the country of origin of the PICO single use negative pressure wound therapy system (``PICO NPWT System'') for purposes of U.S. Government procurement.

[Federal Register Volume 80, Number 129 (Tuesday, July 7, 2015)]
[Notices]
[Pages 38718-38721]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-16553]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Notice of Issuance of Final Determination Concerning Wound 
Therapy System

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: Notice of final determination.

-----------------------------------------------------------------------

SUMMARY: This document provides notice that U.S. Customs and Border 
Protection (``CBP'') has issued a final determination concerning the 
country of origin of the PICO single use negative pressure wound 
therapy system manufactured and distributed by Smith

[[Page 38719]]

& Nephew. Based upon the facts presented, CBP has concluded that the 
United Kingdom will be the country of origin of the PICO single use 
negative pressure wound therapy system (``PICO NPWT System'') for 
purposes of U.S. Government procurement.

DATES: The final determination was issued on June 30, 2015. A copy of 
the final determination is attached. Any party-at-interest, as defined 
in 19 CFR 177.22(d), may seek judicial review of this final 
determination within August 6, 2015.

FOR FURTHER INFORMATION CONTACT: Antonio J. Rivera, Valuation and 
Special Programs Branch, Regulations and Rulings, Office of 
International Trade (202) 325-0226.

SUPPLEMENTARY INFORMATION: Notice is hereby given that on June 30, 2015 
pursuant to subpart B of part 177, U.S. Customs and Border Protection 
Regulations (19 CFR part 177, subpart B), CBP has issued a final 
determination concerning the country of origin of the PICO NPWT System 
manufactured and distributed by Smith & Nephew, which may be offered to 
the U.S. Government under an undesignated government procurement 
contract. This final determination, HQ H259473, was issued under 
procedures set forth at 19 CFR part 177, subpart B, which implements 
Title III of the Trade Agreement Act of 1979, as amended (19 U.S.C. 
2511-18). In the final determination, under the totality of the 
circumstances, considering the PICO NPWT System's use as a single 
medical instrument, the origin of the dressings, and the flash 
programming and final assembly of the pump, which will be performed in 
the U.K., and will change the pump into a specialized pump that can 
only be used with its respective dressings, CBP concluded that the 
country of origin of the PICO NPWT System will be the United Kingdom 
for purposes of U.S. Government procurement.
    Section 177.29, CBP Regulations (19 CFR 177.29), provides that a 
notice of final determination shall be published in the Federal 
Register within 60 days of the date the final determination is issued. 
Section 177.30, CBP Regulations (19 CFR 177.30), provides that any 
party-at-interest, as defined in 19 CFR 177.22(d), may seek judicial 
review of a final determination within 30 days of publication of such 
determination in the Federal Register.

    Dated: June 30, 2015.
Harold Singer,
Acting Executive Director, Regulations and Rulings, Office of 
International Trade.

HQ H259473

June 30, 2015

OT:RR:CTF:VS H259473 AJR

CATEGORY: Origin

Daniel S. Char, Esq.
Associate General Counsel (Commercial)
Smith and Nephew, PLC
150 Minuteman Road
Andover, MA 01810

RE: Trade Agreements Act; Government Procurement; Country of Origin 
of the PICO Single Use Negative Pressure Wound Therapy System

Dear Mr. Char:

    This is in response to your letter, dated November 19, 2014, 
requesting a final determination on behalf of Smith & Nephew, PLC 
(``Smith & Nephew''), pursuant to subpart B of part 177 of the U.S. 
Customs and Border Protection (``CBP'') Regulations (19 CFR part 
177). Under these regulations, which implement Title III of the 
Trade Agreements Act of 1979 (``TAA''), as amended (19 U.S.C. 2511 
et seq.), 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 final determination concerns the country of origin of Smith 
& Nephew's PICO Single Use Negative Pressure Wound Therapy System 
(``PICO NPWT System''). As the manufacturer and U.S. importer, Smith 
& Nephew is a party-at-interest within the meaning of 19 CFR 
177.22(d)(1) and is entitled to request this final determination. In 
addition, we have reviewed and grant the request for confidentiality 
pursuant to 19 CFR 177.2(b)(7), with respect to certain information 
submitted.

FACTS:

    The PICO NPWT System is a sterile, single-use, complete negative 
pressure wound therapy system consisting of a pump, two dressings 
with attached long tube assemblies, and retention strips. It is 
marketed for use in a sterile operating room environment. Each 
dressing is applied to the wound and held in place with the 
retention strips. The long tube assembly is attached to the dressing 
on one end, and to the PICO pump on the other end, connecting them 
together. The suction pump pulls air out of the dressing via the 
long tube assembly, creating negative pressure and drawing excess 
fluid from the wound into the dressing. The pump is battery powered 
and delivers 80 mmHg of continuous negative pressure for up to seven 
days, after which it is programmed to permanently stop working. 
Consistent with the lifespan of the pump, the dressings provide a 
total of seven days wear time. The pump in the PICO NPWT System can 
only be used with the dressings included in the system, and will 
only be used once by a patient for a specific wound type as the 
therapy prescribes. The dressings are only sold with the pump and 
not separately available. Unlike conventional negative pressure 
systems that use canisters for the collection of wound fluid, the 
PICO NPWT System is canister-less, which according to your 
submission means that the components of the PICO NPWT System can 
only be used together as a system.
    The pump in the PICO NPWT System consists of: a printed circuit 
board (``PCB'') assembly that provides pressure measurement and 
feedback control for the pump; a diaphragm pump and motor that 
provide airflow to maintain pressure; components such as an internal 
air path and check valve; a plastic housing; and, batteries. Most of 
the pump's components are made in China, except for a lightweight 
pipe, valve and connector made in the U.S., and the batteries. The 
pump components and subassemblies will be shipped from China to the 
United Kingdom (``U.K.'') for the remainder of the pump 
manufacturing process. In the U.K., U.S.-origin firmware, written 
and validated in the U.S. according to medical device and Food and 
Drug Administration standards, will be loaded onto the pump at flash 
programming stations. The flash programming stations are equipped 
with ``bed of nails'' interfaces, which have discrete electrical 
conductors that extend and make contact with discrete pads on the 
PCB assembly. You state that the erasable programmable read-only 
memory (``EPROM'') on the PCB assembly is actively programmed by 
sending electric charges through the ``bed of nails'' to the PCB 
assembly in order to drive the EPROM into receptive mode, and then 
sending byte by byte to program the EPROM with the unique 
calibrations and specific parameters required to operate the 
pump.\1\ You state that this process requires moderate, semi-skilled 
technicians trained in ``clean-room'' techniques and operating 
programming fixtures. The pump is then fully assembled by assembling 
the subassemblies with the case pieces and attaching the battery 
cover and label, which you state requires low, basic ``box build'' 
assembly techniques. After assembly, the pump goes through a series 
of tests to verify calibrated performance of the device, which you 
state requires moderate, semi-skilled technicians operating test 
fixtures.
---------------------------------------------------------------------------

    \1\ You state that, though EPROM is not irreversible, re-
programming EPROM requires working through different levels of 
encryption and the use of specific equipment, which is not readily 
available.
---------------------------------------------------------------------------

    You state that the firmware is essential to the function of the 
pump because the firmware ensures that the pump dispenses the 
accurate amount of negative pressure. You state that while the 
components used to manufacture the PICO NPWT System are largely 
generic (e.g. micro-controllers, small battery powered motors and 
generic PCB assemblies), it is only when the pump is calibrated and 
then flashed with specific firmware that it becomes a true medical 
device, as the flashing enables the pump to deliver calibrated, 
therapeutic negative pressure levels to the wound.

[[Page 38720]]

    You state that the material, labor, and overhead costs of the 
PICO NPWT System are broken down per country as follows: [XXXX]% 
from the pump and battery production in China, [XXXX]% from flashing 
and final assembly in the U.K., and the remaining [XXXX]% \2\ mainly 
from the U.K.
---------------------------------------------------------------------------

    \2\ [XXXX]% derives from the production of the dressing in the 
U.K. Aside from [XXXX]% for primary sterile barrier costs from both 
the U.K. and [XXXX], the remaining costs will be incurred in the 
U.K.
---------------------------------------------------------------------------

    The dressings are manufactured in the U.K., with materials of 
U.K. and Canadian origin,\3\ to produce a four-layer dressing that 
consists of: (1) a high moisture vapor transfer rate (``MTVR'') film 
to allow for transpiration of the wound fluid; (2) a superabsorbent 
layer to hold the fluid; (3) an airlock layer to ensure consistent 
delivery of negative pressure from the pump to the wound bed; and, 
(4) an adhesive layer to maintain an effective seal around the 
dressing and prevent trauma. The manufacturing operations to produce 
the dressings involve extruding medical grade film, perforating the 
adhesive layer to ensure breathability of the dressing, and then 
shaping, cutting and laminating together the layers of the dressing. 
The four-layer dressing is then connected to a long tube assembly, 
which is also manufactured in the U.K. from U.K.-origin materials. 
The dressings and pumps are then sterilized, separately sealed, 
packed, and then re-sterilized. Once the PICO NPWT System is 
received by its user, the user will connect the pump to the dressing 
by the attached long tube assembly.
---------------------------------------------------------------------------

    \3\ All of the layers, except for the super-absorbent layer that 
is from Canada, are from the U.K.
---------------------------------------------------------------------------

    You state that a majority of the essential therapeutic elements 
for wound healing are delivered via the unique dressing. You state 
that the dressing is the fundamental ``enabling technology,'' as the 
combination of layers work together to: manage the wound fluid; 
ensure consistent delivery of negative pressure from the pump to the 
wound bed (stimulating blood vessel and cell growth); and, maintain 
an optimal environment for wound healing by protecting the wound 
from outside contaminants and limiting disruption of the wound bed, 
which allows for the formation of granulation tissue.
    The PICO NPWT System is imported into the United States packaged 
for retail sale. Its main components, the pump and the dressings, 
are not assembled together and must be connected to each other by 
the user after the dressing is secured to the patient with the 
retention strips. You state that, as imported, the PICO NPWT System 
is classified in subheading 9018.90.80, Harmonized Tariff Schedule 
of the United States (``HTSUS''), as a medical instrument. You also 
state that it is described by two of the American Medical 
Association Current Procedural Terminology (``CPT'') codes, G0456 
and G0457, which provide for: ``negative pressure wound therapy 
(e.g. vacuum assisted drainage collection) using a [. . .] device, 
not durable medical equipment, including provision of [. . .] 
dressing(s), topical application(s), wound assessment, and 
instructions for ongoing care, per session.'' According to your 
submission, the difference in the codes is based on the description 
of the size of the wound to be treated.

ISSUE:

    What is the country of origin of the PICO NPWT System for 
purposes of U.S. Government procurement?

LAW AND ANALYSIS:

    Pursuant to Subpart B of Part 177, 19 CFR 177.21 et seq., which 
implements Title III of the Trade Agreements Act of 1979, as amended 
(19 U.S.C. 2511 et seq.), 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.
    Under the rule of origin set forth under 19 U.S.C. 2518(4)(B):
    An article is a product of a country or instrumentality only if 
(i) it is wholly the growth, product, or manufacture of that country 
or instrumentality, or (ii) in the case of an article which consists 
in whole or in part of materials from another country or 
instrumentality, it has been substantially transformed into a new 
and different article of commerce with a name, character, or use 
distinct from that of the article or articles from which it was so 
transformed.
    See also 19 CFR 177.22(a).
    In determining whether the combining of parts or materials 
constitutes a substantial transformation, the determinative issue is 
the extent of operations performed and whether the parts lose their 
identity and become an integral part of the new article. Belcrest 
Linens v. United States, 573 F. Supp. 1149 (Ct. Int'l Trade 1983), 
aff'd, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are 
minimal or simple, as opposed to complex or meaningful, will 
generally not result in a substantial transformation. See C.S.D. 80-
111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and 
C.S.D. 90-97. If the manufacturing or combining process is a minor 
one which leaves the identity of the article intact, a substantial 
transformation has not occurred. Uniroyal, Inc. v. United States, 3 
CIT 220, 542 F. Supp. 1026 (1982), aff'd 702 F. 2d 1022 (Fed. Cir. 
1983).
    In order to determine whether a substantial transformation 
occurs when components of various origins are assembled into 
completed products, CBP considers the totality of the circumstances 
and makes such determinations on a case-by-case basis. The country 
of origin of the item's components, extent of the processing that 
occurs within a country, and whether such processing renders a 
product with a new name, character, and use are primary 
considerations in such cases. Additionally, factors such as the 
resources expended on product design and development, the extent and 
nature of post-assembly inspection and testing procedures, and 
worker skill required during the actual manufacturing process will 
be considered when determining whether a substantial transformation 
has occurred. No one factor is determinative.
    In this case, the PICO NPWT System is comprised of the pump and 
the dressings. These two components are attached to each other by 
the user and together, these two components are used as one product 
to extract fluid from the wound. The four-layer dressing is 
manufactured in the U.K. by combining MTVR film from the U.K. to 
allow for transpiration of the wound fluid, a superabsorbent layer 
from Canada to hold the fluid, an airlock layer from the U.K. to 
ensure consistent delivery of negative pressure from the pump to the 
wound bed, and an adhesive layer from the U.K. to effectively seal 
the dressing. The long tube assembly, which is produced in the U.K. 
from U.K. materials, is adhered to the dressing in the U.K. and is 
later connected by the user to the pump to create a one-way vacuum 
via a unique taper-lock connector that ensures the pump and dressing 
can only connect to each other and not to other medical connectors. 
The pump is as important as the dressing in allowing negative 
pressure to be created and to enable fluid to be drawn from the 
wound. Therefore, the additional processes performed on the pump 
component are necessary in order to find that the PICO NPWT System 
is a product of the U.K.
    You argue that the PICO NPWT System should be considered a 
product of the U.K. because the U.K is the country of origin of the 
dressings, and that although the pump components and subassemblies 
will be made in China, the pump will be flash programmed with 
firmware and the final assembly of the pump will take place in the 
U.K. You state that the pump will be programmed with U.S.-origin 
firmware at flash programming stations equipped with ``bed of 
nails'' interfaces, which have discrete electrical conductors that 
extend from the ``bed of nails'' and make contact with discrete pads 
on the PCB assembly.\4\ You state that the EPROM is actively 
programmed because this process sends electric charges through the 
``bed of nails'' to the PCB assembly in order to drive the EPROM 
into receptive mode, and then sends byte by byte to program the 
EPROM with the unique calibrations and specific parameters required 
to operate the pump.\5\ You state that, though the EPROM is not 
irreversible, re-programming the EPROM requires working through 
different levels of

[[Page 38721]]

encryption and the use of specific equipment, which is not readily 
available.\6\ Accordingly, you state that only when the pump is 
calibrated and flashed with specific firmware, it becomes a true 
medical device, as the flashing enables the pump to deliver 
calibrated, therapeutic negative pressure levels to the wound. In 
support of your positions you cite Headquarters Ruling (``HQ'') 
H034843, dated May 5, 2009; and HQ 968000, dated February 14, 2006.
---------------------------------------------------------------------------

    \4\ ``Bed of nails'' refers to a traditional electronic fixture 
with numerous pins extending from the fixture to make contact with 
points on a PCB. Pressing a PCB against a ``bed of nails'' interface 
allows the PCB to be directly accessed for programming. See Michael 
J. Smith, Why Program Devices at In-Circuit Test?, Evaluation 
Engineering, at http://www4.evaluationengineering.com/articles/201110/why-program-devices-at-in-circuit-test.php (specifically the 
``bed of nails'' explanation); see also ``In-Circuit Test,'' 
Wikipedia, at http://en.wikipedia.org/wiki/In-circuit_test (only 
with reference to ``Bed of Nails tester'' section).
    \5\ EPROM refers to a non-volatile memory that retains its 
contents until it is exposed to ultraviolet light, and it is 
programmed by using a specialized machine to force an electric 
charge that sends bits of the EPROM onto a PCB. See G. Groeseneken, 
et al., Basics of Nonvolatile Semiconductor Memory Devices, 25-28, 
at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.111.9431&rep=rep1&type=pdf; see also Integrated 
Circuit Engineering Corporation, ROM, EPROM, and EEPROM Technology, 
4-9, at https://web.eecs.umich.edu/~prabal/teaching/eecs373-f10/
readings/rom-eprom-eeprom-technology.pdf.
    \6\ EPROM is not easily reprogrammed because, even when the 
reprogramming change is minimal, the process requires erasing the 
memory by exposing the EPROM to ultraviolet light, and then 
reprogramming it byte by byte. See id.
---------------------------------------------------------------------------

    HQ H034843 concerned the country of origin of USB flash drives 
that used software and firmware developed in Israel and an assembly 
process that began in China and ended in Israel or the United 
States. CBP noted that the assembly in Israel or the United States, 
mainly the installation and customization of the firmware and 
software, made the USB flash drives functional, permitted them to 
execute their security features, and increased their value. 
Therefore, the USB flash drives were substantially transformed in 
the countries where these operations took place, making the country 
of origin for the USB flash drives either Israel or the United 
States.
    In HQ 968000, CBP ruled that the country of origin for marking 
purposes of a fabric switch for storage area networks was the United 
States. The assembly of the hardware for the switch occurred in 
China. Then, the resulting electromechanical assembly was shipped to 
the United States, where U.S.-origin software was installed, 
configured, and tested. See also Data General v. United States, 4 
Ct. Int'l Trade 182 (1982).
    As in HQ H034843 and HQ 968000, the firmware will be installed 
in a different country from where the majority of the product is 
assembled, thereby imparting the product (here, the pump) with an 
essential and required feature (here, enabling the pump to operate 
as a unique medical device). However, despite these similarities, HQ 
H034843 and HQ 968000 concerned a USB flash drive and a switch for 
network storage, which are instruments primarily associated with 
computer-related products, while in this case the product is 
primarily a medical instrument and serves separate functions apart 
from the programmed capabilities. For instance, in HQ H215657, dated 
April 29, 2013, CBP held that a flashlight originated from China 
despite the fact that it was programmed in the U.S. with U.S. 
software. HQ H215657 explained that the programming was not 
essential to the basic operation of the flashlight, as it only 
enhanced how the flashlight operated, without changing its 
fundamental nature. Though such programming provided the flashlight 
with some additional features, CBP held that the programming was not 
sufficiently complex to change the identity or characterize the 
device.
    Nonetheless, to the extent that the programming process in the 
U.K. is integrated with the U.K.-origin dressing to produce a 
specific-use medical device, we find that the last substantial 
transformation of the PICO NPWT System occurs in the U.K. The unique 
dressing is the ``enabling technology'' that provides the essential 
therapeutic elements for wound healing (e.g. fluid management, 
protecting against contaminants, and limiting wound bed disruption) 
to the instrument. Furthermore, the programmed pressure calibrations 
are critical to the pump's function as a medical device, and can 
only tolerate a small margin for error since any programming error 
would devalue the pump for medical purposes and require correction 
via a difficult reprogramming technique.
    Based on the information in your request, under the totality of 
the circumstances, considering the PICO NPWT System's use as a 
single medical instrument, the origin of the dressings, and the 
flash programming and final assembly of the pump, which will be 
performed in the U.K, and will change the pump into a specialized 
pump that can only be used with its respective dressings, we find 
that the country of origin of the PICO NPWT System will be the 
United Kingdom for purposes of U.S. Government procurement.

HOLDING:

    Based on the facts in this case, we find that the country of 
origin of the PICO NPWT System will be the United Kingdom for 
purposes of U.S. Government procurement.
    Notice of this final determination will be given in the Federal 
Register, as required by 19 CFR 177.29. Any party-at-interest other 
than the party which requested this final determination may request, 
pursuant to 19 CFR 177.31, that CBP reexamine the matter anew and 
issue a new final determination. Pursuant to 19 CFR 177.30, any 
party-at-interest may, within 30 days of publication of the Federal 
Register Notice referenced above, seek judicial review of this final 
determination before the Court of International Trade.

Sincerely,

Harold Singer, Acting Executive Director
Regulations and Rulings
Office of International Trade

[FR Doc. 2015-16553 Filed 7-6-15; 8:45 am]
BILLING CODE 9111-14-P