CIT Rules CBP Origin Determination Incomplete in Its 1st Gov't Procurement Ruling
On January 24, 2011 in Xerox Corporation v. U.S., the Court of International Trade remanded back to U.S. Customs and Border Protection a government procurement final determination on certain recycled laser toner printer cartridges and ordered CBP to explicitly identify the country of origin or state why it cannot be determined.
The court notes that this is the first such case brought in the CIT pursuant to 28 USC 1581(e).1
(In 1938, the Buy American Act (BAA) established federal government procurement preferences for domestically manufactured products. Under the BAA, in order for a good to be considered a “domestic end product,” procurable by the federal government, it must be manufactured in the U.S. with substantially all (which has been interpreted to mean greater than 50%) articles, materials, or supplies produced, mined or manufactured in the U.S.
The BAA is still in effect, but the Trade Agreements Act of 1979 allows BAA domestic preferences to be waived for articles above a certain price threshold that are “products of”2 designated foreign countries and instrumentalities (DFCIs). DFCIs include: (i) members of the international Agreement on Government Procurement (GPA); (ii) countries that extend GPA-equivalent opportunities to the U.S.; and (iii) least developed countries.
Companies have been seeking origin determinations by CBP for the past three decades to determine the country of origin of products for government procurement purposes.)
Xerox Challenging CBP Ruling that Recycled Cartridges Were Not Product of U.S.
Xerox is challenging a CBP final determination (HQ H009107) issued in August 2007 to Nukote International (a company not party to the current action) relating to the country of origin of certain refurbished (i.e., recycled) laser printer toner cartridges for purposes of government procurement.
In the final determination, CBP explained that Nukote’s printer cartridges are recycled from empty toner cartridges that have been collected “in the United States and, to a substantially lesser extent, in Canada, Singapore, the United Kingdom, Hong Kong and China.” The empty cartridges are sorted in an unnamed “foreign location,” and certain manufacturing processes take place in an unnamed “second foreign location,” before final processes are undertaken in the U.S.
CBP found that the merchandise in question was not substantially transformed in the U.S. and therefore was not a product of the U.S. for purposes of government procurement. However, CBP did not articulate where the goods were substantially transformed, and therefore did not positively identify the country of origin. (See ITT’s Online Archives or 08/14.07 news, 07081410, for BP summary of CBP’s determination.)
Xerox sought a ruling from the Court that CBP had erred, arguing that the processing of Nukote’s goods in the U.S. was sufficient to effect substantial transformation, and that the country of origin for purposes of government procurement was therefore the U.S.
CBP Moved to Dismiss Case as Not Under CIT’s Jurisdiction, Not Justiciable
CBP moved to dismiss the case, alleging that the particular determination it made in this instance was not the type of determination the CIT has jurisdiction to review. CBP also argued that the case raised no “justiciable controversy,” as even a favorable ruling would not provide meaningful relief to Xerox. This is because a ruling that Nukote’s goods were substantially transformed in the U.S. would not address whether they met the 50% domestic content requirement of the BAA, and CBP could not imagine any other purpose for which Nukote or Xerox could have wanted the requested ruling.
Court Denied CBP’s Claims, Said Its Ruling Was Incomplete
The court denied CBP’s motion to dismiss the case, stating that it does have jurisdiction over such determinations and that the case does have justiciable controversy, as country of origin determinations have utility and value.
The court determined that while nothing about CBP’s inquiry in its final determination was fundamentally inconsistent with statute, it left the job unfinished. CBP failed to indicate whether Nukote’s goods are or are not products of a DFCI -- or where they were substantially transformed, if at all. (CBP only determined that the goods were not substantially transformed in the U.S. and therefore were not products of the U.S.)
(The court did not dispute CBP’s practice of issuing country of origin determinations instead of “product of” DFCI determinations for purposes of government procurement, stating that once the country of origin is determined, whether or not the article is a product of a DFCI becomes self-evident.
The court also stated that CBP has leeway to state that it cannot make an origin determination when it has insufficient facts to do so.3)
Remanded Back to CBP to Identify Country of Origin or State Why Not Possible
Therefore, no later than February 8, 2011, CBP must file with the Court a final determination upon remand that is consistent with the court’s Opinion and Order. The determination must identify the country of origin of Nukote’s printer cartridges for purposes of government procurement or make an explicit final determination that the country of origin cannot be determined.
No later than February 15, 2011, the parties must also submit to the court a joint proposed scheduling order governing the balance of this case.
128 USC 1581(e) concerns CIT’s jurisdiction over civil actions to review certain determinations, including those under section 305(b)(1) of the Trade Agreements Act of 1979 which provide for the Secretary of the Treasury (or Customs, the Secretary’s designee) to issue advisory rulings and final determinations on whether an article is or would be a product of a foreign country or instrumentality designated as eligible for certain benefits.
2An 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.
3The CIT also noted in its ruling that if CBP were to make a speculative determination upon insufficient facts, it would have the same practical effect as finding that the articles in question do not qualify as products of any DFCI.
(Slip-Op. 11-8, dated 01/24/11)