In a Final Determination published in the Federal Register in May, U.S. Customs and Border Protection held that application software installed on existing computers and on an ID scanner manufactured in China did not substantially transform the individual elements (ID scanner, labels, printer and barcode scanner) into a Visitor Management System (VMS).

The scanners and printers functioned as such when imported, and the software, while defining a specific use, did not change the basic function of the hardware. Although the Federal Acquisition Regulation contemplates that an “end product” offered under a Trade Agreements Act (TAA)-covered contract should have a single country of origin, CBP found each element of the VMS retained its individual country of origin, two of which were from China, a non-designated country.

CBP declined, however, to provide a country of origin determination for the application software itself suggesting that “to the extent that the Raptor software is an intangible product developed in the United States and transmitted electronically via intangible signals, the Raptor software, by itself is not subject to the country of origin determinations issued by CBP for purposes of U.S. Government procurement.”

While there is significant merit to this position and perhaps welcome news to contractors selling software to the government, it is hard to reconcile with the growing number of CBP determinations that have in fact found substantial transformation for software products. The CBP distinguished the most recent of those determinations, H268858, on grounds that it involved software that became a tangible product when loaded on U.S.-origin discs for sale to the government.