CBP Finds Transponders From China Not Transformed by Programming in Canada

Modems manufactured in China and sent to Canada for programming and other processing are not transformed in Canada and should be considered a product of China, CBP said in a Nov. 26 ruling. The ruling was in response to a request from Electroline Equipment, which asked CBP about NAFTA treatment and the country of origin of the transponders. The transponders are subject to the Section 301 tariffs on goods from China because China is the country of origin, the agency said.

The modems are made in China but sent to Canada in order to become transponders, which are used by cable and telecommunications companies. “The transponders are based on cable modem hardware technology, but the programming completed in Canada turns the unprogrammed modems into a measuring and controlling device that uses the cable modem communication channels to transmit telemetry data, send alarms, and execute actions sent by the cable operator network management system,” the company said. Even so, Electroline said it uses the name “modem” in some product names because one selling point “is that the product can easily be integrated into a customer’s back office software and system as a modem while their network management group accesses the transponder.”

The company argued that after the operations in Canada “the complete transponders are a different article from the Chinese origin modems.” But, because the transponders can also be integrated as modems, “the programming is adding an additional functionality, rather than completely changing the function,” CBP said. Also, “downloading of the firmware onto the Flash Memory is not a permanent change that cannot be undone. Therefore, we find that the programming and testing in Canada do not substantially transform the transponders, and the country of origin of the transponders is China.” The transponders may be marked as products of Canada but are subject to the Section 301 duties, CBP said.