[Federal Register: August 30, 2004 (Volume 69, Number 167)]
[Notices]
[Page 52935-52938]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30au04-90]
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DEPARTMENT OF LABOR
Employment and Training Administration
[TA-W-50,588]
Murray Engineering, Inc. Complete Design Service, Flint,
Michigan; Notice of Negative Determination on Remand
The United States Court of International Trade (USCIT) remanded to
the Department of Labor for further investigation Former Employees of
Murray Engineering v. U.S. Secretary of Labor, USCIT 03-00219. The
Department concludes that the subject worker group does not qualify for
eligibility to apply for Trade Adjustment Assistance (TAA) benefits for
two reasons. First, the subject facility does not produce an article
because designs are not an article for TAA purposes. Second,
irrespective of whether the subject facility's designs are articles,
the petition would be denied because there was neither a shift of
production nor increased imports as required under section 222(a) of
the Trade Act of 1974, as amended (Trade Act), and the workers do not
qualify as adversely affected secondary workers under section 222(b) of
the Trade Act.
On January 15, 2003, the petitioner filed a petition on behalf of
workers of Murray Engineering, Inc., Complete Design Service, Flint,
Michigan (``Murray Engineering'') for TAA. The petition stated that
workers design automotive gauges, tools, fixtures, and dies.
The Department's initial negative determination for the former
workers of Murray Engineering was issued on February 5, 2003. The
Notice of Determination was published in the Federal Register on
February 24, 2003 (68 FR 8620). The Department's determination was
based on the finding that workers provided industrial design and
engineering services and did not produce an article within the meaning
of Section 222 of the Trade Act.
In a letter dated February 19, 2003, the petitioner requested
administrative reconsideration of the Department's negative
determination. The petitioner alleged that Murray Engineering produced
a ``tangible drawing essential and integral to the making or building
of a product'' and that the Department was misled by the ``Service'' in
the company's name.
The Department denied the petitioner's request for reconsideration
on March 31, 2003, stating that the engineering drawings, schematics,
and electronically generated information prepared by the subject worker
group were not considered production within the meaning of the Trade
Act. The Department further stated that the fact that the information
is generated on paper is irrelevant to worker group eligibility for
TAA. The Department's Notice of Negative Determination Regarding
Application for Reconsideration was published in the Federal Register
on April 15, 2003 (68 FR 18264).
By letter of April 30, 2003, the petitioner appealed the
Department's denial of the request for reconsideration to the USCIT
asserting that ``machine drawings (plans) are an article.'' The
petitioner asserts that the subject worker group should be eligible to
apply for TAA due to imports of like or directly competitive articles
and, alternatively, because they are adversely affected secondary
workers.
The Department filed a motion requesting that the USCIT remand the
case to the Department for further investigation, and the USCIT granted
the motion.
The Department issued its Notice of Negative Determination on
Remand on August 20, 2003. The Notice was published in the Federal
Register on September 10, 2003 (68 FR 53395). The remand determination
stated that the workers did not produce an article and were not
eligible for certification as workers producing an article affected
either by a shift of production or by imports, or as adversely affected
secondary workers.
On May 4, 2004, the USCIT remanded the matter to the Department for
further investigation, directing the Department to investigate: (1) The
nature of the designs provided by Murray Engineering to its
customers;(2) how the designs are sold to Murray Engineering's
customers; (3) what proportion of the designs are printed or embodied
on CD-Rom/diskette; and (4) how the petitioner's eligibility to apply
for TAA is affected by the different formats in which the designs are
embodied. The USCIT reserved judgment whether the Murray Engineering
workers are qualified for certification as adversely affected secondary
workers.
The designs created by Murray Engineering are used to make
machines, tools, gauges, dies, molds and fixtures for hydraulic,
pneumatic, mechanical, and electrical systems used in the manufacture
of products. Each design is unique because each one is job specific and
tailored to customer's specifications. Workers use computer software
such as Unigraphics and Auto Cad to create each design.
According to the Murray Engineering company official, Murray
Engineering customers are charged for the labor incurred in the
creation of the designs and can either pay by design or pay by the
hour. Printed copies of the design are provided to customers about two-
thirds of the time and, in all instances, designs are provided on CD-
Rom.
When a project is accepted by Murray Engineering, it is assigned to
a designer to develop the designs. The assigned designer is responsible
for understanding and adhering to the design specifications,
understanding the client's product and manufacturing operations, and
working with the client to develop the final design. The designer
creates multiple designs for the customer, from which the customer
would choose one, and Murray Engineering would then modify the chosen
design as requested. The design process requires constant input and
approval by the customer. Steps of the design process may be repeated
before the final design is approved by the customer.
Once the designs are completed and meet the customer's
requirements, the designs are saved on Murray Engineering's computer
network. The designs are then hand-delivered to the customer in the
format that the customer has requested. As noted above, in all cases
the designs are provided on CD-Rom, and in two-thirds of the cases
printed copies are provided. Data charts, test results, and other
schematics may accompany the designs when the designs are sent to the
customer.
The job descriptions provided by Murray Engineering for the
Complete Design Service show that workers are engaged primarily in
activity related to the preparation of designs of machines, tools,
gauges, dies, molds and fixtures for hydraulic, pneumatic, mechanical,
and electrical systems used in the manufacture of products. The
positions are detail-oriented and require a wide range of technical
skills (including designing, drafting, mathematical computation, and
computer graphics). Additionally, some drafters and designers may be
required to take additional training and acquire the skills and
knowledge (including familiarity with the client's products and
manufacturing operations) needed to create the design per
specifications.
[[Page 52936]]
The USCIT's May 4, 2004 decision suggests that any item classified
in the Harmonized Tariff Schedule of the United States (``HTSUS'') is
an ``article'' for all purposes of the Trade Act, including the TAA
program. If one relies solely on HTSUS classification codes, one would
conclude that the workers of Murray Engineering produce an article
within the meaning of the TAA program because designs printed on paper
and designs transmitted on diskette or CD-Rom are included under HTSUS
classification codes. Designs recorded on paper are identified in
heading 4911, HTSUS, and designs recorded on diskette or CD-Rom is
identified in subheading 8524.39.40, HTSUS. Since Murray Engineering
provides all designs to its customers on CD-Rom, the designs would be
included under subheading 8524.39.40, HTSUS, and the two-thirds of the
designs provided on paper would be included under heading 4911, HTSUS.
However, the Department believes that rote application of HTSUS
classification codes is not the sole arbiter in this matter, and the
Department bases this determination that the workers do not produce an
article for TAA purposes upon a careful review of many sources of
information rather than limiting its analysis to rote application of
HTSUS classification codes.
The Department believes that HTSUS classification codes are not, in
this case, determinative because the designs are subject to duty only
to the extent that the medium upon which it is recorded is subject to
duty. Clarifying this point, the duty would be levied without regard to
the content or value of the designs themselves, but rather is
determined by the medium itself. Thus, designs recorded on paper are
subject to duty only to the extent that the medium upon which they are
recorded (paper) is subject to duty (heading 4911, HTSUS). Likewise,
designs recorded on diskette or CD-Rom are subject to duty only to the
extent that the medium upon which they are recorded is subject to duty
(subheading 8524.39.40, HTSUS). In contrast, telecommunication
transmissions, such as electronic mail, television and radio signals,
and Internet activity, are exempt from the HTSUS (General Note 3e(ii))
and, therefore, designs sent by such means are not subject to duty.
This is an important distinction because workers of Murray Engineering,
Complete Design Service are engaged in developing designs and not in
the manufacture of the mediums on which the designs are conveyed to
customers.
The Department believes it would lead to absurd results and would
contravene the purposes of the TAA program to condition the workers'
eligibility for benefits on the medium through which designs are
provided to customers. Allowing the medium of conveyance to control
whether designs are articles for purposes of determining TAA worker
group eligibility would result in workers performing identical work as
Murray Engineering workers being denied TAA benefits if their firm
solely e-mailed designs to customers, without providing them on CD-Rom,
diskettes, or paper. The Department believes this would be an unjust
and absurd basis for distinguishing whether a group of workers would be
eligible to apply for TAA. Therefore, the Department believes that it
would be erroneous to conclude that the Murray Engineering designs are
articles solely because they would, because of their medium of
conveyance, fall under specified HTSUS classification codes.
Although HTSUS classification codes arguably support that designs
are articles, other sources support the conclusion that designs are not
articles for TAA purposes. These sources include: (1) Documents
illustrating the company's self-identification as a service provider,
the design creation process, and the workers' job descriptions; (2)
information from the Department of Homeland Security, U.S. Customs and
Border Protection (Customs); (3) the Central Product Classification
system compiled by the United Nations; (4) the World Trade
Organization's ``Services Sectoral Classification List'' and General
Agreement on Trade in Services; and (5) the Department of Labor, Bureau
of Labor Statistics, Occupational Outlook Handbook.
Murray Engineering identifies itself as a company that provides
industrial design and engineering solution services to manufacturing
industries. The company official has consistently referred to Murray
Engineering as a service provider and the Department notes that the
company was unable to provide production figures because no such
records are kept since it considers itself to be a service company.
That Murray Engineering gives customers the option of paying by the
hour rather than by the design further supports that Murray Engineering
does not produce an article because common experience is that payment
by hours of labor rather than by quantity of a finished product is not
an option provided to customers purchasing articles.
The Department sought information from Customs, because Customs is
an authority on import classification, on the classification of designs
and whether Murray Engineering's designs are subject to duty under the
HTSUS. Customs suggested that the Department review the U.S. Customs
Service, Customs Bulletin and Decisions, Volume 36, No. 6 (February 6,
2003), Attachment A (a collection of Customs classification decisions).
Throughout Attachment A, Customs valued carrier media bearing data or
instructions, inclusive or exclusive of the value of the recorded data
or instructions, only on the cost or value of the carrier medium
itself. That Customs classifies and values imports based on physical
characteristics supports that the Murray Engineering designs are not
``articles'' for TAA program purposes because they would be dutiable
based on the medium of conveyance rather than the designs contained on
the medium. As noted above, this is important because workers of Murray
Engineering, Complete Design Service are engaged in design work and not
in the manufacture of the medium of conveyance.
Pursuant to a suggestion by the U.S. International Trade
Commission, the Department sought guidance from the United Nations'
Central Product Classification system (CPC), which also supports that
the Murray Engineering designs are not articles. The United Nations
developed the CPC to provide unrestricted access to selected global
data, including international trade statistics. The CPC classifies
items into products and services. It is clear from a review of the CPC
that design work is a service. The designs created by the workers of
Murray Engineering are covered by Section Eight (``Business services;
agricultural, mining and manufacturing services''), Group 867
(``Architectural, engineering and other technical services''), Class
8672 (``Engineering services''), Subclasses 86725 (``Engineering design
services for industrial processes and production'') and 86726
(``Engineering design services n.e.c.''). The Explanatory note for
Subclass 86726 states that ``[i]ncluded here are acoustical and
vibration engineering designs, traffic control system designs,
prototype development and detailed designs for new products and any
other specialty engineering design services.'' The identification of
design work as a service supports that designs are not an article.
Further, the Department referred to a World Trade Organization
(WTO) classification system, the ``Services Sectoral Classification
List,'' that is similar to the CPC and supports a conclusion that
Murray Engineering does not produce articles. The ``Services
[[Page 52937]]
Sectoral Classification List'' identifies and describes types of
services in various industries. This classification list was developed
as a reference for the international trade community when dealing with
services negotiations. A careful review of this list shows that it
follows the CPC and lists ``Engineering services'' in Section 8672 and
``Related scientific and technical consulting services'' in Section
8675. The Department believes that the Murray Engineering design work
logically falls within these classifications, supporting that the
workers perform a service and do not produce articles.
Finally among sources of information in the international trade
community, the Department referred to the WTO's General Agreement on
Trade in Services (GATS) for guidance. The GATS provides further
support for concluding that Murray Engineering does not produce
articles. The GATS is a set of rules covering international trade in
services. The GATS identifies ``architectural and engineering
services'' as a sector that ``includes work by engineering firms to
provide blueprints and designs for buildings and other structures and
by engineering firms to provide planning, design, construction and
management services for building structures, installations, civil
engineering work and industrial processes.'' This description
encompasses the design work performed by Murray Engineering and
supports that designs are not articles because the work is categorized
in a classification system that is specific to service work and, by its
very purpose, excludes manufacture and trade of tangible goods.
In addition to sources of information above, the Department
examined a source of information outside the international trade
community but within the Department of Labor, the Occupational Outlook
Handbook. The Occupational Outlook Handbook is published by the
Department of Labor, Bureau of Labor Statistics (BLS), and it provides
further support that a conclusion that designs are not articles. BLS
published the ``Occupational Outlook Information'' handbook in 1946 to
assist vocational counselors in finding employment for returning
veterans. BLS published the Occupational Outlook Handbook for civilians
in 1949. The purpose of the publication is to guide the general
public--schools, colleges, employment service offices, vocational
guidance counselors, and job-seeking individuals--in matters regarding
employment, training, and career development. The Department believes
this publication is useful for analyzing the proper classification of
design work because it reflects the Department's broader view of how
various jobs are classified.
The Occupational Outlook Handbook categorizes design work under the
job functions of ``drafters.'' The Occupational Outlook Handbook states
that ``[d]rafters prepare technical drawings and plans used by
production and construction workers to build everything from
manufactured products, such as toys, toasters, industrial machinery,
and spacecraft. . . . Their drawings provide visual guidelines, show
the technical details of the products and structures, and specify
dimensions, materials, and procedures. Drafters fill in technical
details, using drawings, rough sketches, specifications, codes, and
calculations previously made by engineers, surveyors, architects, or
scientists. . . . Some drafters use their knowledge of engineering and
manufacturing theory and standards to draw the parts of the machine in
order to determine design elements, such as the numbers and kinds of
fasteners needed to assemble the machine.'' This description applies to
the work performed by Murray Engineering workers.
The Occupational Outlook Handbook states, under the ``employment''
heading for the occupation of ``drafters,'' that ``[a]lmost half of all
jobs for drafters were in architectural, engineering and related
services firms that design construction projects or do other
engineering work on a contract basis for other industries.'' (Emphasis
added.) This description applies to Murray Engineering workers and
supports that drafting work is a service rather than involving the
production of an article.
Even if one concludes that the Murray Engineering designs are
articles for TAA purposes, the subject worker group cannot be certified
because the certification criteria are not met under either under
Section 222(a) of the Trade Act or, for adversely affected secondary
workers, under Section 222(b) of the Trade Act.
The Department also investigated, assuming for argument that
designs are articles, whether the certification criteria under Section
222(a) of the Trade Act have been met. This investigation inquired into
whether Murray Engineering shifted production from the subject facility
to another country, or whether the subject firm or its major declining
customers increased imports of products like or directly competitive
with those made at the subject facility. The investigation revealed
that Murray Engineering did not shift design work abroad or import
designs during the relevant time periods (2001 and 2002). The
Department conducted a survey of Murray Engineering's major declining
customers regarding their purchases of designs for periods 2001 and
2002. The customers surveyed constituted a significant portion of the
subject company's sales declines during the relevant time period. All
the customers reported no import purchases of designs during the
surveyed time periods.
Regarding TAA eligibility as adversely affected secondary workers
under section 222(b) of the Trade Act, the subject worker group can be
certified as eligible to apply for TAA as adversely affected secondary
workers only if Murray Engineering either: (1) Supplied components or
unfinished or semi-finished goods to a firm employing workers who are
covered by a certification of eligibility for adjustment assistance; or
(2) assembled or finished products made by such a firm. In the case at
hand, neither criterion is met because Murray Engineering did no
assembly or finishing work, nor did any of Murray Engineering's
customers' workers receive a certification of eligibility to apply for
TAA during the relevant time period.
In order to be eligible as suppliers of components or unfinished or
semi-finished goods, as petitioner claims the subject worker group to
be, the subject worker group must have produced a component part of the
product that is the basis of the TAA certification. Because Murray
Engineering did not produce a component part of a final product, they
were not secondary suppliers of a TAA-certified facility, as required
by section 222(b) of the Trade Act. Even if the design specifications
were sometimes mounted or affixed to their customers' manufacturing
equipment, the display of the design specifications were not necessary
for the equipment to function properly and did not enhance the
equipment's performance; thus, the designs were not component parts.
Further, Murray Engineering did no business with a TAA-certified
company during the relevant time period. The petitioning worker
specifically claims that Murray Engineering provided designs to Lamb
Technicon, a TAA-certified company (TA-W-40,267 & TA-W-40,267A).
However, Murray Engineering did business with Lamb Technicon most
recently in 1999, which is before the relevant time period for the
Murray Engineering petition at issue in this case. Therefore, Lamb
Technicon's certification (TA-W-40,267 & TA-W-40,267A) is not a valid
basis for
[[Page 52938]]
certifying Murray Engineering workers as adversely affected secondary
workers eligible to apply for TAA.
Conclusion
After careful reconsideration on remand, I affirm the original
notice of negative determination of eligibility to apply for TAA for
workers and former workers of Murray Engineering, Inc., Complete Design
Service, Flint, Michigan.
Signed at Washington, DC this 19th day of August 2004.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. 04-19672 Filed 8-27-04; 8:45 am]
BILLING CODE 4510-30-P