[Federal Register: December 21, 2005 (Volume 70, Number 244)]
[Notices]
[Page 75837-75840]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21de05-87]
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DEPARTMENT OF LABOR
Employment and Training Administration
[TA-W-50,129 and TA-W-50,129A]
IBM Corporation, Global Services Division, Piscataway, NJ; IBM
Corporation, Global Services Division, Middletown, NJ; Notice of
Negative Determination on Remand
The United States Court of International Trade (USCIT) remanded to
the Department of Labor (Labor) for further investigation Former
Employees of IBM Corporation, Global Services Division v. U.S.
Secretary of Labor, Court No. 03-00656. The USCIT's Order was issued on
August 1, 2005.
A petition for Trade Adjustment Assistance (TAA), dated November
13, 2002, was filed on behalf of workers at IBM Corporation, Global
Services Division, Piscataway and Middletown, New Jersey (the subject
firm). The petitioning workers had been employed by AT&T and had
handled the same responsibilities for IBM, after being outsourced by
AT&T to IBM in 2000.
In the petition, the workers alleged that the subject firm was
shifting computer software production to Canada and importing those
products from Canada. Upon institution of the petition on November 19,
2002, the Department conducted an investigation to determine whether
the subject workers were eligible to apply for TAA. The relevant period
for purposes of the investigation was determined to be November 2001
through November 2002.
For workers of the subject firm to be certified as eligible to
apply for TAA, the following criteria must be met:
(1) A significant number or proportion of the workers in such
workers' firm, or an appropriate subdivision of the firm, have
become totally or partially separated, or are threatened to become
totally or partially separated; and
(2) The sales or production, or both, of such firm or
subdivision have decreased absolutely, imports of articles like or
directly competitive with articles produced by such firm or
subdivision have increased, and the increase in imports contributed
importantly to such workers' separation or threat of separation and
to the decline in the sales or production of such firm or
subdivision; or
(3) There has been a shift in production by such workers' firm
or subdivision to a foreign country of articles like or directly
competitive with articles which are produced by such firm or
subdivision; and the country to which the workers' firm has shifted
production of the articles is a party to a free trade agreement with
the United States, is a beneficiary country under the Andean Trade
Preference Act, African Growth and Opportunity Act, or the Caribbean
Basin Economic Recovery Act or there has been or is likely to be an
increase in imports of articles that are like or directly
competitive with articles which are or were produced by such firm or
subdivision.
29 U.S.C. Section 222
The investigation revealed that the workers were engaged in the
analysis and maintenance of computer software and information systems
(identifying product requirements, developing network solutions, and
writing software). The Department determined that the workers did not
produce an article within the meaning of Section 222 of the Trade Act.
The Department's determination was issued on March 26, 2003. The Notice
of determination was published in the Federal Register on April 7, 2003
(68 FR 16834).
By application of April 29, 2003, a petitioner requested
administrative reconsideration of the Department's negative
determination regarding eligibility for workers and former workers of
the subject firm to apply for TAA. In the request for reconsideration,
the petitioner alleged that the workers did produce an article and
argued that the denial was the result of an overly narrow and
antiquated interpretation of production by the Department.
The Department reviewed the petitioner's request for
reconsideration and affirmed that the workers did not produce an
article within the meaning of Section 222 of the Trade Act. Prior to
making the determination, the Department reviewed the legislative
intent of the TAA program as well as the language of the Trade Act. The
Department also reviewed the Harmonized Tariff Schedule of the United
States (HTSUS) and the North American Industry Classification System
(NAICS), and sought guidance from the U.S. Customs Service (Customs).
On June 26, 2003, the Department issued a Notice of Negative
Determination Regarding Application
[[Page 75838]]
for Reconsideration. The Department's Notice of determination was
published in the Federal Register on July 15, 2003 (68 FR 41845).
By letter dated September 11, 2003, the Plaintiffs requested
judicial review by the USCIT, asserting that the workers of the subject
firm produced an article within the meaning of the Trade Act and
characterizing the Department's basis for denying certification for the
subject workers as irrational.
The USCIT's August 1, 2005 Order directed the Department to (1)
further investigate the nature of the software produced by the
Plaintiffs, including whether the software was embodied in any kind of
physical medium, (2) explain the differences between the activities
performed by the Plaintiffs and those performed by other petitioners
involved in developing software who had received TAA benefits in the
past, and (3) explain and support the Department's position with
respect to the characterization of the software at issue as an article
or a service.
Remand Investigation Findings
During the remand investigation, the Department obtained additional
information and clarification, from two subject firm officials, SAR 1,
2-6, 19-42, 48-50, 57-59, 62-67, 70-73, and Plaintiffs, SAR 1, 7-18,
42-47, 51-56, 60-61, 68-69 and position descriptions of the petitioning
workers. SAR 22-42. The Department also conducted a conference call
with subject firm officials to clarify a technical matter regarding the
software. SAR 1. Further, the Department took action to reconcile
conflicting information. SAR 73.
In order to determine whether the Plaintiffs engaged in activities
which constitute production, the Department requested that the
Plaintiffs and the subject firm provide the Department with information
about the workers' functions, and copies of the workers position
descriptions. SAR 4, 8. Information regarding the workers' functions
was received from all three Plaintiffs. SAR 17, 43, 53.
According to the Plaintiffs, the separated workers were Information
Technology (IT) Specialists, SAR 17, 43, 53, who identified software
program specifications, created source code, generated unit and string
testing, and ensured that system input and processing were accurate.
SAR 17, 18, 43, 52, 53. The software and source code were stored in
disk drives (also known as a Direct Access Storage Device) at a
mainframe data center located at the client's facility and were
``viewable on remote terminals.'' Workers could access the software and
code regardless of where they were stored. Corrections were made by
``changing the source code and compiled software that reside on the
Direct Access Storage Devices.'' SAR 54, 55. ``Back-ups of programs
were also kept on tapes and CDs * * * Code was delivered on the shared
directories of hard drives, where it could be accessed by those who
needed to view or test. CDs were also used in some instances.'' SAR 66.
Information provided by the subject firm, including the various
position descriptions which account for a significant majority of the
displaced workers, confirms that the workers were IT Specialists, with
various levels of expertise, who provided services and assisted in the
construction, implementation, and integration of software systems. More
senior workers may also have identified new IT services opportunities
and developed tools and methods for managing, analyzing, designing and
implementing IT solutions. SAR 22-42.
Nature of the Software Produced by the Plaintiffs
Software consists of source code (text written by software
developers commanding the computer to do a certain task) and object
code (text written in the language of the computer which enables the
computer to execute the command, hence, also known as the execution
file). The object code operates as a ciphering key because, without the
proper object code, the source code cannot be executed. In some
instances where computers cannot interface, an object code may be
required to read or translate another object code before the source
code can be executed.
The software at issue is client (AT&T) legacy (old, pre-existing)
mainframe software and midrange software for network applications and
systems (software used to run and repair the client's older systems),
SAR 1, 20, and was designed to operate on the client's mainframe
computers. SAR 17, 52, 53, 55. The software could be accessed remotely
by the workers. SAR 55, 66, 73. The source code at issue was not
provided to the client on a physical medium.
The information initially provided regarding whether the software
was embodied on a physical medium appeared to be inconsistent.
According to a Plaintiff, Mr. Plumeri, ``[t]he code was stored on
either mainframe, Windows or Unix based servers. Backups of programs
were also kept on tapes and CDs * * * Code was delivered on the shared
directories of hard drives, where it could be accessed by those who
needed to view or test. CDs were also used in some instances.'' SAR 66.
The other two Plaintiffs, Mr. Fusco and Ms. Berger, stated that the
``software, since it was designed to run on mainframe computers, was
embodied on the disk drives'' in the client's off-site data center. SAR
17, 52, 54. The subject firm, moreover, stated that the software was
electronically stored and delivered to the client's internal servers
and the software is not embodied or delivered to AT&T in any kind of
physical medium. SAR 20, 71.
In order to reconcile the apparent conflict, the Department
contacted the subject firm for an explanation. SAR 1, 73. According to
the subject firm, source code and documentation related to the
development of the software at issue is stored in and shared through an
internal server, and while back-up copies are saved on CD, the CDs are
not shared with the client. SAR 73.
The subject firm officials also explained that the CDs presented to
the client contained only those documents, such as billing invoices and
work schedules, generated for contract administration purposes, along
with the object code the client needed to access the business
documents. In that very narrow regard, there was software sent from the
subject firm to the client through a physical medium. However, that
software was not source code and was not related to the software that
was produced by the former employees and transmitted electronically to
the client. There was no software reduced to a physical medium for the
purpose of serving the client. SAR 73.
Differences Between Activities Performed by the Plaintiffs and Those
Performed by Software Development Petitioners Who Received TAA Benefits
in the Past
Information provided for the record by the Plaintiffs and the
subject firm substantiated that the workers were IT Specialists
performing software design and implementation activities (software
architecture, systems engineering, design, development, coding,
testing, installing and product support). SAR 17, 21, 43, 52, 53. The
record evidence does not indicate that the workers were engaged in
production or the support of production of an article at an affiliated
facility.
The Department's practice of certifying non-production workers who
support an affiliated domestic production facility has been consistent.
In past cases where petitioners involved in developing software were
certified as eligible to apply for TAA, the workers supported an
affiliated domestic
[[Page 75839]]
production facility. For example, recently, the Department certified
software writers in Former Workers of Ericsson, Inc. v. Elaine Chao,
United States Secretary of Labor (Court No. 02-00809). In Ericsson, the
workers wrote software code which was embodied on a physical medium
(CD-Rom). The CD-Rom was mass-produced at an affiliated, domestic
facility and then distributed to customers. The workers of the subject
firm were certified because they supported an affiliated domestic
production facility whose workers independently qualified for TAA
(mass-production of the CD-Rom shifted to a qualifying country).
The record, as fully developed on remand, strongly supports the
conclusion that the Plaintiffs did not meet the criteria satisfied in
Ericsson and related software cases. Therefore, the Department properly
determined that the plaintiffs were not eligible to apply for TAA
benefits.
Department's Position With Respect to the Characterization of the
Software at Issue as an Article or as a Service
While the Trade Act does not include a definition of ``article''
among the definitions applicable to the TAA program, the term is
integral to making TAA determinations and, as such, the Department has
given the meaning of ``article'' considerable thought. The USCIT has
recognized that, as used in the Trade Act, the term ``article''
embraces a tangible commodity. See Nagy v. Donovan, 571 F. Supp 1261,
1263 (CIT 1983). This position was recently supported in Former
Employees of Gale Group, Inc. v. U.S. Secretary of Labor, Court No. 04-
00374, 2005 WL 3088605 * 5 (November 18, 2005) and Former Employees of
Merrill Corp. v. U.S. Department of Labor, 389 F. Supp.2d 1326, 1342-
1343 (CIT 2005).
In Gale Group, the USCIT held that workers who ``performed
electronic indexing services'' were not eligible for TAA benefits,
because they did not produce an article for the purposes of 19 U.S.C.
2272(a)(2)(B). Gale Group * 4. Further, the USCIT held that the denial
of TAA benefits was a reasonable interpretation supported by
substantial evidence and in accordance with law, notwithstanding
plaintiffs' arguments that other sources of law (i.e., the American Job
Creation Act of 2004; various state tax cases; and determinations by
the International Trade Commission (ITC) under the ITC's Trade Act
Sec. 337 authority to protect intellectual property) could support a
ruling in their favor.
Trade Act Sec. 337 was amended in 1988, for the express purpose
making it ``broad enough to prevent every type and form of unfair
practice.'' S. Rep. 595, 67th Congress, 2d Session, at 3. Therefore, it
was foreseeable that the ITC, applying that expanded remedial
authority, would find that it was not limited to acts that occur during
the physical process of importation. For example, the ITC has held
that, while the Commission ``accommodates, where possible, the policies
and views of [the U.S.] Customs [Service] (which ``has determined not
to regulate electronic transmissions''),'' there were circumstances
where it was ``appropriate to reach such importations.'' In Re Certain
Hardware Logic Emulation Systems and Components Thereof, USITC Inv. No.
337-TA-383, 1998 WL 307240, page 11 (March 1998).
Trade Act Sec. 222, which controls the present proceeding, has not
undergone any such amendment. Indeed, there have been several recent
legislative efforts (most recently in June 2005) to amend the Trade Act
so that it does cover service workers as well as production workers.
However, those efforts, to date, have been unsuccessful. Thus, the
Department's disposition of the present case is properly controlled by
existing Trade Act Sec. 222, under which the Department applies the
HTSUS to require that an ``article'' be a tangible object, not by the
ITC's application of its broad Trade Act Sec. 337 authority in
intellectual property cases.
Throughout the Trade Act, an ``article'' is referenced as something
that can be subject to a duty. Telecommunications transmissions
(including electronically transmitted software code) are specifically
exempted from duty as they are not goods subject to the provisions of
the HTSUS General Note 3(I). Because the software code at issue is
electronically manipulated and delivered to the client only in an
electronic form, the Plaintiffs do not produce an article. See, e.g.,
Former Employees of Dendrite International, 70 FR 21247-3 (April 25,
2005).
Plaintiffs Argue That the Department's Interpretation of ``article'' is
Overly Narrow
The Department's interpretation of ``article'' to require a
tangible state is consistent with Congressional intent and supported by
legislative history of the Trade Act. The Trade Act was designed to
counteract the effects of imports upon the manufacturing sector and
other labor-intensive industries. See S. Rep. No. 1298, 93rd Cong.
(1974), reprinted in 1974 U.S.C.A.N. 7186. Since Congress took explicit
legislative action to set criteria for TAA eligibility, any expansion
of Trade Act's scope should be the result of legislation. Further, the
Department is obligated to be faithful to the legislative will and is
bound to the language of the statute. See Machine Printers and
Engravers Ass'n v. Marshall, 595 F.2d 860, (D.C. Cir. 1979). As already
noted, while legislation has been proposed that would expand the scope
of the Trade Act to include service workers such as the plaintiffs, to
date, no such amendment has been adopted.
The Department's reliance on the HTSUS to exclude the plaintiffs
from eligibility is appropriate. See Former Employees of Murray
Engineering v. Chao, 358 F. Supp.2d 1269, 1272 n.7 (CIT 2005) (``the
language of the Act clearly indicates that the HTSUS governs the
definition of articles, as it repeatedly refers to ``articles'' as
``items subject to a duty''); HTS, General Note 3(I) (exempting
``telecommunications transmissions'' from ``goods subject to the
provisions of the [HTSUS]''). For the Department to abandon the use of
the HTSUS and abrogate its current practice would be inappropriate
unless the Department had an adequate substitute, such as one contained
in the Code of Federal Regulations.
The Department's treatment of service (including software) cases
and its requirement that articles be tangible has been consistent.
Service workers may be certified only if they directly support
production of an article. Under the Department's methodology, non-
production workers may be eligible for TAA certification as ``support
service workers'' if:
(1) Their separation was caused importantly by a reduced demand
for their services from a parent firm, a firm otherwise related to
the subject firm by ownership, or a firm related by control;
(2) The reduction in the demand for their services originated at
a production facility whose workers independently met the statutory
criteria for certification; and
(3) The reduction directly related to the product impacted by
imports.
Former Employees of Henderson Sewing Mach. v. United States, 265 F.
Supp. 2d 1346, 1359 (CIT 2003) (citing Former Employees of Chevron
Prods. Co. v. United States Sec'y of Labor, 245 F. Supp. 2d 1312, 1328-
29 (CIT 2002) (citing Bennett v. U.S. Sec'y of Labor, 20 CIT 788, 792
(1996); Abbott v. Donovan, 570 F. Supp. 41, 49 (1983))).
The Court in Henderson Sewing sustained the Department's
interpretation of the statute to preclude certification of petitioners
as support service workers in the instance where no production employee
independently
[[Page 75840]]
qualified for certification. Id. at n.16. (citing Abbott, 570 F. Supp.
at 49 (citing Woodrum, 564 F. Supp. 826) (``the Court must accord
substantial deference to the interpretation of the statute [19 U.S.C.
2272(a)] by the agency [Labor] charged with its administration'');
Bennett, 20 CIT at 792 (stating in pertinent part that ``plaintiff[s]
are eligible for certification [as support service workers] when * * *
their separation is caused by a reduced demand for their services from
a production department whose workers independently meet the statutory
criteria for certification'' and holding that ``Labor permissibly and
reasonably interpreted [19 U.S.C. 2272(a)] in formulating the test for
certifying support service workers'').
The Department has consistently determined that workers engaged in
the design and development of software may be certified if they support
an affiliated, domestic firm at which workers are engaged in producing
a trade-impacted ``article.'' See, e.g., Notice of Determinations
Regarding Eligibility to Apply for Worker Adjustment Assistance and
NAFTA Transitional Adjustment Assistance in: Ericsson, Inc., Messaging
Group, Woodbury, N.Y., 68 FR 8619-8621 (TA-W-50,446) (Feb. 24, 2003);
Computer Sciences Corporation at Dupont Corporation, 67 FR 10767 (TA-W-
39,535) (March 8, 2002); e-Gain Communications Corporation, Novato
California, 68 FR 50195 (TA-W-51,001) (Aug. 20, 2003).
Workers in these cases were certified based, in part, upon a
finding that the subject facilities produced hardware or software
embodied in some tangible format. Workers in the case at hand, however,
do not directly support certifiable production workers eligible for TAA
benefits, and this distinction explains the different results in cases
involving workers engaged in similar activity. While the case results
may differ, based on the particular facts of each case, the
Department's application of the statute has been consistent.
The Department has carefully investigated the matter on remand and
has found no basis to support finding that workers of IBM Corporation,
Global Services Division, Piscataway and Middletown, New Jersey are
engaged in the production of an article or support for the production
of an article. Consequently, they are not eligible for certification.
Conclusion
In the case of IBM Corporation, Global Services Division,
Piscataway and Middletown, New Jersey, it has been clearly established
that the workers of the subject facility did not produce an article or
support the production of an article within the meaning of the Trade
Act and that they are not eligible for certification.
As the result of the findings of the investigation on remand, I
affirm the original notice of negative determination of eligibility to
apply for adjustment assistance for workers and former workers of IBM
Corporation, Global Services Division, Piscataway and Middletown, New
Jersey.
Signed at Washington, DC, this 9th day of December, 2005.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. E5-7600 Filed 12-20-05; 8:45 am]
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