TIRED OF CUSTOMS' DELAYS, FIRM DROPS MARKETING PLAN \ CASE SHOWS GOVERNMENT YET TO "REINVENT' ITSELF

TIRED OF CUSTOMS' DELAYS, FIRM DROPS MARKETING PLAN \ CASE SHOWS GOVERNMENT YET TO "REINVENT' ITSELF

Good things come to those who wait, but in the case of a California high-tech company that anticipated an advanced determination from U.S. Customs on the origin of its product, the wait was not worth it.

Xircom, Thousand Oaks, Calif., a manufacturer of PC cards, got the decision it wanted from Customs on Jan. 29. But the wait was so long, it simply gave up on its marketing plan to sell PC cards to the U.S. government.The lengthy delay in getting an advanced ruling on country of origin is significant, because it underscores how regulatory matters can affect not only the flow of goods but also investment decisions on where to manufacture and which markets to target.

Xircom's case also demonstrates the continued sluggishness of the government, despite numerous efforts to streamline the regulatory process.

It also suggests that, while the U.S. government ardently tries to open foreign government-procurement markets, dealing with the government in Washington is not always a simple process.

The country-of-origin ruling sought by the company in May 1996 was important, since Xircom wanted to manufacture in Mexico, which qualifies for waivers to the Buy America rules for U.S. government procurement. Xircom had to prove that substantial transformation of the product took place. Xircom has traditionally manufactured in Malaysia.

If the product had been judged of Malaysian origin, Xircom could not have qualified for Buy America waivers, and the investment would be for naught.

Tired of waiting on the government, the company made a decision. ''We felt compelled to shelve the whole thing,'' said Randall Holliday, Xircom's in-house attorney.

Xircom generally does not sell to retailers, but instead to companies like Toshiba that use its PC cards as components in their computers.

As part of new market strategy, it sought to manufacture in Mexico to sell to the U.S. government.

Following the Jan. 29 decision by Customs, Xircom officials are rethinking the Mexico plan they had abandoned.

''It may cause us to revisit the plan and give some additional thought,'' said Mr. Holliday.

Customs published a decision in Jan. 29 editions of the federal register. The agency agreed with Xircom that a substantial transformation took place in the programming and assembly in Mexico, giving it a Mexican origin.

Customs Senior Counsel Burt Schlissel, in the Office of Regulations & Rulings, provided the decision but could not be reached for comment.

The PC cards assembled by Xircom are the size of a credit card and plug into the PC slot of a portable computer to provide either a modem connection or a local area network connection.

The principal hardware component, the printed circuit board and components, was manufactured for Xircom in Penang, Malaysia.

Software components and operational software on diskettes would come from the United States, and programming and assembly would take place in Mexico.