Modification of Headquarters Ruling Letter 085558, dated March 26, 1990, corrections to page 5

HQ 086851 April 8, 1990 CLA-2 CO:R:C:G 086851 JMH CATEGORY: Classification TARIFF NO.: 4901.99.00, 8471.20.00, 8471.91.00, 8471.92.65, 8471.99.15, 8471.99.60, 8472.92.20, 8472.92.40, 8473.30.40, 8473.30.80, 8507.30.00, 8517.40.10, 8524.90.40, 8543.80.90, 9027.20.40, 9902.84.71 Mr. Allan T. Low U.S. Customs Manager Hewlett Packard P.O. Box 10301 Palo Alto, CA 94303-0890 RE: Modification of Headquarters Ruling Letter 085558, dated March 26, 1990, corrections to page 5 Dear Mr. Low: Enclosed please find a modification of Headquarters Ruling Letter 085558 (HQ 085558), dated March 26, 1990. The errors on page five of HQ 085558 have been corrected. Otherwise, the ruling is unchanged. Thank you for bringing these errors to our attention. FACTS: Hewlett Packard, a major multinational high technology company, is importing into the United States seven forms of shipments consisting of products manufactured throughout the world. You state that the following assumptions have been established: 1. Microcomputer: integrated central processing unit (CPU) and drive/storage housed in one cabinet. 2. VECTRA: a personal computer system consisting of separately housed CPU/drive, monitor, and keyboard presented together. (CPU contains a microprocessor capable of processing words greater than 8-bits in length and capable of directly addressing more than 8-MB of memory off the microprocessor.) 3. Liquid chromatograph: analytical equipment used in liquid chromatography classifiable under subheading 9027.20.40, HTSUSA. -2- 4. None of the goods described as "U.S. goods returned" have been advanced in value or improved in condition. Each shipment is discussed separately as follows: Shipment A FACTS: This shipment is a microcomputer and its accessories from Mexico. It includes: 1. microcomputer - country of origin is Mexico 2. modem - country of origin is the United States 3. manuals for operating and reference - printed in the United States 4. "operating" software recorded on magnetic media - recorded in the United States 5. "applications" software recorded on magnetic media - recorded in the United States ISSUE: What is the appropriate classification for the microcomputer and its accessories? LAW AND ANALYSIS: The classification of merchandise under the HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUSA, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...and according to the following provisions." An examination of the headings establishes that the microcomputer, modem, software and manuals are each classifiable within different headings - headings 8471, 8517, 8524, and 4901, HTSUSA, respectively. These headings describe: 4901 Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets... 4901.99.00 Other... * * * * * * * * * * * * * 8471 Automatic data processing machines and units thereof... -3- 8471.20.00 Digital automatic data processing machine, containing in the same housing at least a central processing unit and an input and output unit, whether or not combined... 8471.91.00 Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same system, one or two of the following types of units: storage units, input units, output units... * * * * * * * * * * * * * 8517 Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems... 8517.40.10 Other apparatus, for carrier-current line systems...Modems, of a kind used with data processing machines of heading 8471... * * * * * * * * * * * * * 8524 Records, tapes and other recorded media for sound or other similarly recorded phenomena 8524.90.40 Other...Other... Three of the items, the microcomputer (heading 8471, HTSUSA), the modem (heading 8517, HTSUSA) and the software (heading 8524, HTSUSA) are found within Section XVI, HTSUSA. There are two relevant Section XVI notes which must be explored. The first note, Section XVI, Note 3, HTSUSA, addresses composite machines. The note states: Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole...are to be classified as if consisting only of that component or as being that machine which performs the principal function. The Explanatory Notes to Section XVI, assert that the two or more machines comprising the composite machine are "of different kinds...described in different headings...". Harmonized Commodity Description and Coding System (HCDCS), Vol. 3, p. 1133. Although the Explanatory Notes are not dispositive, they are to be looked to for the proper interpretation of the -4- HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). The microcomputer and modem in question are classifiable within different headings and are different machines. However, it is this office's opinion that they do not form a composite machine because they are not "fitted together to form a whole." The Explanatory Notes define "fitted together to form a whole" as incorporating one machine within the other, mounting one on the other, or mounting both machines on a common base or frame or in a common housing. HCDCS, Vol. 3, p. 1133. The connection of a modem to a microcomputer by electrical wires does not constitute "fitted together to form a whole." Therefore, the microcomputer and its accessories are not a composite machine within Section XVI, Note 3, HTSUSA. The second relevant section note, Section XVI, Note 4, HTSUSA, addresses functional units. The note states: Where a machine...consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function. The Explanatory Notes express that a "functional unit" covers only those "machines and combination of machines essential to the performance of the function specific to the functional unit as a whole..." HCDCS, Vol. 3, p. 1133. The function specific to the goods in question is the operation of the microcomputer which is covered by heading 8471, HTSUSA. Each of the items in question is devoted to the function of the microcomputer. Therefore, it is the opinion of this office, that the microcomputer and its accessories are a "functional unit" to be classified within the classification for the microcomputer. The microcomputer contains a CPU and drive/storage within one housing. Subheading 8471.20.00, HTSUSA, requires that a digital automatic data processing machine contain in one housing a CPU and an input/output unit. The microcomputer does not contain the input/output unit, and therefore, does not meet the terms of subheading 8471.20.00 as required by GRI 6, HTSUSA, and GRI 1. The proper classification for the microcomputer is within subheading 8471.91.00, HTSUSA. Therefore, the whole unit is classified within subheading 8471.91.00, HTSUSA. However, an examination of the applicable chapter notes reveals Chapter 85, Note 6, HTSUSA. This note states: -5- Records, tapes and other media of heading 8523 or 8524 remain classified in those headings, whether or not they are entered with the apparatus for which they are intended. The operating and applications software are classified within subheading 8524.90.40, HTSUSA. Thus, according to the chapter note, the software remains classified there regardless of the classification of the other merchandise with which it is imported. Therefore, the microcomputer and its accessories result in two classifications. The functional unit of the microcomputer, the modem, and the manuals are classified together within subheading 8471.91.00, HTSUSA, as "Automatic data processing machines and units thereof...Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same system, one or two of the following types of units: storage units, input units, output units..." The software is classified within subheading 8524.90.40, HTSUSA, as "Records, tapes and other recorded media for sound or other similarly recorded phenomena...Other...Other" Shipment B FACTS: This shipment consists of a dot matrix printer and its accessories from Singapore. It includes: 1. dot matrix printer - country of origin is Singapore 2. power cable with connectors - country of origin is Mexico 3. reusable Ni-Cad batteries - country of origin is Japan 4. recharger/adapter - country of origin is Korea ISSUE: What is the appropriate HTSUSA classification for the dot matrix printer and its accessories? LAW AND ANALYSIS: You state that the dot matrix printer and its accessories are to be imported in one large carton and sold together. The same analysis used in shipment A is used in this instance. The dot matrix printer, power cable with connectors, reusable Ni-Cad batteries, and recharger/adapter are classifiable within different headings: headings 8471, 8473, 8507, and 8543, HTSUSA, respectively. These headings describe: -6- 8471 Automatic data processing machines and units thereof... 8471.92.65 Input or output units, whether or not entered with the rest of a system, which may contain in the same housing one or two of the following types of units: storage units, input units, output units...Printer units... * * * * * * * * * * * * 8473 Parts and accessories...suitable for use solely or principally with machines of headings 8469 to 8472... 8473.30.80 Parts and accessories of the machines of heading 8471...Other... * * * * * * * * * * * * * 8507 Electric storage batteries, including separators therefor, whether or not rectangular (including square); parts thereof... 8507.30.00 Nickel-cadmium storage batteries... * * * * * * * * * * * * * 8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof... 8543.80.90 Other... If the subject items form a composite machine or a functional unit with the meaning of the Section XVI Notes, then they may be classified according to the article which gives the unit its principal function. As explained in the discussion of shipment A, articles which form a composite machine within the meaning of Section XVI, Note 3, HTSUSA, are "fitted together to form a whole." Once again, these articles are not mounted or incorporated together, nor are they mounted on a common base or frame. Therefore, the dot matrix printer and its accessories are not a composite machine. It is the opinion of this office that the dot matrix printer and its accessories form a "functional unit" within the meaning of Section XVI, Note 4, HTSUSA. Each of the goods "contributes -7- to the clearly defined function" of the dot matrix printer. The classification appropriate to the function of the dot matrix is subheading 8471.92.65, HTSUSA, which describes "Automatic data processing machines and units thereof...Input or output units, whether or not entered with the rest of a system and whether or not containing storage units in the same housing...Printer units..." Shipments C, D, E, and F FACTS: Shipments C, D, E, and F each consist of a system composed of a liquid chromatograph and a VECTRA personal computer. The systems are designed to perform and analyze liquid chromatography. The shipments vary only by the country of origin of the products. Shipment C: This shipment is a system from West Germany. It includes: 1. liquid chromatograph - country of origin is West Germany 2. VECTRA personal computer system - country of origin for all units is the United States Shipment D: This shipment is also from West Germany. It includes: 1. liquid chromatograph - country of origin is the United States 2. VECTRA personal computer system - country of origin for all units is West Germany Shipment E: This shipment also is shipped from West Germany, but the personal computer is of mixed origins. The shipment contains: 1. liquid chromatograph - country of origin is West Germany 2. VECTRA personal computer a. CPU/Drive - country of origin is the United States b. other units - country of origin is France Shipment F: This shipment is shipped from Japan. Thus, some of the goods are subject to the 100% duty sanction under subheading 9903.41.20, HTSUSA. The shipment includes: 1. liquid chromatograph - country of origin is the United States -8- 2. VECTRA personal computer a. CPU/Drive - country of origin is Japan b. other units - country of origin is Korea ISSUE: What is the appropriate classification for the liquid chromatograph and VECTRA personal computer system when shipped together from any country, regardless of the country of origin of the components? LAW AND ANALYSIS: The classification of the liquid chromatograph and the components of the VECTRA personal computer begins with GRI 1 which dictates that the headings, section notes and chapter notes be analyzed. There are two headings, one for each machine, involved in these shipments. The headings are 8471 and 9027, HTSUSA, which describe: 8471 Automatic data processing machines and units thereof... 8471.91.00 Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same housing one or two of the following types of units: storage units, input units, output units... 8471.92.20 Other...keyboards... 8471.92.40 Other...Other..with cathode ray tube... * * * * * * * * * * * * * 9027 Instruments and apparatus for physical or chemical analysis...parts and accessories thereof... 9027.20.40 Chromatographs and electrophoresis instruments... As discussed previously, Section XVI, Note 4, provides for the classification of "functional units" within the heading appropriate to the function of the unit. Chapter 90, Note 3, HTSUSA provides that Section XVI, Note 4 also applies to Chapter 90. Thus, Section XVI, Note 4 is applicable to heading 9027. In this instance, the chromatograph and the personal computer contribute together for the clearly defined function of -9- analyzing substances. The computer merely runs the experiments. It is the chromatograph that actually performs the analytical function. Thus, the two machines of shipments C, D, E, and F would be classified as one functional unit within the chromatograph's classification. The chromatograph and Vectra personal computer, when imported together, are a functional unit properly classified within subheading 9027.20.40, HTSUSA, as "Instruments and apparatus for physical or chemical analysis...parts and accessories thereof...Chromatographs and electrophoresis instruments..." Shipment G FACTS: This final shipment consists of a series of printed circuit board assemblies (PCA's) from Mexico. The PCA's enable a user to upgrade the computer to a higher revision, greater logic capability and memory capacity. This upgrade is performed by exchanging certain critical PCA's in the computer with the PCA's in an "upgrade kit." The PCA's are packaged in individual boxes and shipped together with operating and reference manuals and literature in one large carton. A "typical" upgrade kit includes: 1. at least one each 4-MB memory board - country of origin is the United States 2. one memory controller board - country of origin is West Germany 3. one arithmetic logic unit board - country of origin is Mexico 4. one control and maintenance controller - country of origin is Mexico 5. one control process store - country of origin is Mexico Items 3, 4 and 5 working in unison comprise the "motherboard" or CPU for the computer. ISSUE: Issue 1: What is the appropriate classification for the upgrade kit under the TSUS? Issue 2: What is the appropriate classification for the upgrade kit under the HTSUSA? -10- LAW AND ANALYSIS: Issue 1: What is the appropriate classification for the upgrade kit under the TSUS? The classification of merchandise under TSUS is governed by the General Headnotes. General Headnote 10(a) provides that imported goods be classified according to "the general, schedule, part and subpart headnotes, and the provisions describing the classes of imported article..." General Headnote 10 (ij) provides that a part is to be classified in an item for that part unless another item is more specific. In this instance, the upgrade kit consists of five articles. These products are described in the inferior headings to Items 676.15 and 676.54, TSUS, for automatic data processing (ADP) machines, since the articles are intended to be incorporated into an ADP. A specific classification, Item 676.54, TSUS, exists for parts of these machines. Thus, each of the boards, as part of an ADP, is described within Item 676.54. However, Headquarters Ruling Letter 554581, dated July 2, 1987, determined that a motherboard is an unfinished computer. Noting General Headnote 10(h), TSUS, an unfinished computer is classified within the item for a finished computer, Item 676.15, TSUS. Since the arithmetic logic unit board, the control and maintenance controller, and the control process store together constitut