Protests and Applications for Further Review Nos 1512-14-100025, 1512-14-100026, and 1512-14-100130; Classification of incomplete PPE and MRO equipment dispensers

HQ H269223 June 8, 2017 CLA-2 OT:RR:CTF:CPM H269223 NCD CATEGORY: Classification TARIFF NO.: 8476.90.0000 Port Director Service Port Charlotte U.S. Customs and Border Protection 1901 Crossbeam Drive Charlotte, NC 28217 Attn: Sharon Saunders, Senior Import Specialist Re: Protests and Applications for Further Review Nos: 1512-14-100025, 1512-14-100026, and 1512-14-100130; Classification of incomplete PPE and MRO equipment dispensers Dear Port Director: The following is our decision as to Protests and Applications for Further Review Nos. 1512-14-100025, 1512-14-100026, and 1512-14-100130, which were timely filed on, respectively, March 25, 2014, April 2, 2014, and October 22, 2014. The protests all pertain to the classification of incomplete PPE and MRO equipment dispensers under the Harmonized Tariff Schedule of the United States (“HTSUS”). Various entries of the subject items were entered by Protestant and liquidated by U.S. Customs and Border Protection (“CBP”) at the Port of Wilmington (“the Port”). Protestant asserts that CBP’s classification of the subject items at liquidation is incorrect. In reaching the below decision, we have taken into account information provided and arguments set forth in all three protests; in Protestant’s supplemental submission of June 16, 2014 (“first supplemental submission”); in our April 24, 2017 meeting with Protestant’s representatives; and in Protestant’s supplemental submission of May 22, 2017 (“second supplemental submission”). FACTS: The instant protest pertain to the incomplete bodies of apparatus which, when fully assembled, are used to dispense personal protective equipment (“PPE”) and maintenance, repair, and operations (“MRO”) equipment. In its completed state, the item consists of a large metal outer shell that fully encases an internal rotary drum, as well as an external control panel from which the unit is operated. Along the internal drum’s outer circumferential surface are multiple rows of horizontal shelves and removable vertical dividers that, in conjunction, form adjustable compartments for the placement of PPE and MRO equipment. Dispensation of the PPE or MRO equipment contained in the apparatus is effectuated and regulated by the external control device, which includes a touchscreen-operated automatic data processor and radiofrequency or magnetic card reader. According to Protestant, the large majority of the finished dispensers are sold to industrial suppliers, which in turn install the dispensers in their customers’ facilities – typically industrial worksites – and continually stock the dispensers’ internal compartments. Employees of a supplier’s customer can access a dispenser’s contents by swiping or scanning an employer-issued, dispenser-calibrated card and navigating a series of prompts displayed on the touchscreen to select specific equipment. Selection of the equipment in turn initiates the rotation of the internal drum to a designated position at which the compartment containing the selected equipment aligns with one of several doors along the front of the metal shell. Once the drum has been rotated to the correct position, the corresponding door is unlocked by an internal locking mechanism and is illuminated by LED lights, at which point the user can open the door and retrieve the equipment. Upon removal of the equipment, a notification indicating such is electronically transmitted to the supplier (or in some cases to the dispenser’s manufacturer for batching and transmission to the supplier). The supplier bills the customer for any items removed at regular intervals. However, in the purportedly limited cases in which the dispensers are sold directly to end-users, use of the dispensers may not necessarily involve a transaction of this type. At entry, the subject dispensers consist of the side and back panels of the outer shell, the internal rotary drum with compartments, and the motor which rotates the drum. Following importation, they are fitted with front panels, which contain the compartment doors and mechanical locking mechanisms, as well as external control panels and various electrical components necessary for actuation of the mechanical components. The subject items were entered in thirty-three separate entries between August 10, 2012 and September 5, 2014, and were classified upon entry in heading 8476, HTSUS, specifically subheading 8476.89.00, HTSUS, which provides for ”Automatic goods-vending machines (for example, postage stamp, cigarette, food or beverage machines), including money-changing machines; parts thereof: Other machines: Other.” CBP liquidated the units between September 27, 2013 and September 5, 2014 in heading 8479, HTSUS, specifically subheading 8479.89.98 of the 2013 and 2014 HTSUS, which provided for “Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other: Other.” In its protests and first supplemental submission, Protestant claims classification in heading 9403, HTSUS, specifically subheading 9403.20.00, HTSUS, which provides for “Other furniture and parts thereof: Other metal furniture.” In its second supplemental submission, Protestant claims, in the alternative, classification in 8476.89.00, HTSUS, as entered. ISSUE: Whether the subject items are properly classified in heading 8476, HTSUS, as automatic goods-vending machines or parts thereof, in heading 8479, HTSUS, as machines having individual functions, or in heading 9403, HTSUS, as “other” furniture. LAW AND ANALYSIS: Initially, we note that the matters protested are protestable under 19 U.S.C. §1514(a) (2) as decisions on classification. The protests were timely filed, within 180 days of liquidation of the first entry. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2) (B) (ii), (iii) (codified as amended at 19 U.S.C. § 1514(c) (3) (2006)). Further Review of Protests Nos. 1512-14-100025, 1512-14-100026, and 1512-14-100130 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(a) because Protestant alleges that the decisions are inconsistent with a previous CBP decision with respect to substantially similar merchandise. Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (“GRIs”) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes. GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. GRI 2(a) provides, in relevant part, that “[a]ny reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished articles has the essential character of the complete or finished article.” The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The 2012, 2013, and 2014 HTSUS provisions under consideration in the instant case are as follows: 8476 Automatic goods-vending machines (for example, postage stamp, cigarette, food or beverage machines), including money-changing machines; parts thereof: Other machines: 8476.89.00 Other 8476.90.00 Parts 8479 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and mechanical appliances: 8479.89 Other: 8479.89.98 Other 9403 Other furniture and parts thereof: 9403.20.00 Other metal furniture Protestant claims that the subject items are classified in heading 9403, HTSUS, which applies, inter alia, to “other” furniture. Note 2 to Chapter 94 states, in pertinent part, as follows: The articles (other than parts) referred to in headings 9401 to 9403 are to be classified in those headings only if they are designed for placing on the floor or ground… The General EN to Chapter 94 expounds upon this requirement as follows: For the purposes of this Chapter, the term “furniture” means:   Any “movable” articles (not included under other more specific headings of the Nomenclature), which have the essential characteristic that they are constructed for placing on the floor or ground, and which are used, mainly with a utilitarian purpose, to equip private dwellings, hotels, theatres, cinemas, offices, churches, schools, cafés, restaurants, laboratories, hospitals, dentists’ surgeries, etc., or ships, aircraft, railway coaches, motor vehicles, caravantrailers or similar means of transport. (It should be noted that, for the purposes of this Chapter, articles are considered to be “movable” furniture even if they are designed for bolting, etc., to the floor, e.g., chairs for use on ships); EN 94.03 states, in pertinent part, as follows: This heading covers furniture and parts thereof, not covered by the previous headings. It includes furniture for general use (e.g., cupboards, show-cases, tables, telephone stands, writing-desks, escritoires, book-cases, and other shelved furniture (including single shelves presented with supports for fixing them to the wall), etc.), and also furniture for special uses. The heading includes furnitures for: Private dwellings, hotels, etc., such as: cabinets, linen chests, bread chests, log chests; chests of drawers, tallboys; pedestals, plant stands; dressing-tables; pedestal tables; wardrobes, linen presses; hall stands, umbrella stands; side-boards, dressers, cupboards; food-safes; bedside tables; beds (including wardrobe beds, camp-beds, folding beds, cots, etc.); needlework tables; stools and foot-stools (whether or not rocking) designed to rest the feet, fire screens; draught-screens; pedestal ashtrays; music cabinets, music stands or desks; play-pens; serving trolleys (whether or not fitted with a hot plate). Offices, such as: clothes lockers, filing cabinets, filing trolleys, card index files, etc. Schools, such as: school-desks, lecturers’ desks, easels (for blackboards, etc.). Churches, such as: altars, confessional boxes, pulpits, communion benches, lecterns, etc. Shops, stores, workshops, etc., such as: counters; dress racks; shelving units; compartment or drawer cupboards; cupboards for tools, etc.; special furniture (with cases or drawers) for printing-works. Laboratories or technical offices, such as: microscope tables; laboratory benches (whether or not with glass cases, gas nozzles and tap fittings, etc.); fume-cupboards; unequipped drawing tables. Pursuant to Note 2 to Chapter 94, and as explained in the General EN to the chapter, the tariff term “furniture” applies, with limited exceptions, only to portable articles that are designed for placement on the floor or ground and that are primarily utilitarian, rather than decorative, in nature. See The Pomeroy Collection, Ltd. v. United States, 893 F. Supp. 2d 1269, 1283-85 (Ct. Int’l Trade 2013) (citing Furniture Import Corp. v. United States, 56 Cust. Ct. 125, 133 C.D. 2619 (1966)). Above and beyond this, the requisite and defining features of furniture are evident in the exemplars of such set forth in EN 94.03. See LeMans Corp. v. United States, 660 F.3d 1311, 1321 (Fed. Cir. 2011) (stating that use of EN exemplars to clarify the scope of a heading is “entirely proper”). One notable characteristic shared by all the exemplars is the inherence of their utilitarian value by virtue of their structural design. For example, tables, desks, pulpits, alters, beds, foot-stools, and trolleys are all made up of flat surfaces capable of bearing weight with the support of legs, while draught screens and play-pens consist of vertical panels or rails that provide enclosure for their users. None of these articles require assistive mechanisms to render them fully functional. In a similar vein, the cabinets, cupboards, wardrobes, chests, sideboards, lockers, and other receptacles identified in EN 94.03 all include doors, lids, or other openings that offer complete and direct access to their internal space. In this manner, they enable the uninhibited manual placement and retrieval of contents stored within them by their users, even when stripped of any additional components – mechanical, electrical, or otherwise – that may restrict or increase ease of access. In contrast, the subject items, while free-standing and movable, lack a structural design that renders them suitable for storage in the absence of its mechanical components. Rather than openly accessible, the items’ internal compartments are incorporated into a rotary drum which is encased on three sides. As such, only a portion of the article’s full range of compartments are reachable at any given time, and complete access to the compartments is contingent upon rotation of the internal mechanical drum to particular positions. It is unclear whether the drum could be rotated manually to this end, and in fact, Protestant has conceded that it is not used in this manner. It is therefore our view that, absent mechanization of the drum to allow for unfettered placement, storage, and retrieval of PPE and MRO equipment contained in the compartments, the item cannot be said to offer utilitarian value as a receptacle. Because it also lacks the utility of, and structural likeness to, any other article of furniture, it cannot be said to satisfy the criteria of furniture for purposes of classification in heading 9403, HTSUS. Protestant contends that the subject item is in fact classifiable in heading 9403 at the time of entry because it is, at that point, “essentially a metal cabinet with storage compartments and a motor that rotates the drum.” We disagree. The subject item is not essentially a storage cabinet; rather, it is essentially a machine, insofar as it contains all the requisite features to mechanically dispense the items placed in it. Specifically, the item is equipped at entry with the drum, which rotates the compartment to align with the access doors, as well as the internal mechanism that unlocks these doors. That it does not contain the electronic device to track the dispensation of these items upon entry is irrelevant, as discussed above. In fact, because the unit’s compartments are entirely encased by the outer shell, manual placement or retrieval of items is not possible when the unit is left unpowered. That the item is completely useless for its intended purpose absent its mechanical components further reinforces our position that it cannot be considered an article of furniture. Protestant also cites previous CBP rulings, including New York Ruling Letter (NY) N204484, dated March 13, 2012, and NY K82370, dated January 27, 2004, in support of its asserted classification in heading 9403. However, unlike the subject merchandise, the “Hybrid Accucab” at issue in NY N204484 took the form of a traditional cabinet, replete with doors that allowed full access to the unit’s internal shelves, and therefore fit among the exemplars set forth in EN 94.03. While the Hybrid Accucab was equipped with electronic components that controlled access to the unit and managed its contents, these components did not impart the unit’s functionality as a receptacle. Similarly, while the “Variable Height” cabinet, countertop, and washbasin at issue in NY K82370 incorporated mechanical components, those components were designed only to raise or lower the primary articles so as to facilitate their use. They did not altogether enable this use, as the cabinet, washbasin, and countertop were already fully functional as, respectively, receptacles and a weight-bearing surface. Accordingly, our determination is not precluded by either NY N204484 or NY K82370, and is in fact supported by various CBP rulings pertaining to machines that move or dispense items placed within them. See, e.g., NY N167776, dated June 22, 2011 (classifying storage unit with internal rotating chambers outside heading 9403, HTSUS); NY N074022, dated September 29, 2009 (similarly classifying pharmaceutical distribution system with internal retrieval mechanism outside heading 9403). As such, we consider Protestant’s alternative claim for classification in heading 8476, HTSUS, as “automatic goods-vending machines.” In so doing, we note that the items are incomplete at entry and are processed into finished goods only following importation. We therefore must specifically determine whether the goods into which the items are completed fall within the scope of heading 8476, and if so, whether the items can be treated as the completed goods for purposes of classification. Alternatively, because heading 8476 applies to “parts” of vending machines, we consider whether the items qualify as such in the event that they cannot be classified as complete articles of the heading. EN 84.76 provides, in pertinent part, as follows with respect to the scope of heading 8476, HTSUS: This heading covers the various kinds of machines which supply some kind of merchandise when one or more coins, tokens or a magnetic card are put in a slot (other than those machines covered more specifically by other headings of the Nomenclature or excluded from the Chapter by a Chapter or Section Note).  The term “vending” in the context of this heading refers to a “monetary” exchange between the purchaser and the machine in order to acquire a product.  This heading does not cover machines which dispense a product but do not have a device to accept payment.   * * *   The heading covers not only machines in which the distribution is automatic, but also those consisting of a number of compartments from which the merchandise can be withdrawn after the coin has been inserted, the machine incorporating a device for releasing the lock of the appropriate compartment (e.g., by pressing on a corresponding button). * * * PARTS   Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), the heading also covers...parts of the machines of this heading. The term “vending machine” is not defined in the HTSUS. In the absence of a statutory definition, a tariff term is construed according to its common and commercial meaning, which are presumably identical. Tyco Fire Products v. United States, 841 F.3d 1353, 1357 (Fed. Cir. 2016). A term’s meaning may be ascertained by reference to dictionaries, which specifically impart its common meaning, as well as “other reliable information sources” and, in particular, the ENs. Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999); see also GRK Can., Ltd. v. United States, 761 F.3d 1354, 1357 (Fed. Cir. 2014) (emphasizing the importance of the ENs). Among the sources that are regularly consulted pursuant to this maxim is industry literature, which may inform a term’s commercial meaning. See Rocknell Fastener, Inc. v. United States, 267 F.3d 1354, 1361 (Fed. Cir. 2001) (citing ANSI specifications as industry standards indicative of commercial designation); see also Well Luck Co., Inc. v. United States, 208 F. Supp. 3d 1364 (Ct. Int'l Trade 2017); and Specialty Commodities