Modification of HQ 961705; Subheading 9817.00.96, HTSUS; Ophthalmic Surgical Microscopes

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H285358 August 6, 2018 OT:RR:CTF:VS H285358 YAG/JMV Port Director U.S. Customs and Border Protection JFK Airport, Building 77 Jamaica, New York 11430 RE: Modification of HQ 961705; Subheading 9817.00.96, HTSUS; Ophthalmic Surgical Microscopes Dear Port Director: This is in reference to Headquarters Ruling Letter (“HQ”) 961705, dated August 25, 1999, issued with regard to a protest filed by counsel, on behalf of Topcon American Corporation (“Topcon”). In HQ 961705, U.S. Customs and Border Protection (“CBP”) determined, in relevant part, that ophthalmic surgical microscopes were eligible for duty-free treatment under subheading 9817.00.96, Harmonized Tariff Schedule of the United States (“HTSUS”). We have reviewed HQ 961705 and found it was partially incorrect. For the reasons set forth below, with respect to the eligibility of the subject surgical microscopes for duty-free treatment under subheading 9817.00.96, HTSUS, we hereby modify HQ 961705. On July 19, 2017, CBP published its proposed modification of HQ 961705 in the Customs Bulletin, Volume 51, Number 29, pursuant to section 625(c), Tariff Act of 1930, (19 U.S.C. 1625(c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub.L. 103-182, 107 Stat. 2057, 2186 (1993). One comment was received in response to the proposed modification and revocation of the above referenced ruling. The comment disagreed with the proposed modification and revocation and the analysis of the proposed ruling letter. A discussion of the comment and CBP’s reasoning are found in the “Law and Analysis” section below. The tariff classifications of the other products imported by Topcon under heading 9018, HTSUS, as found in HQ 961705, are unaffected. FACTS: HQ 961705 stated, in relevant part: The merchandise is a variety of ophthalmic apparatus produced by Topcon in Japan. Specifically, they are: slit lamps, tonometers; retinal cameras, ophthalmometers (also known as keratometers); screenscopes, lensmeters, vision testers, auto chart projectors; operation microscopes; and parts thereof. Customs classified the subject merchandise at entry in subheading 9018.50.0000, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for other ophthalmic instruments and appliances. With one exception, the protestant advocates classification of the subject merchandise in subheading 9018.19.9550, HTSUS, which provides for other electro-diagnostic apparatus. Protestant contend that the ophthalmic surgical microscopes are classifiable in subheading 9817.00.96, as other articles specially designed or adapted for the use or benefit of the handicapped. […] Counsel advises that the ophthalmic operation microscopes at issue are compound optical microscopes, stereoscopic and without a means for photographing an image, classifiable in subheading 9011.10.8000. […] In particular, the Topcon sales literature indicates that the microscope is designed to facilitate ophthalmic microsurgery. It delivers three dimensional images using a coaxial illumination standard, and aids in the observation of red reflex. The unit is capable of fine focusing adjustment within a range of 36mm, at a speed of 2.2mm per second. There are five different magnification lens settings. The unit is capable of five different field of view settings. The supporting arms have a range of motion more limited than other surgical microscopes. The axis of the optical path remains fixed over the eye, resulting in an observation angle set at a limited operating rate (generally 45 degrees to the optical axis). Counsel states that Topcon only produces and distributes to the ophthalmic market, representing them as designed specifically for ophthalmic microsurgery. They are in most cases used for cataract surgery or posterior vitrectomy The only product at issue in this case is the ophthalmic surgical microscope produced by Topcon in Japan. ISSUE: Whether the subject surgical microscopes are eligible for duty-free treatment under subheading 9817.00.96, HTSUS? LAW AND ANALYSIS: Subheading 9817.00.96, HTSUS, came into effect in the United States through a series of international agreements and acts of Congress. Its basis is in the Agreement on the Importation of Educational, Scientific and Cultural Materials, opened for signature Nov. 22, 1950, 17 U.S.T. 1835, 131 U.N.T.S. 25, or “Florence Agreement,” drafted by the United Nations Educational, Scientific, and Cultural Materials (“UNESCO”) in July of 1950. In 1976, UNESCO adopted the Nairobi Protocol to the Florence Agreement, which expanded the scope of products to include materials specially designed for handicapped persons. See Protocol to the Agreement on the Importation of Educational, Scientific, or Cultural Materials, opened for signature 1 Mar. 1977, 1259 U.N.T.S. 3.   Congress ratified the Nairobi Protocol and enacted it into law in 1983. Pub. L. 97-446, § 161, 96 Stat. 2329, 2346 (1983). The Senate stated in its Report that one of the goals of this law was to benefit the handicapped and show support by the United States for the rights of the handicapped. The Senate was concerned, however, that people would misuse this tariff provision to avoid paying duties on expensive products. As a result, it stated that it did not intend “that an insignificant adaptation would result in duty free treatment for an entire relatively expansive article . . . the modification or adaptation must be significant so as to clearly render the article for use by handicapped persons.” S. Rep. (Finance Committee) No. 97-564, 97th Cong. 2nd Sess., Sept. 21, 1989.   Section 1121 of the Omnibus Trade and Competitiveness Act of 1988 (Pub. L. No. 100-418, 102 Stat. 1107) and Presidential Proclamation 5978 implemented the Nairobi Protocol by inserting permanent provisions—specifically, subheadings 9817.00.92, 9817.00.94, and 9817.00.96—into the HTSUS. These tariff provisions provide that “[a]rticles specially designed or adapted for the use or benefit of the blind or other physically or mentally handicapped persons” are eligible for duty-free treatment. Notes in subchapter XVII of Chapter 98 of the HTSUS define the terms “blind or other physically or mentally handicapped persons” and limit the classification of certain products under subheadings 9817.00.92, 9817.00.94, and 9817.00.96, HTSUS. U.S. Note 4(a), subchapter XVII, Chapter 98, HTSUS, defines the term “blind or other physically or mentally handicapped persons” as “any person suffering from a permanent or chronic physical or mental impairment which substantially limits one or more major life activities, such as caring for one's self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, or working.” U.S. Note 4(b), subchapter XVII, Chapter 98, HTSUS, excludes four categories of goods from subheadings 9817.00.92, 9817.00.94, and 9817.00.96, HTSUS: (1) articles for acute or transient disability; (2) spectacles, dentures, and cosmetic articles for individuals not substantially disabled; (3) therapeutic and diagnostic articles; and (4) medicine or drugs. To summarize, for the subject surgical microscopes to qualify for duty-free treatment under subheading 9817.00.96, HTSUS, the following must be true: Patients undergoing surgery or other treatments with the subject surgical microscopes are considered blind or other physically or mentally handicapped persons for purposes of Chapter 98, HTSUS; The subject surgical microscopes are specially designed or adapted for the use or benefit of such patients considered blind or other physically or mentally handicapped persons for purposes of Chapter 98, HTSUS; and, The subject surgical microscopes are not articles within the excluded categories listed in U.S. Note 4(b), subchapter XVII, Chapter 98, HTSUS (e.g., therapeutic articles, etc.). In HQ 961705, CBP found that the subject surgical microscopes were not therapeutic articles because the microscopes did not heal or cure the underlying condition of the patient. To support this position, it cited Travenol Laboratories, Inc. v. U.S., 17 CIT 69 (1993), stating that therapeutic articles within the context of this provision are those articles that heal or cure a condition. See also T.D. 92-77, 26 Cust. B. 240 1992 (implementing the duty-free provisions of the Nairobi Protocol); and, HQ 952465, dated January 27, 1993. From the facts provided in HQ 961705, it is not entirely clear whether the subject surgical microscopes are not considered therapeutic. However, we note that merely because an article is not considered therapeutic does not mean it is not an article for an acute or transient disability or another article within the excluded categories. Similarly, demonstrating that an article is not within the excluded categories alone does not equate to qualification for duty-free treatment under subheading 9817.00.96, HTSUS. These issues were never thoroughly addressed in HQ 961705, and thus it is not clear whether the requirements for eligibility under subheading 9817.00.96, HTSUS, were satisfied. In the proposed modification of HQ 961705, CBP addressed the issues pertaining to the eligibility of the subject microscopes under subheading 9817.00.96, HTSUS. In response to the proposed notice, CBP received one (1) comment disagreeing with the proposed modification and revocation (and the analysis of the proposed HQ H285358). The comment argues that the surgical microscopes in issue are specifically designed, marketed, and used to perform microsurgeries to treat conditions that render individuals physically handicapped. We disagree. Whether patients undergoing surgery or other treatments with the subject surgical microscopes are considered blind or other physically or mentally handicapped persons for purposes of Chapter 98, HTSUS? As noted above, U.S. Note 4(a), subchapter XVII, Chapter 98, HTSUS, defines the term “blind or other physically or mentally handicapped persons” as “any person suffering from a permanent or chronic physical or mental impairment which substantially limits one or more major life activities, such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, or working.” T.D. 92-77 provides further guidance for interpreting this term as follows: The only ruling by Customs on the issue of what constitutes a “handicapped” person under this statute was HQ 556090, dated November 8, 1991. In this ruling, Customs held that individuals who suffer from chronic arthritis, scoliosis, severe hernia problems and post-polio syndrome and who need heavy-duty support corsets, are “handicapped” within the meaning of the Nairobi Protocol, and therefore, the corsets are eligible for duty-free treatment. However, Customs also held in this ruling that brassieres designed for women who have mastectomies are not eligible for duty-free treatment. Customs determined that women with mastectomies are not substantially limited in any major life activity. The focus of post-operative therapy for women who have had mastectomies is the reassurance that they are fully capable of leading full, productive lives after the operation. Other physical ailments that CBP has considered to be physical handicaps that limit one or more major life activities include: people who cannot walk (see HQ H024976, dated March 23, 2009 (concerning a wheel chair securement system for motor vehicles)); diabetes (see HQ 561020, dated October 14, 1998 (concerning a diabetes organizer)); hearing loss/impairment (see HQ 563415, dated January 25, 2006 (concerning a carrying case for a hearing aid and its components)); chronic incontinence (see HQ 560278, dated April 7, 1997 (concerning adult pull-on pants)); permanent or chronic pain (see HQ 563002, dated May 26, 2004 (concerning a pouch for holding a pump that would be implanted into the body and deliver medication)); arrhythmia and other heart problems (see HQ 563125, dated December 27, 2004, and HQ 557302, dated March 17, 1993 (concerning pacemakers, defibrillators, and accessories to such medical equipment)); and, people with speech defects (see HQ 088503, dated May 3, 1991 (concerning a speech synthesizer that converted typed words into a synthesized voice)). On the other hand, CBP has noted that certain conditions are not physical handicaps for purposes of Chapter 98, HTSUS. For instance, in HQ H121544, dated October 6, 2014, CBP held that metabolic disorders or severe food allergies, which limit the capacity to digest, metabolize, or ingest certain foods, requiring avoidance of such foods, do not impair the actual physical act of eating. HQ H121544 noted that in other CBP rulings regarding classification under heading 9817, HTSUS, the conditions or diseases directly impaired one’s physical ability to perform one or more major life activities. Similarly in HQ H131516, dated March 1, 2011, CBP differentiated the pain from swollen, itchy, or aching feet that may render an individual “unable to stand on their feet for an entire shift or too tired to stop at the grocery store on their way home from work” from those individuals with little or no mobility “unable to perform one or more major life activities.” See also HQ H092454, dated April 28, 2010 (differentiating light incontinence from a condition that CBP considers a physical handicap, chronic incontinence). See generally HQ 559916, dated May 8, 1997; and, HQ 087669, dated November 16, 1990 (holding that broadly used medical supplies (e.g., hospital gowns and medical bed pads) did not qualify for treatment under subheading 9817.00.96, HTSUS, because the evidence showed that various conditions requiring use of the supplies were not chronic or permanent conditions and no evidence specifically showed that the conditions were physical handicaps). The commenter states that surgical microscopes with premium optics, superior illumination and other features are uniquely adapted to treat ailments that cause physical handicaps. The commenter asserts that the surgical microscopes treat conditions that frequently, although not always, substantially limit an individual’s ability to perform a major life activity, which is sufficient for a condition to qualify as a handicap under the definition in U.S. Note 4(a). However, the commenter failed to grasp the difference between the actual physical handicap and the transient impairment that might render the person handicapped. In order to qualify for treatment under 9817.00.96, the impairment must be actual and not theoretical or potential. Additionally, the subchapter note specifies that the subheading does not cover “. . . articles for acute or transient disability . . .” U.S. Note 4(b), Subchapter XVII, Chapter 98, HTSUS. Therefore, the impairment must be permanent as opposed to transient, and chronic as opposed to acute. The subject surgical microscopes are used for patients undergoing various types of ophthalmic microsurgeries, including surgeries that do not treat a handicap. It is noted that Topcon’s ophthalmic surgical microscopes are an important and indispensable aid to the surgeon in magnifying the area to be operated on and in performing delicate and precise microsurgeries on the eye. In support of Topcon’s position, Topcon cited HQ 952465. In HQ 952465, instruments for cataract surgery, vitrectomy, glaucoma filtration procedures, corneal transplantation, and retinal attachment were determined to be for the benefit of the handicap because they were used to improve a visually handicapped person’s ability to see. However, in reviewing Topcon’s literature on their ophthalmic surgical microscopes, it is noted that use of these microscopes is not limited to the treatments described in HQ 952465, but extends to other surgeries, such as refractive surgeries. The most widely performed type of refractive surgery is laser-assisted in situ keratomileusis surgery, commonly referred to as LASIK. The American Academy of Ophthalmology states that LASIK and other types of refractive surgery may be a good option for patients that want to decrease their dependence on glasses or contact lenses and are free of eye disease. While HQ 961705 states that persons requiring ophthalmic surgery are physically handicapped, it is difficult to consider a condition that is not an eye disease, but merely wanting less dependence on glasses, to be a physical handicap for purposes of Chapter 98, HTSUS. Furthermore, as noted in HQ H121544, HQ 559916, and HQ 087669, the subject surgical microscopes treat various conditions that do not directly impair one’s physical ability to perform one or more major life activities. In contrast, with the rulings where CBP has considered physical ailments to be a physical handicap limiting one more major life activity, there has been evidence directly connecting the use of the product with a specific condition (e.g., diabetes, chronic incontinence, arrhythmia, etc.) that is considered a physical handicap. Even when certain products could treat physical handicaps such as chronic incontinence, the fact that evidence showed otherwise without persuasively showing use for conditions considered physical handicaps, weighed against finding that the product qualified for treatment under subheading 9817.00.96, HTSUS. Similarly, we find no persuasive evidence in HQ 961705 directly connecting the use of the subject surgical microscopes to a specific condition that is considered a physical handicap. Rather, there are various and broad ophthalmic microsurgery uses for the subject surgical microscopes. To this extent, it is not clear which of the various types of ophthalmic surgeries would be considered physical handicaps, and which would not. Accordingly, we do not have enough evidence in HQ 961705 to substantiate the claim that all, most, many, or any of the patients undergoing surgery or other treatments with the subject surgical microscopes are considered physically handicapped for purposes of Chapter 98, HTSUS. Whether the subject surgical microscopes are specially designed or adapted for the use or benefit of such patients considered blind or other physically or mentally handicapped persons for purposes of Chapter 98, HTSUS? The meaning of the phrase “specially designed or adapted” with regard to imported articles has been decided on a case-by-case basis. In HQ 556449, dated May 5, 1992, CBP set forth five factors it would consider in making this case-by-case determination. The same factors are relevant in determining whether a part is “specially designed or adapted” for an article for the use or benefit of handicapped persons. These factors include: (1) the physical properties of the article itself (i.e., whether the article is easily distinguishable by properties of the design, form, and the corresponding use specific to this unique design, from articles useful to non-handicapped persons); (2) whether any characteristics are present that create a substantial probability of use by the chronically handicapped so that the article is easily distinguishable from articles useful to the general public and any use thereof by the general public is so improbable that it would be fugitive; (3) whether articles are imported by manufacturers or distributors recognized or proven to be involved in this class or kind of articles for the handicapped; (4) whether the articles are sold in specialty stores which serve handicapped individuals; and, (5) whether the condition of the articles at the time of importation indicates that these articles are for the handicapped. With regard to the first factor, a product’s compliance with the ADA has been an important consideration in CBP’s determination under this factor. For ex