Tariff classification of HP Presence Small Space Solutions

HQ H326071 July 25, 2023 OT:RR:CTF:EMAIN H326071 PF CATEGORY: Classification TARIFF NO.: 8517.62.00 Mr. Lars-Erik A. Hjelm Ms. Emily S. Opp Akin Gump Strauss Hauer & Feld LLP2001 K Street, N.W.Washington, DC 20006-1037 RE: Tariff classification of HP Presence Small Space Solutions Dear Mr. Hjelm: This is in reply to your request for a prospective ruling on behalf of HP Inc. (“HP”), on the tariff classification, under the Harmonized Tariff Schedule of the United States (HTSUS), of the HP Presence Small Space Solution and the HP Presence Small Space Solution Plus AI Camera (“subject merchandise”). Your request was forwarded by the National Commodity Specialist Division to this office for a response. Our decision takes into account meetings held on November 30, 2022, March 15, 2023, and a supplement submitted on May 9, 2023. FACTS: The subject merchandise is referred to as the HP Presence Small Space Solution and the HP Presence Small Space Solution Plus AI Camera. The subject merchandise is described as a system designed to facilitate videoconferencing and remote communications. The subject merchandise allows users to have video and audio calls. Moreover, the subject merchandise connects to virtual (remote) users through Microsoft Teams or Zoom applications. The subject merchandise will consist of the following at the time of importation: An “HP Presence Mini Conferencing PC” (“Mini Conferencing PC”) — a “personal computer” that stores and runs an operating system (“OS”), preinstalled and/or user-selected applications, and corresponding data at the command of the user. An “HP Presence Control” (“Control”) — a touchscreen control panel that provides data outputs to the user (as images and sound) while allowing the user to input data and commands (through voice and touch). And in the Solution Plus (but not the Solution), a “Presence See 4K AI Camera (“4K AI Camera”) (a movable device that captures and transmits images, sound and temperature readings to facilitate videoconferencing).” In your submission, you state that the general purpose of the subject merchandise is to facilitate and enhance videoconferencing and remote communications experiences, specifically by blending harmoniously into a conference space. For example, one typical use would involve the placement of the Control at the center of a conference room table, placement of the Mini Conferencing PC below the Control, and (where applicable) placement of the See 4K AI Camera at the head of the table or a separate table. The Control and See 4K AI Camera would be connected by cable to the Mini Conferencing PC. When these items are so situated and connected, a user can operate the Control to execute videoconferencing and other applications on the Mini Conferencing PC, view and hear data outputs from these applications, and activate the See 4K AI Camera. You note that the “HP Presence” units — i.e., the Mini Conferencing PC, Control, and, in the case of the Solution Plus, see 4K AI Camera — function interdependently and can only be used when connected via cable. Each unit has a unique layout of external ports that corresponds to the other units, and each unit is embedded with firmware that interacts specifically and exclusively with other units. Only once connected to the Mini Conferencing PC or other personal computer with similar specifications, for example, can the Control display or emit information and register and direct commands. Likewise, the See 4K AI Camera requires and relies on a connection to the Mini Conferencing PC (or comparable personal computer) to initiate and stop the capture of images, sound, and other data. Conversely, the Mini Conferencing PC depends upon the Control to provide data outputs and receive user commands. Consequently, these components are not capable of use as free-standing components without a connection. The specification for the HP Presence Small Space Solution describes the product as follows: Adaptive AI-enhanced audio and engaging controls make virtual meetings more personal. HP Presence interacts intuitively with you providing an intelligent meeting experience…Bring people together with this intuitive and easy-to-setup conferencing system…. Enjoy room-filling Audio by Bang & Olufsen calibrated to your room dimensions with dedicated audio processing that produces natural voice and audio output. The specification for the HP Presence Small Space Solution Plus AI Camera describes the product as follows:  AI-enhanced audio, cinematic 4K video and engaging controls make virtual meetings more personal…Bring people together with this intuitive and easy-to-setup conferencing system…. The intelligent HP Presence See 4K Camera wakes on room entry and automatically adjust the framing of the video with speaker tracking and picture-in-picture modes. Room filling Audio by Bang & Olufsen produces natural voice and audio output from the HP Presence Control. At the March 15, 2023 meeting, a representative from HP discussed that upon importation, the Mini Conferencing PC is preloaded with either a Zoom or a conferencing Teams application. The Mini Conferencing PC cannot run both applications, Zoom and Teams, by itself. In other words, the Zoom and Teams programs are not capable of interacting with each other solely on the Mini Conferencing PC. In order to run the second application (either Zoom or Teams), a user would need to connect a laptop to run the second program. For example, if the Mini Conferencing PC is imported with a preloaded with a Zoom application, it could not run the Teams application without connecting to laptop. Similarly, if the Mini Conferencing PC is imported with a preloaded Teams application, it could not run the Zoom application without connection to a laptop. Below are images of the two systems with summaries of their components:
ISSUE: Whether the subject merchandise is classified as automatic data processing (ADP) system of heading 8471, HTSUS or a telecommunication system of heading 8517, HTSUS. LAW AND ANALYSIS: 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 (AUSR). The GRIs and the AUSR are part of the HTSUS, and are 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 and, unless otherwise required, according to the remaining GRIs taken in order. 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. Initially, we note that because the HP Presence Small Space Solution Plus Camera contains a separate “4K AI Camera”, it constitutes a retail set classifiable pursuant to GRI 3 if its components are put up for retail sale. However, we find that the “HP Presence Mini Conferencing PC” imparts the set with its essential character due to the fact that it provides the set with the vast majority of its functionality to hold and facilitate virtual meetings. Therefore, the HTSUS headings under consideration are as follows: 8517 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof: Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): 8517.62 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: 8471 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included: Other automatic data processing machines: 8471.49 Other, entered in the form of systems. Note 6 to Chapter 84 provides the legal provisions for ADP machines, ADP systems, ADP units and exclusions for classification therein. ADP machines are defined in Legal Note 6 (A) to Chapter 84, HTSUS, which provide as follows: For the purposes of heading 8471, the expression "automatic data processing machines" means machines capable of: Storing the processing program or programs and at least the data immediately necessary for the execution of the program; Being freely programmed in accordance with the requirements of the user; Performing arithmetical computations specified by the user; and Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run. An ADP system is defined in Note 6 (B): Automatic data processing machines may be in the form of systems consisting of a variable number of separate units. To be classified as an ADP unit under heading 8471, HTSUS, an article must meet the terms of Legal Note 6 (C) to Chapter 84, HTSUS, which provides that: Subject to paragraphs (D) and (E) below, a unit is to be regarded as being a part of an automatic data processing system if it meets all the following conditions: It is of a kind solely or principally used in an automatic data processing system; It is connectable to the central processing unit [CPU] either directly or through one or more other units; and It is able to accept or deliver data in a form (codes or signals) which can be used by the system. Separately presented units of an automatic data processing machine are to be classified in heading 8471. However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of paragraphs (C) (ii) and (C) (iii) above, are in all cases to be classified as units of heading 8471. Chapter 84, Note 6 (D) identifies certain units that must be classified in their own provisions when separately presented. It states, in relevant part: Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in Note 6 (C) above : Printers, copying machines, facsimile machines, whether or not combined; Apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network); Loudspeakers and microphones; Television cameras, digital cameras and video camera recorders… Note 6 (E) to Chapter 84 states the following: Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the HTSUS at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989). The EN to heading 8471 provides, in pertinent part: AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF Data processing is the handling of information of all kinds, in pre-established logical sequences and for a specific purpose or purposes. Automatic data processing machines are machines which, by logically interrelated operations performed in accordance with pre-established instructions (program), furnish data which can be used as such, or, in some cases, serve in turn as data for other data processing operations.   This heading covers data processing machines in which the logical sequences of the operations can be changed from one job to another, and in which the operation can be automatic, that is to say with no manual intervention for the duration of the task…. However, the heading excludes machines, instruments or apparatus incorporating or working in conjunction with an automatic data processing machine and performing a specific function. Such machines, instruments or apparatus are classified in the headings appropriate to their respective functions or, failing that, in residual headings (See Part (E) of the General Explanatory Note to this Chapter). AUTOMATIC DATA PROCESSING MACHINES The automatic data processing machines of this heading must be capable of fulfilling simultaneously the conditions laid down in Note 6 (A) to this Chapter. […] Thus, machines which operate only on fixed programs, i.e., programs which cannot be modified by the user, are excluded even though the user may be able to choose from a number of such fixed programs. These machines have storage capability and also stored programs which can be changed from job to job…. ADP systems are further clarified in the EN to heading 8471 as: Automatic data processing machines may comprise in the same housing, the central processing unit, an input unit (e.g., a keyboard or a scanner) and an output unit (e.g., a visual display unit), or may consist of a number of interconnected separate units. In the latter case, the units form a “system” when it comprises at least the central processing unit, an input unit and an output unit (see Subheading Note 2 to this Chapter). The interconnections may be made by wired or wireless means. A complete automatic data processing system must comprise, at least: (1) A central processing unit which generally incorporates the main storage, the arithmetical and logical elements and the control elements; in some cases, however, these elements may be in the form of separate units. (2) An input unit which receives input data and converts them into signals which can be processed by the machine. (3) An output unit which converts the signals provided by the machine into an intelligible form (printed text, graphs, displays, etc.) or into coded data for further use (processing, control, etc.). Two of these units (input and output units, for example) may be combined in one single unit. A complete automatic data processing system is classified in this heading, even though one or more units may be classified elsewhere when presented separately (see Part (B) Separately presented units, below). These systems may include remote input or output units in the form of data terminals. Such systems may also include units, apart from the input or output units, designed to increase the capacity of the system for instance, by expanding one or more of the functions of the central unit (see Part (B) below). Such units are inserted between the input or output units (start and end of the system), although adapting and converting units (channel adaptors and signal converters) may occasionally be connected before the input unit or after the output unit. The EN to heading 8471, Part (B) Separately presented units, states that: Subject to the provisions of Notes 6 (D) and (E) to this Chapter, this heading also covers separately presented constituent units of automatic data processing systems. These may be in the form of units having a separate housing or in the form of units not having a separate housing and designed to be inserted into a machine (e.g., insertion onto the main board of a central processing unit). Constituent units are those defined in Part (A) above and in the following paragraphs, as being parts of a complete system. An apparatus can only be classified in this heading as a unit of an automatic data processing system if it: a) Performs a data processing function; b) Meets the following criteria set out in Note 6 (C) to this Chapter c) Is not excluded by the provisions of Notes 6 (D) and (E) to this Chapter. … If the unit performs a specific function other than data processing, it is to be classified in the heading appropriate to that function or, failing that, in a residual heading (see Note 6 (E) to this Chapter). If an apparatus does not meet the criteria set out in Note 6 (C) to this Chapter, or is not performing a data processing function, it is to be classified according to its characteristics by application of General Interpretative Rule 1, if necessary in combination with General Interpretative Rule 3 (a). The Explanatory Notes to note 6 (E) to Chapter 84 state as follows:In accordance with the provisions of Note 6 (E) to Chapter 84, the following classification principles should be applied in the case of a machine incorporating or working in conjunction with an automatic data processing machine, and performing a specific function:(1) A machine incorporating an automatic data processing machine and performing a specific function other than data processing is classifiable in the heading corresponding to the function of that machine or, in the absence of a specific heading, in a residual heading, and not in heading 84.71.(2) Machines presented with an automatic data processing machine and intended to work in conjunction therewith to perform a specific function other than data processing, are to be classified as follows: the automatic data processing machine must be classified separately in heading 84.71 and the other machines in the heading corresponding to the function which they perform unless, by application of Note 4 to Section XVI or Note 3 to Chapter 90, the whole is classified in another heading of Chapter 84, Chapter 85 or of Chapter 90. The EN to heading 8517 states, in relevant part:This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electromagnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks. You maintain that the subject merchandise are two ADP systems in accordance with Note 6 (C) to Chapter 84 and Subheading Note 2 to Chapter 84. The first alleged “system” includes a Mini Conferencing PC and a separate Control. The second purported “system” includes the Mini Conferencing PC, Control, and a 4K AI camera. However, before we consider whether the subject merchandise are ADP systems, we first must consider whether the Mini Conferencing PC is freely programmable and thereby satisfying the requirements of Note 6 (A) to Chapter 84 of being an ADP machine. The Mini Conferencing PC appears capable of “storing the processing program or programs and at least the data immediately necessary for the execution of the program;” “performing arithmetical computations specified by the user;” and “executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.” See Note 6(A)(i), (iii) and (iv) to Chapter 84, HTSUS. At issue in this case is whether the Mini Conferencing PC is “capable of … being freely programmed in accordance with the requirements of the user.” See Note 6(A)(ii) to Chapter 84, HTSUS. In Optrex America Inc. v. United States, 427 F. Supp. 2d. 1177 (Ct. Int’l Trade 2006), aff’d, 475 F.3d 1367 (Fed. Cir. 2007) (“Optrex”), the U.S. Court of App