CLA-2 CO:R:C:S 557024 BLS
District Director of Customs
Buffalo, New York 14202
RE: Internal Advice No. 45/91; Computer Assisted Medical
Reconstruction and Analysis System; Alteration; HRL
556992
Dear Sir:
This is in reference to your memorandum dated July 17, 1991,
forwarding a letter dated May 31, 1991, from PBB USA Inc.,
requesting internal advice with respect to the applicability of
subheading 9802.00.50, Harmonized Tariff System of the United
States (HTSUS), to the "host computer", part of the Computer
Assisted Medical Reconstruction and Analysis system (CAMRA),
currently being imported into the U.S. Request is also made for
our opinion as to the proper classification of the host computer,
and country of origin marking requirements for the imported system
and its components.
FACTS:
The CAMRA system consists essentially of a host computer with
the ISG Graphic subsystem ("board set"), a monitor, keyboard, tape
drive, printer, modem, and specialized software. The system was
designed, constructed and programmed to provide medical personnel
with a computer-enhanced, two or three-dimensional image of cat
scans, x-rays and other one-dimensional images. It is a tool used
in the diagnosis of medical conditions, diseases, etc. The
importer sells these systems exclusively to hospitals, clinics,
research laboratories, medical centers, etc.
The host computer is of U.S. origin and is sent to Canada
where it is modified by the addition of the Canadian produced board
set. The purpose of this modification, according to the importer,
is to increase the data processing speed of the computer to enable
it to handle the complex software to be utilized. The other
components, which may be U.S. origin, or from other countries such
as Canada, Japan, or Korea, are added to complete the system.
After final configuration and testing, the board set is removed
from the system and packaged separately, before the complete system
is shipped to the U.S.
- 2 -
ISSUES:
1. What is the classification of the host computer used with
the CAMRA system?
2. Does the addition of the board set in Canada constitute
an alteration of the host computer, within the meaning of
subheading 9802.00.50, HTSUS?
3. What is the proper country of origin for marking purposes
of the host computer and of the components comprising the CAMRA
system?
LAW AND ANALYSIS:
1. Classification
The importer states that the host computer for the CAMRA
system "is a standard computer workstation which is purchased from
Silicon Graphics or Sun Microsystems.... The computer itself is an
off the shelf piece of equipment that can be bought by any
customer, anywhere in the United States. (Emphasis added.) Into
this system, ISG incorporates its parallel processing accelerator
board [in Canada] in order to speed up the system to allow it to
process 3D images generated on the ISG Allegro system [and then it
is imported back into the United States]."
Upon export from the United States, the host computer is
classified under the following provisions:
Processor - 8471.91.00 which provides for "Digital processing
units"
Keyboard - 8471.92.20 which provides for "Keyboards"
Monitor - 8471.92.40 which provides for "Display units; Other"
It is our opinion that when the host computer is imported with
the incorporated parallel processing accelerator, the same
classifications apply because at importation, the computer is not
dedicated to medical, surgical, dental or veterinary sciences
(heading 9018), it merely has improved processing capabilities.
2. Subheading 9802.00.50, HTSUS
Subheading 9802.00.50, HTSUS, provides a partial duty
exemption for articles returned to the U.S. after having been
exported to be advanced in value or improved in condition by means
of repairs or alterations. Such articles are dutiable only upon
- 3 -
the value of the foreign repairs or alterations, provided the
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8), are satisfied. However, entitlement to this tariff
provision is precluded in circumstances where the operations
performed abroad destroy the identity of the articles or create new
or commercially different articles. See, A.F Burstrom v. United
States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp.
v. United States, 3 CIT 9 (1982). Tariff treatment under
subheading 9802.00.50, HTSUS, is also precluded where the exported
articles are incomplete for their intended use prior to the foreign
processing. Guardian; Dolliff & Company, Inc. v. United States,
81 C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).
In Headquarters Ruling Letter (HRL) 556992, dated May 7, 1993,
notebook computers with a monochrome video display were to be sent
abroad at the customer's option to have the monochrome display
replaced with a color display feature. The upgraded unit would
retain all of the original capabilities of the exported unit, i.e.,
the ability to store programs, to be freely programmed, to perform
computations, and to execute a program requiring logical decision.
In that case, we found that the computer in its exported condition
was complete for its intended use as an "automatic data processing
machine". It could be used for this purpose without exercising the
option to upgrade the unit. There was no change in the identity
of the computer as a result of the upgrade and no new article was
created. Accordingly, we found that the upgrade was an alteration
within the meaning of subheading 9802.00.50, HTSUS. (See also
Royal Bead Novelty v. United States, 324 F. Supp. 1394 (1972),
where a lustrous coating given to glass beads also marketed in that
condition was found to constitute an alteration.)
In the instant case, the importer states that the software
generates the 3D views, and that a standard workstation could
accomplish this task, but would take up to 60 minutes to perform
this function. The added board set merely accelerates the process.
The exported computer is itself a standard off-the-shelf unit that
can be purchased by any customer in the U.S. The computer, or
"digital processing unit", is returned from abroad after processing
with the same general uses it had upon exportation, but with the
added accelerator feature. As in HRL 556992, we find that the
computer in its exported condition is complete for its intended use
as a "Digital processing unit", and that the processing abroad does
not serve to change the identity or the character of the exported
article. No new article of commerce is created as a result of the
processing abroad. Rather, the exported computer is merely
enhanced with an accelerator feature. Accordingly, we find that
the modifications performed abroad constitute an alteration within
the meaning of subheading 9802.00.50, HTSUS.
- 4 -
3. Country of Origin Marking
In view of our findings, above, the host computer as a product
of the United States exported and returned is excepted from marking
pursuant to section 134.32(m), Customs Regulations (19 CFR
134.32(m)). The board set should be marked with Canada as the
country of origin. In this regard, it is noted that the importer
advises that these items will be separately packaged. The other
components of the CAMRA system should be marked to reflect their
respective countries of origin.
HOLDING:
1. Upon importation, the host computer will be classified as
follows:
Processor - 8471.91.00 which provides for "Digital processing
units"
Keyboard - 8471.92.00 which provides for "Keyboards"
Monitor - 8471.92.40 which provides for "Display units: Other"
2. The modification of the host computer in Canada, by the
addition of the ISG Graphite subsystem, constitutes an alteration
of the host computer within the meaning of subheading 9802.00.50,
HTSUS. Therefore, the computer will be entitled to the partial
duty exemption pursuant to that provision.
3. The host computer will be excepted from marking pursuant to 19
CFR 134.32(m). Canada will be marked as the country of origin of
the ISG Graphite subsystem. The other components of the CAMRA
system will be marked according to their respective countries of
origin.
Sincerely,
John Durant, Director
Commercial Rulings Division
CC: Chief, National Import Specialist Division, Branch 1
New York Seaport