CLA-2 R:C:M 957416 RFA
District Director of Customs
4430 East Adamo Drive
Suite 301
Tampa, FL 33605
RE: Protest No. 1801-94-100025; Hotel Security System; Metal
Lock Cases; Door Handles; Cables; Card Encoder; Card Reader;
Software; Automatic Data Processing (ADP) Units; Functional
Unit; Goods Put Up in Sets for Retail Sale; Legal Note 5(B)
to Chapter 84; Legal Note 6 to Chapter 85; Legal Note 4 to
Section XVI; Heading 8543; EN 83.01; HQs 956654, 957509,
952154, 950925
Dear District Director:
The following is our decision regarding the request for
further review of Protest No. 1801-94-100025, which concerns the
classification of the TL-2000 TimeLox Hotel Security System under
the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The subject merchandise, labeled as the TL-2000 TimeLox
Hotel Security System (TimeLox 2000), is an electronic locking
system based on the use of magnetic cards to open the locks
instead of keys. The system is designed to provide hotels with a
complete security and billing system. It consists of the
following components which were entered together: an encoder;
door handles, screws, bolts and nuts; card readers that are
printed circuit boards inside metal lock cases for doors or walls
(part numbers 855438 and 855439); cables; programmed operator
software and manuals.
The encoder is the card issuing unit of this system and is
directly or via an RS485 communications link, connected to the
central processing computer. The processor chip in the encoder
encrypts individual three track magnetic cards with particular
data that is obtained by the software. The individual cards are
coded with credit and personal information for a limited period
of time. Additionally, the encoder imparts data on the cards,
which when presented to the individual card reader locks,
executes a logical sequence to determine whether access to rooms,
corridors, swimming pools, parking garages, etc., is permitted.
The protest deals mainly with the card reader which was
entered under subheading 8471.92.88, HTSUS, as other input/output
units of an automatic data processing (ADP) system. The entry
was liquidated under subheading 8301.40.60, HTSUS, as other
electronic locks, on March 18, 1994. The protest was timely
filed on June 16, 1994.
Counsel for protestant also requested in the alternative
that classification of the entire TimeLox 2000 under subheading
8543.80.95, HTSUS, as other electrical machines or apparatus,
having individual functions, not specified elsewhere, be also
under consideration.
The subheadings under consideration are as follows:
8301.40.60: Padlocks and locks (key, combination or
electrically operated), of base metal . . . :
[o]ther locks: [o]ther. . . .
Goods classifiable under this provision have a general,
column one rate of duty of 5.7 percent ad valorem.
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:
8471.92.88: Input or output units, whether or not entered
with the rest of the system and whether or
not containing storage units in the same
housing: [o]ther: [o]ther: [o]ther: [o]ther
. . . .
Goods classifiable under this provision have a general,
column one rate of duty of 3.7 percent ad valorem.
8471.99.90: Other: [o]ther: [o]ther: [o]ther. . . .
Goods classifiable under this provision have a general,
column one rate of duty of 3.7 percent ad valorem.
8524.90.40: Records, tapes and other recorded media for
sound or other similarly recorded phenomena.
. . : [o]ther: [o]ther . . . .
Goods classifiable under this provision have a general,
column one rate of duty of 9.7 cents per square meter
of recording surface.
8543.80.95: Electrical machines or apparatus, having
individual functions, not specified or
included elsewhere in this chapter . . . :
[o]ther machines and apparatus: [o]ther:
[o]ther. . . .
Goods classifiable under this provision have a general,
column one rate of duty of 3.9 percent ad valorem.
ISSUE:
Whether the TimeLox 2000 is classifiable as a functional
unit as automatic data processing machines and units thereof, or
as other electrical machines and apparatus, not specified
elsewhere, under the HTSUS?
LAW AND ANALYSIS:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's). GRI
1 provides that classification shall be determined according to
the terms of the headings and any relative section or chapter
notes.
Initially, we note that Legal Note 6 to chapter 85, HTSUS,
states that: "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." In
classifying a group of merchandise containing media of heading
8523 or 8524, HTSUS, Customs has interpreted the meaning of Legal
Note 6 to Chapter 85, HTSUS, as requiring that software is to be
broken out from the rest of the entry and classified separately.
See HQ 957509 (April 17, 1995); 952154 (November 17, 1992); HQ
950925 (May 12, 1992). Based upon Legal Note 6 to chapter 85,
HTSUS, we find that the software for the TimeLox 2000 is
classified under subheading 8524.90.40, HTSUS.
The protestant states that the merchandise should be
classified as a functional unit according to the principles of
Legal Note 4 to section XVI, HTSUS, because the entire system
acts as an integrated hotel security and billing system. Legal
Note 4 to section XVI, HTSUS, provides that:
Where a machine (including a combination of machines)
consist 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.
Based upon Legal Note 4 to section XVI, HTSUS, the
protestant states that classification of the TimeLox 2000 should
be under either heading 8471 or heading 8543, HTSUS, as an
integrated hotel security and billing system.
In HQ 956654, dated November 3, 1994, Customs determined
that an interactive system that enabled cable-TV customers to
participate in interactive programming could not be classified
as a functional unit under heading 8543, HTSUS. The basis for
this decision is stated as follows:
The components in the system must "contribute together
to a clearly defined function covered by one of the
headings in chapter 84 or chapter 85." Heading 8543,
HTSUS, only describes, in a generic form, articles
which are not classifiable elsewhere under chapter 85,
HTSUS. It is not, by definition, a provision which
specifically describes any type of merchandise or
components forming a unit of merchandise.
Consequently, we find that heading 8543, HTSUS, cannot
cover any clearly defined function.
The protestant states that the merchandise performs the
function of providing hotel security and billing. This specific
function is not described in either heading 8543 or heading
8471, HTSUS. Therefore, based upon the rationale of HQ 956654,
we find that classification of the TimeLox 2000 under heading
8543 and heading 8471, HTSUS, is precluded.
We will now deal with the issue of whether the combinations
of the merchandise, for classification purposes, are "goods put
up in sets for retail sale". GRI 3(b) provides that "goods put
up in sets for retail sale, which cannot be classified by
reference to 3(a), shall be classified as if they consisted of
the material or component which gives them their essential
character."
The Harmonized Commodity Description and Coding System
Explanatory Notes (EN) constitute the Customs Cooperation
Council's official interpretation of the HTSUS. While not
legally binding, 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 FR
35127, 35128 (August 23, 1989). To determine what is a "set
put up for retail sale", EN X to GRI 3(b), page 4, states that:
[f]or the purposes of this Rule, the term "goods put up
in sets for retail sale" shall be taken to mean goods
which:
(a) consist of at least two different articles which
are, prima facie, classifiable in different
headings;
(b) consist of products or articles put up together to
meet a particular need or carry out a specific
activity; and
(c) are put up in a manner suitable for sale directly
to users without repacking (e.g., in boxes or
cases or on boards).
Based upon the available information about the subject
merchandise, we find that it does not meet the definition of a
set, because it is not put up in a manner suitable for sale
directly to the user. The electronic locks, card readers, door
handles, cable, etc., are entered in bulk and left in a warehouse
until needed, depending on what the requirements are for the end-user (i.e., the hotel) at a later date. Therefore, we conclude
that the components of the TimeLox 2000 must be classified
separately.
According to the information provided, the card readers are
printed circuit boards inside metal lock cases for doors or
walls. EN 83.01, page 1117, states that Heading 8301, HTSUS,
covers:
. . . fastening devices operated by a key (e.g., locks
of the cylinder, lever, tumbler or Bramah types) or
controlled by a combination of letters or figures
(combination locks).
It also includes electrically operated locks (e.g., for
street doors of blocks of flats or for lift doors).
These locks may be operated, e.g., by insertion of a
magnetic card, by entering the combination data on an
electronic keyboard, or by radio wave signal.
We believe that heading 8301, HTSUS, includes electrically
operated locks such as the TimeLox 2000. Therefore, the card
readers in the metal lock cases are classifiable under subheading
8301.40.60, HTSUS, as other electrically operated locks.
The encoder is the card issuing unit of this system and is
directly or via an RS485 communications link, connected to the
central processing computer. The processor chip in the encoder
encrypts individual three track magnetic cards with particular
data that is obtained by the software. The individual cards are
coded with credit and personal information for a limited period
of time. Additionally, the encoder imparts data on the cards,
which when presented to the individual card reader locks,
executes a logical sequence to determine whether access to rooms,
corridors, swimming pools, parking garages, etc., is permitted.
To classify the encoder as a unit for an automatic data
processing machine unit, it must meet Legal Note 5 to chapter 84,
HTSUS, which provides that:
Automatic data processing machines may be in the form
of systems consisting of a variable number of
separately-housed units. A unit is to be regarded as
being a part of the complete system if it meets all the
following conditions:
(a) it is connectable to the central processing unit
either directly or through one or more other
units;
(b) it is specifically designed as part of such a
system (it must, in particular, unless it is a
power supply unit, be able to accept or deliver
data in a form (code or signals) which can be used
by the system).
The encoder unit meets the definition of Legal Note 5(B) to
chapter 84, HTSUS, because it connects to the central processing
computer and it is able to transcribe data from the computer's
software onto the magnetic card keys. Therefore, we find that
the encoder is classifiable under subheading 8471.99.90, HTSUS,
as other units for automatic data processing machines. See NY
848856 (January 25, 1990); NY 855611 (August 27, 1990).
The screws, nuts, bolts and cables are classifiable under
their own separate provisions under the HTSUS.
HOLDING:
The software for the TimeLox 2000 is classified under
subheading 8524.90.40, HTSUS, as other recorded media.
The card readers in the metal lock cases (part numbers
855438 and 855439) are classifiable under subheading 8301.40.60,
HTSUS, as other electrically operated locks.
The encoder is classifiable under subheading 8471.99.90,
HTSUS, as other units for automatic data processing machines.
The screws, nuts, bolts and cables are classifiable under
their own separate provisions under the HTSUS.
The protest for the card readers should be DENIED. In
accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive,
this decision, together with the Customs Form 19, should be
mailed by your office to the protestant no later than 60 days
from the date of this letter. Any reliquidation of the entry in
accordance with the decision must be accomplished prior to
mailing of the decision. Sixty days from the date of the
decision the Office of Regulations and Rulings will take steps to
make the decision available to Customs personnel via the Customs
Rulings Module in ACS and the public via the Diskette
Subscription Service, Freedom of Information Act and other public
access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: District Director, Baltimore, MD