CLA-2 RR:TC:MM 957981 RFA
Mr. R. Kevin Williams
O'Donnell, Byrne, Basham & Williams
20 North Wacker Drive
Suite 1416
Chicago, Illinois 60606
RE: Digital Color Printers; Printing Machinery; Automatic Data
Processing (ADP) Units; Functional Unit; Legal Note 5 to
Chapter 84; Legal Note 4 to Section XVI; General EN to
Chapter 84; HQs 088024 and 957491
Dear Mr. Williams:
This is in response to your letter dated April 27, 1995, to
the then Regional Commissioner of Customs, New York, on behalf of
AM Multigraphics, concerning the tariff classification of the
Xeikon DCP-1 digital color printers ("DCP-1") under the
Harmonized Tariff Schedule of the United States (HTSUS). Your
letter was referred to this office for a response. In preparing
this ruling, we also considered the information provided with
your letters of May 1, 1996, and July 1, 1997. We sincerely
regret the delay in responding.
FACTS:
The merchandise, labeled as the Xeikon DCP-1, is a 4-color
digital printer specially designed for short-run, full color
applications. Instead of requiring the costly intermediate
steps, such as mechanical art, film and plate-making, commonly
associated with color printing, the DCP-1 prints directly from
digital data to paper. Images, text and line art can be created
on any standard desktop publishing system that produces
PostScript Level 2 output. The DCP-1 is an example of a new type
of commercial product known in the industry as short-run printing
with digital presses or "digital print-on-demand". Completed
jobs are sent digitally to the DCP-1 where they are stored
internally in memory for printing on the web-fed printing engine.
The printing engine contains two sets of four CMYK (cyan,
magenta, yellow, and black) printing units. One set of printing
units is on each side of the paper, allowing for duplex printing
in a single pass. The DCP-1 prints at a speed of up to 70 duplex
pages per minute.
The DCP-1 consists of five subsystems: a paper supply unit;
a print tower; a paper output unit; a digital system; and a
cooling unit. The paper supply unit holds the paper rolls (the
print web) used during the operation of the DCP-1. The paper
rolls are mounted on an axle in the paper supply unit. The unit
is designed so that paper rolls may be changed when a different
paper size or grade is needed for a new job. The paper supply
unit also conditions the paper by monitoring the moisture
content. The web drive motors in the printing tower feed the
paper from the paper supply unit.
The printing tower contains eight print units four on each
side of the paper web) which prints the document by electrostatic
means. The paper is then cooled and cut before leaving the print
tower. The paper output unit receives the cut paper sheets,
separating blank waste sheets and test prints from the finished
product as it leaves the printing tower. The cooling unit cools
the water used by the four conditioning circuits which are
regulating the temperature and humidity in the printing tower,
cooling the paper after it passes the heated roller, and cooling
the writing heads.
The digital system, which controls the operation of the DCP-1, consists of two control computers (the host and the print
engine supervisor), and three functional subsystems (the host
interface, the imaging control system, and the instrumentation
control system). Both computers are dedicated solely to
operating the DCP-1 system and are incapable of accepting
additional software other than that provided with the DCP-1.
ISSUE:
Is the DCP-1 digital color printer classifiable as an
automatic data processing (ADP) printer, or as printing machinery
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.
Legal Note 4 to Section XVI, HTSUS, states that: "[w]here a
machine (including a combination of machines) consists 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." The DCP-1 consists of five
subsystems (a paper supply unit, a print tower, a paper output
unit, a digital system, and a cooling unit) intended to
contribute together to the clearly defined function of printing.
You claim that the DCP-1 is an ADP printer classifiable
under heading 8471, HTSUS. Heading 8471, HTSUS, is governed by
the terms of Legal Note 5 to Chapter 84, HTSUS, which provides,
in relevant part:
(B) Automatic data processing machines may be in
the form of systems consisting of a variable number of
separate units. Subject to paragraph (E) below, a unit
is to be regarded as being a part of a complete system
if it meets all the following conditions:
(a) It is of a kind solely or principally used in an
automatic data processing system;
(b) It is connectable to the central processing unit
either directly or through one or more other units; and
(c) It is able to accept or deliver data in a form
(codes or signals) which can be used by the system.
* * * * * * *
(D) Printers, keyboards, X-Y coordinate input devices
and disk storage units which satisfy the conditions of
paragraphs (B)(b) and (B)(c) above, are in all cases to be
classified as units of heading 8471.
(E) Machines performing a specific function other
than data processing and incorporating or working in
conjunction with an automatic data processing machine
are to be classified in the headings appropriate to
their respective functions or, failing that, in
residual headings.
Based upon Legal Note 5(B) and 5(D), you state that the DCP-1 is an ADP printer. However, the DCP-1 is more than just an ADP
printer, it is an entire printing system which acts as a
functional unit designed to replace off-set printing presses.
Legal Note 5(E) to chapter 84 clearly states that machines
performing a specific function are to be classified in the
heading appropriate to their respective functions.
The issue remains which of the above legal notes determines
the classification of the subject merchandise. In HQ 957491,
dated July 31, 1996, Customs stated that Legal Note 5(D) must be
read in light of Legal Note 5(E) to chapter 84, HTSUS. Customs
concluded that "while note 5(D) negates the sole or principal use
requirement when considering the classification of printers,
keyboards, X-Y coordinate input devices and disk storage units,
note 5(E) provides a separate prerequisite to the classification
of any ADP machine and, therefore, ADP unit."
The Harmonized Commodity Description and Coding System
Explanatory Notes (ENs) constitute the official interpretation of
the HTSUS. While not 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 FR 35127, 35128 (August 23,
1989). General EN (E) for Chapter 84, states that:
MACHINES INCORPORATING OR WORKING IN CONJUNCTION WITH
AN AUTOMATIC DATA PROCESSING MACHINE AND PERFORMING A
SPECIFIC FUNCTION
In accordance with the provisions of the last
paragraph of Note 5 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:
(i) 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.
(ii) 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 [emphasis added].
According to the sales literature, the DCP-1's technology
"will revolutionize short-run, full color printing with faster
turnaround, targeted custom documents and increased profits." On
December 5, 1993, The New York Times published an article titled
"Gutenberg Goes Digital", which states, in part, that: "[a] new
generation of presses is emerging that eliminates the metal
plates, creating flexibility that should allow shorter press runs
and even let the publisher make on-the-fly changes. A full-color
advertising circular, for example, could carry a message tailored
to each individual customer."
Based upon the information in the above-cited articles, we
find that the DCP-1 is a functional unit by application of Legal
Note 4 to Section XVI and Legal Note 5(E) to chapter 84, and is
performing the specific function of short-run four color
printing. Heading 8443, provides for printing machinery.
Therefore, we find that the DCP-1 is classifiable under heading
8443, HTSUS, as printing machinery.
We note that it has been suggested that the EN 84.43 for
this heading limits printing machinery to those types of machines
that print by means of the type, printing blocks, plates or
cylinders of heading 8442, HTSUS. However, nothing in the legal
text of heading 8443 provides for such limitations. Furthermore,
"[i]t must also be remembered that the tariff statutes were
enacted 'not only for the present but also for the future,
thereby embracing articles produced by technologies which may not
have been employed or known to commerce at the time of the
enactment * * *.'" Nec America, Inc. v. United States, 8 CIT 184,
186(1984), citing Corporacion Sublistatica, S.A. v. United
States, 1 CIT 120, 126, 511 F.Supp. 805, 809 (1981); See also
Davis Turner & Co. v. United States, 45 CCPA 39, 41, C.A.D. 669
(1957). See also Simmon Omega, Inc. v. United States, 83
Cust.Ct. 14, C.D. 4815 (1979), and Trans-Atlantic Co. v. United
States, 471 F.2d 1397, 60 CCPA 100, C.A.D. 1088 (1973), in which
the courts have held that technological advancements and
"improvement in the design of an article does not militate
against its continuing to be a form of the named articles." See
HQ 088024 (January 3, 1991), in which Customs held that the 3M
Digital Matchprint Color Proofing System was a technologically
advanced, special purpose, printing proofing system suitable only
for proofing printing jobs and therefore classifiable under
subheading 8443.50.50 [now 8443.59.50], HTSUS, as other printing
machinery.
We further note that the merchandise includes software.
Legal Note 6 to chapter 85, HTSUS, provides that "[r]ecords,
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 HQ 950675, dated
January 7, 1992, Customs held that software, whether imported in
floppy disk form or downloaded onto the system's hard disk drive,
was classifiable under heading 8524, HTSUS, whether or not
entered with the rest of the system. Therefore, the subject
software should be classified separately under heading 8524,
HTSUS. At the time of entry, the proper subheading shall be
determined based upon what type of media the software is recorded
on and whether or not it contains sounds and images.
HOLDING:
Based upon the application of Legal Note 4 to Section XVI,
the Xeikon DCP-1 digital color printer is classifiable under
subheading 8443.59.50, HTSUS, which provides for: "[p]rinting
machinery, including ink-jet printing machines, other than those
of heading 8471. . . : [o]ther printing machinery: [o]ther:
[o]ther. . . ." The column one, general rate of duty is 1.3
percent ad valorem.
The software is classified within heading 8524, HTSUS, as
recorded media. At the time of entry, the proper subheading
shall be determined based upon what type of media the software is
recorded on and whether or not it contains sounds and images.
Sincerely,
John Durant, Director
Tariff Classification Appeals Division