CLA-2 RR:CR:GC 961050 gah
Port Director
U.S. Customs Service
610 S. Canal Street
Chicago, Illinois 60607
RE: Protest 3901-97-102166; flexible integrated circuits
Dear Port Director:
This is our decision on protest 3901-97-102166 timely filed by counsel on behalf of Motorola, Inc., on August 28, 1997, against your decision regarding the classification of flexible integrated circuits. All entries were reliquidated on May 30, 1997 after a notice of rate advance. In preparing this decision, consideration was given to supplemental submissions from counsel dated April 22, 1998, September 15, 1998, and April 9, 1999, as well as arguments presented at a meeting on April 14, 1999.
FACTS:
The merchandise has been described on submitted invoices and literature variously as flex circuits, flex circuit assemblies, hybrid flexes, and flex microtac prismatics, produced in Malaysia. Counsel claims that they are hybrid integrated circuits (HICs). Counsel further describes the merchandise at issue as used in the production of cellular phones and rechargeable battery packs. Materially identical merchandise is used in two-way radios and computers. The merchandise connects rechargeable battery cells to the host device, that is, a cellular phone, computer or two-way radio.
Customs classified what are claimed to be similar circuits in preclassification determinations 878763 of October 22, 1992 and 894316 of
February 4, 1994, in subheading 8542.20.0000, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), predecessor to current subheading 8542.40.0000, which provides for hybrid integrated circuits, duty free.
Following a request for information on October 31, 1996, which was replied to promptly, and a notice of action on April 24, 1997 from Customs, 92 entries of the merchandise at issue were reliquidated. That action reclassified the goods in subheading 8507.90.8000, which provides for parts of other storage batteries. Subsequently, the protest was filed, in which counsel argues that the classification on reliquidation was incorrect and that the prior preclassification determination is correct.
ISSUE:
Is the merchandise classified as hybrid integrated circuits of subheading 8542.40.0000, as electrical apparatus for protecting electrical circuits of subheading 8536.30.8000, or as parts of other storage batteries of subheading 8507.90.80?
LAW AND ANALYSIS:
Classification of merchandise under the Harmonized Tariff Schedule of the United States (HTSUS) is in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes. Merchandise that cannot be classified in accordance with GRI 1 is to be classified in accordance with subsequent GRIs.
The Harmonized Commodity Description and Coding System Explanatory Notes (EN) constitute the official interpretation of the Harmonized System at the international level. While neither 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).
Heading 8542 provides for electronic integrated circuits and microassemblies. Chapter 85, legal note 5(B) defines that phrase as including, in pertinent part,
(b) Hybrid integrated circuits in which passive elements (resistors, capacitors, interconnections, etc.), obtained by thin or thick film technology, and active elements (diodes, transistors, monolithic integrated circuits, etc.), obtained by semiconductor technology, are combined to all intents and purposes indivisibly, on a single insulating substrate (glass, ceramic, etc.). These circuits may also include discrete components;
The merchandise at issue is a populated flexible printed circuit made in two stages. In stage one, Motorola’s supplier laminates a thin copper foil to an insulating polyimide substrate. An image is photo-exposed onto the copper, used to create a conductive pattern. This is layered with solder, and the copper is etched to create a conductive pattern and nonconductive areas. A protective coating is applied and the printed circuit substrate is cut to final shape. In stage two, the printed circuit is then sent to Motorola where it is populated. Motorola layers the printed circuit with solder and populates the substrate by placing discrete passive and active components onto the conductive pattern of the printed circuit, at which time the entire circuit is baked to form an indivisible whole. The passive discrete components are made by thick film technology and the active elements, discrete and monolithic integrated circuits, are made by semiconductor technology.
The classification of the flexible circuits manufactured in the above manner depends on the interpretation given to chapter 85, legal note 5(B)(b), supra, and the Explanatory Note (EN) (I)(2) to heading 8542, as follows:
Hybrid integrated circuits. These are microcircuits built up on an insulating substrate on which a thin or thick film circuit has been formed. This process allows certain passive elements (resistors, capacitors, interconnections, etc.) to be produced at the same time. However, to become a hybrid integrated circuit of this heading, semiconductors must be incorporated and mounted on the surface, either in the form of chips, whether or not encased, or as encased semiconductors (e.g., in specially designed miniature casings). Hybrid integrated circuits may also contain separately produced passive elements which are incorporated into the basic film circuit in the same way as the semiconductors. Usually these passive elements are components such as capacitors, resistors or inductors in the form of chips.
Substrates made up of several layers, generally ceramic, heat bonded together to form a compact assembly, are to be taken to form a single substrate within the meaning of Note 5 (B) (b) to this Chapter.
The components forming a hybrid integrated circuit must be combined to all intents and purposes indivisibly, ...
Counsel argues that legal note 5(B)(b) and EN 8542(I)(2) require only that HICs contain elements obtained by film technology, whether discrete or built up on the substrate. Stated conversely, counsel does not believe that elements must be produced through film technology directly on the substrate of the HIC, in the mass before the semiconductors and discrete passive components are added to the substrate. If counsel is correct, classification as HICs in heading 8542 will result.
Legal note 5(B)(b) indicates that HICs are so called because they contain circuits formed by two types of technology, film and semiconductor, combined indivisibly on the same substrate. Film technology in this context is done by film deposition through masks, deposition of a continuous film with selective etching, or by screen printing using pastes or ink to form circuits in the mass. Semiconductor technology, on the other hand, involves placing active components, discrete active and/or monolithic integrated circuits, based on the electronic properties of semiconductor materials, onto the circuit pattern to form a populated circuit. See generally, McGraw-Hill MultiMedia Encyclopedia of Science and Technology, articles on Printed Circuits, Semiconductor and Integrated Circuits.
Legal note 5(B)(b) goes on to indicate that HICs may also include discrete components. This sentence implicitly states that HICs must contain nondiscrete components. Discrete components refer to elements separately made and incorporated on the substrate. A. Freedman, The Computer Glossary 142 (Sixth Ed. 1993). Thus, nondiscrete components are circuits made in the mass. We turn to the Explanatory Notes to clarify what the drafters intended to include within the terms of legal note 5(B)(b).
HICs are therein described as microcircuits built up on an insulating substrate on which a thin or thick film circuit has been formed. This process allows certain passive elements (resistors, capacitors, interconnections, etc.) to be produced at the same time. This text indicates that directly on top of the substrate, a film circuit is produced in the mass, and that further building up of the circuit is intended.
Legal note 5(B)(b) requires an HIC to contain passive film components, and according to the EN, they must be produced in the mass. We believe the drafters of the Harmonized System intended the legal note and the EN to be read as a whole, the one supporting the other. To that end, we interpret the Harmonized System’s definition of an HIC as formed by layering a thin or thick film circuit, in the mass (nondiscrete) directly on top of the substrate. Stated another way, an HIC begins with a printed circuit produced through film technology, see chapter 85 legal note 4 and the EN to heading 8534, to which are added components produced through semiconductor technology. As the second stage, both the legal note and the EN state that separately produced semiconductors must be incorporated as well. It is by this sequence of technologies that the legal note and EN together define an integrated circuit as hybrid.
Motorola’s flex circuits are not constructed with a film layer directly on the substrate and in the mass. Rather, its use of film technology is in the production of discrete components that populate the circuit board after the electronic pathway is produced. Therefore, classification in subheading 8542.40 cannot result.
The flexible circuits are housed within battery packs. The battery packs are then inserted in or attached to a host device, either a cell phone, a two-way radio or a computer. The flex circuit provides the path through which the electricity flows between the battery pack and the host device. Failing classification in heading 8542, counsel asks that Customs classify the flexible circuits as parts of the host devices, specifically subheading 8529.90.23 or subheading 8473.30.10. In order to address whether the flex circuits can be classified as parts of their host devices, rather than parts of the machinery in which they are most directly housed, Section XVI, note 2(a) must be applied. That note requires that parts of machines which are goods included in any of the headings of chapter 84 or 85 are to be classified in their respective headings. In other words, if the flexible circuits are specifically described in their own heading within chapter 84 or 85, classification in such heading would result before they would be classified as parts of host devices to which they connect.
Customs preclassified similar goods in subheading 8542.40. Later, it reliquidated these goods in subheading 8507.90.8000, the residual provision for parts of other electrical storage batteries, based on Motorola’s response to Customs request for information. Based on our analysis of Section XVI, note 2(a), above, we conclude that 8507 does not accurately describe the flex circuits.
Heading 8536 provides for electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits. In the Customs Form 28 that Motorola submitted, it states that its flex circuits provide additional safety circuitry to prevent batteries from overcharging or short circuiting. Now, in advocating classification as parts of host devices, counsel notes that the flex circuits function to identify the (electrical) capacity of the battery cell, to terminate any rapid charge feature of the battery cell and to prevent (protect from) inadvertent (electrical) battery cell discharge. Parentheticals added for emphasis. We find that all of the subject merchandise is specifically provided for in heading 8536, HTSUS, by operation of section XVI, note 2(a).
GRI 6 states, in summary, that classification at the subheading level is determined according to the terms of the subheadings, on the understanding that only subheadings at the same level are comparable. The applicable competing subheadings within heading 8536 are:
- Other apparatus for protecting electrical circuits
- Other apparatus
Motorola states that all of the electricity in its batteries flow through the flex circuit, and that therefore their principal function is to make connections to or in electrical circuits. We disagree. Such a design of the flex circuit is intended as a safety measure. The flex circuit is not necessary to access the electricity in a storage battery. They are critical in rechargeable storage batteries to determine how much electricity the battery has, and to cause the charge and discharge of the battery’s electricity in a safe manner to protect the host device. These functions incorporate switches and connecting devices all for the protection of circuits in use. See generally, Explanatory Note to heading 8536. The goods are specifically described within subheading 8536.30, other apparatus for protecting electrical circuits.
HOLDING:
The flexible circuits are classifiable in subheading 8536.30.8000, other electrical apparatus for protecting electrical circuits, which carries a 2.7 percent ad valorem duty rate.
The protest should be Denied. In accordance with Section 3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant, Director
Commercial Rulings Division