CLA-2 RR:CR:GC 966997 GGD
Port Director
Customs and Border Protection
Port of Otay Mesa
9777 Via de la Amistad
San Diego, California 92154
RE: Internal Advice Request No. 04/014; Classification and NAFTA Eligibility of “Model 1394 Turbo Subassembly”
Dear Port Director:
This letter is in response to Internal Advice Request No. 04/014, initiated by a letter dated May 2, 2003, submitted by counsel on behalf of Rockwell Automation, Inc. The request concerns the North American Free Trade Agreement (NAFTA) eligibility and classification under the Harmonized Tariff Schedule of the United States (HTSUS), of a product designated the “Model 1394 Turbo Subassembly,” components of which are manufactured in Malaysia, Mexico, and the United States.
FACTS:
The merchandise at issue is a “turbo subassembly” for the Rockwell model 1394 motion controller. In its condition as imported, the subassembly consists of three printed circuit assemblies (PCAs) that are joined to a faceplate. Each of the three PCAs is described more completely as follows:
1394T-01 Subassembly. This is the central processing unit (CPU) PCA. It provides digital signaling processing functionality, system communications functions, and provides supervisory control of the 1394-DRIVE module.
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1394-DRIVE. This module provides the drive functionality of the Model 1394 motion controller. It communicates with the axis modules (which, in turn, control the motion of the work piece being regulated) and coordinates the activity of these modules.
RIO Plug Card. This is an optional module which allows the Model 1394 Turbo Subassembly to communicate on the Rockwell Automation I/O (input/output) network, and with other devices, such as programmable controllers.
The 1394T-01 subassembly (the CPU) is manufactured in Malaysia and imported into Mexico. The 1394-DRIVE module is assembled in Mexico. The RIO Plug Card module is a NAFTA-originating PCA produced in the U.S. The three PCA modules are bolted together using threaded standoffs. A fabricated mounted bracket is connected to the front of the assembly, allowing the turbo subassembly to be mounted in a complete Model 1394 motion controller system enclosure. Rockwell Automation assembles the complete motion controller in the U.S.
ISSUES:
1) Whether the “Model 1394 Turbo Subassembly” is classified under heading 9032, HTSUS, which covers “Automatic regulating or controlling instruments and apparatus; parts and accessories thereof;” or under heading 8537, HTSUS, which covers “Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517.”
2) Whether the 1394T-01 subassembly PCA (the CPU) is classified under heading 9032, HTSUS, when imported into Mexico from Malaysia.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied. The Explanatory Notes (EN) to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and GRI.
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The internal advice applicant, through counsel, initially contended that the “1394 turbo subassembly” was classified in subheading 8537.10.90, HTSUS (under which the merchandise had been entered for several years as NAFTA originating), the provision for “Boards, panels, consoles…equipped with two or more apparatus of heading 8535 or 8536…including those incorporating instruments of apparatus of chapter 90...: For a voltage not exceeding 1,000 V: Other.” The non-originating PCA from Malaysia was said to be classifiable in subheading 8538.90.30, HTSUS, as “Parts suitable for use solely or principally with the apparatus of heading 8535, 8536 or 8537: Other: Printed circuit assemblies: Other,” and to have undergone the required change due to Regional Value Content requirements (the other two PCAs being originating goods of the U.S. and Mexico).
The Bureau of Customs and Border Protection (CBP) initially questioned the importer as to whether the complete 1394 turbo subassembly was, itself, more properly classified in subheading 8538.90, as a part of a motion controller classified in subheading 8537.10.90, in which case the Malaysia-origin PCA (the CPU) would not undergo the required change and the 1394 turbo subassembly would be dutiable at 3.5 percent ad valorem when imported into the U.S. In response, Rockwell directed the exporter to withdraw its NAFTA certificates of origin and requested internal advice. Counsel maintained that CBP had broadly interpreted subheading 8537.10.90, HTSUS, and had not required that goods, as imported, be able to control or distribute electricity, only that they be intended to so function. In support of its position, counsel cited to several CBP rulings, these being, Headquarters Ruling Letters (HQ) 957727, dated October 3, 1995, HQ 962564, dated March 2, 2000, New York Ruling Letters (NY) B87602, dated September 5, 1997, NY A81034, dated March 29, 1996, NY D82916, dated October 22, 1998, and NY F84252, dated April 12, 2000. The cited rulings are not relevant to the case at hand in light of information subsequently provided to CBP.
Heading 8537 is within section XVI, HTSUS. Note 1(m) to section XVI provides that the section does not cover articles of chapter 90, HTSUS. Thus, if the model 1394 turbo subassembly is described in chapter 90 (which includes heading 9032), it cannot be classified in heading 8537. Among other merchandise, chapter 90 covers measuring, checking, and precision instruments and apparatus, and parts and accessories thereof. Heading 9032, HTSUS, covers “Automatic regulating or controlling instruments and apparatus; parts and accessories thereof.” Note 7(b) to chapter 90, HTSUS, states that heading 9032 applies only to:
Automatic regulators of electrical quantities, and instruments or apparatus for automatically controlling non-electrical quantities the operation of which depends on an electrical phenomenon varying according to the factor to be
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controlled, which are designed to bring this factor to, and maintain it at, a desired value, stabilized against disturbances, by constantly or periodically measuring its actual value.
The EN to heading 90.32 (II) provide, in pertinent part, that:
The automatic regulators of this heading are intended for use in complete automatic control systems which are designed to bring a quantity, electrical or non-electrical, to, and maintain it at, a desired value, stabilised against any disturbances, by constantly or periodically measuring its actual value. They consist essentially of the following devices:
A measuring device …
An electrical control device …
A starting, stopping or operating device …
An automatic regulator within the meaning of Note 7(b) to this Chapter consists of the devices described in (A), (B), and (C) above, whether assembled together as a single entity or in accordance with Note 3 to this Chapter, a functional unit.
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Automatic regulators are connected to an electrical, pneumatic or hydraulic actuator, which brings the controlled variable back to the desired value.…
Subsequent to the filing of the request for internal advice and CBP’s review of information submitted to support the contention that the 1394 turbo subassembly was properly classified in subheading 8537.10.90, HTSUS, CBP requested additional information, specifically any information that would establish whether the turbo subassembly meets, or does not meet, the requirements of note 7(b) to chapter 90, HTSUS. In response, the importer submitted new information, of which it had been previously unaware, establishing that the motion control functionality of the 1394 turbo subassembly is based on a PID (Proportional, Integral, Derivative) loop controller algorithm, and that the PID functionality resides on the CPU module.
The results of research conducted on the World Wide Web include an article at www.expertune.com entitled “What is PID—Tutorial Overview.” Pertinent portions of the article recount the fact that “controllers” are designed to eliminate the need for
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continuous operator attention. An automobile’s cruise control and a home’s thermostat are provided as examples of controllers used to automatically adjust a variable to hold the “measurement” at the “set-point.” The set-point is where one wants the measurement to be, and “error” is defined as the difference between set-point and measurement. “Error” is equal to “set-point” minus “measurement.” The variable being adjusted is called the “manipulated variable” and is usually equal to the output of the controller. The output of PID controllers change in response to a change in measurement or set-point. With proportional band (i.e., the “P” in “PID”), the controller output is proportional to the error or a change in measurement (depending on the controller). With integral action (the “I”), the controller output is proportional to the amount of time the error is present. With derivative action (the “D”), the controller output is proportional to the rate of change of the measurement of error.
The motion control functionality of the 1394 turbo subassembly is based on a PID loop controller algorithm, the functionality of which resides on the 1394T-01 CPU module. The PID controller characteristics function to measure deviation from a set-point and automatically adjust a variable to hold the measurement at the set point. As such, the model 1394 turbo subassembly imported into the U.S., and the Malaysia origin 1394T-01 CPU component, are classifiable under heading 9032, HTSUS. In accordance with note 7(b) to chapter 90, the complete imported good and the CPU component are each designed to bring a variable factor to, and maintain it at, a desired value, stabilized against disturbances, by constantly or periodically measuring its actual value. Since the import and CPU component are classifiable in heading 9032, more specifically subheading 9032.90.60, they are excluded from classification in section XVI (which covers heading 8537) by note 1(m) to that section.
With regard to the CPU component and NAFTA, in cases where non-originating materials are used to produce a good in a NAFTA country, and in order to qualify for the NAFTA preferential treatment, the non-originating material, under applicable provisions of GN 12, HTSUS (19 U.S.C. § 1202), and the NAFTA Rules of Origin Regulations (ROR) (19 C.F.R. Part 181, App.) must: undergo a change in tariff classification; undergo an applicable change in tariff classification and meet regional value content requirements; or simply meet regional value content requirements, as applicable to the specific situation. See GN 12(b), HTSUS (19 U.S.C. § 1202), and 19 C.F.R. part 181, app. § 4(2)(a) – (c). GN 12(b) states, in pertinent part, that:
For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if –
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(ii) they have been transformed in the territory of Canada, Mexico, and/or the United States so that –
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note. . . .
Noting that the imported merchandise at issue is classifiable in subheading 9032.90, HTSUS, the applicable rule is GN 12(t)/90.79, which states the tariff shift rule as requiring: “A change to subheading 9032.90 from any other heading.” In the instant case, the Malaysia origin PCA used to produce the imported Model 1394 turbo subassembly is classifiable in heading 9032. Therefore, when assembled into the product imported, the component does not undergo the necessary change in tariff classification as set forth in GN 12(t)/90.79. Therefore, the Model 1394 turbo subassembly does not qualify for NAFTA preferential treatment.
HOLDING:
The Model 1394 Turbo Subassembly is classified in subheading 9032.90.60, HTSUS, the provision for “Automatic regulating or controlling instruments and apparatus; parts and accessories thereof: Parts and accessories: Other.” The general column one duty rate is 1.7 percent ad valorem. Based on this classification, the merchandise at issue does not undergo the necessary change in tariff classification as prescribed in GN 12(t)/90.79 to qualify for NAFTA preferential treatment.
You are to mail this decision to the internal advice applicant no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other means of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division