CLA-2 OT:RR:CTF:EMAIN: H296912 PF
David W. Fong
SK Hynix America Incorporated
3101 North First Street, Building B
San Jose, CA 95134
RE: Tariff classification of solid-state drives
Dear Mr. Fong:
This is in reply to your request, submitted on April 11, 2018, on behalf of SK Hynix America Incorporated (“SK Hynix”), seeking a prospective ruling from U.S. Customs and Border Protection (“CBP”) on the tariff classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of two models of a solid-state drive (“SSDs”). In reaching our determination, we have considered information presented in your April 11, 2018 request and a separate email submission dated July 24, 2018.
FACTS:
The models of the subject SSDs under consideration are a SK Hynix SL308 and SC300A, which contain NAND flash memory circuit assemblies that are housed in a case and function as data storage drives. After importation, the SSDs are incorporated into other devices, such as servers, laptops, desk tops, and tablets. The SSDs are solid-state non-volatile storage devices that are designed to accept, store, or deliver electronic data using flash memory semiconductors. They contain a connecting socket (for use in connecting to a host device) which is incorporated in a housing and includes a flash controller in the form of an integrated circuit. The SSDs do not contain a hard disk drive or other non-SSD storage medium.
Product literature for the SK Hynix SSD notes that the SL308 has a storage density of 120, 150, and 500 Gigabytes (“GB”) and that the SK Hynix SSD SC300A has a storage density of 128, 256, and 512GB. On the SK Hynix website, the SSDs are described as “multi-tasking product[s] boasting fast booting in various PCs, excellent durability, and outstanding speed.” SK Hynix markets their SSDs to individual consumers, businesses, schools, and universities.
ISSUE:
Whether the subject SSDs are classified as units of automatic data processing machines of heading 8471, HTSUS, or as solid-state non-volatile storage devices of heading 8523, HTSUS.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). 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 GRIs may then be applied in their appropriate order.
The HTSUS headings under consideration are the following:
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:
* * *
8471.70 Storage units:
* * *
Other storage units:
8471.70.60 Not assembled in cabinets for placing on a table, desk, wall, floor or similar place.
8523 Discs, tapes, solid-state non-volatile devices, “smart cards” and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37:
* * *
Semiconductor media:
8523.51.00 Solid-state non-volatile storage devices.
GRI 3 states, in pertinent part:
When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description.
Note 5(C) to Chapter 84, HTSUS, states, in pertinent part:
(C) Subject to paragraphs (D) and (E) below, a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions:
(i) It is of a kind solely or principally used in an automatic data processing system;
(ii) It is connectable to the central processing unit either directly or through one or more other units; and
(iii) It is able to accept or deliver data in a form (codes or signals) which can be used by the system.
Separately presented units of an automatic data processing machine are to be classified in heading 8471. However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of paragraphs (C) (ii) and (C) (iii) above, are in all cases to be classified as units of heading 8471.
Note 5 to Chapter 85, HTSUS, provides, in pertinent part:
For the purposes of heading 8523:
“Solid-state non-volatile storage devices” (for example, “flash memory cards” or “flash electronic storage cards”) are storage devices with a connecting socket, comprising in the same housing one or more flash memories (for example, “FLASH E²PROM”) in the form of integrated circuits mounted on a printed circuit board. They may include a controller in the form of an integrated circuit and discrete passive components, such as capacitors and resistors;
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HS and are thus useful in ascertaining the proper classification of merchandise. See T.D. 89-90, 54 Fed. Reg. 35127 (August 23, 1989).
The EN to heading 85.23 states, in pertinent part:
In particular, this heading covers:
* * *
(C) Semiconductor Media
Products of this group contain one or more electronic integrated circuits.
Thus, this group includes:
(1) Solid-state, non-volatile data storage devices for recording data from an external source (See Note 4 (a) to this chapter). These devices (also known as “flash memory cards” or “flash electronic storage cards”) are used for recording data from an external source, or providing data to, devices such as navigation and global positioning systems, data collection terminals, portable scanners, medical monitoring appliances, audio recording apparatus, personal communicators, mobile phones, digital cameras and automatic data processing machines. Generally, the data are stored onto, and read from, the device once it has been connected to that particular appliance, but can also be uploaded onto or downloaded from an automatic data processing machine.
The media use only power supplied from the appliances to which they are connected, and require no battery.
These non-volatile data storage devices are comprised of, in the same housing, one or more flash memories (“FLASH E2PROM/EEPROM”) in the form of integrated circuits mounted on a printed circuit board, and incorporate a connecting socket to a host appliance. They may include capacitors, resistors and a microcontroller in the form of an integrated circuit. Example of solid state non-volatile storage devices are USB flash drives.
In your ruling request, you seek clarification as to whether the subject SSDs are classified in heading 8471, HTSUS or in heading 8523, HTSUS.
To be classified under heading 8471, HSTUS, as a “unit thereof” of an automatic data processing machine, the subject SSDs must satisfy Note 5(C) to Chapter 84, HTSUS. The subject SSDs are storage devices which are designed for physical incorporation into an ADP machine and have a connecting socket that directly connects to an ADP machine. They are able to accept or deliver data in a form which can be used by the computer system. Therefore, the criteria of Note 5(C)(ii) and (iii) to Chapter 84, HTSUS, are satisfied.
The SSDs employ (NAND) Flash memory, which is based on semiconductor microchip technology rather than magnetic disks. The SSDs are not “disk storage units” as described in Note 5(C) to Chapter 84, HTSUS. Therefore, the products must be “of a kind solely or principally used in an automatic data processing system” in accordance with Note 5(C)(i) to Chapter 84, HTSUS. See BenQ Am. Corp. v. United States, 646 F.3d 1371, 1379-81 (Fed. Cir. 2011).
For articles governed by principal use, Additional U.S. Rule of Interpretation 1(a), HTSUS, provides that, in the absence of special language or context which otherwise requires, such use “is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.” In other words, the article's principal use at the time of importation determines whether it is classifiable within a particular class or kind of merchandise. See BenQ, 646 F.3d, at 1379-1380.
While Additional U.S. Rule of Interpretation 1(a), HTSUS, provides general criteria for discerning the principal use of an article, it does not provide specific criteria for individual tariff provisions. However, the courts have provided factors which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: general physical characteristics, the expectation of the ultimate purchaser, channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), use in the same manner as merchandise which defines the class, economic practicality of so using the import, and recognition in the trade of this use. See United States v. Carborundum Company, 63 CCPA 98, C.A.D. 1172, 536 F. 2d 373 (1976), cert. denied, 429 U.S. 979. CBP has applied this principle in subsequent rulings. See, e.g., HQ 082780, dated December 18, 1989. This principle has been carried over to the HTSUS, as courts have determined that principal use under the HTSUS is defined as the use which “exceeds all other uses.” See Lenox Collections v. United States, 20 C.I.T. 194, 196 (Ct. Int’l. Trade, 1996).
The SSDs are flash memory storage devices designed to be incorporated into laptops, desktops, tablets, and other electronic devices. These products provide increased reliability from their lack of moving parts, decreased power consumption and noise, and increased speed compared to traditional compact disk or floppy disk drives. Product literature for the SK Hynix SL308 SSD notes that it has a storage density of 120, 150, and 500 GB and that the SK Hynix SC300A SSD has a storage density of 128, 256, and 512GB. On the SK Hynix website, the SSDs are described as “multi-tasking product[s] boasting fast booting in various PCs, excellent durability, and outstanding speed.” SK Hynix markets their SSDs to individual consumers, businesses, schools, and universities. The SSDs are designed to be inserted directly into an ADP. Based on the Carborundum factors and the information above, we find that the principal use of the subject SSDs are as units of an ADP machine, and that Note 5(C)(i) to Chapter 84, HTSUS, is satisfied.
Because the products at issue satisfy Note 5(C) to Chapter 84, HTSUS, they fall under the scope of heading 8471, HTSUS. Specifically, the products are classifiable under subheading 8471.70.60, HTSUS, which provides for: “Automatic data processing machines and units thereof; …: Storage units: Other storage units: Not assembled in cabinets for placing on a table, desk, wall, floor or similar place.”
With respect to heading 8523, HTSUS, in order to be classified as a “solid state non-volatile storage device,” the products must satisfy Note 5(a) to Chapter 85, HTSUS. This Note lists four criteria, specifically: that it is a storage device; with a connecting socket; that it has flash memory in the same housing as the connecting socket; and that the flash memory be in the form of an integrated circuit mounted on a printed circuit board.
The term “flash memory” is defined as “[A] type of EEPROM that can only be erased in blocks; it cannot be erased one byte at a time. In this regard, it resembles a disk drive that is divided into sectors. Flash memory is usually used for storing large amounts of data, like a disk; …”. See Dictionary of Computer and Internet Terms, 10th Ed. (2009), at pp. 193-194. The term “EEPROM”, which stands for Electrically Erasable Programmable Read-Only Memory, is defined as a type of memory chip whose contents can both be recorded and erased by electrical signals, but do not go blank when power is removed.” See id. at p. 162. A “chip”, or “integrated circuit”, is defined as “an electronic device consisting of many miniature transistors and other circuit elements on a single silicon chip.” See id. at pp. 90, 254.
The subject SSDs are devices that store or transmit data. The SK Hynix SL308 has a storage density of up to 500 GB and the SK Hynix SC300A has a storage density of up to 512GB. The SSDs also contain a connecting socket for use in connecting to a host device, such as a server, laptop, or desktop. The SSDs have flash memory in the same housing as the connecting socket. The flash memory is in the form of an integrated circuit. As a result, the subject SSDs meet the terms of Note 5(a) to Chapter 85, HTSUS, and are properly classified in heading 8523, HTSUS, as “solid-state non-volatile storage devices.”
Because the subject SSDs are prima facie classifiable under both headings 8471 and 8523, we must resort to GRI 3 to determine which heading is the correct one. According to GRI 3(a), “[t]he heading which provides the most specific description shall be preferred to headings providing a more general description.” The description provided by heading 8523, HTSUS, “[S]olid state non-volatile storage devices,” is more specific than the description provided by heading 8471, HTSUS, “[U]nits thereof,” because heading 8523, HTSUS, is “the provision with requirements that are more difficult to satisfy and, that describe the article with the greatest degree of accuracy and certainty.” Pomeroy Collection, Ltd. v. United States, 559 F. Supp. 2d 1374, 1393 (Ct. Int’l. Trade 2008). Therefore, by operation of GRI 3(a), the subject SSDs are correctly classified under heading 8523, HTSUS.
With regard to classification at the subheading level, CBP must consider whether the instant merchandise is “semiconductor media.” The term “media” has been previously defined by CBP as “a material that stores or transmits data.” See Headquarters Ruling Letter (“HQ”) H097659, dated August 31, 2010; HQ 962507, dated May 22, 2002 (citing The Computer Glossary, 6th Ed. (1993) p. 346). EN 85.23 also provides that “semiconductor media” of subheading 8523, HTSUS, includes products that contain “one or more electronic integrated circuits.” See EN 85.23(C).
The subject SSDs constitute “media” because they are data storage devices that store or transmit data. The subject SSDs also meet the terms of “semiconductor media” because they contain one or more electronic integrated circuits. Specifically, the SSDs are comprised of a flash controller in the form of an integrated circuit that incorporates semiconductor technology. As such, the SSDs are specifically classified under subheading 8523.51, HTSUS, which provides for “[S]olid state non-volatile storage devices . . . Semiconductor media: solid-state non-volatile storage devices.”
Our decision is consistent with CBP’s prior treatment of SSDs. In New York Ruling Letter (“NY”) N264697, dated May 29, 2015, CBP classified a standalone SSD which was a flash memory storage device in subheading 8523.51, HTSUS. The SSD contained flash memory components housed in a case that was ready for installation into various types of other host devices, which required data storage, such as computers, laptops, and digital video recorders. CBP determined that the SSD was a solid-state non-volatile storage device that was designed to store electronic data using a flash memory semiconductor. The SSD also contained a connecting socket incorporated in the same housing and a flash controller in the form of an integrated circuit. The SSD did not contain a processor. As the subject SSDs in this case are similar to the SSD in NY N264697, they are classified in subheading 8523.51, HTSUS.
HOLDING:
By application of GRI 1, the subject SSDs are classified in heading 8523, HTSUS, and specifically in subheading 8523.51, HTSUS, which provides for “Discs, tapes, solid-state non-volatile devices, “smart cards” and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37: Semiconductor media: Solid-state non-volatile storage devices.” The 2018 column one, general rate of duty for merchandise of this subheading is free.
Duty rates are subject to change. The text of the most recent HTSUS and the accompany duty rates are provided at www.usitc.gov. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gregory Connor, Branch Chief
Electronics, Machinery, Automotive, and International Nomenclature Branch