OT:RR:CTF:VS H301481 JK
Andrew C. Sevey
Moog Inc.
1995 NC HWY 141
Murphy, NC 28906
RE: Eligibility of rotor assembly for duty-free tariff treatment under the Nairobi Protocol; 9817.00.96; specially designed or adapted for the handicapped; parts
Dear Mr. Sevey:
This is in response to your letter dated September 24, 2018, on behalf of Moog, Inc. (Moog), which requests a binding ruling regarding the eligibility of an imported rotor assembly for duty-free treatment under subheading 9817.00.96, Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The article under consideration is a rotor assembly. You state that this rotor assembly is specially designed for an electric motor that powers the compressor of a portable oxygen concentrator (POC), a medical device that supplies supplementary oxygen to its users. Moog specially produces this rotor assembly for Inogen, a manufacturer and seller of POCs. Inogen custom orders this rotor assembly from Moog with specific requirements for the design and manufacture of the rotor assembly for use with its POCs. The rotor assembly is manufactured in China and imported into the United States for processing prior to being used in the POC.
As imported, the instant rotor assembly has certain physical features that differentiate it from Moog’s standard catalog rotors. While Moog’s standard catalog rotors are designed with a front shaft extension, the instant rotor features an additional rear shaft extension. The dual-shaft design of the instant rotor allows it to maintain symmetry, which is required to operate the dual-piston function of the compressor in the POC. The front shaft extension operates one piston in the compressor, while the rear shaft extension operates the other. The tight tolerances and dimensions of the shaft extensions are specific to this application.
In addition, you state that the shaft material used in the rotor assembly is unique to its design. For the instant rotor, precipitation-hardening stainless steel is used for the shaft material, whereas standard rotors use martensitic stainless steel. Precipitation hardening is a process by which the impurities in the crystalline metal are rectified by application of a chemical solution and specific heating regime. The benefit of this process is increased durability or wear resistance, the ability to undergo high tensile and yield stress, and improved machinability. The enhanced machinability of the precipitation-hardening steel allows the shaft to meet the tight tolerances required for its use in a POC. The improved characteristics of the metal provide the added quality and reliability required for use in a U.S. Food and Drug Administration (FDA) regulated medical device.
As the rotor assembly at issue must be used in an oxygen-supplying medical device, Inogen requires higher quality components and processes. Unlike standard rotor assemblies, the instant rotor assembly uses primer at the bond joint of the rotor core to the shaft. When being used in a POC, a slip of the rotor core on the shaft would result in a non-functioning motor and compressor, causing a loss of concentrated oxygen to the user. This risk is mitigated by specially machined glue grooves and primer where the shaft and rotor core meet. This results in a stronger bond between the components and a lower likelihood of failure.
Additionally, the instant rotor assembly uses a high energy, neodymium rare earth magnet to produce the torque and efficiency required for use in a POC. In comparison, you state that lower energy magnets such as ceramic and samarium cobalt would not be able to meet the power and efficiency requirements of a POC. Furthermore, you state that the magnet is customized specifically to fit within the diameter and length constraints of the POC’s compressor and is finished with an epoxy resin coating, which is not a standard offering.
Finally, Inogen requires a special marking on the magnet’s outer diameter, which helps Inogen comply with FDA regulations for medical devices regarding purchase controls, identification and traceability. See 21 C.F.R. §§ 820.50, 820.60, and 820.65.
You provided pictures showing differences between Moog’s standard catalog rotors and the instant rotor assembly, as well as pictures showing how the rotor assembly is incorporated into the POC. You provided a chart with a side-by-side comparison of the specifications of the instant rotor assembly with a standard catalog equivalent rotor. You also provided various engineering drawings and specification sheets of the rotor assembly, including a drawing from Inogen providing the special design for the rotor assembly. Finally, you provided copies of blanket purchase agreements between Inogen and Moog, and a statement issued by Inogen listing the design requirements of the rotor assembly supplied by Moog for use in Inogen’s POCs.
In reaching our decision, we have considered additional information which was submitted by you on April 26 and May 9, 2019.
ISSUE:
Whether the rotor assembly is eligible for duty-free treatment under subheading 9817.00.96, HTSUS, as a part of an article specially designed or adapted for the handicapped.
LAW AND ANALYSIS:
Congress passed the Educational, Scientific, and Cultural Materials Importation Act of 1982, Pub. L. No. 97-446, 96 Stat. 2329, 2346 (1983), and the Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, 102 Stat. 1107 (1988), to implement the Nairobi Protocol to the Florence Agreement on the Importation of Educational, Scientific and Cultural Materials (“Nairobi Protocol”), an international agreement intended to provide “duty free treatment to articles for the use or benefit of the physically or mentally handicapped persons, in addition to articles for the blind.” See also U.S. Customs Serv. Implementation of the Duty-Free Provisions of the Nairobi Protocol, Annex E, to the Florence Agreement, T.D. 92-77, 26 Cust. B. & Dec. 240, 241 (1992) (“Implementation of the Nairobi Protocol”). Presidential Proclamation 5978 and Section 1121 of the Omnibus Trade and Competitiveness Act of 1988, provided for the implementation of the Nairobi Protocol into subheadings 9817.00.92, 9817.00.94, and 9817.00.96, HTSUS. Therefore, this legislation eliminated duties for products covered by subheading 9817.00.96, HTSUS, which provides for:
articles specially designed or adapted for the use or benefit of the blind or other physically or mentally handicapped persons; parts and accessories (except parts and accessories of braces and artificial limb prosthetics) that are specially designed or adapted for use in the foregoing articles . . . Other.
See subheading 9817.00.96, HTSUS; see also Sigvaris, Inc. v. United States, 227 F. Supp. 3d 1327, 1335 (Ct. Int’l Trade 2017). Subheading 9817.00.96 excludes “(i) articles for acute or transient disability; (ii) spectacles, dentures, and cosmetic articles for individuals not substantially disabled; (iii) therapeutic and diagnostic articles; or, (iv) medicine or drugs.” U.S. Note 4(b), Subchapter XVII, Chapter 98, HTSUS.
Accordingly, eligibility within subheading 9817.00.96, HTSUS, depends on whether the article in question is “specially designed or adapted for the use or benefit of the blind or physically and mentally handicapped persons,” and whether it falls within any of the enumerated exclusions. See subheading 9817.00.96, HTSUS; U.S. Note 4(b), Subchapter XVII, Chapter 98, HTSUS. Note 4(a) to Chapter 98, HTSUS, provides:
(a) For purposes of subheadings 9817.00.92, 9817.00.94 and 9817.00.96, the
term “blind or other physically or mentally handicapped persons” includes any person suffering from a permanent or chronic physical or mental impairment which substantially limits one or more major life activities, such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, or working.
U.S. Note 4(a), Subchapter XVII, Chapter 98, HTSUS. This list of exemplar activities indicates that the term “handicapped persons” is to be liberally construed so as to encompass a wide range of conditions, provided the condition substantially interferes with a person’s ability to perform an essential daily task. See Sigvaris, 227 F. Supp. 3d at 1335. While the HTSUS and subchapter notes do not provide a proper definition of “substantial” limitation, the inclusion of the word “substantially” denotes that the limitation must be “considerable in amount” or “to a large degree.” Id. at 1335. (citing Webster’s Third New International Dictionary).
In the Court of Appeals for the Federal Circuit’s decision in Sigvaris, Inc. v. United States, 899 F.3d 1308 (Fed. Cir. 2018), the court found that the Court of International Trade reached the correct conclusion in finding the merchandise at issue therein, compression stockings, not eligible for subheading 9817.00.96, HTSUS treatment, but the court disagreed with the lower court’s analysis. The court found that the Court of International Trade looked to the condition or disorder and whether it is a handicap. The court stated:
The plain language of the heading focuses the inquiry on the “persons” for whose use and benefit the articles are “specially designed,” and not on any disorder that may incidentally afflict persons who use the subject merchandise . . . Instead, we must ask first, “for whose, if anyone’s, use and benefit is the article specially designed,” and then, “are those persons physically handicapped?”
Id. at 1314.
The language of subheading 9817.00.96, HTSUS, states that the provision provides for “articles specially designed or adapted” for the use or benefit of the physically handicapped. The design and construction of an article may be indicative of whether it is specially designed or adapted for the use or benefit of the handicapped. The HTSUS does not establish a clear definition of what constitutes “specially designed or adapted for the use or benefit” of handicapped persons. In the absence of a clear definition, the Court of the International Trade stated that it may rely upon its own understanding of the terms or consult dictionaries and other reliable information. See Danze, Inc. v. United States, Slip Op. 18-69 (Ct. Int’l Trade 2018). Moreover, in analyzing this same provision in Sigvaris v. United States, the Court of International Trade construed these operative words as follows:
The term “specially” is synonymous with “particularly,” which is defined as “to an extent greater than in other cases or towards others.” . . . The dictionary definition for “designed” is something that is “done, performed, or made with purpose and intent often despite an appearance of being accidental, spontaneous, or natural.”
See Sigvaris, 227 F. Supp. 3d at 1336 (citing Webster’s Third New International Dictionary). See also Sigvaris, Inc. v. United States, 899 F.3d 1308 (Fed. Cir. 2018), wherein the court cited the definitions relied upon by the Court of International Trade in Sigvaris, in concluding that “articles specially designed for handicapped persons must be made with the specific purpose and intent to be used by or benefit handicapped persons rather than the general public.” See Sigvaris, 899 F.3d at 1314. The Court of Appeals for the Federal Circuit refined this requirement which it found to be incomplete. The court concluded that:
to be “specially designed,” the subject merchandise must be intended for the use or benefit of a specific class of persons to an extent greater than for the use or benefit of others.
Id.
CBP has recognized several factors to be utilized and weighed against each other on a case-by-case basis when determining whether a particular product is “specially designed or adapted” for the benefit or use of handicapped persons. See Implementation of the Nairobi Protocol, 26 Cust. Bull. & Dec. at 243-244. These factors include: (1) the physical properties of the article itself (i.e., whether the article is easily distinguishable by properties of the design, form, and the corresponding use specific to this unique design, from articles useful to non-handicapped persons); (2) whether any characteristics are present that create a substantial probability of use by the chronically handicapped so that the article is easily distinguishable from articles useful to the general public and any use thereof by the general public is so improbable that it would be fugitive; (3) whether articles are imported by manufacturers or distributors recognized or proven to be involved in this class or kind of articles for the handicapped; (4) whether the articles are sold in specialty stores which serve handicapped individuals; and, (5) whether the condition of the articles at the time of importation indicates that these articles are for the handicapped. See also Danze, Inc. v. United States, Slip Op. 18-69 (Ct. Int’l Trade 2018); Sigvaris, Inc. v. United States, 227 F. Supp. 3d 1327 (Ct. Int’l Trade 2017), aff’d, 899 F.3d 1308 (Fed. Cir. 2018). In Sigvaris, the Court of Appeals for the Federal Circuit found that “[t]hese factors aid in assessing whether the subject merchandise is intended for the use or benefit of a specific class of persons to a greater extent than for the use or benefit of others.” Sigvaris, 899 F.3d. 1315. The court adopted these factors into its analysis.
In this case, the merchandise at issue is a rotor assembly that is said to be a specially designed component part of a portable oxygen concentrator. We note that subheading 9817.00.96, HTSUS, provides duty-free treatment not only to articles that are specifically designed or adapted for the use or benefit of handicapped persons, but also for “parts and accessories…that are specially designed or adapted for use in the foregoing articles.” See also Starkey Laboratories, Inc. v. United States, 6 F. Supp. 2d 910 (Ct. Int’l Trade 1998) (imported parts of hearing aids were eligible for duty-free treatment under subheading 9817.00.96, HTSUS). Accordingly, to determine whether the rotor assembly is eligible for classification under subheading 9817.00.96, HTSUS, we must first determine if the POC for which it was designed is an article specially designed or adapted for the handicapped.
Following the court’s analysis in Sigvaris, 899 F.3d 1308 (Fed Cir. 2018), our first inquiry is determining for whose use and benefit the POC is “specially designed,” and whether such persons are physically handicapped. According to your submission, POCs are medical devices intended to provide supplemental oxygen to persons who require greater oxygen concentrations than provided in the levels of ambient air. The provision of supplemental oxygen, also known as oxygen therapy, is a form of medical intervention that must be prescribed by a physician, who will order tests on a patient to determine if blood oxygen levels are low enough to recommend treatment. Many insurance plans, including Medicare, will cover up to 80% of the cost of a POC if a patient has been prescribed oxygen therapy.
Oxygen therapy can be delivered via a variety of methods and devices, including oxygen gas, liquid oxygen, oxygen concentrators or hyperbaric oxygen therapy. Unlike compressed oxygen tanks which require refills or replacements when the supply of oxygen is depleted, oxygen concentrators operate by pulling oxygen out from the atmospheric air, and purifying and compressing the oxygen before delivering it to the user’s airways via nasal prongs (an oxygen cannula). POCs work similarly to stationary oxygen concentrators but are smaller, lighter and able to run on battery power, enabling the user to travel with the device. However, POCs may deliver a lower percentage of pure oxygen than a larger stationary oxygen concentrator, and some deliver only a “pulse” of oxygen rather than a continuous flow.
Because oxygen therapy must be prescribed by a physician, the purchase of oxygen therapy devices such as POCs must also be accompanied by a prescription. See 21 U.S.C. § 360ddd-1 (Regulation of medical gases). POCs are also regulated by the FDA as anesthesiology devices and are subject to Class II performance standards. See 21 C.F.R. § 868.5440 (Portable oxygen generator). POCs are typically prescribed for patients who suffer from medical conditions such as chronic obstructive pulmonary disease (COPD), pneumonia, asthma, heart failure, sleep apnea, cystic fibrosis, or other chronic lung conditions or respiratory trauma that make it difficult for the patient to absorb the oxygen that he or she needs. While oxygen therapy can be administered at home or under medical care, POCs in particular benefit patients who wish to maintain a level of mobility and independence with the help of portable oxygen therapy. Some people only need oxygen therapy while participating in certain activities, like exercising or sleeping, while other people require it more regularly. In addition to enabling patients to live more active lives, oxygen therapy for more than 15 hours a day has been shown to increase life expectancy in some patients. Other benefits of oxygen therapy may include improved exercise tolerance, mental alertness, sleep, mood, and stamina.
Based on the evidence above, we find that POCs are specially designed or adapted for the use of benefit of a specific class of persons to a greater extent than others, i.e., for persons who have difficulty breathing due to low oxygen blood levels. The physical properties of the POC and its characteristics indicate that it is used solely for the purpose of providing supplemental oxygen to this specific class of persons. Given the device’s clearly intended purpose, we consider the general public’s use of this device for any other purpose to be so improbable as to be fugitive. Further, the POC is an FDA-regulated medical device for which its benefits to persons suffering from chronic respiratory conditions such as COPD is supported in the medical literature. Additionally, Inogen and other manufacturers of POCs specifically market and sell or rent the device for this specific class of persons via home medical equipment providers and distributors, or their own specialty websites. Inogen also explicitly states under its terms and conditions that orders for its POCs require a prescription.
Moreover, we conclude that the specific class of persons for which the POC is intended is physically handicapped. As noted earlier, persons who have low oxygen blood levels typically suffer from chronic lung conditions or respiratory trauma that make it difficult for the patient to absorb a sufficient amount of oxygen from the air into his or her lungs, substantially limiting his or her ability to breathe. Such persons can suffer from a variety of symptoms, such as shortness of breath, fatigue, and rapid breathing and heart rate, wheezing, coughing, sweating, confusion and changes in mood, behavior or skin color. Based on these symptoms, it is reasonable to conclude that having insufficient oxygen blood levels is a physical impairment that would substantially limit one or more major life activities, including a person’s ability to breathe, which is identified specifically by U.S. Note 4(a) as an example of a major life activity. The evidence also suggests that persons who have difficulty breathing due to low oxygen blood levels often suffer from impairments that are known to be permanent or chronic in nature, such as COPD, asthma, heart failure, and cystic fibrosis. While oxygen therapy can be administered for a shorter period of time in a clinical setting and for more acute or transient conditions such as pneumonia or sleep apnea, patients who suffer from permanent or chronic breathing impairments and require long-term oxygen therapy may benefit from POCs especially, which enables them to receive supplemental oxygen even while traveling.
None of the exclusions listed under U.S. Note 4(b) apply to the POC. Because the POC is intended for persons who have difficulty breathing due to low oxygen levels, and such persons typically suffer from permanent or chronic conditions, we find that the POC is not an article for acute or transient disability. We also do not consider the POC to be a therapeutic or diagnostic article. It does not diagnosis a patient’s condition; a physician must do so before a POC can be prescribed. While a POC can provide a variety of health benefits to a patient and even in some cases extend his or her life with regular use, it cannot be considered a therapeutic article as it is not used to cure or heal the patient’s underlying condition. See Travenol Laboratories, Inc. v. United States, 813 F. Supp. 840 (1993) (holding that whether an article cures or heals is the standard with regard to the tariff meaning of the term "therapeutic"). As none of the other exclusions listed under Note 4(b) are applicable to the POC, we conclude that a POC is an article designed or adapted for the use and benefit of physically handicapped persons. This holding is also consistent with several of our New York Ruling Letters (NY) which found that POCs or oxygen concentrators were articles designed or adapted for the use and benefit of physically handicapped persons. See NY N162408 dated May 10, 2011 and NY A81034 dated March 29, 1996.
Although we have determined that POCs qualify for classification in subheading 9817.00.96, HTSUS, the parts of such POCs, such as the rotor assembly at issue, do not automatically qualify for such treatment. We must examine whether the rotor assembly is specially designed or adapted for use in POCs and therefore eligible for classification in subheading 9817.00.96, HTSUS. In considering whether the rotor assembly qualifies as a part of the POC under subheading 9817.00.96, HTSUS, we consider whether it would be considered a part of the POC under a general analysis of the classification of parts.
With regard to the classification of the rotor assembly at issue, we note that Presidential Proclamation 6821 of September 12, 1995, 60 Fed. Reg. 47633 (September 13, 1995), expanded the scope of subheadings 9817.00.92 through 9817.00.96 to include “parts or accessories” of such articles. Thus, the issue before us is whether the rotor assembly constitutes a “part” of an article “specially designed or adapted” for the handicapped.
The traditional rule in this regard is "that a 'part' of an article is something necessary to the completion of that article. It is an integral, constituent, or component part, without which the article to which it is joined could not function as such article." See United States v. Willoughby Camera Stores, Inc., 21 C.C.P.A. 332, T.D. 46851 (1933), which held that a tripod is not “part” of a camera. Moreover, because a determination regarding whether an item constitutes a "part" is highly fact specific, the courts and CBP have applied other criteria to make this determination.
The courts have held that "the mere fact that two articles are designed to be used together is not alone sufficient to establish that either is a part of the other, or of their combined entity." Westfield Manufacturing Company v. United States, 191 F. Supp. 578 (1961). In Schick X-Ray Co. v. United States, 271 F. Supp. 305 (1967), the court stated that, “[m]any …objects, despite the fact that their usefulness is only in conjunction with other articles, retain a separateness of identity and a functional self-sufficiency which preclude their classification as parts.”
We must also consider the case law with regard to the particular provision for articles for the use or benefit of the handicapped. In Starkey Laboratories, Inc. v. United States, F. Supp. 2d 910 (Ct. Int’l Trade 1998), the court found certain parts of hearing aids to be specially designed or adapted for the use or benefit of deaf persons. The court found that the parts (inter alia, potentiometers, trimmers, variable resistors, coils, microphones, receivers, hearing aid body parts and hearing aid subassemblies including microphones or receivers) were specially designed or adapted in that the parts had to adhere to certain design limitations, i.e., the merchandise had to be resistant to humidity and moisture; it had to be manufactured to fine tolerances; and, for those components that used power, their power consumption had to be designed to be low as that is needed to prolong battery life in hearing aids.
In Headquarters Ruling Letter (HQ) 562870 dated December 19, 2003, CBP found that a motor assembly was a part specifically designed or adapted for use with an insulin pump, a device intended to mimic the pancreas and deliver insulin continuously to the user. The motor assembly powered the pump and was manufactured exclusively to the importer’s specifications, having been specifically engineered to be small and compact and produce enough power to be used in the insulin pump. In CBP’s view, the motor assembly was not a self-contained object that functioned separately from the insulin pump; rather it constituted a part of the finished article only when combined with its other components. CBP also noted that because the wiring, capacity and basic programming of the motor assembly was specific to the insulin pump, it could not be installed in any other mechanism.
In a ruling involving the same insulin pump at issue in HQ 562870, CBP found that an infusion set was also a part specifically designed or adapted for use with the insulin pump. See HQ 562869 dated December 23, 2003. The infusion set was essentially a thin plastic tube that had a needle or soft cannula at the end, through which insulin was delivered to the user. CBP found that the infusion set served as an integral component of the insulin pump, without which insulin could not be delivered to the user. CBP noted that the connectors attached to the tubing were specific to the pump receptors and could not be used in other capacity.
In applying the principles set forth above, we find that the rotor assembly at issue constitutes a part of the POC, rather than functioning as a self-contained object. The POC’s motor, which powers the compressor, would not be able to operate for its intended purpose without the integration of the rotor assembly. Moreover, the rotor assembly is custom ordered by Inogen for exclusive use with its POCs, and requires a number of special adaptions for it to function in a small and compact medical device that provides supplemental oxygen. Unlike Moog’s standard catalog rotors, the rotor assembly at issue has a dual-shaft design that enables it to work with the dual-piston function of the POC’s compressor. It also uses a type of shaft material that increases its resistance to wear and stress and improves its machinability, allowing the shaft to meet the tight tolerances and dimensions required for use in a POC. Unlike standard rotor offerings, the rotor assembly uses a primer at the bond joint of the rotor core to the shaft to strengthen the bond between the components, and a high energy magnet to produce the torque and efficiency required to power a POC. Based on this evidence, we are convinced that these features of the rotor assembly are specific to its application with a POC. Accordingly, consistent with prior court decisions and CBP rulings, we conclude that the rotor assembly at issue qualifies as a part that is specially designed or adapted for use in a POC, which is itself an article specially designed or adapted for the physically handicapped within the meaning of Nairobi Protocol, Annex E, to the Florence Agreement, as codified in the Education, Scientific, and Cultural Materials Act of 1982. Therefore, we find that the rotor assembly is eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
HOLDING:
On the basis of the information submitted, a portable oxygen concentrator designed to provide supplemental oxygen to its users is an article “specially designed or adapted” for the handicapped for purposes of the Nairobi Protocol, Annex E, to the Florence Agreement, as codified in the Education, Scientific, and Cultural Materials Act of 1982. Therefore, the rotor assembly that is specially designed for use in a portable oxygen concentrator is a “part” of that article and eligible for duty-free treatment under subheading 9817.00.96, HTSUS.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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,
Monika R. Brenner, Chief
Valuation & Special Programs Branch