CLA-2 OT:RR:CTF:EMAIN H304416 PF
Michael K. Tomenga
Neville Peterson LLP
1400 16th Street, N.W.
Washington, D.C. 20036
RE: Tariff classification of the ActivPanel Version 7
Dear Mr. Tomenga:
This is in reply to your correspondence to U.S. Customs and Border Protection (“CBP”), Office of Trade, Regulations and Rulings, on behalf of your client Promethean, Inc. (“Promethean”). In your letter, you seek a prospective ruling under the Harmonized Tariff Schedule of the United States (“HTSUS”) regarding the tariff classification of the ActivPanel Interactive Display version 7 (“ActivPanel v7”). We have taken into consideration supplemental information received on October 24, 2019 and January 30, 2020.
FACTS:
There are two models of the ActivPanel v7 subject to this request, which are the ActivPanel Nickel and ActivPanel Titanium. Both models contain a 4K ultra high-definition liquid crystal display (“LCD”) video monitor containing a touch overlay, a CPU, speakers and connectors for various signal inputs and outputs, including VGA, USD, and HDMI, and a remote control. The LCD screen size of the ActivPanel Nickel is available from 65 inches to 86 inches and the LCD screen size of the ActivPanel Titanium is available from 70 inches to 86 inches. Both ActivPanel v7 models are configured with a Quad Core processor, 2GB to 4GB of memory, 16GB to 64GB internal storage, a graphics processor, audio, Ethernet, Wi-Fi and Bluetooth connectivity.
The ActivPanel v7 is described as an interactive display and includes a menu bar that allows users access to applications, tools, files, and other attached computing machines. The ActivPanel v7 is sold with Promethean Classroom Essential Applications, which include Whiteboard, Annotate, Screen Share, Spinner and Timer. The Promethean Classroom Essential Apps are educational applications that provide a user with whiteboard, screen capture, annotating, and mirroring functions. The ActivPanel v7 also has an application or control feature entitled the “Locker” that displays and provides access to the applications that are installed onto the ActivPanel v7 as well as the applications that are stored on a separate computing device. The ActivPanel v7 includes a preinstalled Promethean Store, which includes curated educational applications. In order to install an application from the Promethean Store or from the Google Play Store onto the ActivPanel v7, a separate computing system is required.
Promethean sells different types of computing/Open Pluggable Specification (“OPS”) modules that are externally connected to the ActivPanel v7, including Chromebox, OPS-M, and ActivConnect OPS-G. These OPS modules are considered optional devices and are not imported with the ActivPanel v7. The Chromebox uses a Chrome operating system, contains 4GB of RAM, a 128GB solid-state drive, and has Wi-Fi and Bluetooth connectivity. The Chromebox is connected to the ActivPanel v7 via an HDMI cable, the OPS-M is connected to the ActivPanel v7 via an OPS connection port on the ActivPanel v7’s housing, and the ActiveConnect OPS-G is mounted directly onto the ActivPanel v7 via a mounting bracket. The Chromebox allows a user to download applications from the Google Play Store directly onto the ActivPanel v7, which appear on the ActivPanel v7’s screen. The OPS-M (Windows version) is pre-loaded with Windows 10 and allows a user to install applications and software packages such as Microsoft Office. The ActivConnect G uses an Android operating system and allows the downloading of applications from any Android Application Store to the ActivPanel v7. The ActiveConnect G is described as an external Android Module that gives the ActivPanel v7 “tablet-like capabilities, [and] puts the digital world at your fingertips with access to apps, content, mirroring, and more.”
Promethean’s website also provides a description of the OPS modules on its website and describes the objective of these devices:
The objective of the OPS is to provide the ability for a wide range of computing units to be integrated into display units such as the ActivPanel based on standardized dimensions and the use of a common 80-pin JEA socket and other connectors.
The Chromebox is described as follows:
The Promethean Chromebox is the perfect solution for extending an existing Chrome OS ecosystem to the ActivPanel Elements Series, providing certified and seamless access to your preferred apps from the Google Play Store. View and launch downloaded apps directly from the Unified Menu with one-click access and no need for source switching.
The ActivPanel v7 has a CPU on a scaler board. The CPU that runs the Android operating system functions as an image processor that takes a signal from an automatic data processing (“ADP”) machine input and translates it onto the LCD in the form of an image. Aside from the control and interface applications that are installed directly onto the internal scaler CPU, users are limited as to what they can directly install on the scaler board CPU. Applications that provide general purpose computing functions reside on the computing/OPS modules, such as the ActiveConnect OPS-G, Chromebox, and OPS-M and not on the ActivPanel v7. A support video from Promethean describes how a user can “integrate the ActivConnect OPS-G with the ActivPanel Elements Series so the apps will exist in the Locker alongside the apps from the ActivPanel.” In addition, a separate support video states that the OPS-M and Active Connect G are required to install applications. Moreover, in order to manually install applications, users must download the specific application from their personal computer, save it to a USB drive, and insert it into the mounted OPS/ActiveConnect OPS-G/Chromebox.
Promethean also creates and supports lesson delivery software, entitled ActivInspire and ClassFlow for use on its ActivPanels v7. These applications are not physically installed on the ActivPanel v7, but instead are installed on a separate ADP machine. The ClassFlow application is installed on the ActiveConnect OPS and is marketed is for its ability to “deliver lessons, write, draw, annotate and poll students.” In addition, the ActivInspire specifications require a Windows, Mac or Linux operating system to function and the ActivPanel v7 runs on an Android operating system. Based on the ActivInspire specifications, this software has to be installed on a separate ADP machine and not on the ActivPanel v7. Neither the ActivInspire nor Classflow programs allow users to perform general purpose computing functions.
ISSUE:
Whether the ActivPanel v7 is classified as an automatic data processing (“ADP”) machine of heading 8471, HTSUS or a combined input/output unit of an ADP machine of heading 8471, HTSUS.
LAW AND ANALYSIS:
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (“GRIs”) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation (“AUSR”). The GRIs and the AUSR are part of the HTSUS, and are considered statutory provisions of law for all purposes.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRIs taken in order. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
The HTSUS headings under consideration are as follows:
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:
* * *
Other automatic data processing machines:
8471.41.01 Compromising in the same housing at least a central processing unit and an input and output unit, whether or not combined..
* * *
8471.60 Input or output units, whether or not containing storage units in the same housing:
8471.60.10 Combined input/output units…
ADP machines are defined in Legal Note 5(A) to Chapter 84, HTSUS, which
provide as follows:
For the purposes of heading 8471, the expression "automatic data processing machines" means machines capable of:
Storing the processing program or programs and at least the data immediately necessary for the execution of the program;
Being freely programmed in accordance with the requirements of the user;
Performing arithmetical computations specified by the user; and
Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.
To be classified as an ADP unit under heading 8471, HTSUS, an article must meet the terms of Legal Note 5(C) to Chapter 84, HTSUS, which provides that:
Subject to paragraphs (D) and (E) below, a unit is to be regarded as being a part of an automatic data processing system if it meets all the following conditions:
It is of a kind solely or principally used in an automatic data processing system;
It is connectable to the central processing unit [CPU] either directly or through one or more other units; and
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….
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the HTSUS at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The ENs to heading 8471 provide, in pertinent part:
AUTOMATIC DATA PROCESSING MACHINES
AND UNITS THEREOF
Data processing is the handling of information of all kinds, in pre-established logical sequences and for a specific purpose or purposes.
Automatic data processing machines are machines which, by logically interrelated operations performed in accordance with pre-established instructions (program), furnish data which can be used as such, or, in some cases, serve in turn as data for other data processing operations.
This heading covers data processing machines in which the logical sequences of the operations can be changed from one job to another, and in which the operation can be automatic, that is to say with no manual intervention for the duration of the task….
However, the heading excludes machines, instruments or apparatus incorporating or working in conjunction with an automatic data processing machine and performing a specific function. Such machines, instruments or apparatus are classified in the headings appropriate to their respective functions or, failing that, in residual headings (See Part (E) of the General Explanatory Note to this Chapter).
AUTOMATIC DATA PROCESSING MACHINES
The automatic data processing machines of this heading must be capable of fulfilling simultaneously the conditions laid down in Note 5(A) to this Chapter. […]
Thus, machines which operate only on fixed programs, i.e., programs which cannot be modified by the user, are excluded even though the user may be able to choose from a number of such fixed programs.
These machines have storage capability and also stored programs which can be changed from job to job….
The ActivPanel v7 is capable of “storing the processing program or programs and at least the data immediately necessary for the execution of the program;” “performing arithmetical computations specified by the user;” and “executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.” See Note 5(A)(i), (iii) and (iv) to Chapter 84, HTSUS. At issue in this case is whether the device is “capable of … being freely programmed in accordance with the requirements of the user.” See Note 5(A)(ii) to Chapter 84, HTSUS.
In Optrex America Inc. v. United States, 427 F. Supp. 2d. 1177 (Ct. Int’l Trade 2006), aff’d, 475 F.3d 1367 (Fed. Cir. 2007) (“Optrex”), the U.S. Court of Appeals for the Federal Circuit (“CAFC”) upheld CBP’s longstanding interpretation that a “freely programmable” ADP machine is one that: (i) applications can be written for, (ii) does not impose artificial limitations upon such applications, and (iii) will accept new applications that allow the user to manipulate the data as deemed necessary by the user. 475 F.3d at 1368. See also Headquarters Ruling Letter (“HQ”) 964880, dated December 21, 2001. The Optrex court noted that “[CBP’s] interpretation is supported by the World Customs Organization’s Explanatory Notes […] which provide that ‘machines which operate only on fixed programs, that is, programs which cannot be modified by the user, are excluded [from heading 8471] even though the user may be able to choose from a number of such fixed programs.’ Explanatory Note 84.71(I)(A).” Id. at 1370. The court added that “[a]pplication programs are not ‘fixed’ because they can be installed or deleted from a machine.” 427 F. Supp. 2d at 1197.
CBP has ruled that devices which enable the user to decide which applications to install or delete from the device are freely programmable. For example, in HQ 964880, supra, CBP examined the classification of the Palm VII and VIIx – personal digital assistants (“Palm PDAs”) with Internet connectivity. Both models used Palm’s 3.2.0 OS, a 16MHz microprocessor, and came with 2 MB of random access memory and 2 MB of read-only memory. They were imported with pre-installed applications (including a date book, an address book, a memo pad, and desk top e-mail connectivity software) and could accept additional applications that were available directly from Palm or from third-party vendors. In finding that the devices were freely programmable, CBP stressed the fact that they could be programmed in several ways: directly on the devices, with a host computer to generate a generic application, or with a host computer to generate a native application. CBP also noted that:
the Palm [OS] is an open operating system; programming tools are readily available to any user either directly from Palm or from other commercial sources;
programming tools are readily available to any user either directly from Palm or from other commercial sources; [and]
hundreds of software applications are currently available for the Palm OS through a variety of vendors who distribute them either as freeware, shareware, or commercial applications …
CBP classified the PDAs in subheading 8471.30.00, HTSUS, as portable ADP machines.
Conversely, in HQ H026665, dated July 9, 2008, CBP ruled that the AIDA System Compact II, a machine used in hospitals to archive images, video and audio files associated with patient information onto a database, was not freely programmable because users were not free to add or remove software from the device. There, CBP noted, first, that the importer could not provide “… an affirmative representation that the hardware and software are installed into the AIDA without any proprietary restrictions or blocks” and second, that “the software installation manual and license prohibited the downloading of additional software and also identified such action as an impediment to the operation of the device.”
Similarly, in HQ 964682, dated July 15, 2002, we determined that the Sony PlayStation2 (“PS2”), a video game console, was not freely programmable because:
[p]roprietary blocks in the PS2 prevent the console from running any commercially available Linux OS and only specially designed Sony disks can be read by the system. If a non-PS2 compatible disc is inserted in the console, the hardware layer (with the firmware) determines that the disc does not contain one of the accepted formats and thus does not acknowledge it as accepted media.
Significantly, we noted that to run additional Linux-based programs on the PS2, the user was required to install Sony’s version of the Linux OS, which was not included with the console. Moreover, in HQ 952862, dated November 1, 1994, CBP determined that Teklogix data collection devices were not freely programmable, in part, because they were not “general purpose” machines and were designed for certain specific applications and could not by themselves perform the typical applications of computers or personal computers. HQ 952862 discussed the concept of freely programmable by examining the definitions of computer and personal computer and stated as follows:
In determining whether a particular machine is "freely programmable," it is helpful to examine the definitions of the terms "computer" and "personal computer." A computer, which is freely programmable, is a "[g]eneral-purpose machine that processes data according to a set of instructions that are stored internally either temporarily or permanently." A. Freedman, The Computer Glossary, Sixth Edition, pg. 95 (1993). A personal computer "is functionally similar to larger computers, but serves only one user. It is used at home and in the office for almost all applications traditionally performed on larger computers." Computer Glossary (1993), pg. 400. Personal Computers "are typically used for applications, such as word processing, spreadsheets, database management and various graphics-based programs, such as computer-aided design (CAD) and desktop publishing. They are also used to handle traditional business applications, such as invoicing, payroll and general ledger. At home, personal computers are primarily used for games, education and word processing." A. Freedman, The Computer Glossary, Fourth Edition, pg. 524 (1989). Because they can perform any of the above-listed applications, personal computers are considered to be "freely programmable.
The ActivPanel v7 is not freely programmable because it runs on fixed programs, specifically, its Promethean Classroom Essential Applications. The installation and execution of applications beyond the Promethean Classroom Essential Applications requires an external computing module, such as the ActivConnect OPS-G, OPS-M, or Chromebox. Promethean’s website discusses the OPS Modules and notes that:
The objective of the OPS is to provide the ability for a wide range of computing units to be integrated into display units such as the ActivPanel based on standardized dimensions and the use of a common 80-pin JEA socket and other connectors.
It is apparent that a user cannot install, modify or remove program applications on the ActivPanel v7. For example, the ActivPanel v7 cannot receive third-party applications, such as a word processing program or a virus protection program without the presence of an ADP machine. Numerous ActivPanel v7 support videos discuss that a separate OPS is required to install third-party applications. The ActivPanel v7 also requires a separate OPS/computing machine for the installation of the ActivInspire and ClassFlow software programs. EN 84.71(I)(A) provides that machines which operate only on fixed programs that cannot be modified by the user are excluded from heading 8471, HTSUS, even when the user may be able to choose from a number of such fixed programs. In this case, the ActivPanel v7 operates on fixed programs and does not accept the installation or removal of applications at will.
Unlike the Palm VII and Palm VIIx in HQ 964880, supra, the ActivPanel v7 requires a separate ADP machine to execute applications or programs apart from its limited classroom applications. In HQ 964880, CBP found that the Palm VII and Palm VIIx were freely programmable because when applications were downloaded to these devices, the programs could be stored, retained, and execute on the Palm devices. In the present case, the ActivPanel v7 cannot store, retain, or execute third-party applications without being connected to a separate OPS/computing device.
Promethean maintains that the scaler board CPU runs the educational and application software for the ActivPanel v7 such that a separate ADP machine is not required for the installation and execution of all third-party programs. However, the scaler board CPU that is installed inside the ActivPanel v7 functions as an image processor that takes the signal from the ADP machine input and translate it onto the LCD in the form of an image. The functionality of the scaler board CPU does not rise to the level of an ADP machine.
The ActivPanel v7 is not a general purpose ADP machine because it cannot by itself perform the functions of computers or personal computers, including general purpose computing tasks. The ActivPanel v7 has no word processing functions, spreadsheet, database management, desktop publishing, or email functions, nor is it capable of handling traditional business applications, such as invoicing, payroll, general ledger. These limitations preclude the use of the ActivPanel v7 for the typical applications associated with ADP machines. See HQ 952862.
For the foregoing reasons, we find that the ActivPanel v7 is not “freely programmable” as required by Note 5(A)(ii) to Chapter 84, HTSUS. Therefore, the ActivPanel v7 does not meet the requirements of Note 5(A) to Chapter 84, HTSUS, and it is not an ADP machine of heading 8471.50, HTSUS.
The ActivPanel v7 is an interactive display unit designed to connect to an ADP machine for the purpose of performing input and output functions in an ADP system. Legal Note 5(B) to Chapter 84, HTSUS, provides guidance regarding units of ADP machines. It states that “[a]utomatic data processing machines may be in the form of systems consisting of a variable number of separate units.” Per EN 84.71, a unit is to be regarded as a part of the complete system if it meets all of the following conditions:
(a) Performs a data processing function;
(b) Meets the following criteria set out in Note 5 (C) to [Chapter 84, supra]:
It is of a kind solely or principally used in an automatic data processing system;
It is connectable to the central processing unit either directly or through one or more other units; and
It is able to accept or deliver data in a form (codes or signals) which can be used by the system; and
(c) Is not excluded by the provisions of Notes 5 (D) and (E) to this Chapter….
According to Legal Note 5(B), the subject ActivPanel v7 must be: connectable to a CPU; capable of receiving data from an ADP system; and of a type of display that is principally or solely used in an ADP system. The subject ActivPanel v7 meets this criteria as it is directly connectable to a CPU, is able to accept or deliver data from an ADP system, and is of a kind solely or principally used in a ADP system. The ActivPanel v7 is also not excluded by the provisions of Notes 5(D) or 5(E).
The ActivPanel v7 allows users to manipulate on-screen data directly and to a PC. The touch and LCD panel provide for an input and output medium and allow multiple users to connect their laptop or computing device to the ActivPanel v7 for the purpose of displaying, interacting, screen sharing from the user’s computing machine. Because the ActivPanel v7’s infrared touchscreen and LCD panel are permanently combined into a single unit and the display unit is principally used within an ADP system for the purpose of performing a data processing function, the subject ActivePanel v7 display unit is classified as a combined input output unit for ADP machines under subheading 8471.60.10, HTSUS.
Our decision is consistent with New York Ruling (“NY”) N300326, dated September 11, 2018 where we found that Clevertouch LED touch screens that were designed to be used in a classroom or business setting as an interactive whiteboard in a standalone configuration (and not imported with an ADP module) were units of an ADP machine and were classified in 8471.60.10, HTSUS. In addition, in NY N285600, dated May 15, 2017, we determined that a different ActivePanel model, that consisted of an LCD display with multiple connection terminals and which allowed the unit to connect to an ADP machine for the display and manipulation of content, was an interactive display unit of subheading 8471.60.10, HTSUS.
HOLDING:
By application of GRIs 1 and 6, the subject ActivPanel v7 is classified in heading 8471, HTSUS, and specifically in subheading 8471.60.10, HTSUS, which provides for “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: Input or output units, whether or not containing storage units in the same housing: Combined input/output units.“ The 2020 column one, general rate of duty for merchandise of this heading is Free.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8471.60.1000, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 8471.60.10, HTSUS, listed above. The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading.
For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at: https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions https://www.cbp.gov/trade/remedies/301-certain-products-china
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