CLA-2 CO:R:C:G 086851 JMH
8471.99.15, 8471.99.60, 8472.92.20, 8472.92.40,
8473.30.40, 8473.30.80, 8507.30.00, 8517.40.10,
8524.90.40, 8543.80.90, 9027.20.40, 9902.84.71
Mr. Allan T. Low
U.S. Customs Manager
Hewlett Packard
P.O. Box 10301
Palo Alto, CA 94303-0890
RE: Modification of Headquarters Ruling Letter 085558, dated
March 26, 1990, corrections to page 5
Dear Mr. Low:
Enclosed please find a modification of Headquarters Ruling
Letter 085558 (HQ 085558), dated March 26, 1990. The errors on
page five of HQ 085558 have been corrected. Otherwise, the
ruling is unchanged. Thank you for bringing these errors to our
attention.
FACTS:
Hewlett Packard, a major multinational high technology
company, is importing into the United States seven forms of
shipments consisting of products manufactured throughout the
world. You state that the following assumptions have been
established:
1. Microcomputer: integrated central processing unit
(CPU) and drive/storage housed in one cabinet.
2. VECTRA: a personal computer system consisting of
separately housed CPU/drive, monitor, and keyboard
presented together. (CPU contains a microprocessor
capable of processing words greater than 8-bits in
length and capable of directly addressing more than
8-MB of memory off the microprocessor.)
3. Liquid chromatograph: analytical equipment used in
liquid chromatography classifiable under subheading
9027.20.40, HTSUSA.
-2-
4. None of the goods described as "U.S. goods
returned" have been advanced in value or improved
in condition.
Each shipment is discussed separately as follows:
Shipment A
FACTS:
This shipment is a microcomputer and its accessories from
Mexico. It includes:
1. microcomputer - country of origin is Mexico
2. modem - country of origin is the United States
3. manuals for operating and reference - printed in
the United States
4. "operating" software recorded on magnetic media -
recorded in the United States
5. "applications" software recorded on magnetic media
- recorded in the United States
ISSUE:
What is the appropriate classification for the microcomputer
and its accessories?
LAW AND ANALYSIS:
The classification of merchandise under the HTSUSA is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUSA, states in part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes...and according to the
following provisions."
An examination of the headings establishes that the
microcomputer, modem, software and manuals are each classifiable
within different headings - headings 8471, 8517, 8524, and 4901,
HTSUSA, respectively. These headings describe:
4901 Printed books, brochures, leaflets and
similar printed matter, whether or not in
single sheets...
4901.99.00 Other...
* * * * * * * * * * * * *
8471 Automatic data processing machines and units
thereof...
-3-
8471.20.00 Digital automatic data processing
machine, containing in the same housing
at least a central processing unit and
an input and output unit, whether or not
combined...
8471.91.00 Other...Digital processing units,
whether or not entered with the rest of
a system, which may contain in the same
system, one or two of the following
types of units: storage units, input
units, output units...
* * * * * * * * * * * * *
8517 Electrical apparatus for line telephony or
telegraphy, including such apparatus for
carrier-current line systems...
8517.40.10 Other apparatus, for carrier-current
line systems...Modems, of a kind used
with data processing machines of heading
8471...
* * * * * * * * * * * * *
8524 Records, tapes and other recorded media for
sound or other similarly recorded phenomena
8524.90.40 Other...Other...
Three of the items, the microcomputer (heading 8471,
HTSUSA), the modem (heading 8517, HTSUSA) and the software
(heading 8524, HTSUSA) are found within Section XVI, HTSUSA.
There are two relevant Section XVI notes which must be explored.
The first note, Section XVI, Note 3, HTSUSA, addresses
composite machines. The note states:
Unless the context otherwise requires, composite
machines consisting of two or more machines fitted
together to form a whole...are to be classified as if
consisting only of that component or as being that
machine which performs the principal function.
The Explanatory Notes to Section XVI, assert that the two
or more machines comprising the composite machine are "of
different kinds...described in different headings...".
Harmonized Commodity Description and Coding System (HCDCS), Vol.
3, p. 1133. Although the Explanatory Notes are not dispositive,
they are to be looked to for the proper interpretation of the
-4-
HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). The
microcomputer and modem in question are classifiable within
different headings and are different machines. However, it is
this office's opinion that they do not form a composite machine
because they are not "fitted together to form a whole." The
Explanatory Notes define "fitted together to form a whole" as
incorporating one machine within the other, mounting one on the
other, or mounting both machines on a common base or frame or in
a common housing. HCDCS, Vol. 3, p. 1133. The connection of a
modem to a microcomputer by electrical wires does not constitute
"fitted together to form a whole." Therefore, the microcomputer
and its accessories are not a composite machine within Section
XVI, Note 3, HTSUSA.
The second relevant section note, Section XVI, Note 4,
HTSUSA, addresses functional units. The note states:
Where a machine...consists of individual components
(whether separate or interconnected by piping, by
transmission devices, by electric cables or by other
devices) intended to contribute together to a clearly
defined function covered by one of the headings in
chapter 84 or chapter 85, then the whole falls to be
classified in the heading appropriate to that
function.
The Explanatory Notes express that a "functional unit"
covers only those "machines and combination of machines essential
to the performance of the function specific to the functional
unit as a whole..." HCDCS, Vol. 3, p. 1133. The function
specific to the goods in question is the operation of the
microcomputer which is covered by heading 8471, HTSUSA. Each of
the items in question is devoted to the function of the
microcomputer. Therefore, it is the opinion of this office, that
the microcomputer and its accessories are a "functional unit" to
be classified within the classification for the microcomputer.
The microcomputer contains a CPU and drive/storage within
one housing. Subheading 8471.20.00, HTSUSA, requires that a
digital automatic data processing machine contain in one housing
a CPU and an input/output unit. The microcomputer does not
contain the input/output unit, and therefore, does not meet the
terms of subheading 8471.20.00 as required by GRI 6, HTSUSA, and
GRI 1. The proper classification for the microcomputer is within
subheading 8471.91.00, HTSUSA. Therefore, the whole unit is
classified within subheading 8471.91.00, HTSUSA.
However, an examination of the applicable chapter notes
reveals Chapter 85, Note 6, HTSUSA. This note states:
-5-
Records, tapes and other media of heading 8523 or 8524
remain classified in those headings, whether or not
they are entered with the apparatus for which they are
intended.
The operating and applications software are classified
within subheading 8524.90.40, HTSUSA. Thus, according to the
chapter note, the software remains classified there regardless of
the classification of the other merchandise with which it is
imported.
Therefore, the microcomputer and its accessories result in
two classifications. The functional unit of the microcomputer,
the modem, and the manuals are classified together within
subheading 8471.91.00, HTSUSA, as "Automatic data processing
machines and units thereof...Other...Digital processing units,
whether or not entered with the rest of a system, which may
contain in the same system, one or two of the following types of
units: storage units, input units, output units..." The
software is classified within subheading 8524.90.40, HTSUSA, as
"Records, tapes and other recorded media for sound or other
similarly recorded phenomena...Other...Other"
Shipment B
FACTS:
This shipment consists of a dot matrix printer and its
accessories from Singapore. It includes:
1. dot matrix printer - country of origin is Singapore
2. power cable with connectors - country of origin is
Mexico
3. reusable Ni-Cad batteries - country of origin is
Japan
4. recharger/adapter - country of origin is Korea
ISSUE:
What is the appropriate HTSUSA classification for the dot
matrix printer and its accessories?
LAW AND ANALYSIS:
You state that the dot matrix printer and its accessories
are to be imported in one large carton and sold together. The
same analysis used in shipment A is used in this instance. The
dot matrix printer, power cable with connectors, reusable Ni-Cad
batteries, and recharger/adapter are classifiable within
different headings: headings 8471, 8473, 8507, and 8543,
HTSUSA, respectively. These headings describe:
-6-
8471 Automatic data processing machines and units
thereof...
8471.92.65 Input or output units, whether or not
entered with the rest of a system, which
may contain in the same housing one or
two of the following types of units:
storage units, input units, output
units...Printer units...
* * * * * * * * * * * *
8473 Parts and accessories...suitable for use
solely or principally with machines of
headings 8469 to 8472...
8473.30.80 Parts and accessories of the machines of
heading 8471...Other...
* * * * * * * * * * * * *
8507 Electric storage batteries, including
separators therefor, whether or not
rectangular (including square); parts
thereof...
8507.30.00 Nickel-cadmium storage batteries...
* * * * * * * * * * * * *
8543 Electrical machines and apparatus, having
individual functions, not specified or
included elsewhere in this chapter; parts
thereof...
8543.80.90 Other...
If the subject items form a composite machine or a
functional unit with the meaning of the Section XVI Notes, then
they may be classified according to the article which gives the
unit its principal function. As explained in the discussion of
shipment A, articles which form a composite machine within the
meaning of Section XVI, Note 3, HTSUSA, are "fitted together to
form a whole." Once again, these articles are not mounted or
incorporated together, nor are they mounted on a common base or
frame. Therefore, the dot matrix printer and its accessories are
not a composite machine.
It is the opinion of this office that the dot matrix printer
and its accessories form a "functional unit" within the meaning
of Section XVI, Note 4, HTSUSA. Each of the goods "contributes
-7-
to the clearly defined function" of the dot matrix printer. The
classification appropriate to the function of the dot matrix is
subheading 8471.92.65, HTSUSA, which describes "Automatic data
processing machines and units thereof...Input or output units,
whether or not entered with the rest of a system and whether or
not containing storage units in the same housing...Printer
units..."
Shipments C, D, E, and F
FACTS:
Shipments C, D, E, and F each consist of a system composed
of a liquid chromatograph and a VECTRA personal computer. The
systems are designed to perform and analyze liquid
chromatography. The shipments vary only by the country of origin
of the products.
Shipment C: This shipment is a system from West Germany. It
includes:
1. liquid chromatograph - country of origin is West
Germany
2. VECTRA personal computer system - country of origin
for all units is the United States
Shipment D: This shipment is also from West Germany. It
includes:
1. liquid chromatograph - country of origin is the
United States
2. VECTRA personal computer system - country of origin
for all units is West Germany
Shipment E: This shipment also is shipped from West Germany, but
the personal computer is of mixed origins. The shipment
contains:
1. liquid chromatograph - country of origin is West
Germany
2. VECTRA personal computer
a. CPU/Drive - country of origin is the United
States
b. other units - country of origin is France
Shipment F: This shipment is shipped from Japan. Thus, some
of the goods are subject to the 100% duty sanction under
subheading 9903.41.20, HTSUSA. The shipment includes:
1. liquid chromatograph - country of origin is the
United States
-8-
2. VECTRA personal computer
a. CPU/Drive - country of origin is Japan
b. other units - country of origin is Korea
ISSUE:
What is the appropriate classification for the liquid
chromatograph and VECTRA personal computer system when shipped
together from any country, regardless of the country of origin of
the components?
LAW AND ANALYSIS:
The classification of the liquid chromatograph and the
components of the VECTRA personal computer begins with GRI 1
which dictates that the headings, section notes and chapter notes
be analyzed. There are two headings, one for each machine,
involved in these shipments. The headings are 8471 and 9027,
HTSUSA, which describe:
8471 Automatic data processing machines and units
thereof...
8471.91.00 Other...Digital processing units,
whether or not entered with the rest of
a system, which may contain in the same
housing one or two of the following
types of units: storage units, input
units, output units...
8471.92.20 Other...keyboards...
8471.92.40 Other...Other..with cathode ray tube...
* * * * * * * * * * * * *
9027 Instruments and apparatus for physical or
chemical analysis...parts and accessories
thereof...
9027.20.40 Chromatographs and electrophoresis
instruments...
As discussed previously, Section XVI, Note 4, provides for
the classification of "functional units" within the heading
appropriate to the function of the unit. Chapter 90, Note 3,
HTSUSA provides that Section XVI, Note 4 also applies to Chapter
90. Thus, Section XVI, Note 4 is applicable to heading 9027.
In this instance, the chromatograph and the personal
computer contribute together for the clearly defined function of
-9-
analyzing substances. The computer merely runs the experiments.
It is the chromatograph that actually performs the analytical
function. Thus, the two machines of shipments C, D, E, and F
would be classified as one functional unit within the
chromatograph's classification.
The chromatograph and Vectra personal computer, when
imported together, are a functional unit properly classified
within subheading 9027.20.40, HTSUSA, as "Instruments and
apparatus for physical or chemical analysis...parts and
accessories thereof...Chromatographs and electrophoresis
instruments..."
Shipment G
FACTS:
This final shipment consists of a series of printed circuit
board assemblies (PCA's) from Mexico. The PCA's enable a user to
upgrade the computer to a higher revision, greater logic
capability and memory capacity. This upgrade is performed by
exchanging certain critical PCA's in the computer with the PCA's
in an "upgrade kit." The PCA's are packaged in individual boxes
and shipped together with operating and reference manuals and
literature in one large carton. A "typical" upgrade kit
includes:
1. at least one each 4-MB memory board - country of
origin is the United States
2. one memory controller board - country of origin is
West Germany
3. one arithmetic logic unit board - country of origin
is Mexico
4. one control and maintenance controller - country of
origin is Mexico
5. one control process store - country of origin is
Mexico
Items 3, 4 and 5 working in unison comprise the
"motherboard" or CPU for the computer.
ISSUE:
Issue 1: What is the appropriate classification for the
upgrade kit under the TSUS?
Issue 2: What is the appropriate classification for the
upgrade kit under the HTSUSA?
-10-
LAW AND ANALYSIS:
Issue 1: What is the appropriate classification for the
upgrade kit under the TSUS?
The classification of merchandise under TSUS is governed by
the General Headnotes. General Headnote 10(a) provides that
imported goods be classified according to "the general, schedule,
part and subpart headnotes, and the provisions describing the
classes of imported article..." General Headnote 10 (ij)
provides that a part is to be classified in an item for that part
unless another item is more specific.
In this instance, the upgrade kit consists of five articles.
These products are described in the inferior headings to Items
676.15 and 676.54, TSUS, for automatic data processing (ADP)
machines, since the articles are intended to be incorporated into
an ADP. A specific classification, Item 676.54, TSUS, exists for
parts of these machines. Thus, each of the boards, as part of an
ADP, is described within Item 676.54.
However, Headquarters Ruling Letter 554581, dated July 2,
1987, determined that a motherboard is an unfinished computer.
Noting General Headnote 10(h), TSUS, an unfinished computer is
classified within the item for a finished computer, Item 676.15,
TSUS. Since the arithmetic logic unit board, the control and
maintenance controller, and the control process store together
constitute a motherboard they are an unfinished computer to be
classified within Item 676.15.
You state that the three boards comprising the motherboard
and the two memory expansion boards are a kit to be imported
together. When two or more components are shipped together and
intended to be used together, the concept of an entirety must be
considered. If the goods are an entirety they are dutiable as
one complete article. Articles may be regarded as entireties
when the components, upon being joined, form a new article which
has a character or use different from that of any of the parts,
or when one of the components is predominant and the other parts
are merely incidental to the predominant part. E.M. Stevens
Corp. v. United States, 49 Cust. Ct. 203, Abstract 66971 (1962).
For the doctrine of entireties to apply, the articles must
be imported together. Benrus Watch Co. et al. v. United States,
21 CCPA 139, T.D. 46467 (1933), cert. den. 291 U.S. 679, 54 SCR
529, 79 L. Ed. 1067 (1933); United States v. Baldt Anchor, Chain
& Forge Division of the Boston Metals Co. et al., 59 CCPA 122,
C.A.D. 1051, 459 F. 2d 1403 (1972); Trans-World Shipping Service,
Inc. et al. v. United States, 58 Cust. Ct. 120, C.D. 2900 (1967).
-11-
The five printed circuit board assemblies in question are
imported together and when joined operate to expand an ADP's
capabilites. When functioning together, their character is
different than any of the parts functioning separately. It is
the opinion of this office that these five boards, when imported
together, constitute an entirety. As an entirety the articles
are dutiable together. The motherboard, as an unfinished
computer, is the dominant component of this entirety. Therefore,
the appropriate tariff provision for these articles is Item
676.15, TSUS, which describes "Accounting, computing and other
data-processing machines..."
Issue 2: What is the appropriate classification for the
upgrade kit under the HTSUSA?
As stated previously, the classification of merchandise
under the HTSUSA is governed by the GRI's. GRI 1 states in part
that "for legal purposes, classification shall be determined
according to the terms of the headings and any relative section
or chapter notes...and according to the following provisions."
The applicable headings in this instance for the upgrade kit
are heading 8471, HTSUSA, for the three boards comprising the
"motherboard" and heading 8473, HTSUSA, for the memory expansion
boards. As stated previously, the "motherboard" is viewed as an
unfinished automatic data processing machine. GRI 2(a), HTSUSA,
states that "[a]ny reference in a heading to an article shall be
taken to include a reference to that article incomplete or
unfinished..." Headings 8471 and 8473 state the following:
8471 Automatic data processing machines and units
thereof...
8471.91.00 Other...Digital processing units,
whether or not entered with the rest of
a system, which may contain in the same
system, one or two of the following
types of units: storage units, input
units, output units...
* * * * * * * * * * * * *
8473 Parts and accessories...suitable for use
solely or principally with machines of
headings 8469 to 8472...
8473.30.40 Parts and accessories of the machines of
heading 8471...Not incorporating a cathode
ray tube...
-12-
When two or more headings are in contention GRI 3, HTSUSA,
is implemented. 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. However, when two or more
headings each refer to part only of the materials or
substances contained in mixed or composite goods or to
part only of the items in a set put up for retail sale,
those headings are to be regarded as equally specific
in relation to those goods, even if one of them gives a
more complete or precise description of the goods.
(b) Mixtures, composite goods...and goods put up in
sets for retail sale, which cannot be classified by
reference to 3 (a), shall be classified as if they
consisted of the material or component which gives them
their essential character, insofar as this criterion is
applicable.
(c) When goods cannot be classified by reference to
3(a) or 3(b), they shall be classified under the
heading which occurs last in numerical order among
those which equally merit consideration.
GRI 3(a) dictates that the most specific heading is
preferred, unless the goods are mixed, composite or items in a
set for retail sale and two or more headings apply to part of the
goods. The PCA's are not a mixture or a composite good. So, to
be classified according to GRI 3(b) the PCA's must constitute a
"set."
To determine what is a "set" to implement this rule, the
Explanatory Notes to the HTSUSA must be examined. The
Explanatory Notes, although not dispositive, are to be looked to
for the proper interpretation of the HTSUSA. 54 Fed. Reg. 35127,
35128 (August 23, 1989). The Explanatory Note for Rule 3(b)
gives a three part test for "sets for retail sale." Harmonized
Commodity Description and Coding System (HCDCS), Vol. 1, p. 4.
The three step definition states "For the purposes of this
Rule, the term 'goods put up in sets for retail sale' shall be
taken to mean goods which:
-13-
(a) consist of at least two different articles which
are prima facie, classifiable in different
headings.
(b) consist of products or articles put up together to
meet a particular need or carry out a specific
activity; and
(c) are put up in a manner suitable for sale directly
to users without repacking (e.g., in boxes or
cases or on boards)." (emphasis added)
Since these three steps are listed in the conjunctive, all
three must be met. First, the two memory boards and the three
boards comprising the "motherboard" must be different articles,
classifiable within different headings. The memory expansion
boards are classifiable within subheading 8473.30.40, HTSUSA, as
"...Parts and accessories of the machines of heading 8471..."
The "motherboard" is classifiable within subheading 8471.91.00,
HTSUSA, as "...Digital processing units..." The motherboard is
further classified within subheading 9902.84.71, HTSUSA, which is
a temporary free provision. At least two different headings are
applicable. The first requirement is met.
Secondly, the articles must be put up to meet a particular
need or activity. The PCA's are put together to meet a
particular computer programming need. Thus, the second
requirement is fulfilled.
Finally, the boards must be packed in manner a suitable for
sale to the end user. You state that the PCA's are packaged
together for sale directly to users without further packing.
Therefore, the third requirement is met. The memory expansion
boards and the "motherboard" are a "set" within the meaning of
GRI 3(a) and (b), HTSUSA. However, since both headings 8471 and
8473 cover part only of the set, they are equally specific.
Therefore, the PCA's cannot be classified according to GRI 3(a).
GRI 3(b), HTSUSA, requires that goods put up in sets for
retail sale are to be classified according to the component that
gives the goods their essential character. It is the opinion of
this office that the characteristics of the "motherboard", as an
unfinished ADP, are the dominant characteristics of the set.
Therefore, the motherboard provides the essential character of
the set. The upgrade kit is a set properly classified within
subheadings 8471.91.00/9902.84.71, HTSUSA, as "Automatic data
processing machines and units thereof...Digital processing units,
whether or not entered with the rest of a system..."
HOLDING:
Shipment A, the microcomputer and its accessories are a
functional unit within the meaning of Section XVI, Note 4,
-14-
HTSUSA. The microcomputer, modem, and the manuals are properly
classified within subheading 8471.91.00, HTSUSA, as "Automatic
data processing machines and units thereof...Other...Digital
processing units, whether or not entered with the rest of a
system, which may contain in the same system, one or two of the
following types of units: storage units, input units, output
units..." Chapter 85, Note 6, HTSUSA requires that the software
be classified separately within subheading 8524.90.40, HTSUSA, as
"Prepared unrecorded media for sound recording or similar
recording of other phenomena...Magnetic discs..."
Shipment B, the dot matrix printer and its accessories form
a "functional unit" within the meaning of Section XVI, Note 4,
HTSUSA. The classification appropriate to the function of the
dot matrix is subheading 8471.92.65, HTSUSA, which describes
"Automatic data processing machines and units thereof...Input or
output units, whether or not entered with the rest of a system
and whether or not containing storage units in the same
housing...Printer units..."
The shipments of C, D, E, and F, the liquid chromatograph
and the VECTRA personal computer are a functional unit as defined
by Section XVI, Note 4. The clearly defined function of the unit
is the analysis performed by the liquid chromatograph. Therefore,
the shipments are properly classified within subheading
9027.20.40, HTSUSA, as "Instruments and apparatus for physical or
chemical analysis...Chromatographs and electrophoresis
instruments..."
Shipment G, the five printed circuit board assemblies, is a
set put up for retail sale within the meaning of GRI 3(b). The
"motherboard" gives the set its essential character. The upgrade
kit is a set properly classified within the heading applicable to
the "motherboard", subheading 8471.91.00/9902.84.71, HTSUSA, as
"Automatic data processing machines and units thereof...Digital
processing units, whether or not entered with the rest of a
system..."
Sincerely,
John Durant, Director
Commercial Rulings Division