CLA-2 CO:R:C:M 088747 MBR
District Director
U.S. Customs Service
Room 137
110 S. Fourth St.
Minneapolis, Minnesota 55401
RE: Protest No. 3501-90-000256; Disk Drives; Controllers; ADP
Machines; Parts; Unfinished; HQ 085946; HQ 554581; HQ 068986;
HQ 079697; HQ 082602; HQ 080082; Daisy-Heddon; U.S. v. John
A. Steer; U.S. v. Willoughby Camera Store; Nord Light v. U.S.;
Westinghouse Electric v. U.S.; Fairchild Camera v. U.S.
Dear Sir:
This is our response regarding Further Review of Protest No.
3501-90-000256, regarding the classification of disk drives and
controllers under the Tariff Schedules of the United States (TSUS).
FACTS:
The IBM 9335 Direct-Access Storage Subsystem provides fixed-
disk storage for a main frame ADP system. The 9335 Direct-Access
Storage Subsystem consists of one IBM 9335 AO1 Device Function
Controller and from one to four IBM 9335 Model BO1 Direct-Access
Storage Units. After importation, the controller and one or more
disk drives are mounted in a rack enclosure. The units are
connected by cables.
The IBM 9335 Model AO1 Device Function Controller is designed
to be mounted in a 5.25 inch drawer. It consists of: a system
adapter, a microprocessor, random access read/write memory (RAM)
and read only storage (ROS), a device adapter which comprises a
device interface adapter and a device read/write adapter, power
supplies, cooling equipment and front and back control panels.
The IBM 9335 Model BO1 Direct-Access Storage Unit is designed
to be rack-mounted in a 10.5 inch drawer. Each Model BO1 stores
approximately 850 million bytes of formatted information on three
fixed 14 inch disks. The information is accessed by two rotary
actuators, each of which carries six read/write heads. The main
components of the Model BO1 are: a disk enclosure (sealed unit)
comprising three disks, 12 read/write heads, the disk spindle of
the drive motor, two actuators, combined main air and breather
filter, electronic circuitry for (1) head selection, (2) read
preamplification, and (3) write current. Each BO1 also has a front
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control panel, input/output plugs in the rear, a power supply and
is cooled by a forced-air fan at the front of the unit. Power is
supplied to the dc power supply unit and the fan from a combined
supply plug and filter through a power supply on/off switch and a
manually resettable circuit breaker.
The disk drives and controllers were entered in 1987 and 1988
under the duty-free provision for parts of ADP machines in item
676.54, TSUS. However, they were classified under the provision
for office machines not specifically provided for in item 676.30,
TSUS. The entries were liquidated on October 19, 1990 and the
protest was timely filed on November 19, 1990.
ISSUE:
Are the disk drives and controllers classifiable as parts of
ADP machines in item 676.54, TSUS, or are they properly
classifiable as office machines n.s.p.f. in item 676.30, TSUS?
LAW AND ANALYSIS:
In HQ 085946, dated January 2, 1990, we reviewed the
classification of the same merchandise. In that decision we
addressed the same questions specifically raised in the instant
Protest. Additionally, HQ 554581, dated July 2, 1987, addressed
the dutiable status of similar rack mounted data processing
equipment. Accordingly, reference should be made to our previous
decisions for detailed information as to our current position.
In summary, we stated that we did not regard Headnote 2(a),
Subpart G, Part 4, Schedule 6, TSUS (which requires that office
machines have a base) and General Headnote 10(h) (which requires
that TSUS provisions be regarded as encompassing unfinished
versions of an article as well as finished versions) in conflict.
This position was also previously taken in such matters as our
decision of November 5, 1981, IA 120/81, file No. 068986.
Accordingly, the fact that components of the instant type lack
housings in their condition as imported, does not, by itself
preclude their classification under item 676.30, if a housing will
be added after importation or they otherwise will be used in an
installation with a common housing, i.e., a rack.
We further held, that the base for fixing or placing an office
machine on a table, desk, etc., which was part of the added
housing, whether or not a single or common housing, also satisfied
the Headnote 2(a) requirements in the case of rack-mounted
equipment.
For purposes of classification in item 676.15, TSUS, a data
processing machine is a device, or a system consisting of several
devices in the form of modules or units, which is capable of
accepting and storing data necessary to execute a program, with the
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additional capability of being freely programmed in accordance with
the requirements of a user, and executing a processing program,
without human intervention, which requires a logical decision that
results in a certain modification of the execution during the
processing run. In addition, there must be a capability to perform
one or more of the four arithmetical operations (i.e., addition,
subtraction, multiplication and division), specified by a user.
Merchandise which does not have the capability to perform
arithmetical computation, but otherwise meets the above-outlined
criteria, has generally been determined to be properly classifiable
in item 676.30, TSUS, which provides for "[o]ffice machines, not
specially provided for."
Such systems which are designed only for operation on "fixed"
programs do not, by their very nature, meet the above-outlined
criteria for purposes of tariff classification in item 676.15,
TSUS. Automatic data processing systems which are either
integrated with, or designed to work in conjunction with other
apparatus to perform a specific function, may also be precluded
from being provided for in item 676.15, TSUS, as classification is
generally controlled by the respective specific function to be
performed, rather than the "means" (data processing) by which the
function is performed or facilitated. Examples of such systems
would be those which are either integrated with, or otherwise
restricted by their technology to either performing as or
facilitating the function of, certain controlling apparatus (not
to be confused with ADP "controllers"), communications apparatus,
or analytical apparatus.
In the instant case, the chief use is known, at the time of
importation, to be within a system dedicated to automatic data
processing, as that term is described by lexicographical sources
and is understood for purposes of tariff classification. There
also can be no dispute that the units at issue are of a type of
which the chief use is within the broad area of "doing work,
concerning the writing, recording, sorting, filing of
correspondence, records, accounts, forms, etc., or for doing other
'office work.'"
The determination of a unit's state of completion is made by
determining the state of the unit itself and not the final
"completed systems" in which they will ultimately function. They
are fully assembled, have cooling apparatus and their own power
sources. To make them fully functional one need only plug them in.
In fact, it is clear that the only purpose of rack-mounting the
units together is for the convenience of proximity in connecting
them together with cables and, perhaps, space consolidation. Thus,
it is our view that these units are complete.
Neither item 676.15, TSUS, nor item 676.30, TSUS, provides for
"computers." Likewise, item 676.54, TSUS, does not provide for
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"parts of computers." Rather, these tariff items provide for,
respectively, certain data processing machines incorporating a
calculating mechanism, and certain office machines, including so-
called "peripherals" (i.e., constituent units of a data processing
system that are external to a central processing unit and perform
a variety of input, output, storage and other tasks, either online
or off-line). Item 676.54, TSUS, provides for parts of both types
of articles. That the subject units may be utilized to provide
decentralized central processing to a nebulous so-called "complete"
data processing system falls short of establishing that they are,
for tariff purposes, essential "parts" of that system which is
indefinable at time of importation. United States v. John A. Steer
Co., 46 CCPA 132, C.A.D. 715, (1958).
Whether separate or joined, each is complete in and of itself
and each is a distinct and separate commercial entity. The most
that can be said is that they may (or may not) be used together
with another particular type of unit of a data processing system,
one as support for the other. It does not make them, for tariff
classification purposes, a "part" of the ultimate automatic data
processing system. United States v. Willoughby Camera Stores,
Inc., 21 CCPA 322, T.D. 46075 (1933).
The fact that each unit at issue requires the attachment of
another article in order to be capable of performing its function
does not render each of them a "part," in that there is no
requirement that a machine must be "self-activating." Nord Light,
Inc. v. United States, 49 CCPA 12, C.A.D. 786 (1961). Although
incapable of functioning unless placed in configuration with
certain other devices, they nevertheless are, in and of themselves,
peripheral machines used in conjunction with data processing
machines, specifically provided for in item 676.30, TSUS.
Westinghouse Electric International Co. v. United States, 28 Cust.
Ct. 209, C.D. 1411 (1952), cited with approval by Fairchild Camera
& Instrument Corp., Inter-Maritime Forwarding Co., Inc. v. United
States, 53 CCPA 122, 126, C.A.D. 887 (1966). Furthermore, the fact
that they are designed to share a common "rack-mounting" does not
mandate their classification as a part. General Electric Company
v. United States, 2 CIT 84 (1981).
General Headnote 10(h), TSUS, states:
10. For the purposes of these schedules --
(h) unless the context requires otherwise, a tariff
description for an article covers such article, whether
assembled or not assembled, and whether finished or not
finished.
The courts have addressed the issue of "unfinished" versus
"parts" classifications in the case of Daisy-Heddon, Div. of Victor
Comptometer Corp. v. United States, 66 CCPA 97,
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C.A.D. 1228, 600 F.2d 799 (1979). The court found the following
criteria determinative in the analysis of this issue:
1. The number of omitted parts compared with the number of
included parts.
2. The amount of time and effort needed to put the article
in its completed condition compared to the time and
effort needed to place it in its imported condition.
3. The cost of the imported (included) parts compared with
the cost of the omitted parts.
4. The significance of the omitted parts to the overall
functioning of the completed article.
5. The trade's characterization of the article as parts.
As to the first criteria, the disk drives and controllers
consist of hundreds of parts, whereas, at importation, they are
only missing one part (the housing).
As to the second criteria, the amount of time and effort
needed to attach the housing is, no doubt, de minimis compared to
the time and effort needed to place these highly complex and
technologically advanced machines into their imported condition.
As to the third criteria, clearly the cost of the housing is
minimal compared with the cost of the unit itself.
As to the fourth criteria, again, the housing itself is
probably not necessary for the unit to function.
As to the fifth criteria, certainly the trade would
characterize the imported article as an automatic data processing
machine missing only one, non-essential, cosmetic part.
Furthermore, it is important to note that even parts which are
essential are not controlling in this analysis. In this regard,
the court stated:
If, as appellant argues, the omission of a part essential to
the use of the eo nomine designated article would prevent
classification as the article in an unfinished condition,
there would be, in practical effect, no such thing as an
unfinished article." Daisy-Heddon, at page 102.
There is no single factor that is determinative of the
question presented. It is a totality that must be given
consideration, with a view toward the guidance set forth by the
court in Daisy-Heddon.
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However, due to the advanced stage of completion of the
imported article, the de minimis amount of time to complete it and
the fact that only one cosmetic part is missing, we conclude that
the disk drive and controller are properly classifiable under item
676.30, TSUS.
Internal Advice 9/87 (HQ 079697) and HQ 082602, provide
classification guidance regarding "print engines." In these cases,
it was determined that the large number of missing parts, the
considerable amount of time to complete the printer and the cost
of the missing parts, mandated classification under item 676.54,
TSUS, ("parts of automatic data processing machines and units
thereof"). However, the instant merchandise is complete except for
one part. Thus, it does not require a large number of parts nor
will it take substantial time or cost to fully complete. Whereas,
Internal Advice 42/87 (HQ 080082) regarded the classification of
five sub-assemblies for a dot matrix printer. This case held the
sub-assemblies to be properly classifiable under item 676.30, TSUS,
(unassembled printer units), even though there were a substantial
number of parts not imported, including the touch pad control
assembly. Again, we held that the amount of time and effort to
complete was minimal as compared to the time and effort required
to assemble the complex and sophisticated parts that go to make up
the five sub-assemblies (even though the parts not included were
essential).
Therefore, logical application of general tariff principles
and previous classification determinations in this area mandate a
conclusion that separately presented articles of a type, of which
the chief use is as peripheral units of an automatic data
processing machine, are properly classifiable in item 676.30, TSUS,
regardless of whether they are housed, unhoused, or may ultimately
share a common housing or chassis with other units, if it is
determined that they are designed for use while placed or fixed to
a floor, desk, table, or similar place, as are the instant units.
HOLDING:
For the foregoing reasons, it is our view that the disk drives
and controllers at issue are classifiable under the provision for
office machines, n.s.p.f., in item 676.30, TSUS.
This protest should be denied in full. In accordance with
Section 3A(11)(b) of Customs Directive 099 3550-065, dated August
4, 1993, Subject: Revised Protest Directive, this decision,
together with Customs Form 19, should be mailed by your office to
the protestant no later than 60 days from the date of this letter.
Any reliquidation of the entry in accordance with this decision
must be accomplished prior to the mailing of this decision. Sixty
days from the date of this decision the Office of Regulations and
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Rulings will take steps to make this decision available to Customs
personnel via the Customs Rulings Module in ACS and the public via
the Diskette Subscription Service, Lexis, Freedom of Information
Act and other public access channels.
Sincerely,
John Durant, Director